TaxTMI 
TaxTMI 
2021 (1) TMI 599
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....he shell fabric and the lining of a garment to give clothing a suitable appearance and stability; that based on the application method, there are two kinds of interlinings: Sewn interlining and fusible interlining; that the interlining which could be fixed with the garments components by sewing is called sewn interlining and for the preparation of sewn interlining a piece of fabric is treated with starch and allowed to dry and finally sewn with the main fabric; that in addition, the fusible interlining which could be fixed with the garments components by applying heat and pressure for a certain time is called fusible interlining. The applicant has stated that these fusible materials provide with several properties which can enhance the appearance of finished garment by influencing the following characteristics:- a. Handle and bulk. b. Shape retention. c. Shrinkage control. d. Crease recovery. e. Appearance after washing or dry cleaning. f. Durability. 3. The applicant has stated that the interlining fabrics is mainly used in the collars, cuffs, etc. part of the garments and samples of the interlining fabrics will be produced ....
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....ot printing process (Heading No.59.03) 03. Note 2(c) was modified in the Chapter Notes w.e.f.01.03.1 989. "Textile fabrics, partially or discretely coated with plastic (Heading No.59.03) 04. Note 2(c) was deleted w.e.f. 16.03.1995. Hence, the Chapter Notes as per the Original CETA was reinstated. 5. The applicant has submitted that Central Board of Excise and Customs(CBEC) has issued circulars from time to time for clarifying the classification of the interlining fabrics; that prior to the introduction of Note 2(c) in the Chapter 59, CBEC had issued a Circular No.24/Coated Fabrics?88CX.1 dated 02.09.1988, wherein the relevant para is reproduced hereunder: "7. From the above definition of the term 'coated fabrics' it is obvious that in the case of plastic coated fabric (i) the polymer is coated to give a continuous and adherent film or layer on the fabric and (ii) the fabric has an impervious surface. 6. The applicant has further submitted that in the HSN at Page 816 under the Heading 59.03 (same as in Central Excise Tariff) it is stated that in many of the textile fabrics classified under this heading, the plastic materia....
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....e 2(c), CBEC had again issued Circular No.433/66/98-CX dated 27th November, 1998, wherein they had stated that the interlining cloth would be appropriately classified under Chapter Heading 59.03 of the Central Excise Tariff. Relevant para is reproduced hereunder: "3. In the 1985 budget the Central Excise Tariff was broadly aligned with the Customs Tariff (based on HSN) and as such Chapter Note 2(c) of Chapter 59 of the Central Excise Tariff was omitted. The omission of Chapter Note 2(c) was neither intended to and nor resulted in changing the classification of fusible interlining cloth under Heading 59.03 of the Central Excise Tariff. This is so because as per the HSN Explanatory Notes(1996), end edition, page 894, textile fabrics which are spattered by spraying with visible particles of thermoplastic material and are capable of providing a bond to other fabrics or materials up the application of heat and pressure are covered under Chapter Heading 59.03 may thus be considered as an exception to Chapter Note 2(a)(4) of Chapter 59 according to which fabrics partially coated or partially covered with plastics and bearing designs resulting from those treatments are excluded fr....
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....ng fabrics', references as given under the erstwhile Central Excise regime can be taken for classifying the said product under the GST regime. (ii) Considering the same, Circular No.24/Coated Fabrics/88-CX.1 dated 02.09.1988 had clarified that to merit classification as coated fabrics under HSN code 5903, it should meet the following requirements: (a) It should have a continuous and adherent film or layer of plastics on one side of the fabric surface. (b) The fabric should be impervious. (c) It should satisfy the conditions prescribed in Note 2 of Chapter 59. (iii) The interlining fabrics manufactured by the applicants do not have continuous and adherent film or layer of plastic on one side of fabrics surface. The fabric is partially coated with thermoplastic. Therefore the product would not fall under the HSN code 5903. (iv) The coating done is not impervious because the design created due to interlining can be easily penetrated. Therefore, relying on the Circular No. 24/Coated Fabrics/88-CX.1 dated 02.09.1988, the product under dispute cannot be classified under the HSN code 5903 and will be classified in the Chapter 52. ....
