TaxTMI 
TaxTMI 
2018 (8) TMI 1650
X X X X Extracts X X X X
X X X X Extracts X X X X
....se 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 changing the process parameters, usually in the range of 8 mm to 16 mm. b) Under Stage 2, the web formed in Stage 1 is impregnated wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xplanation - 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 State GST law also. 2) The impugned goods do not merit classification under Chapter 3918 as "Floor covering of plastics whether or not self-adhesive in rolls or in form of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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 is made up of. c) The term 'textile' or 'textile material l is not defined in the GST Act. Therefore, reference can be taken from various Textile Dictionaries and Encyclopaedia to ascertain the meaning of this term. (i) "Encyclopaedia of Textiles, Fibres and Nonwoven Fabrics" edited by Martin Grayson and published by Wiley-Inter science Publication has defined the term 'textile material'. This encyclopaedia is another in the series of carefully selected reprints from the world-renowned Kirk Othmer Encyclopaedia of Chemical Technology, designed to provide specific audiences with articles grouped by a central theme. As a handy desk reference, it incorporates all the original articles related to textiles, fibres, and non-woven fabrics, as well as specialty fibres such as elastom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x 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 Institute is an international organisation governed by a Council representing members throughout the world. It is legally constituted by a Royal Charter, granted in Britain in 1925. The main central functions are the provision of an operational framework and the maintenance of quality, particularly in regard to professional qualifications and the spread of information to members and others. The term 'textile' as per this publication is defined as follows: "A textile was originally a woven fabric, but the terms textile and the plural textiles are now also applied to fibres, filaments and yarns, natural and manufactured and most products for which these are a principal raw material. Note: This definition embraces, for example, fibre based products in the following categories, threads, cords, ropes and braids; woven, knitted and nonwoven fabrics, lace, nets and embroidery, hosiery, knitwear and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an 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. Under note 1 to chapter 54, the term": man-made fibres", when used in chapters 54 and 55 or elsewhere in the Nomenclature, means filaments or staple fibres composed of organic polymers produced by manufacturing processes, either by: (1) Polymerisation of organic monomers or chemical modification of the resulting polymers(see the General Explanatory Note to the Chapter 39) (synthetic fibres); or by (2) Dissolution or chemical treatment of natural organic polymers, or chemical modification of natural organic polymers (artificial fibres). (1) SYNTHETIC FIBRES The basic material for the manufacture of these fibres are generally derived from coal or oil distillation products or from natural gas. The substances produced by polymerisation are either melted or dissolved in a suitable solvent and then extruded through spinnerets(jets) into air or into a suitable coagulating bath where they solidify in cooling or evaporation of the solvent, or they....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. The relevant extract is as follows: 9. Sum and substance of the aforesaid explanation is that it provides definition of the following different terms:- (1) man-made fibres, (2) artificial fibre, (3) synthetic fibre, and (4) man-made textile material, (5) artificial textile material, (6) synthetic textile material. Man-made fibre by this definition includes both artificial fibre and synthetic fibre. Manmade textile material will include therefore, both synthetic material and artificial textile material. Synthetic fibre means staple fibres and filaments of organic polymers produced by manufacturing process by polymerisation of organic monomers, such as polyamides, polyesters, polyurethanes or polyvinyl derivatives. Similarly, synthetic textile material will also be textile materials of organic polymers produced by manufacturing process by polymerisation of organic monomers, such as polyamides, polyesters, polyurethanes or polyvinyl derivatives. In similar fashion artificial fibre would be....
