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2019 (5) TMI 1213 - AAAR - GSTClassification of goods - Bags made of Cotton - whether the Cotton Bags manufactured by the appellant and classified by the Original Authority under CTH 42022220 is legal and proper or requires modification? - challenge to AAR decision. The first contention of the Appellant is that Chapter 42 of Customs Tariff covers only articles of leather or composition leather or articles which are characteristically of leather trade - HELD THAT:- Classification of goods for the purposes of GST is based on the entries in the First Schedule to the custom Tariff Act 1975. In terms of explanation (iii) and (iv) to Notification No. 1/2017 - Central Tax (Rate) dated: 28-06-2017, tariff heading, 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 and the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall be applied for the interpretation and classification of goods. ‘Shopping bags of textile material’ is specified in the Chapter Heading 4202 itself. Further, those shopping bags with outer surface of textile material is classified under CTH 4202 22 and thereupon depending on the constituent material, the bags are sub-classified. Applying the Interpretative Rule 1, we find that Chapter heading 4202 above, specifically classifies Shopping Bags of cotton with outer surface of textile material - In the case at hand the bags are ‘shopping bags’ made of Cotton having an outer and inner surface made of cotton, a textile material and merits classification under CTH 4202 22 20. Further, the Customs Tariff is based on the Harmonious System of Nomenclature(HSN) which is a dependable guide for interpreting the customs tariff. In as much as it is clear that Chapter 42 is not restricted only to article of leather and Tariff Heading specifically covers ‘Shopping bags’ of cotton, with outer surface of textile materials, we do not find merit in the contention of the appellant that articles of leather or characteristically of leather trade is alone classified under Chapter 42. The next contention of the appellant is that the observation of the AAR is not based on any reasoning supported by Chapter Notes or Section Notes or any interpretative rules and In the absence of any such distinction recognized in the chapter headings, the observation of the AAR is totally without the authority of law - HELD THAT:- The appellant has not disputed the fact that the bags manufactured by them are used as a carry bag and not as packing bags. The difference between the bags covered under the CTH 6305 & the bags under consideration and as to how these bags do not fall under CTH 6305 is also brought out in Para 5.2 of the Ruling. In as much as the original authority has reasoned the decision taken by them, we do not find any infirmity and conclude the contention of the appellant is not supported. The final contention of the Appellant is based on the clarification issued by CBIC vide Circular No. 80/54/2018 dated 31.12.2018 on the issue of classification and applicable GST rates on Polypropylene Woven and Non-Woven Bags and Polypropylene Woven and Non-Woven Bags laminated with BOPP - HELD THAT:- The Circular mentioned is based on the deliberations in the 31st Meeting of the GST Council. The deliberations related to the clarification as to the classification of Polypropylene Woven and Non-Woven Bags and PP Woven and PP Woven and Non-Woven Bags laminated with BOPP(Proposal SI.No. 9 of Part B of Annexure I of the Agenda) - the clarification by the Board in the context of the adoption of HS classification in Customs and the duty drawback clearly provides that the bags (handbags/ shopping bags) made of cotton are squarely classifiable under Chapter heading 4202 of the Customs Tariff and not under Chapter 63. The appellant has stated that the bags supplied by them are in the nature of carry bags/re-usable shopping bags made of cotton, which is a specific entry under tariff heading 42.02. The fact being so, there are no reason to interfere with the ruling of the Original Authority on the Classification and applicable rate of tax payable on such cotton bags. Ruling of AAR upheld - Appeal dismissed.
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