TMI Blog2018 (8) TMI 1650X X X X Extracts X X X X X X X X Extracts X X X X ..... is formed in roll form. In Stage Two, this web is impregnated with a lamination of PVC. These facts are not disputed. There also no dispute that the product is made of 100% plastic. To avoid classification disputes under the GST regime, the Customs Tariff has been adopted for descriptive classification of goods under GST. Further, in case of any doubt, and for the exact classification of any goods, reference needs inevitably to be made to the Section and Chapter Notes provided therein, as has been done in this case by both the appellants and the Maharashtra AAR. It is seen that Chapter 57 of the HSN falls under Section Xl of the Customs Tariff. Section Note 1(h) of Section Xl, relied upon by the AAR, excludes interalia non-wovens impregnated/coated with plastics. In their written submissions the appellant has claimed the said goods to be 'Non-woven' and impregnated/coated (as per their manufacturing process). Thus in view of Note 1(h) of Section Xl, the said goods are apparently excluded outright from this section. If the said goods are excluded from the section Xl, their classification under any Chapter under the Section would also be ruled out - The exposed surface of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to as the Appellant ) against the Advance Ruling No. GST-ARA-17/2017/B-23 dtd. 02.04.2018. Brief Fact of the Case A) M/S National Plastics is a company engaged in the manufacture of floor mats / (floor coverings) made of (PVC textiles) PVC, known as PVC Carpet Mats or Floor coverings or Textile floor covering made up of PVC. B) Manufacturing of the same is undertaken in two stages. Stage 1 being PVC Monofilament production and carpet piling process and stage 2 being Web-lamination and backing process. The prime raw material being used for the aforesaid product is PVC (Poly Vinyl Chloride). The stages of manufacture are as follows: a) Under Stage 1, PVC monofilament yarn with decitex ranging from 1200 to 2800 and filament diameter range 0.38 to 0.75 mm is extruded through a perforated die plate using T-die extrusion. Extrusion is done through 3 to 4 parallel rows along the entire width of T-die and the vertically extruded yarn immediately falls on a water bed to form a non-woven carpet pile. Also, referred to as PVC web, non-woven carpet pile is taken up in a horizontal direction on a roller and wound up in rolls. Pile height of the carpet can be varied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll depend on the schedule of the notification under which the goods are being classified. Further, Notification No. 1/2017-CGST specifically provide that: Explanation - For the purposes of this Schedule, - (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, (iv) The rules for the interpretation of the First Schedule to the Custom Tariff Act, 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. Thus, for the purpose of GST, Classification of goods under any tariff item/ subheading / heading/ chapter shall be done using the general rules of interpretation of the first Schedule of the Customs Tariff Act, 1975 including the Section and Chapter Notes and the General Explanatory Notes to the HSN of the First Schedule of the CTA, 1975. It is submitted that the above explanation is also part of the notification 01/2017-State Tax (Rate) and thus the above ratio will apply to notifications issued under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t some subsequent stage, of being formed under external influence (usually heat and pressure, if necessary with a solvent or plasticiser) by moulding, casting, extruding, rolling or other process into shapes which are retained on the removal of the external influence. Throughout this Schedule any reference to plastics also includes vulcanised fibre. The expression, however, does not apply to materials regarded as textile materials of Section Xl. Further, as per clause no.(p) of the Note 2 to chapter 39, the goods of section XI (textiles or textile articles) i.e. Chapter 50 to 63 will not be covered under this chapter. The relevant extract of the same is reproduced as follow: - This Chapter does not cover: (a) . (b) . . . (p) goods of Section Xl (textiles and textile articles); (q) Thus, on combined reading of note 1 and 2 of the chapter 39, the term plastic for the purpose of chapter 39 will not cover any material which is classified as textile material under section XI of the Tariff. Therefore, the classification can be finalized only after deciding the nature of the material of which the impugned product i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... polymers. Cellulose (gv) and proteins (gv) are the only important natural polymers in naturally occurring fibres (see Biopolymers). Table 1. Classification of Textiles Fibres Naturally occurring fibres vegetable (based on cellulose), cotton, linen, hemp, jute, namieanimal (based on proteins), wood, mohair, vicuna, other animal hairs, silk mineral, asbestos Man-made fibres based on natural organic polymers rayon, regenerated cellulose acelate, partially acetylated cellulose derivative azlon, regenerated protein based on synthetic organic polymers acrylic, based on polyacrylonitrile (also modacrylic) aramid, based on aromatic polyamides nylon, based on aliphatic polyamides olefin, based on polyolefins (polypropylene) polyester, based on polyester of an aromatic dicarboxylic and