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HIGH COURT OF DELHI
JUDGMENT
ASSOCIATION OF TECHNICAL TEXTILES MANUFACTURERS AND PROCESSORS & ANR. ..... Petitioners
Through: Mr. V. Lakshmikumaran and Mr. Kunal Kapoor, Advs.
Through: Ms. Shubhra Parashar, Mr. Virendra Pratap Singh Charak, Mr. Yash Hari Dixit, Mr. Pushpender Singh Charak and
Mr. Jitendra Kumar Tripathi (GP), Advs. for UOI/R-1.
Mr. Akash Vajpai and Ms. Shweta Shandilya, Advs. for R-
2 and R-3
HON'BLE MR. JUSTICE DHARMESH SHARMA
1. The writ petition has been preferred seeking the following reliefs:- “a) Issue a writ of certiorari, or any order or direction in the nature thereof, quashing paragraphs 7.1, 7.2, 7.[3] and 7.[4] of the Circular No. 80/54/2018-GST dated 31.12.2018 issued by the Tax Research Unit of the Respondent No.1; b) Issue any other suitable writ, order or direction, which this Hon'ble Court may deem fit and proper in the facts and circumstances of the present case; c) Pass such further orders/writs and other reliefs as the nature and circumstances of the case may require;”
2. The first petitioner, which is an association of technical textiles manufacturers and the second petitioner which is a member of the said association, are principally aggrieved by the Circular dated 31 December 2018 issued by the Tax Research Unit[1] constituted under the first respondent, and to the extent that it purports to clarify that polypropylene woven and non-woven bags including those laminated with Biaxially Oriented Polypropylene[2] are liable to be classified as falling under Chapter 39 and more particularly Tariff Heading 3923 forming part of the First Schedule to the Customs Tariff Act, 1975[3]. The dispute essentially related to a question of classification of polypropylene woven and non-woven bags under the Harmonized System of Nomenclature[4].
3. The TRU has, on due consideration of the aforesaid issue, clarified that those articles would be classifiable as „plastic bags‟ under Tariff Heading 3923. The petitioners are aggrieved by the aforesaid Circular, since it contends that polypropylene woven or nonwoven bags are made out of textiles and thus cannot be equated with TRU BOPP 1975 Act plastics, which form the subject matter of Chapter 39 of the First Schedule to the 1975 Act.
4. It is also their case that polypropylene non-woven fabric is a textile, which is classifiable under Tariff Heading 5603 comprised in Chapter 56 titled as “Wadding, Felt and Nonwovens; Special Yarns; Twine, Cordage, Ropes and Cables and Articles Thereof”. Quite apart from the controversy with respect to classification, and which we shall consider in the subsequent parts of this decision, a challenge is also raised to the authority and jurisdiction of the TRU to issue such a clarification in the first place.
5. Appearing for the petitioners, Mr. Lakshmikumaran, learned counsel drew our attention to Section 168 of the Central Goods & Services Tax Act, 2017[5], and which reads as follows:-
CGST Act
6. It was submitted that as would be evident from the above provision, the power to issue orders, instructions or directions to Central Tax Officers stands vested exclusively in the Central Board of Indirect Taxes and Customs[6]. It was in that backdrop that Mr. Lakshmikumaran contended that no power stands conferred upon the TRU. According to learned counsel, even if a clarification pertaining to classification were to be issued under the CGST Act, the same could have been achieved only by way of a directive issued by the Board and none other.
7. We note that learned counsels for the respondents could not draw our attention to any provision of the CGST Act, in terms of which the TRU could be said to have been clothed with the authority or jurisdiction to render a clarification with respect to classification of goods and articles. That power clearly appears to stand conferred upon the Board exclusively. We are thus of the considered opinion that no authority vested in the TRU to issue the clarification impugned before us.
8. While this would have been sufficient to dispose of the writ petition on this short ground alone, we proceed further in light of the detailed submissions which were addressed by respective counsels and related to the classification of the article itself.
9. Mr. Lakshmikumaran drew our attention to the title of Chapter 39 of the First Schedule to the 1975 Act and which deals with “Plastics and Articles Thereof”. Learned counsel laid emphasis on the Board Notes 1 and 2 thereof and which purports to exclude textile materials which would otherwise fall within the ambit of Section XI of the First Schedule to the 1975 Act. Notes 1 and 2 of the said Chapter are extracted hereinbelow:- “CHAPTER 39 Plastics and Articles Thereof NOTES
1. Throughout this Schedule, the expression “plastics” means those materials of headings 3901 to 3914 which are or have been capable, either at the moment of polymerisation or at 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 fiber. The expression, however, does not apply to materials regarded as textile materials of Section XI.
