Girish Pavinbhai Rathod (Jay Ambey) Vs Union of India

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

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. Devan 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 the product is covered on only one side and bears a design like dot matrix resulting from coating process and therefore, the goods are directly covered by exceptions mentioned in the chapter note outside the purview of Heading 5903. It was submitted that CESTAT in case of Madura Coats Pvt Ltd vs. C.B.E.& C. New Delhi, reported in 2004 (163) ELT 164 (Mad.)has held that partially coated fabrics is classifiable under Chapters 52, 54 and 55 and could not be covered under Chapter 59 as held by the respondent-authority. It was submitted that lower authorities are bound by the orders of the Tribunal and could not have taken a different view. It was therefore submitted that the impugned orders are liable to be quashed and the matter may be remanded back to the respondent authorities for re-adjudication to decide the same.

5.2. It was submitted by learned Senior Advocate Mr. Parikh that finding of the appellate-authority that criteria 2 regarding classification under Chapter 5903 is fulfilled is also not correct as the said chapter note applies to a the fabric fully coated with film on one or both the sides whereas, the product of the petitioner is partially coated as per the test report obtained from the Atria and the product manufactured by the petitioner is also not of kind mentioned in Chapter Note 3 and 5. It was therefore submitted that the respondent authorities have failed to consider chapter note correctly.

It was submitted that once the coating is partial as per Chapter Note. 4, the same is not covered under Chapter 5903 and appellate authority has wrongly observed that Atria report does not say that the fabric is coated with partially coated or partially covered inasmuch as it is specifically stated that the fabric is porous, previous, non-continuous and not completely embedded in plastic and therefore, the assumption made by the appellate authority that the fabric being completely covered and completely coated on one side is fallacious and perverse and order based on such assumption, is required to be quashed and set aside.

5.3 It was submitted that the appellate-authority could have sought clarification from the Atira or could have sent the sample to any other Government laboratory for testing purpose, however, the impugned orders are passed only on the basis of the assumption and therefore, liable to be quashed and set aside.

5.4. Learned Senior advocate Mr. Parikh invited the attention of the Court to the clarification issued by the Atira at Annexure L of the petition wherein it is clarified that the fabric is partially coated. It was therefore submitted that fabric being partially coated requires to be classified under Chapter 52 as per Chapter 4 of Chapter 59 and the impugned order classifying the partially coated fabric as per Chapter No. 5903 is therefore bad in law and requires to be quashed and set aside.

5.5 It was further submitted that partially coated fabrics are to be covered under Chapters 52 to 55 depending upon the quality-based fabric and therefore the respondent authority could not have held that such fabric cannot be classified under Chapter 52 beyond the scope of advance ruling application in contravention of the plain language of Chapter 59.

5.6 It was submitted that the appellate authority could not have distinguished the order in case of M/s. Madura Coasts (supra) on the ground that another advance ruling authority of West Bengal has held that Circular of 1998 is still relevant and has got persuasive value inasmuch as once the circular is set aside by the Madras High Court and the Lower authority was directed to decide the show cause notice on merits of the case, reliance on circular is required to be disregarded and contrary to the decision of the Madras High Court. It was therefore submitted that once the circular is quashed and set aside by the High Court, the Advance Ruling Authority could not have held that the circular still has a persuasive value.

5.7. Reliance was also placed upon advance ruling order in case of M/s. Goods wear Fashion Pvt. Ltd reported in 2019 (23) G.S.T.L. 154 (A.A.R-GST) as the facts of the sad case were comparable with the case of the petitioner. It was therefore submitted that the order passed by the Advance Ruling in case of M/s. Goods wear Fashion Pvt. Ltd (supra) ought to have been followed and could not have been distinguished on the ground that the test results are different and hence, order cannot be relied upon without recording any reason showing difference in test results.