a dihydricalcohol spandex based on segmented polyurethane vinyon based on polyvinyl chloride based on inorganic substances glass metallic ceramic (ii) Further, Textile Terms and Definitions, Tenth Edition published by the Textile Institute has also defined the term 'textile'. The Textile Institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which are based on polyvinyl chloride i.e. PVC. ii) Further, the Textile Terms and Definitions Tenth Edition published by the textile institute has an entire flow chart of classification of textile fibres given. From the flow chart, it is evident that textile fibres can be classified mainly into natural or manmade fibres. Further, manmade fibres include fibres made from synthetic polymer which further includes polyvinyl derivatives. Further, polyvinyl derivatives include chloro-fibre which are manufactured from PVC. Therefore, textile fibres includes fibres of PVC. iii) Further, the HSN explanatory note to Chapter Heading 5603 are reproduced below: A nonwoven is a sheet or web of predominately textile fibres oriented directionally or randomly and bonded. These fibres may be of natural or manmade origin. They may be staple fibres (natural or manmade) or man-made filaments or be formed in situ. Thus, textile fibres can be of natural or man-made origin. As per HSN explanatory notes to chapter 54, man-made fibres are defined as follows: The General Explanatory Note to Section Xl should be taken into account in reading the Explanatory Note to this Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen thus, there arises no occasion for us to discuss the Heading 5705 which is claimed as being applicable. The case laws being buttressed in respect of the applicability of the Heading 5705 also need no discussion as to their applicability or otherwise. However, we would like to observe herein that we are not at all disagreeable to the point that there are man-made textiles but the same are not required to be referred to here in view of the impugned product being clearly classifiable under Chapter 39 as per discussions held herein above. Thus, once it has been accepted that the impugned goods are made up of manmade textile, it will get covered under section Xl of the tariff and thus will be excluded from the scope of chapter 39. Therefore, in view of the above, it is evident that the material is a textile material and thus excluded from the scope of 3918 and thus the classification suggested by the authority is not correct. v) The appellant further relies on the judgment in the case of Atlantic Spinning and Weaving Mills Ltd 1999 (111) ELT 121 (T) = 1999 (2) TMI 189 - CEGAT, NEW DELHI wherein the tribunal has discussed the meaning of synthetic textile material. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supports the view of the appellant that PVC fibres are textile materials and thus will not be covered under chapter heading 3918. 3) The product is rightly classifiable under chapter 5705: a) In our view, Chapter Heading 5705 of the Customs Tariff, the heading of which reads as other carpets and other textile floor coverings, whether or not made up is the relevant entry in this case. The relevant entry no 146 of Schedule Il under notification 1/2017 is reproduced below: 146. 5705 Other carpets and other textile floor coverings, whether or not made up; such as Mats and mattings including Bath Mats where cotton predominates by weight, of Hand loom, Cotton Rugs of handloom The relevant extract of customs tariff is as follows: Tariff Item Description of goods Unit (1) (2) (3) 5705 Other carpets and other textile floor coverings whether or not made up: m 2 5705 00 Other carpe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he latter case for separation into two carpets. (2). (3). (4) .. .. In the present case, as discussed in facts of the case, the pile of PVC fibres is bonded to the liquid PVC layer on a conveyer belt which forms the substrate of the product. The PVC fibres are bonded to each other by way of adding liquid PVC coating which functions as an adhesive in this case. Thus, it can be seen that the present product clearly falls under the explanation given in the HSN explanatory notes and therefore will be covered under chapter heading 5705. Further, the Chapter note to chapter heading 57 reads as follows: For the purposes of this Chapter, the term 'carpets and other textile floor coverings means floor coverings in which textile materials serve as the exposed surface of the article when in use and includes articles having the characteristics of textile floor coverings but intended for use for other purposes.' It can be seen from the chapter note that Chapter 57 covers those carpets and floor coverings in which textile material serves as the exposed surface of the article. Thus, from the above, it is evident that PVC fibres are covered un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Customs Tariff Act as claimed by the assessee or under sub-heading 5703.30 of the tariff as floor covering. The product was classified as floor covering under heading 5703 by the tribunal. The relevant extract is as follows: 5. As per Explanatory Notes of HSN, Chapter 95 also includes equipment for indoor or outdoor games, appliances and apparatus for sports, gymnastic or athletic. The appellant except claiming the impugned product to be Astra turf for sports has not adduced any material on record to show that the impugned goods are meant for any sports. We observe that the Adjudicating Authority has given the following findings in the Adjudication Order: l have seen the sample. A perusal of samples, however, indicate that goods are nothing but tufted carpet/floor coverings covered under Custom Tariff Heading 57.03 as described in HSN explanatory notes i.e. these have textile yarn/strip inserted into a pre-existing backing, thus producing loops. The yarn/strips forming the pile are fixed with some coating of rubber/plastic or other adhesive and are covered by a secondary baking of loosely woven textile material of manmade fibres. The goods have the characteristic st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sified under 9506. 