Classification Of Polypropylene Bags Can’t Be Changed Just To Avail Lower Tariff-Rate: Calcutta High Court Upholds AAAR’s Ruling
The Calcutta High Court, while upholding the ruling of the Orissa Appellate Authority, held that the classification of polypropylene bags cannot be changed just to avail a lower tariff rate.The single Justice Md. Nizamuddin has observed that the polypropylene bags manufactured by the petitioner are made from plastic granules and cannot be treated as textile articles.The assessee/petitioner is...
The Calcutta High Court, while upholding the ruling of the Orissa Appellate Authority, held that the classification of polypropylene bags cannot be changed just to avail a lower tariff rate.
The single Justice Md. Nizamuddin has observed that the polypropylene bags manufactured by the petitioner are made from plastic granules and cannot be treated as textile articles.
The assessee/petitioner is a manufacturer of polypropylene leno bags by weaving polypropylene strips (tapes). Polypropylene is a variety of plastic. The major raw material in the manufacture of PP Leno bags is plastic granules.
The petitioner, before the introduction of the Goods and Services Tax Act, 2017, had voluntarily declared its finished product under Chapter Heading 3923-29-90 of the Central Excise Tariff Act, 1985, and enjoyed the duty drawback. No cogent reason has been shown by the petitioner as to why and how the tariff heading of the product having the same composition and involving the same process of manufacturing sought to be changed from classification 3923 29 90 to 6305 33 00, except that the rate of tax on the product under the same tariff heading is higher under the newly implemented GST regime.
The petitioners filed an application for advance ruling in Form GST ARA-01 before the West Bengal Authority for Advance Ruling (AAR) seeking an advance ruling on the classification of PP Leno Bag under Chapter Heading 63053300 of the Tariff.
The AAR held that the PP Leno Bags being manufactured by the petitioner can be classified under Chapter Heading 63053300 of the Tariff if the same are made from woven polypropylene fabric using strips not exceeding a width of 5 mm and without any impregnation, coating, covering, or lamination with plastics.
The CGST authority concerned preferred to appeal before the West Bengal Appellate Authority for Advance Ruling (AAAR) against the order of the
The Appellate Authority for Advance Ruling set aside the order passed by the AAR and allowed the appeal filed by the CGST authority. Pursuant to the order of the AAR, the petitioner made "under protest" payments of differential tax amounting to Rs. 6,57,38,093 for the period 1 July, 2017 to 23 November, 2018.
Before the introduction of the GST regime, the rates of duty under Tariff Headings 3923-29-90 and 6305-33-00 both 12.5%. However, in the present regime of GST, the rate of tax under the Tariff Heading 3923-29-90 is 18%, and under the Tariff Heading 6305-33-00, it is 5% or 12%, depending upon the sale value of the products and whether they exceed Rs.1000 per piece or not.
The petitioner contended that, though it is manufactured from plastic, since it is less than 5 mm in width, it should be treated as a textile product. However, prior to the introduction of the GST regime of classification, the petitioner claimed the same product, with the same composition and manufactured using the same procedure, for a long time as plastic products, and the petitioner never argued that the classification was incorrect.
The Court stated that it is not inclined to allow the petitioner to change the classification of the tariff heading to avail itself of a lower rate of tariff under the GST regime when the product of the petitioner is Polypropylene Leno Bags manufactured by weaving Polypropylene strips, the major raw material of which is plastic granules. Before the introduction of the GST regime, the petitioner had been declaring the product under Chapter 3923 29 90 of the Central Excise Tariff Act, 1985, and enjoying the duty drawback; he never contended before the authority, until the introduction of the GST law, that its classification was wrong.
Case Title: Mega Flex Plastics Ltd. & Anr. Versus The Union of India
Case No. - WPA No. 3667 of 2019
Case Citation: 2023 LiveLaw (Cal) 41
Date: 10.02.2023
Counsel For Petitioner: Advocates Vinay Kr. Shraff, Rahul Dhanuka, Pratik Samajpati, Priya Sarah Paul, Priyanka Sharma
Counsel For Respondent: Advocates Uday Sankar Bhattacharya, Vipul Kundalia, Tapan Bhanja, Sujit Mitra