6. On the other hand, learned advocate Mr. P.Y. Divyeshwar for the respondent-authority referred to and relied upon the following averments made in the affidavit-in-reply filed on behalf of respondent Nos. 1, 2 and 4:

“6. With respect to contentions raised in Para 15, 24 and 25, it is submitted that the contention of the appellant that the Appellate Authority of advance ruling has not examined the decision of Madura Coats Pvt. Ltd. vs. CBEC, New Delhi, is not correct. The Appellate Authority of advance ruling has clarified in its order that the contention of the appellant that another case which is relied upon by the GAAR is the Ruling of Uttarakhand State Authority for Advance Ruling Order No.11/2019-20 dated 12.03.2020, and that the perusal of the order of AAR Uttarakhand reveals that they have examined the decision of Madura Coats pvt.ltd. vs. CBEC, New Delhi mentioned above and that the ratio of the two decisions relied upon. by the GAAR are not applicable to the appellant’s case, as in both the cases viz. Sadguru Baridhan pvt.ltd. and Ruby Mills ltd., they have not referred or analyzed the decision of Madura Coats pvt. ltd. vs. Commissioner of Central Excise, ‘l’irunelveli on which the appellant has relied for the purpose of getting Ruling from GAAR. It is submitted that all the aforementioned orders have been issued by the Authorities of Advance Ruling/Appellate Authorities of Advance Ruling after the issuance of the order dated 19.06.2018 of the Appellate Tribunal of Chennai in the case of Madura Coats pvt. Itd. It is also submitted that the quashing of CBEC’s Circular No.433/66/98-CX.6 dated 27.11.1998 by the High Court of Madras is one of the major grounds on which the. Appellate Tribunal has decided the case in favour of Madura Coats pvt.ltd. by ruling that the impugned goods would not be classified under CETH 59.03. Further, the view and stand of CBEC in respect of Circular No.433/66/9~-CX.6 dated 27.11.1998 has been clearly discussed and clarified in detail in the orders of Authority of Advance Ruling, West Bengal as well as that of the Appellate Authority of Advance Ruling, West Bengal in respect of Sadguru Paridhan pvt.ltd. Therefore, the authority has rightly relied on the aforementioned judgements as they support and endorse the view that fusible interlining fabrics of cotton are classifiable under Heading 5903 of the First Schedule of the Customs Tariff Act, 1975.

7. The Ld. Appellate Tribunal of Chennai has decided in favour of Madura Coats Pvt. Ltd on the following main grounds i.e. (i) Chapter note 2 ( C ) introduced in Chapter 59 w.ef. 01.03.1989, by virtue of which fusible interlining fabrics came to be classified under Heading 5903 has been omitted w.e.f. 16.03.1995 (ii) Circular No. 433/66/98-CX-6 dated: 27.11.1998 which expressed that the omission of note 2 (c) was neither intended to nor resulted in changing the classification of fusible interlining cloth under Heading 5903 was quashed by the High Court of Madras (iii) ‘Fusible Interlining Fabrics of Cotton’ were not classifiable under Chapter 5903 but was correctly classifiable under Chapter 52 of the erstwhile Tariff stating that the very basis for changing the classification i.e. Note 2 (c) which was introduced in Chapter 59 has therefore been deleted w.e.f. 16.03.1995 and therefore the position as existed prior to the introduction of said note would be restored. (iv) the retest reports of fabrics of appellant clearly indicate that the samples of the impugned fabric have characteristics which would fall within the exclusion (i) to (v) of Chapter Note 2(a) to CETH 59.03 and also the requirement of impervious for the purpose of Board’s telex Circular 30.09.88 and Circular No. 5/89 is not be satisfied.

8. The appellant has relied upon the decision of the order of the Authority of Advance Ruling of Uttarakhand in the case of M/s Goods wear Fashion Pvt. Ltd. the ruling in the above case has been based on the testing of samples of specimen of fabric of the said applicant from NITRA, Uttar Pradesh. The same is not applicable to the instant case of the appellant as the test results obtained therein are different from that of the test results obtained by the appellant in respect of their sample of fabric from ATIRA and cannot, therefore, be relied upon by the appellant.

9. The Appellate Authority of Advance Ruling relied on following decisions/ judgements in support of their view:

(1) Order No. 33/WBAAR/2019-20 dated 11.11.2019 issued by the West Bengal Advance Ruling Authority in respect of M/s Sadguru Seva Paridhan Pvt. Lid. Wherein a was held that fusible interlining fabric of cotton is classifiable under Heading 5903 in Chapter 59 of the first schedule to the Customs Tariff Act, 1975,

(2) Order No. 11/2019-20 dated: 12.03.2020 issued by the Uttarakhand State Advance Ruling Authority in respect of M/s The Ruby Mills Ltd. wherein it was held that fusible interlining fabric of cotton is classifiable under Heading 5903 in Chapter 59 of the first Schedule to the Customs Tariff Act, 1975.