99. The learned SDR has rightly pointed out that the question of classification did not arise in the said matter and the Commissioner (Appeals) only decided the issue as to whether the import was allowed under OGL or it was restricted one requiring import licence. Further as observed by the Adjudicating Authority goods to Sidhartha International were supplied by a different supplier abroad and neither the catalogue nor sample of those goods were produced, in absence of which it cannot be said that the goods imported by them were same which are impugned in the present matter. We also observe that Commissioner (Appeals) has, in the impugned order, given his findings that as per the composition sheet produced by the Appellants, the fibre used is 100% UV Olefin; primary and secondary backing is of woven polypropylene. Commissioner (Appeals) has referred to The World Book Multimedia Encyclopaedia , according to which Olefin floor coverings are widely used because they are strong and they resist moisture. The Appellants have not produced any material in support of their claim that the imported goods did not have a thread of textile exposed to the surface. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the non-woven will not render it a product which is impregnated, coated, covered or laminated. The relevant extract is as follows: 9. The process of manufacture, as given in the impugned order is as under : The raw materials (collectively known as batch materials) are mixed in certain required proportion to achieve the Glass composition needed to manufacture Glass woo/ Mats. These batch materials are fed in refractory furnace, Which is operated at a temperature of around 1400 0 C. The molten glass then flows through fore hearth into a fiberize and gets fiberized through the holes of a component known as spinner rotating at a high speed. These fibres while falling on the conveyor below are sprayed with bonding chemicals (mixture of aqueous solution of phenol formaldehyde Resin and other chemicals) and carried through a curing oven where they are formed into a bonded/nonwoven mat. At the end of the conveyor, this mat is wound into rolls or cut into slabs and packed in polythene lined hessian bags for transfer to Bonded Store Room. This product is known as Resin Bonded Glass Wool Mats 10. The Revenue has not disputed the process of manufacture and has contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of impregnated fabrics the interstices are completely filled whereas this is not the case with bonded fabrics To find out the true character of fabric, it is necessary that the fabric has to be subjected to certain test as highlighted by the Bombay Textile Research Association in their report dated 20-12-1992 in which they stated that they have subjected the fabrics to examination under SEM (Scanning Electron Microscope) micrographs of longiindenal view (5218 and 5219) and cross sectional view (5230) of fibres. It gives cross sectional view of the fibres. In their report, they have stated that bonding material has not penetrated through the glass fibres, and it is only superficially spread on the surface of the fibre. The Revenue has not rebutted the findings reached by the Collector (Appeals) in the impugned order by producing any technical literature. The Chief Chemist has also not cited any technical authority in support of his answer that the definition of the term impregnated fabric as defined by the American Society for Testing of Materials regarding interstices between the yarns being completely filed up, is not application to a nonwoven felt. In U.P. TwigaFibre Gla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ma facie, classifiable under two or more headings, classification shall be affected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable. (c) When goods cannot be classified by reference to (a) or (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. Thus, applying the above rule, even if the argument of the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covers only goods where cotton is predominant inspite of the semicolon because the use of word 'such as after semi colon is not restrictive but inclusive of the goods mentioned before and after the use of these words. Since, there is no cotton in the goods in question, same does not merit classification under entry no. 146. DISCUSSION AND FINDINGS 9. We have heard both the parties and also seen the sample(s) of their product produced by the Appellant. The issue before us is to decide whether the goods in questionare classifiable under Tariff Item 3918 as held by AAR, or 5705 as claimed by the Appellant. 