IMPORTANT POINT
The classification of goods under the Customs Tariff Act must align with their actual characteristics, particularly distinguishing between fully and partially coated fabrics.

JUDGMENT :

Bhargav D. Karia, J.

1. Heard learned advocate Mr. Deven Parikh with learned advocate Mr. Nirav P. Shah for the petitioner and learned advocate Mr. P.Y. Divyewshwar for the respondents.

2. Having regard to the controversy in the narrow compass, with the consent of the learned advocates for the parties, the matter is taken up for hearing.

3. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the order dated 08.04.2021 passed by the Gujarat Appellate Authority for Advance Ruling Goods and Service Tax.

4. Brief facts of the case are as under:

4.1 The Petitioner Is In the business of manufacturing of fusible interlining cloth, which is used in cuffs, collars, etc. Prior to 1988, the goods were classified under various Chapters. To clarify the issue pertaining to classification, the department had issued Circular No. 24/Coated Fabric/88-CX.1 dated 2.9.1988. By way of aforesaid circular, it is clarified that fabrics partially coated with plastics and bearing designs are excluded from purview of Heading 5903.

4.2 On 15.06.1989, by way of insertion of Chapter Note 2 (c) in Chapter 59 by Finance Act, 1989, the partially coated fabrics were also classified under Chapter 59. The department had Issued Circular bearing No. 5/89 dated 15.6.1989 clarifying the Chapter Note by which partially coated fabrics were first time classified under Chapter 59.

4.3 The aforesaid Chapter Note was omitted with effect from 16.3.1995. In view of the above omission, the status of classification prior to 1989 was restored as per general trade understanding.

4.4 The department insisted for classification under Chapter 59 and a Circular bearing No. 433/66/98 dated 27.11.1998 was issued classifying the partially coated fabrics under Chapter 5903.

4.5 In the case of M/s. Madura Coats, the Hon'ble Madras High Court vide judgement dated 30.09.2003 held the circular dated 27.11.1998 illegal and ultra-virus and quashed the same.

4.6 The judgement dated 30.09.2003 was challenged by way of writ appeal No. 507 of 2005 by the department.

4.7 The Hon‘ble Madras High Court set aside the aforesaid circular vide order dated 05.01.2009 and had directed the Assessing Officer to adjudicate the issue of classification on Its own merits.

4.8 Vide Judgement dated 19.06.2018, the Hon'ble Tribunal decided the Issue of classification in favour of M/s. Madura Coats classifying the partially coated fabric under chapter 52.

4.9 On 13.03.2019, the Petitioner opted for advance ruling of classification of interlining cloth as provided under the GST Act.

4.10 The Advance Ruling Authority vide its order dated 28.09.2020 have held that the goods are classifiable under Chapter 59.

4.11 Against the aforesaid order, the petitioner had filed Appeal with the Appellate Authority of Advance Ruling.

4.12 Vide order dated 08.04.2021, the Appellate relied upon different process applied on cloth to confirm classification under Chapter 59. Aggrieved by the same, the petitioner has approached this Court by way of present petition.

5. Learned Senior advocate Mr. Deven Parikh submitted that the appellant-authority has totally discarded the submissions on merits and has not followed binding precedence on the presumption that the fabric as fully coated quality. It was pointed out that after comparison of the test report, the outcome of the test report is recorded incorrectly relying upon different process applied on fabrics to classification under Chapter 59.

5.1 It was submitted that the issue regarding classification of partially coated interlining cloth is classifiable under Chapters 52, 54 or 55 depending upon classification of best fabric, however, the respondent authorities ignoring the test report of qualitative analysis of fabric manufactured by the petitioner obtained from the Atira, Ahmedabad wherein it is recorded that the coating on the cloth cannot be seen with naked eyes and the coating is non-continuance and the sample is different than the film coating and