(3) Order dated: 19.03.2020 of the Appellate Authority for Advance Ruling, West Bengal in the case of Appeal Case No. 15/WBAAAR/APPEAL/2019 filed by M/s Sadguru Seva Paridhan Pvt. Ltd wherein the order No. 33/WBAAR/2019-20 dated: 11.11.2019 issued by West Bengal Advance Ruling Authority was upheld.

10. With respect to contentions raised in Para 16 to 23, it is submitted that the Appellate Authority of Advance ruling has found that GAAR has neither misread the Chapter Note 2(a) nor negated the content of Chapter Note 2(a) by referring to explanatory notes to HSN in respect of Heading 5903, because the criteria/ conditions mentioned in the explanatory notes to HSN (in respect of Heading 5903) are not in any way different to the Corresponding criteria/ conditions mentioned in Note 2(a) but are in fact, similar to the conditions mentioned in Chapter Note 2(a) of Chapter 59. The only difference here js that the criteria mentioned in Chapter Note 2(a) { column (1) below } helps to identify those fabrics that are excluded from Heading 5903 whereas the criteria mentioned in the explanatory notes to the HSN {marked in bold letters in column (2) below} lays down the conditions which helps in classifying the product under Heading 5903. A comparative chart of the same, which is given below, will help clarify the issue:

(a) textile fabrics, impregnated, coated, covered or laminated with plastics, hatever the weight per squre metre

and whatever the nature of the plastic material (compact Or cellular), other than:

(1) fabrics in which the impregnation, coating or covering cannot be seen with the naked eye (usually Chapters 50 to . 55, 58 or 60); for the « purpose of this  rovision, no account should be « taken of any resulting ‘ change of colour;  (2) products which cannot, i without  racturing, be v bent manually around a c cylinder of a diameter of 7 mm, at a temperature c between 15 C and 30 C a (usually Chapter 39); Us (3) products in which the 5 textile fabric is either s completely embedded in plastics or entirely coated or covered on both sides with such material, provided that such oating OF covering can be seen with the naked eye with no account being taken of any resulting change of colour (Chapter 39);

(4) fabrics partially coated or partially | covered with plastics and bearing designs resulting from these treatments (usually Chapters 50 to 55, 58 or 60); (5) plates, sheets or stmp of cellular plastics, combined with textile fabric, where the textile’ fabric is present merely for  einforcing purposes (Chapter 39); or (6) textile products heading 5811;

(i) That, in the case, of impregnated, coated or covered fabrics, the impregnation, coating or covering can be seen with the naked eye otherwise than by a resulting change in colour. Textile  abrics in which the impregnation, coating or covering cannot be seen with the naked eye or can be seen only by reason of a resulting change in colour usually fall in Chapters 50 to 5S, 38 or 60. Examples of such fabrics are those impregnated with substances designed solely to render them crease-proof, mothproof, unshrinkable or waterproof (e.g., waterproof gabardines and poplins),  Textile fabrics partially. coated or partially covered with plastics and bearing designs resulting from these treatments are also classified in Chapter 50 to 55, 58 or 60. L x (2) That the products are Ss mot rigid, i.e. they can, o without fracturing, be bent 3s, manually around a cylinder of a diameter of 7 mm, at a temperature between 15 ie degrees entigrade and 3O 1t degrees  ntigrade. iz (3) That the fabric is or mot completely embedded of im, nor coated or covered on both sides with, plastics. Products not meeting the requirements of sub paragraph (2) or (3) above usually fallin Chapter 39. However, textile fabric coated or covered on both sides with plastics where the  oating or covering cannot be seen with the naked eye, or can be seen only by reason of a resulting  hanged in color, usually falls in  halter 50 to 55, 58 or 60. Except in the case of textile products of heading 58.11, textile fabrics combined with plates, sheets or strip of cellular plastics, where the textile fabric is present merely for reinforcing purposes, are also  lassified in Chapter 39 (see  General Explanatory Note to  hapter 39, part. Entitled “Plastics and textile combinations”,  enultimate paragraph). The laminated fabrics of this  eading should not be confused with fabrics which are simply assembled in layers by means of a  lasticadhesive. These fabrics, which have no _ plastics showing in  rosssection, generally fall in  hapter 50 to 55. In many of the textile fabrics classified here, the plastic material, usually coloured, forms a surface layer which may be smooth or be embossed to simulate e.g. the grain of leather (Teather cloth”). This heading also covers dipped fabrics (other than those of heading. 59.02),  mpregnated to improve their adhesion to rubber, and textile fabrics which are spattered by spraying with visible particles of thermoplastic material and are capable of providing a bond to other fabrics or materials on the application of heat and pressure.