10. In the facts of the case of their appeal, the appellants have introduced themselves as a company engaged in the manufacture of floor mats/ (floor coverings) made of (PVC textiles) PVC, known as PVC Carpet Mats or Floor coverings or textile floor coverings of PVC. They also advertise their product on their website as 'Mats' having sleek carpet like finish. On perusal of the sample produced before us by the Appellant, we observe that it is in the form of a plastic web on exposed surface and with a sheet-like backing of plastic. The manufacturing proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l base surface of a room to provide comfort, durability, safety, and decoration. Such materials include both handmade and machine-made rugs and carpets and smooth-surfaced floor coverings. Although the words carpet and rug are frequently used interchangeably in referring to textile floor coverings, in modern usage carpets are fastened to the floor and usually cover an entire floor area, and rugs are not fastened and rarely cover the entire floor. Rug and carpet any decorative textile normally made of a thick material and now usually intended as a floor covering. Until the 19th century the word carpet was used for any cover, such as a table cover or wall hanging; since the introduction of machine-made products, however, it has been used almost exclusively for a floor covering. Both in Great Britain and in the United States the word rug is often used for a partial floor covering as distinguished from carpet, which frequently is tacked down to the floor and usually covers it wall-to-wall. In reference to handmade carpets, however, the names rug and carpet are used interchangeably. (ii) Wikipedia defines the terms as below 2 . Flooring is the genera/ term for a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Maharashtra AAR. 13.2 In this context it is seen that Chapter 57 of the HSN falls under Section Xl of the Customs Tariff. Section Note 1(h) of Section Xl, relied upon by the AAR, excludes interalia non-wovens impregnated/coated with plastics. In their written submissions the appellant has claimed the said goods to be 'Non-woven' and impregnated/coated (as per their manufacturing process). Thus in view of Note 1(h) of Section Xl, the said goods are apparently excluded outright from this section. If the said goods are excluded from the section Xl, their classification under any Chapter under the Section would also be ruled out. 13.3 The Appellant, however, have placed their counter claim - that their goods are in the nature of 'textiles', and are therefore excluded from Chapter 39 by virtue of Chapter Note 2(p) of the said Chapter. They have claimed that the exposed surface in their goods is textile materials and hence the same are covered under definition of 'carpets and other textile floor coverings' in terms of the Note 1 to Chapter 57, which states that, For the purposes of this chapter, the term carpets and other textile floor covering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1 to Chapter 57. 14. As regards the Bill of Entry produced by the appellant during hearing for goods imported by their sister concern under CTH 5703, it is observed that neither CTH 5703 is claimed by the appellant nor the detail facts of the goods mentioned in the BE like test report etc. are presented before us to arrive at a conclusion that the goods imported under the said BE are similar to that of the goods in question, excepting the difference of process as claimed by the appellant. Therefore, the said Bill of Entry is of no help to the appellant. The Explanatory notes cited by the appellant for CTH 5703 clearly distinguish the product under import and the goods in question on the ground that under 5703, the backing of carpet is of fabric either woven or non woven and textile yarn is inserted into it, thus producing loops. In the instant case, there is no fabric, woven or non woven and no textile yarn. There is one PVC web obtained by moulding process which is then impregnated with PVC which acts as its base. Therefore, even in absence of relevant details about the product covered under the cited Bill of Entry, the goods in question can not be claimed to be similar to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to claim that their goods are not impregnated, coated, covered or laminated to escape the exclusion clause provided under Section XI vide Note 1(h). But this claim is against their manufacturing process which states that under stage 2, the web formed in Stage 1 is impregnated with a lamination of clear coat of liquid PVC . 19. As regards the argument of the appellant that if product equally merits classification under 2 different chapter headings, as per interpretative rules, the chapter occurring later will apply, we observe that there is no such case of merit classification of the said goods under 2 different chapter headings equally. Instead, the said goods are specifically classifiable under 3918 as PVC floor coverings, and invoking Rule 3 is not necessary when classification can be decided under Rule 1 itself. 20. In view of the above discussion, we hold that the PVC Mats manufactured by the appellant, a sample of which was produced before us, are specifically covered under HSN 3918 as Floor Coverings of PVC in terms of Rule 1 of the Rules of Interpretation of Customs Tariff read with Note 1(h) to Section Xl and Note 1 to Chapter 57. Accordingly, we pass the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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