X X X X Extracts X X X X
X X X X Extracts X X X X
......... Of Silk m2 5705 00 19 ......Other m2 ......Durries: 5705 00 21 ......Durries Cotton m2 5705 00 22 .......Durries of man-made fibres m2 5705 00 23 .......Durries of wool m2 5705 00 24 .......... Cotton Durries of handloom (including Chindi Durries, Cotton Chenille Durries, Rag Rug Durrie, Printed Durrries, Druggets) m2 5705 00 29 ........... Others Of Jute: m2 5705 00 31 ............Of blended Jute m2 5705 00 32 .......... Of coir jute m2 5705 00 39 ...........Other ..........Carpets, carpeting, rugs, mats and mattings: 5705 00 41 ..........knitted m2 5705 00 42 Mats and mattings including Bath Mats, where cotton predominates by weight, of Handloom, Cotton Rugs of Handloom m2 5705 00 90 ........... Others m2 Also, the relevant extract of HSN explanatory notes for chapter 5705 is reproduced below: 5705-other carpets and other textile floor coverings, whether or not made up. This heading covers carpets and textile floor coverings, other than those covered by a more specific heading of this Chapter. The heading includes: (1) Bonded pile carpets, where ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eedles and hooks insert textile yarn into a pre-existing backing (usually a woven fabric or a nonwoven) thus producing loops, or, if the needles and hooks are combined with a cutting device, tufts. The yarn forming the pile are then normally fixed by a coating of rubber or plastic. Usually before the coating is allowed to dry it is either covered by a secondary backing of loosely woven textile material, e.g., jute, or by foamed rubber. Chapter 5703 covers textile floor coverings but made with tufting technology. It is submitted that artificial turf imported by the sister concern is also made up of PVC fibres but is sewed on the backing fabric with the help of specialized multi-needle, the product is classifiable under chapter heading 5703. This shows that the products made by PVC fibres are being classified under chapter 5703 by the customs authority. However, in the case of product under dispute in the present case, there is no tufting carried out. In the present case, the PVC fibres are extruded and the pile is then bonded on to the backing material with the help of adhesives. Thus, the product is classifiable under chapter heading 5705. (c) The appellant further relies upon t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Lading but the same has not been submitted. No explanation as to what is the difference between the two types of goods priced at US $ 2.37 and 2.85 per sq. yard respectively has been submitted. No correspondence with the supplier indicating as to what they were looking for and what they have ordered has been submitted. No explanation regarding the end use of the goods has been submitted. The goods are stated to be for Tennis, hockey and other games. No purchase order, trade enquiry from intended customers has been submitted. It is difficult to comprehend that goods if intended to be used for a specific technical use such as surface for a particular sport would be ordered for random quantities, at random prices without reference to any specifications." 6. We find that no material has been brought on record to controvert the above findings. Neither the Appellants have furnished the catalogue of the foreign supplier to indicate that the impugned goods is to be used for any sport nor any technical evidence to show that the impugned goods is not carpet/floorings. No doubt the onus is on the Revenue to determine the classification of any product, but the appellants can also not claim a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a tufted product, the same was classified under chapter 5703. Therefore, applying the ratio of the above judgment, the impugned product is also classifiable under chapter 5705. d) The appellant had contended in the advance ruling application that the product is classifiable under chapter 5705 as the exposed surface is textile material. However, the authority has relied upon note I(h) to the Section Xl to state that the impugned product is impregnated, coated, covered or laminated with plastic or articles thereof, of Chapter 39 and thus will not fall under chapter 5705. The same is reproduced below: (h) woven, knitted or crocheted fabrics, felt or nonwovens, impregnated, coated, covered or laminated with plastic or articles thereof, of Chapter 39; It is submitted that the authority has mis-understood the manufacturing process of the appellant. The extruded PVC fibres require on the conveyor belt are treated with liquid PVC which acts as bonding material to bond the fibres amongst themselves as well as the substrate. The function of liquid PVC is only as an adhesive. Such use of adhesive will not make the product to be treated as impregnated, coated, covered or laminated with pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om sized or coated materials where the material is applied to the surface and these interstices are not completely filled". The Id. Sr. Counsel has referred to a technical book "Fibre Glass" by J. Gilbert Mohr and William P. Rowe, published by Van Nostrand Reinhold Company, according to which "Raw Glass Fibre in any form, blown bulk or continuous, is harsh and easily fragmentized. This is because self abrasion induced by any kind of molten or rubbering action causes surface defects. These in turn reduce flexural, tensile, and other mechanical strength parameters. Consequently, a family of various types of "binders" for mineral and glass wool product has been developed. Applied from 5 to 25 wt% depending upon application, binders are based mostly phenol - formaldehyde resins for bonding." 11. We find that the Collector (Appeals) considered all the material on record including the opinions rendered by (i) The Bombay Textile Research Association, (ii) The Silk & Art Silk Mills' Research Association, and (iii) Wool Research Association according to whom the impugned product is not impregnated, coated, covered or laminated with plastic or varnish but bonded with adhesive by sprayin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f note 1(h) is completely erroneous. 