Chapter Note 2(a) of Chapter 59 reads as under:

Heading 5903 applies to:

[a} textile fabrics, impregnated, coated, covered or laminated with plastics, whatever the weight per square metre and whatever the nature of the plastic material (compact or cellular), other than: (1) fabrics in which the impregnation, coating or covering cannot be seeh with the naked eye usually Chapters 50 to 55, 58 or 60); for the purpose of this provision, no account should be taken of any resulting change of color;

(2) products which cannot, without fracturing, be bent manually around a cylinder of a diameter of 7mm, at a temperature between 150C and 30 C (usually Chapter 39},

(3) products in which the textile fabric is either completely embedded in plastics or entirely coated or covered on both sides with such material, provided that such coating or covering can be seen with the naked eye with no account being taken of any resulting change of cooler (Chapter 39);

(4) fabrics partially coated or partially covered with plastics and bearing designs resulting from these treatments usually Chapters 50 to 55, 58 or 60);

(5) plates, sheets or strip of cellular plastics, combined with textile fabric, where the textile fabric is present merely for reinforcing purposes (Chapter 39); or textile products of heading 5811;

11. The Ld. Appellate Authority of Advance Ruling held that since the Chapter Note 2(a) of Chapter 59 stipulates that fabrics/ products as detailed/ described under Column (2) below, corresponding to Sr. No. (1) to (5) of the said Note under Column (1) below, will not be covered under Heading 59.03/ will be excluded from Heading 59.03 & the test results in Column (3) below contradicts the respective criteria mentioned in column (2), therefore, the sample product/ fabric of the appellant i.e. M/s Girish Rathod (Jay Ambey) invariably fall under Heading 5903 of the Customs Tariff Act, 1975 (51 of 1975). The comparison of the same is as under:

12. Since all the five criteria / condition required for the Product of the appellant for being classified under Heading 5903 have been fulfilled, the Appellate Authority of Advance Ruling found that based on the test results of the sample product/ fabric obtained by the appellant from ATIRA, Ahmedabad, the said product “fusible Interlining Fabric of Cotton” is undoubtedly classifiable under Heading 5903 of Customs Tariff Act, 1975(51 of 1975) for the reasons discussed hereunder:

Criteria _1: As per this criteria, fabrics in which the impregnation, coating or covering cannot be seen with the naked eye would usually fall under Chapters 50 to 55, 58 or 60. As per the test results, polymer coating cannot be seen with the naked eye but film coating is visible with the naked eye. We find that film coating also involves coating with natural or synthetic polymeric substance (plastic). Even otherwise, the criteria only stipulates that coating must not be visible with the naked eye but does not mention polymer coating or film coating, hence the product/ fabric fulfills this criteria/ condition also for being classified under Heading 5903.

Criteria 2: As per this criteria, products which cannot, without fracturing, be bent manually around a cylinder of a diameter of 7 mm, at a temperature between 15 C and 30 C would fall under Chapter 39. As per the test result, the product can be bent without fracturing around a cylinder of a diameter 7m or more at temperature between 15 degrees C to 30 degrees C, hence the product/fabric fulfills this criteria/ condition also for beirig classified under Heading 5903.

criteria_3: As per this criteria, products in which the textile fabric is either completely embedded in plastics or entirely coated or covered on both sides with such material, provided that such coating or covering can be seen with the naked eye with no account being taken of any resulting change of color would fall under Chapter 39. As per the test result, the fabric is not completely embedded in plastic but is covered with plastic polymer on one side, hence the product/fabric fulfills this criteria/ condition also for being classified under Heading 5903.