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.... Chapter 52 to 55 depending upon the nature of the content. Accordingly, it is submitted that the product in dispute shall be classified under the Chapter 52 once the chapter note itself is removed. (x) Under the GST regime, the goods classified under the HSN code 5903 attracts higher rate of IGST i.e. 12% (CGST 6% + SGST 6%). The goods classified under the Chapter 52 attract IGST rate of 5% (CGST 2.5% + SGST 2.5%). Since, there is huge difference in the taxable rates, it is essential for the Applicant to classify the product at correct rate as it will have higher tax burden on the end consumer. It is also submitted that some competitors of the applicant are classifying the said product under the Chapter 52(depending upon the weight of the cotton in the fabrics) attracting rate of 5%(CGST 2.5% + SGST 2.5%) which has resulted in substantial business loss to the applicant. The applicant further submits that if the reduced rate of duty is not applied to the fabrics manufactured by the applicant, they may have to close the manufacturing operations due to competitive pricing resulting in losses to the company and loss of employments to huge labour force. Hence also the applican....
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.... 2 of Chapter 59. (c) By virtue of amendment to the Central excise Tariff made vide Finance Act, 1989, Note 2(c) came to be introduced in Chapter 59 of the tariff to provide that fusible interlining cloth made by discrete coating of plastic by dot matrix process would be classified under Chapter Heading 5903 with effect from 01.03.1989. Also, another Circular No.5/89 dated 15.06.1989 was also issued by the Board around the same time, clarifying that new note was being introduced in Chapter 59 of the Tariff in order to include fusible interlining cloth made by discrete coating of plastic by dot matrix process in Chapter Heading 5903. The said note reads as under: "Textile fabrics, partially or discretely coated with plastic by dot printing process (heading no.59.03)" (d) Thereafter, the said note was further modified w.e.f. 20.03.1990 to provide as under: "Textile fabrics, partially or discretely coated with plastic (heading no.59.03)" (e) By virtue of amendment brought about w.e.f. 16.03.1995, the said note came to be deleted and was removed from Chapter 59 of the Tariff. (f) The Board vide Circular dated 27.11.1998 expressed th....
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.... had held that the product 'Fusible Interlining Fabrics of Cotton' were not classifiable under Chapter 5903 but was correctly classifiable under Chapter 52 of the erstwhile Tariff stating that the very basis for changing the classification i.e. Note 2(c), which was introduced in Chapter 59, has thereafter been deleted w.e.f. 16.03.1995 and therefore, the position as existed prior to introduction of the said note would be restored; (k) With effect from introduction of Note 2(c), the applicant was classifying their said goods under Chapter Heading 5903 like all other manufacturers of the said product and the said classification was retained by the applicant when transition was made from the erstwhile Central Excise legislation to the present Goods and Service Tax regime. (l) The product manufactured by M/s. Madura Coats pvt.ltd. is identical to the goods manufactured by the applicant as also other manufacturers throughout the Country. (m) Subsequent to the pronouncement of the said decision, many of the other manufacturers including M/s. Madura Coats pvt.ltd. as well as the competitors of the applicant have revised their classification from Chapter....
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....(iv) to the Notification No.01/2017-Central Tax(Rate) dated 28.06.2017 reads as under: "(iii) "Tariff item", "sub-heading" "heading" and "Chapter" shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification". Further, the Tariff Act is aligned to the Harmonised System of Nomenclature and it is a settled position of law that the reference to the Explanatory Notes to the HSN code is admissible for answering any question of classification. 16. To begin with, we will be required to refer to the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) for referring to Heading 5903. Heading 5903 appears in Chapter 59 of the said Tariff which reads as "Impregnated, coated, covered or laminated textile fabrics; textile articles of a kind suitable for industrial use" and reads as under: 5903 T....
