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TMI Blog2024 (9) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to as applicant), registered under the AP Goods & Services Tax Act, 2017. 2. Brief Facts of the case: 2.1 M/s TraPlast Industries Pvt Ltd., is a manufacturer of Natural Fiber Composite (hereinafter referred to as 'NFC') material, which is used to manufacture boards, doors and frames. The applicant uses the NFC to manufacture boards, doors and frames of different sizes and measurements. The said NFC is made of natural fibers such as rice husk, rice grass, wheat grass and coconut shell etc., 2.2 The process of manufacture of the NFC boards is known as extrusion and the same is explained as follows: The natural fibers are mixed with PVC of suspension polymer, additives like stabilizers, impact modifiers, UV resistant additives, LUBRICANTS, PROCESSING AIDS arc mixed in a High speed mixer for uniform and homogeneous blend and to remove the unwanted vapours in the powder. This process continuous up to 110 C centigrade and then dropped to a cooling mixture, where it is cooled and taken for the process of: * Extrusion * Sizing * Traction * Cutting * Extrusion: PVC un compounded natural fibres and resin, unlike some other thermoplastics is not suitable for direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is observed that the applicant is under State Administrative jurisdiction i.e, Guntakal Circle, Ananthapur Division. Accordingly, the application has been forwarded to the jurisdictional State Tax authorities to offer their remarks as per Sec. 98 (1) of CGST/APGST Act 2017. 4.2 In response, remarks arc received from the State jurisdictional officer concerned stating that no proceedings lying pending with the issue, for which the advance ruling sought by the applicant. 5. Admissibility of the application: The question raised as above appeared to fall under section 97 (2) (a), (b) and (e) of CGST/SGST Act, 2017, as no proceedings on the same is pending, the application, as advance ruling is admitted and applicant has paid fee through Electronic Cash Ledger (debited CGST 5000/- & SGST 5000/-) vide reference no. DC3705240043071. 6. Applicant's Interpretation of Law 6.1 The applicant is into the manufacture of NFC boards, doors and frames. NFC boards are made from agricultural raw materials particularly any cellulose material from the agricultural product or by product with fiber content are herein referred as Natural Fibres [e.g. Rice Husk, Rice Grass, wheat grass, coconut s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of round wood or wood residues. It may also be produced from other ligneous materials such as fragments obtained from bagasse, bamboo, cereal straw or from flax or hemp shives. Particle board is normally agglomerated by means of an added organic binder, usually thermosetting resin, which generally does not exceed 15% of the weight of the board. 6.7 The chips, particles or other fragments constituting the particle boards of this heading arc usually recognizable at the edges of the board with the naked eye. However, in some cases, microscopic examination may be required to distinguish the particles and fragments from the ligno-cellulosic fibers characterizing the fiber board of heading 44.11. 6.8 The particle boards are usually sanded. Moreover, they may be impregnated with one or more substances not essential for the agglomeration of their constituent materials but which confer on the board an additional property, e.g., impermeability to water, resistance to rot, insect attack, fire or the spread of flame, chemical agencies or electricity, greater density. In the last instance, the impregnating substances attain an important proportion. 6.9 Oriented strand board, which is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt material with Resin. 'Rice Husk' is part of Rice Plant being other cover of the Rice grain, which is used in this case, along with Resin/Glue, Bamboo, Cereal Straw, flax or hemp shieves and the resultant 'boards' would be thus covered by heading 44.06. 6.12 The applicant submitted that as per the decision of the Hon'ble CESTAT in the above case, any product which has a botanical origin and covers an organic substance associated with cellulose in the cell walls specially of the xylem would fall under the category of "other ligneous material whether or not agglomerated with resins or other organic binding substance (other than specified boards)." The term ligneous as per the New Webster's Dictionary of English, means "of or resembling wood." Therefore, the organic material used by the applicant arc the hard protecting coverings of grains of rice/ natural coils/ agricultural products, which comes out of a plant and moreover, the natural fiber board manufactured by the applicant resembles the wood. Hence, based on the ratio of the Hon'ble CESTAT, Bangalore, the NFC board of the applicant would very well fall under the said category and would come under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.16 The PVC used by the applicant has a supplementary function of holding together the ingredients for manufacturing the NFC board and since the PVC is not the dominant ingredient, the said board would fall under Chapter 44. Thus, the exclusion mentioned above especially under point "a" is not all applicable. 