2. This Chapter does not cover: (a) lubricating preparations of heading 2710 or 3403; (b) waxes of heading 2712 or 3404;
(c) separate chemically defined organic compounds (Chapter 29);
(d) heparin or its salts (heading 3001);
(e) solutions (other than collodions) consisting of any of the products specified in headings 3901 to 3913 in volatile organic solvents when the weight of the solvent exceeds 50% of the weight of the solution (heading3208); stamping foils of heading 3212; (f) organic surface active agents or preparation of heading 3402; (g) run gums or ester gums (heading 3806); (h) prepared additives for mineral oils (including gasoline) or for other liquids used for the same purposes as mineral oils (heading 3811); (ij) prepared hydraulic fluids based on polyglycols, silicones or other polymers of Chapter 39 (heading 3819); (k) diagnostic or laboratory reagents on a backing of plastics (heading3822);
(l) synthetic rubber, as defined for the purpose of Chapter 40, or articles thereof;
(m) saddlery or harness (heading 4201) or trunks, suit--cases, hand—bags or other containers of heading 4202; (n) plaits, wickerwork or other articles of Chapter 46; (o) wall coverings of heading 4814; (p) goods of Section XI (textiles and textile articles); (q) articles of Section XII (for example, footwear, headgear, umbrellas, sun umbrellas, walking-sticks, whips, riding-crops or parts thereof); (r) imitation jewellery of heading 7117; (s) articles of Section XVI (machines and mechanical or electrical appliances); (t) parts of aircraft or vehicles of Section XVII; (u) articles of Chapter 90 (for example, optical elements, spectacle frames, drawing instruments);
(v) articles of Chapter 91 (for example, clock or watch cases);
(x) articles of Chapter 94 (for example, furniture, lamps and lighting fittings, illuminated signs, prefabricated buildings); (y) articles of Chapter 95 (for example, toys, games, sports requisites); or (z) articles of Chapter 96 (for example, brushes, buttons, slide fasteners, combs, mouth--pieces or stems for smoking pipes, cigarette holders or the like, parts of vacuum flasks or the like, pens, propelling pencils, and monopods, bipods, tripods and similar articles.”
10. It would thus appear that while Tariff Heading 3923 speaks of articles for the conveyance or packing of goods, it would essentially extend to articles made of plastics and read holistically exclude textiles completely therefrom. Tariff Heading 3923 is reproduced hereinbelow:- “3923 Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics 3923 10 - Boxes, cases, crates and similar articles: 3923 10 10 --- Plastic containers for audio or video cassettes, cassette tapes, floppy disk and similar articles kg 6 [15%] - 3923 10 20 --- Watch-box, jewellery box and similar containers of plastics kg 6 [15%] - 3923 10 30 --- Insulated ware kg 6 [15%] - 3923 10 40 --- Packing for accommodating connectors kg 6 [15%] - 3923 10 90 --- Other kg 6 [15%] - - Sacks and bags (including cones): 3923 21 00 -- Of polymers of ethylene kg 6 [15%] - 3923 29 -- Of other plastics: 3923 29 10 --- Of poly (vinyl chloride) kg 6 [15%] - 3923 29 90 --- Other kg 6 [15%] - 3923 30 - Carboys, bottles, flasks and similar articles: 3923 30 10 --- Insulated ware kg 6 [15%] - 3923 30 90 --- Other kg 6 [15%] - 3923 40 00 - Spools, cops, bobbins and similar supports kg 6 [15%] - 3923 50 - Stoppers, lids, caps and other closures: 3923 50 10 --- Caps and closures for bottles kg 6 [15%] - 3923 50 90 --- Other kg 6 [15%] - 3923 90 - Other: 3923 90 10 --- Insulated ware kg 6 [15%] - 3923 90 20 --- Aseptic bags kg 6 [15%] - 3923 90 90 --- Other kg 6 [15%] -”