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....d, covered or sheathed with plastics, of heading 5604. 3. For the purposes of heading 5905, the expression "textile wall coverings" applies to products in rolls, of a width of not less than 45 cm, suitable for wall or ceiling decoration, consisting of a textile surface which has been fixed on a backing or has been treated on the back (impregnated or coated to permit pasting). This heading does not, however, apply to wall coverings consisting of textile flock or dust fixed directly on a backing of paper (heading 4814) or on a textile backing (generally heading 5907). 4. For the purposes of heading 5906, the expression "rubberised textile fabrics" means: (a) textile fabrics impregnated, coated, covered or laminated with rubber: (i) weighing not more than 1,500 g/m2; or (ii) weighing more than 1,500 g/m2 and containing more than 50% by weight of textile material; (b) fabrics made from yarn, strip or the like, impregnated, coated, covered or sheathed with rubber, of heading 5604; and (c) fabrics composed of parallel textile yarns agglomerated with rubber, irrespective of their weight per square metre. This....
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....ining cloth of a kind used in oil presses or the like, of textile material or of human hair; (iv) flat woven textile fabrics with multiple warp or weft, whether or not felted, impregnated or coated, of a kind used in machinery or for other technical purposes; (v) textile fabrics reinforced with metal, of a kind used for technical purposes; (vi) cords, braids and the like, whether or not coated, impregnated or reinforced with metal, of a kind used in industry as packing or lubricating materials; (b) textile articles (other than those of headings 5908 to 5910) of a kind used for technical purposes [for example, textile fabrics and felts, endless or fitted with linking devices, of a kind used in paper making or similar machines (for example, for pulp or asbestos-cement), gaskets, washers, polishing discs and other machinery parts]. 18. Explanatory notes to HSN in respect of Heading 5903 reads as under: This heading covers textile fabrics which have been impregnated, coated, covered or laminated with plastics (e.g., poly(vinyl chloride)). Such products are classified here whatever their weight per m2 and whatever the nature of th....
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...., impregnated to improve their adhesion to rubber, and textile fabrics which are spattered by spraying with visible particles of thermoplastic material and are capable of providing a bond to other fabrics or materials on the application of heat and pressure. This heading also includes textile fabrics made from year, strip or the like, impregnated, coated, covered or sheathed with plastics, of heading 56.04. The fabrics of this heading are used for a variety of purposes including furnishing materials, the manufacture of handbags and travel goods, garments, slippers, toys etc., in book binding, as adhesive tapes, in the manufacture of electrical equipment etc. This heading also excludes: (a) Quilted textile products of heading 58.11 (b) Textile fabrics coated or covered with plastics for use as floor coverings (heading 59.04). (c) Textile fabrics, impregnated or coated, having the character of wall coverings(heading 59.05). (d) Textile fabrics, impregnated, coated, covered or laminated with plastics made up as described in Part(II) of the General Explanatory Note to Section XI. 19. We have thoroughly gone thr....
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....tic would continue to be classified under Heading 5903 by issuing Circular No.433/66/98-CX.6 dated 27.11.1998. This Circular differs from Circular No.5/89 dated 15.06.1989. The difference arises from the application of the provisions of the explanatory notes to the HSN Code. In the said explanatory notes to Chapter 59, textile fabrics which were spattered by spraying with visible particles of thermoplastic material and were capable of providing a bond to other fabrics or materials on the application of heat and pressure were classifiable under Heading 5903. According to Circular No.433/66/98-CX.6 dated 27.11.1998, such classification should be treated as an exception to Chapter Note 2(a)(4) to Chapter 59. 20.1 The Appellate Authority for Advance Ruling, West Bengal in order dated 19.03.2020 in the case of Appeal Case No. 15/WBAAAR/APPEAL/2019 dated 26/09/2019 filed by M/s. Sadguru Seva Paridhan pvt.ltd. stated as under in respect of Circular No.433/66/98-CX.6 dated 27.11.1998 in Para-3(v) to (vii) of the said order: "(v) While striking down the above mentioned Circular No. 433/66/98-CX-6 dated 27/11/1998 as ultra vires and contrary to Section 37B of the Central Excise A....