4) Without prejudice to the above if the product equally merits classification under 2 different chapter headings, as per the interpretative rules, the chapter occurring later will apply. It is an accepted fact that the impugned product is made up of PVC. PVC is classifiable under chapter 3904. If the argument of the authority is accepted, PVC will be covered under the definition of plastic as provided by chapter notes of HSN explanatory notes and thus floor covering of PVC are classifiable under chapter 3918. Further, as submitted above, the PVC fibres are a textile material as asserted by HSN explanatory notes as well as the authorities have themselves admitted this in their order. Further, the description for manufacture of product in the HSN explanatory notes of chapter 57 clearly matches with the description of manufacturing the impugned product. Therefore, the product also merits classification under chapter 5705. As per general rules of interpretation, a product shall be classified under the heading which provides the most specific description. In case this is not possible and the goods equally merit classification under 2 different ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3918, and thus the order of AAR classifying the same under 3918 should be set aside. They pleaded that their arguments were not covered in the findings of the AAR so they have come before the Appellate authority with same grounds and arguments. They further submitted that they had no dispute about classification of PVC flooring under HSN 3918 but their product being different from PVC flooring should not be classified under HSN 3918. They argued that coir mat attracts GST @ 12%, similar sports material attracts GST @ 12% so their product should also attract GST @12% as the use is same. They explained in detail, through various definitions, that PVC fibres are textile materials which are excluded from Ch 39 by virtue of Note 2 to Chapter 39. They also produced some sample of PVC carpets being imported by their sister concern by classifying the same under HSN 5703 and produced copy of Bill of Entry in this respect. The Appellant claimed that their product is covered under CTH 57050090 as 'Others' under Customs Tariff. They reiterated the judgments cited by them in their written submission in support of their claim that semi colon used in entry no. 146 of schedule Il of Notif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p" 5702: Carpets and other textile floor coverings, woven, not tufted or flocked, whether or not made up, including "Kelem", 'Schumacks", "Karamanie" and similar hand-woven rugs; 5703: Carpets and other textile floor coverings, tufted, whether or not made up; 5704: Carpets and other textile floor coverings, of felt, not tufted or flocked, whether or not made up; and finally, 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 Handloom, Cotton Rugs of handloom Thus it can be seen that the appellant would have us classify the product under the entry 'other carpets and other textile floorings', i.e. other than those falling under headings 5701 to 5704; whereas the AAR has preferred the classification as 'floor coverings of plastics'. 12. In the absence of any definition for the terms in the tariff, let us look at the meaning of 'floor coverings' and 'carpets' as it is understood in common parlance. For instance, (i) The Encyclopaedia Britannica defines floor coverings and carpets1 as below: Floor covering material made from ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is often used interchangeably with the term "rug", although the term "carpet" can be applied to a floor covering that covers an entire house, whereas a "rug" is generally no bigger than a single room, and traditionally does not even span from one wall to another, and is typically not even attached as part of the floor. (iii) As per the Collins Dictionary3, Floor Covering is defined as zany material used to cover the floor of a room, such as a carpet or tiles' In view of the above definitions, it is clear that floor coverings is a wide term and includes carpets, mats, rugs used to cover a floor area. Therefore, it will have to be the material or form of the floor covering which will decide the correct classification. 13. With this in mind, let us examine the claim of Appellant for classification of the said goods under HSN 5705. 13.1 At the outset we must place on record that 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 ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Designates the constructed fabric including woven, knitted and non-woven structures as well as lace and crochet goods.3. Descriptive of processes, organisations, personnel associated with the manufacture of products from fibres or yarns. Textile Material-- An inclusive term for fibres, yarns, fabrics and products that retain relatively the same tensile strength, flexibility and properties of the original fibres. From the above definitions, it is inferred that textile refers to fabric of any nature and textile material includes fibre, filaments and yarns which are primarily used to manufacture textiles, or fabric. 13.5 Coming to the goods in question, the exposed surface of the article does not contain fabric or fibres, filaments or yarns, but is a web of PVC made from a moulding process in which T-shaped monofilaments result in the intermediate process. It is not the case of the appellants that that they manufactured the non-woven product (PVC web) by use of monofilament yarns. There are no identifiable fibres, filaments or yarns in the exposed surface of their product and the web like structure made from 100% PVC therefore does not qualify for the textile materials as specifi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al in their support that use of semi colon between two entries makes the sentences separate and they have to be read disjunctively. We have observed in above paras that the goods in question are neither carpets nor textile floor coverings but are PVC floor coverings and thus the claim of importer for first part of entry does not hold ground. Thus, even if their argument on semi colon is accepted, the goods in question are not covered under the said entry no. 146 of Schedule II. 17. As regards two Tribunal judgments cited by the appellant for their argument that PVC fibres are classifiable as Textile material, we observe that classification of PVC fibres as textile material is not under dispute before us. The issue of dispute is the classification of material used in the exposed surface of the floor coverings/mats as textile material which we have discussed above that the material used in the exposed surface of the goods in question is PVC web and not PVC fibres. 18. The appellant has also relied on a judgment of Tribunal wherein it has been ruled that applying bonding material does not make the product impregnated, coated, covered or laminated. It appears that the appellant wants....