11. It is however the case of the petitioners that polypropylene woven or non-woven fabric is classified under Chapter 56 falling in Section XI [Textiles and Textile Articles], and which is titled “Wadding, Felt and Non-Wovens; Special Yarns; Twine, Cordage, Ropes and Cables and Articles Thereof”. According to the petitioners, polypropylene non-woven fabric is classified under Tariff Heading 5603. The said Heading reads as follows:- “Tariff Item Description of goods Unit Rate of duty Standard Preferential (1) (2) (3) (4) (5) 5603 Nonwovens, whether or not impregnated, coated, covered or laminated - Of man-made filaments: 5603 11 -- Weighing not more than 25 g/m[2]: kg. - 5603 11 10 -- Crop covers, conforming to IS kg. 20% - 5603 11 90 --- Other kg. 20% - 5603 12 00 -- Weighing more than 25 g/m[2] but not more than 70 g/m[2] kg. 20% - 5603 13 00 -- Weighing more than 70 g/m[2] than 150 g/m[2] kg. 10% 5603 14 00 -- Weighing more than 150 g/m[2] kg. 20% - Other: 5603 91 00 -- Weighing not more than 25 g/m[2] kg. 10% - 5603 92 00 -- Weighing more than 25 g/m[2] than 70 g/m[2] kg. 20% 5603 93 -- Weighing more than 70 g/m[2] than 150 g/m[2] 5603 93 10 --- Mulch Mats, kg. 10% - 5603 93 90 --- Other kg. 10% - 5603 94 --- Weighing more than 150 g/m[2] 5603 94 10 --- Non-woven Geotextile and articles thereof, Conforming to IS kg. 20% - 16391, IS 16392 5603 94 20 --- Mulch Mats, kg. 20% - 5603 94 90 --- Other kg. 20% -”
12. Our attention was also drawn to Note 3 comprised in Chapter 56 of the First Schedule to the 1975 Act, which reads as under:- “CHAPTER 56 Wadding, Felt and Nonwovens; Special Yarns; Twine, Cordage, Ropes and Cables and Articles Thereof.
3. Headings 5602 and 5603 cover respectively felt and nonwovens impregnated, coated, covered or laminated with plastics or rubber whatever the nature of these materials (compact or cellular). Heading 5603 also includes nonwovens in which plastics or rubber forms the bonding substance. Headings 5602 and 5603 do not, however, cover: (a) Felt impregnated, coated, covered or laminated with plastics or rubber, containing 50 per cent or less by weight of textile material or felt completely embedded in plastics or rubber (Chapter 39 or 40); (b) Nonwovens, either completely embedded in plastics or rubber, or entirely coated or covered on both sides with such materials, provided that such coating or covering can be seen with the naked eye with no account being taken of any resulting change of colour (Chapter 39 or40); or
(c) Plates, sheets or strip of cellular plastics or cellular rubber combined with felt or nonwovens, where the textile material is present merely for reinforcing purposes (Chapter 39 or 40).”
13. On the basis of the article in question being classifiable under Chapter 56, Mr. Lakshmikumaran would submit that it clearly cannot be placed alongside articles of plastic. Our attention was also invited to Tariff Heading 6305 and which also deals with packaging material but made of textiles. Tariff Heading 6305 is extracted hereinbelow:- Tariff Items Description of goods Unit Rate of Duty Standard Preferential (1) (2) (3) (4) (5) 6305 Sacks and bags, of a kind used for the packing of goods 6305 10 - Of jute or of other textile bast fibres of heading 5303 6305 10 10 --- Jute bagging for raw cotton kg. 10% - 6305 10 20 --- Jute corn (grains) sacks kg. 10% - 6305 10 30 --- Jute hessian bags kg. 10% - 6305 10 40 --- Jute sacking bags kg. 10% - 6305 10 50 --- Jute wool sacks kg. 10% - 6305 10 60 --- Plastic coated or paper cum polythene lined jute bags and sacks kg. 10% - 6305 10 70 --- Paper laminated hessian jute kg. 10% - 6305 10 80 --- Jute soil savers kg. 10% - 6305 10 90 --- Others kg. 10% - 6305 20 00 - Of cotton - Of man-made textile materials: kg. 10% - 6305 32 00 -- Flexible intermediate bulk containers kg. 10% - 6305 33 00 -- Other, of polyethylene or polypropylene strip or the like kg. 10% - 6305 39 00 -- Other kg. 10% - 6305 90 00 - Of other textile materials kg. 10% -
14. Mr. Lakshmikumaran also contended that the Authority for Advance Rulings[7] in the following cases had also held that polypropylene bags are liable to be placed under Tariff Heading 6305: (a) In the matter of U.S Polytech[8]; (b) In the matter of JJ Fabrics[9];
(c) In the matter of SMVD Polypack Pvt. Ltd10;
(d) In the matter of Kanniwadi Nagarajan Sharmila11.