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....oth of cotton fabrics as submitted by the applicant appears to be similar to the one mentioned hereinabove. Further, according to Circular No.433/66/98-CX-6 dated 27/11/1998, such classification should be treated as an exception to Chapter Note 2(a)(4) to Chapter 59. It is also seen that the applicant has, nowhere in their application or in their written or oral submissions, taken the view that Circular No.433/66/98-CX-6 dated 27/11/1998 has erred in treating fusible interlining cloth as a category of textile fabric that is spattered by spraying with visible particles of thermoplastic material and is capable of providing a bond to other fabrics or materials on the application of heat and pressure. In the absence of any such submission, it is reasonable to agree with the views expressed by CBEC in Circular No. 433/66/98-CX-6 dated 27/11/1998 that fusible interlining cloth is classifiable under Heading 5903. In view of the facts mentioned above, we find that the applicant's product 'fusible interlining cloth of cotton fabric' would undoubtedly be classifiable under Heading 5903 only. We, therefore, conclude that the product 'fusible interlining cloth of cotton fabric' of the applican....
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....29 -- Other fabrics : 5209 31 -- Plain weave : 5209 32 -- 3-thread or 4-thread twill, including cross twill : 5209 39 -- Other fabrics : 5209 41 -- Plain weave : 5209 42 00 -- Denim 5209 43 -- Other fabrics of 3-thread or 4-thread twill, including cross twill : 5209 49 -- Other fabrics : 5209 51 -- Plain weave Lungis 5209 52 -- 3-thread or 4-thread twill, including cross twill : 5209 59 -- Other fabrics : 5210 WOVEN FABRICS OF COTTON, CONTAINING LESS THAN 85% BY WEIGHT OF COTTON, MIXED MAINLY OR SOLELY WITH MAN-MADE FIBRES, WEIGHING NOT MORE THAN 200 G/M2 - Unbleached : 5210 11 -- Plain weave : 5210 19 00 -- Other fabrics m2 - Bleached : 5210 21 -- Plain weave : --- Other : 5210 29 -- Other fabrics : - Dyed : 5210 31 -- Plain weave : 5210 32 -- 3-thread or 4-thread twill, including cross twill : 5210 39 -- Other fabrics : - Of yarns of different colours : 5210 41 -- Plain weave : 5210 49 -- Other fabrics : - Printed : 5210 51 -- Plain weave : ....
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.... and similar terry fabrics(heading 58.02). (d) Gauze(heading 58.03). (e) Woven fabrics for technical uses of heading 59.11. 21.3 Explanatory notes to HSN with respect to Headings 5210 and 5211 read as under: This heading covers woven fabrics as defined in Part(I)(C)of the General Explanatory Note to Section XI. It covers these fabrics provided they are classified as cotton fabrics by the application of Note 2 to Section XI (see also Part (I)(A) of the General Explanatory Notes to Section XI) and provided they meet the following specification: (a) Contain less than 85% by weight of cotton. (b) Are mixed mainly or solely with man-made fabrics. (c) Weigh not more than 200 g/m2. The heading does not include: (a) Bandages, medicated or put up for retail sale (heading 30.05) (b) Fabrics of heading 58.01. (c) Terry toweling and similar terry fabrics(heading 58.02). (d) Gauze(heading 58.03). (e) Woven fabrics for technical uses of heading 59.11. 21.4 Explanatory notes to HSN with respect to Headings 5212 reads as under: This heading covers woven fabrics (as defined in Part(I)(C)of....