Criteria 4: As per this criteria, fabrics partially coated or partially covered with plastics and bearing designs resulting from these treatments are covered under Chapter 50 to 55, 58 or 60. In other words fabrics which are not partially coated or not partially covered with plastics and bearing designs resulting from these treatments are not covered under Chapter 50 to 55, 58 or 60, but under: heading 5903. As per the corresponding test result of ATIRA, the fabric of the appellant is covered with plastic polymer on one side and bears a design like a dot matrix design resulting from coating process i.e. it does not mention that the fabric is partially coated or partially covered with plastics and bears designs resulting from these treatments. The test result also mentions that the said fabric is coated only on one side, on plain reading of the same, we can assure that the said fabric is completely covered or completely coated on one side with plastic polymer and the other side jg uncoated. Thus, even when one side of the fabric I.e completely coated with plastic polymers, it cannot be said to be partially coated or partially covered with plastic polymers. To clarify the issue, we will be required to refer to the meaning of ‘partially’ as appearing in the dictionaries. The meaning of ‘partially’ as per various dictionaries is mentioned below:

i.  As per Vocabulary.com, meaning of ‘partially’ is in part, partly, in some degree.

ii. As per Thesaurus.com, meaning of ‘partially’ is – partly, somewhat, fractionally, in some measure, On going through the aforementioned meanings of ‘partially’ appearing in various dictionaries, it can be derived that it stands for ‘a small part’ of the whole OR ‘a small fraction’ of the whole OR a small measure’ of the whole, In the present case, the fabric of the appellant i.e. ‘fusible interlining fabric of cotton’ is the whole and only when a small fraction of the fabric OR a small part of the fabric OR a small measure of the fabric is coated with

Saar Se Plastic polymer, can it be called as partially, coated or partially covered. Here, we find, that out of the two sides of the fabric, one side is completely coated with plastic polymer but the other side is uncoated. Such type of coating cannot be termed as ‘partially’ coated OR ‘partially’ covered with plastic polymer i.e. it would rather be considered as half-coated or half-covered with plastic polymers. Thus, since one of the two sides of the fabric is completely covered with plastic polymer. Thus, since aforementioned test result, it cannot be considered to be partially covered or partially coated with ‘plastics by any stretch of imagination. In view of the above, we conclude that the product/fabric fulfills this criteria/ condition also for being classified under Heading 5903.

Criteria 5: As per this criteria, plates, sheets or strip of cellular plastics, combined with textile fabric, where the textile fabric is present merely for reinforcing purposes would fall under Chapter 39. As per the test results, the fabric is not merely present for reinforcing purposes of plates, sheets or strip of cellular plastics since it contains 85% and more of cotton, hence the product/fabric fulfills this criteria/ condition also for being classified under Heading 5903.

13. Chapter notes of Chapter 52 read as under:

Sub-Heading Note:

For the purposes of sub-headings 5209 42 and 5211 42, the expression “denim” means fabrics of yarns of different coolers, of 3 – thread or 4~= thread twill, including broken twill, warp faced, the warp yarns of which are of one and the same color and the weft yarns of which are grey or of the yarns.

14. Since chapter notes of Heading 5208 and 5209 are not available, reference is being made to explanatory notes to HSN with respect to Headings 5208 and 5209 which read as under:

Cotton fabrics are produced in great variety and are used, according to their characteristics for making clothing, household linen, bedspreads, curtains, other furnishing articles etc.

The heading does not include:

(a) Bandages, medicated or put up for retail sale (heading 30.05)

(b) Fabrics of heading 58.01.

(c) Terry toweling and similar terry fabrics (heading.58.02).

(d) Gauze (heading 58. 03)

(e) Woveri fabrics for technical uses of (heading 59.11).

16. Since chapter notes of Heading 5212 are not available it ’ reference is being made to explanatory notes to HSN with respect to Headings 5212 which read as under:

This heading/ covers woven fabrics (as defined in Pari() {C) of the General Explanatory Note to Section(X]) made of cotton yarns. However, it should be noted that it covers only mixed woven fabrics, other than those of the preceding headings of this Chapter or specified or included in the second part of this Section (Chapter 58 or 59, usually). Bandages, medicated or put up for retail sale, are excluded (heading 30.05).

