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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, NIRAL R. MEHTA, JJ.
MESSRS ANANTA SYNTHETIC INNOVATIONS – Petitioner
Versus
STATE OF GUJARAT – Respondent
Special Civil Application No. 504 of 2023
Decided On : 11-07-2024
Classification - GST - Articles 226 and 227 of the Constitution of India - The court interpreted the classification of Geo Membrane under GST, determining it as a textile product under HSN Code 59111000, thus subject to a lower GST rate of 12% instead of 18%.
Fact of the Case:
The petitioner, a manufacturer of Geo Membrane, challenged the classification of their product under GST, arguing it should be classified as a textile under HSN Code 59111000, while the authorities classified it as a plastic article under HSN Code 39269090.
Finding of the Court:
The court found that the Geo Membrane is a woven fabric and should be classified under Chapter 59 of the Tariff, thus subject to a GST rate of 12%, aligning with the classification of similar products by other manufacturers.
Issues: The primary issue was whether the Geo Membrane manufactured by the petitioner should be classified under Chapter 39 as a plastic article or under Chapter 59 as a textile product.
Ratio Decidendi: The court held that the classification of the product as a textile fabric was consistent with the common understanding of textiles, and the previous ruling in a similar case supported this classification.
Result: The petition was allowed, classifying the Geo Membrane under HSN Code 59111000 and directing the application of a 12% GST rate.
JUDGMENT :
BHARGAV D. KARIA, J.
1. Heard learned advocate Mr. Paresh M. Dave for the petitioner and learned advocate Ms. Hetvi Sancheti for the respondent No. 2.
2. Rule returnable forthwith. Learned advocate Ms. Hetvi Sancheti waives service of notice of Rule on behalf of respondent No. 2.
3. Having regard to the controversy involved which is in a narrow compass, with the consent of both the learned advocates, the matter was taken up for hearing.
4. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner has prayed for the following reliefs:
(B) That Your Lordships may be pleased to issue a Writ of Certiorari or a Writ of Mandamus or any other appropriate writ, order or direction quashing and setting aside Advance Ruling No. GUJ/GAAR/R/107/2020 dated 30.12.2020 (Annexure-D) passed by the Gujarat AAR, thereby holding and declaring that the goods manufactured by the petitioners, namely, Geo Membrane for water proof lining fabrics merit classification under Tarifi 59111000 and are chargeable to GST @ 12% Adv.”
5. The brief facts of the case are that the petitioner a partnership firm which has come into effect from 13.10.2019, is manufacturer of Geo Membrane which is a textile fabrics. The petitioner - firm is also registered under the provisions of the Central/Gujarat Goods and Services Tax Act, 2017 (for short ‘the GST Act’). According to the petitioner, the product i.e. Geo Membrane which is a textile product, is chargeable to GST as textile fabrics under HSN Code 59111000, whereas as per the Department, it was chargeable as plastic Geo Membrane being an article of plastic to GST under HSN Code 39269090.
6. The petitioner has explained in detail the process of manufacturing of Geo Membrane which is also known in the trade as ‘Geo Grid’, ‘Geo Grid Fabrics’ and ‘Geo Fabrics’ as under:
(b) These tapes/strips are then loaded on circular looms or flat looms for weaving purpose. By employing weft and warp method of weaving, woven fabrics are produced by using the tapes/strips of width below 5 mm. These are uncoated woven fabrics of plastic: and such fabrics in rolls are further processed for producing coated/laminated fabrics on extrusion lamination machine within the applicant's factory.
(c) Rolls of uncoated fabrics loaded on extrusion lamination machine are drawn for feeding into the laminating unit. Mix of Low Density Polythene (LDPE), LLDPE and colour/black master batch is fed into the extruder through a Hopper, and melted by applying heat and friction, for forming a thin film in a molten state. Uncoated fabric is thus coated/laminated on one side by this molten mix, and passed over a chill roll containing chilled water. Edges of coated/laminated fabrics are trimmed and then wound on steel pipes on a winder.
(d) Same way the other side of the fabric is also coated/laminated to form a waterproof fabric. For increasing thickness of such fabric, one side coated/laminated fabrics are sandwiched laminated with a film and then laminated again with one more layer of fabric to
The court established that woven fabrics, regardless of raw material, are classified as textiles under GST, ensuring uniformity in tax treatment across similar products.
The classification of goods under the Customs Tariff Act must align with their actual characteristics, particularly distinguishing between fully and partially coated fabrics.
The burden of proof for product classification lies with the taxing authority, and mere assertions without evidence are insufficient to justify classification decisions.
Tax exemption for HDPE woven fabrics requires actual levy of additional duty; nil rate does not equate to exemption under sales tax law.
The DGFT's circular improperly restricted FPS benefits contrary to the Foreign Trade Policy, reaffirming that products described under ITC HS code 5407 are entitled to benefits without retroactive li....
The court established that inconsistent classification of similar products by the Appellate Authority necessitates a reevaluation to ensure fair tax treatment.
Authorities cannot apply prospective regulation retroactively, and Flexible Intermediate Bulk Containers are classified under Chapter 6305 based on established precedents.
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