6.17 In view of the foregoing the applicant wishes to submit that as per the manufacturing process explained above, it is evident that the major proportion of raw material used is the natural fiber which is nothing but rice husk and coconut shell powder. The other materials such as recycled material & processing addictive and PVC resin are comparatively less in proportion as compared to the natural fiber. The PVC resin, acts as a binding agent of all the other raw materials used. Thus, the major proportion of raw material used for manufacturing the NFC board is the natural fibre i.e. the rice husk and coconut shell powder. The applicant further wish to submit that, based on the HSN explanatory notes and the ratio of the Hon'ble Tribunal (Bangalore), the NFC Board of the applicant would appropriately falls under Chapter 44 and Heading 44.10 of the GST Tariff. As per SI. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. Cement Bonded Particle Board; b. Jute Particle Board; c. Rice Husk Board; d. Glass-fibre Reinforced Gypsum Board (GRG) e. Sisal-fibre Boards; f. Bagasse Board; and g. Cotton Stalk Particle Board h. Particle/fibre board manufactured from agricultural crop residues From the above, it may be observed that Rice Husk Board or fibre board manufactured from agricultural crop residues, irrespective of the Chapter under which the same are classified, are subjected to CGST @ 6% and 6% SGST. 7. Personal Hearing: A personal hearing was conducted on 19.06.2024, which was attended by the authorized representative, Sai Makarandh, Advocate, who has filed Vakalat for authorization on dated 10.04.2024 and reiterated the submissions made in the application and further directed to submit additional information. 8. Additional submission made: 8.1 The applicant was requested to submit the additional information, which were eventually provided on 24th June, 2024, regarding the composition of the NFC boards manufactured and further submitted the samples of the NFC boards. 8.2 M/s. TraPlast Industries Private Limited (GSTIN: 37AAHCT6584E1ZY) regarding the question whether the Natural Fib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding exceptional durability, low maintenance requirements and is resistant to moisture and heat. The process of manufacture of the NFC boards is known as extrusion and the same is explained as follows: The Natural fibres are mixed with PVC of suspension polymer, additives like stabilizers, impact modifiers, UV resistant additives, LUBRICANTS, PROCESSING AIDS are mixed in a High speed mixer for uniform and homogeneous blend and to remove the unwanted vapours in the powder. This process continuous up to HOC centigrade and then dropped to a cooling mixture, where it is cooled and taken for the process of: * Extrusion * Sizing * Traction * Cutting In terms of explanation (iii) and (iv) to Notification No. 1/2017 Central Tax (Rate) dt. 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 classificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard; b. Jute Particle Board; c. Rice Husk Board; d. Glass-fibre Reinforced Gypsum Board (GRG) e. Sisal-fibre Boards; f. Bagasse Board; and g. Cotton Stalk Particle Board h. Particle/fibre board manufactured from agricultural crop residues From the above, it may be observed that Rice Husk Hoard or fibre board manufactured from agricultural crop residues, irrespective of the Chapter under which the same are classified, are subjected to CGST @ 6% and 6 % SGST. In view of the above discussions, we Rule as under: "Natural Fibre Composite (NFC) Board" manufactured by the applicant merits classification under Chapter 441193 of the Customs Tariff and attracts 6 % CGST as per S.No. 92 of Schedule II under Notification 1/2017 Central Tax (Rate) Dt. 28.06.2017 and 6 % SGST under Notification No. ll(2)/CTR/5:32(d 4)/2017 vide G.o. (Ms) No. 62 dated 29.06.2017 as amended In view of the above discussions, we pass an order as follows: RULING (Under Section 98 of Central Goods and Services Tax Act, 2017 and the Andhra Pradesh Goods and Services Tax Act, 2017) Question: Whether Natural Fibre Composite board manufactured by the applicant comprising of Natural Fibre, Calcium carbonate, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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