15. According to Mr. Lakshmikumaran, although certain decisions rendered by the AAR have taken a contrary view, the conflict in opinions so rendered could not have been resolved or laid to rest by the issuance of a circular and that too by a body, which has not been statutorily conferred that power.
16. Mr. Lakshmikumaran also sought to distinguish the decision of the Madhya Pradesh High Court in Raj Pack Well Ltd v. Union of India12, a decision which was cited by the respondents, contending that undisputedly the product which formed the subject matter of that judgment related to HDPE strips and tapes of a width not exceeding 5 mm. According to learned counsel for the petitioners, Raj Pack Well neither considered nor decided the interplay between Chapter 39 and Section XI of the First Schedule of the 1975 Act.
17. Appearing for respondent nos. 2 and 3, Mr. Vajpai submitted that the AAR and the Appellate Authority for Advance Rulings13 in various States had held that polypropylene bags, whether laminated with BOPP or not, would be liable to be viewed as plastic bags falling under Tariff Heading 3923 as opposed to 6305 as claimed by the petitioners. He has in terms of a Note, which was placed on the record of these proceedings, referred to the following decisions:-
(c) In the matter of Mount Fab Packaging LLP16.
18. We note that while both the petitioners as well as the respondents have sought to draw sustenance from various decisions rendered either by the AAR or the AAAR, they were neither cited nor placed before us for our consideration. We thus desist from rendering any observation or comment on the correctness or otherwise of the opinions so rendered.
19. While on the subject of decisions rendered on the question that stands posited, we also deem it apposite to take note of a recent decision of the Calcutta High Court decision in Mega Flex Plastics Ltd & Anr v. Union of India & Ors17. The Calcutta High Court, on the facts of the said case, while dealing with the aspect of classification of polypropylene leno bags under the 1975 Act, held that polypropylene leno bags were classifiable under Chapter 39 of the 1975 Act, rather than Chapter 63. Although the aforesaid decision presently forms subject matter of an appeal preferred before a Division Bench of the Calcutta High Court, no stay operates thereon.
20. Mr. Vajpai further referred to a decision handed down by a Division Bench of this Court in Praveen Mittal vs. UOI18, in support of his contention that non-woven polypropylene bags were held to fall
2009 SCC Online Del 2643 within the ambit of plastic bags. We note that in Praveen Mittal, the Division Bench had held as under:-
26. We further note that the impugned circular while purporting to convey a position with respect to the classification of non-woven polypropylene bags has rested its conclusions solely on the basis of the provisions contained in Chapter 39. It has neither alluded to Section XI of the First Schedule to the 1975 Act nor has it referred to Chapter 56 thereof. The contention of the petitioners that non-woven polypropylene is an article which would fall within Tariff Heading 5603 was neither questioned nor contested before us by the respondents. In any case, a reading of the impugned circular would establish that it fails to examine the issue on the anvil of the distinction which the 1975 Act appears to construct when it places plastics under Chapter 39 and textiles and articles thereof separately in Section XI, and more particularly, as was contended by the petitioners in Chapters 56 and 63 of the said enactment. The impugned circular also fails to advert to the Notes placed in Chapter 39, and which in unambiguous terms, exclude textiles from the ambit thereof. For the aforenoted additional reasons, we find ourselves unable to uphold the impugned circular.
27. While we were invited by Mr. Lakshmikumaran to render a final verdict on the issue of classification itself, we find that respective sides have, in this respect, failed to place adequate material on the record. The failure of parties to address the question comprehensively constrains us to desist from rendering a definitive opinion in that respect bearing in mind the industry wide ramifications that may ensue. Courts should avoid expressing an opinion on questions of classification unless they are directly raised and adequate and cogent material placed on the record. Bearing in mind the impact that such a ruling may have, findings in that respect, in any case, should not be founded on material which is tenuous and inadequate
28. We are further of the view that since the writ petition itself stood restricted to the validity of the circular, it would be imprudent for us to hand down a verdict imbued with attributes of finality. We are thus of the considered opinion that the issue of classification should be left open for the consideration of the competent authority in appropriate proceedings.
29. The writ petition shall consequently stand allowed. The impugned circular dated 31 December 2018 is hereby quashed. We leave it open to the petitioners to adopt such measures, insofar as the issue of classification is concerned, as may be permissible in law.
YASHWANT VARMA, J. DHARMESH SHARMA, J.