17. On going through the aforementioned headings, chapter note of Chapter 52 as well as the explanatory notes to HSN with respect of the headings 5208, 5209 and 5212, we find that it does not cover laminated fabrics or fabrics coated with plastics, Hence, it can be concluded that ‘Fusible Interlining fabrics of cotton.’ will not be covered under Chapter 52 of the First Schedule to the Customs Tariff Act, 1975.

18. The Ld. Appellate authority of Advance Ruling did not agree with the contention of the appellant when they state that their product/fabric falls under Sr.No.2 along (5) of Chapter Note 2(a) of Chapter 59, that it is therefore classifiable under Chapter 50 to 55 and therefore there is no need to refer to other Rules and Explanatory Notes to HSN, since, as discussed earlier, the test results obtained by the appellant from ATIRA in respect of their fabric ‘fusible interlining fabrics of cotton’ has already been compared with the criteria/ exclusion clauses of Sr.No. 1 to 5 of Chapter Note 2(a) of Chapter 59 and it has been proved beyond doubt that the product of the appellant is specifically covered under Heading 5903 of the Customs Tariff Act, 1975).”

Referring to the above averments it was submitted that the petition may be dismissed and no interference may be made in the impugned orders passed by the appellate authority on advance ruling.

7. Having heard learned advocate for the respective parties and having considered the facts of the case, findings arrived at by the appellate authority of the advance ruling confirming the order passed by the advance ruling authority holding that the product “fusible inter lining fabric of cotton” of the petitioner is correctly classifiable under Heading 5903 of Chapter 59 to the First Schedule to the Custom Tariff Act, 1975, is based upon difference between Chapter under 2(a) for Heading 5903 Chapter 59 in First Schedule of Custom Tariff Act, 1975 and the explanatory note of Heading No. 5903 from HSM without considering the contents of the Heading 5903 of the Custom Tariff Act which reads as under:

“5903 TEXTILE FABRICS, IMPREGNATED, COATED, COVERED OR LAMINATED WITH PLASTICS OTHER THAN THOSE OF HEADING 5902

Chapter Note 2(a) of Chapter 59 reads as under:

Heading 5903 applies to:

(a} textile fabrics, impregnated, coated, covered or laminated with plastics, whatever the weight per square metre and whatever the nature of the plastic material (compact or cellular), other than:

(1) fabrics in which the impregnation, coating or covering cannot be seen with the naked eye usually Chapters 50 to 55, 58 or 60); for the purpose of this provision, no account should be taken of any resulting change of colour;

(2) products which cannot, without fracturing, be bent manually around a cylinder of a diameter of 7mm, at a temperature between 150C and 30oC (usually Chapter 39},

(3) products in which the textile fabric is either completely embedded in plastics or entirely coated or covered on both sides with such material, 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);

(4) fabrics partially coated or partially covered with plastics and bearing designs resulting from these treatments usually Chapters 50 to 55, 58 or 60);

(5) plates, sheets or strip of cellular plastics, combined with textile fabric, where the textile fabric is present merely for reinforcing purposes (Chapter 39); or textile products of heading 5811.”

8. On perusal of the above, it is clear that the Heading 5903 would apply only to the fabrics in which impregnation coating or covering cannot be seen with the naked eye. The comparison made by the appellate authority of the criteria prescribed under the Chapter Note 2(a) of Chapter 59 of the Custom Tariff Act, 1965 and the corresponding test result as per the Atira’s test report is concerned, Criteria 1 which provides that film coating is visible with naked eye as per test report however, Chapter note 2(a) does not refer to the film coating but it refers to the coating and covering which cannot be seen with naked eye. The comparison made by the appellate authority which is reproduced here under is therefore erroneous as per the test report of Atira:

“Criteria 1: As per this criteria, fabrics in which the impregnation, coating or covering cannot be seen with the naked eye would usually fall under Chapters 50 to 55, 58 or 60. As per the test results, polymer coating cannot be seen with the naked eye but film coating is visible with the naked eye. We find that film coating also involves coating with natural or synthetic polymeric substance (plastic). Even otherwise, the criteria only stipulates that coating must not be visible with the naked eye but does not mention polymer coating or film coating, hence the product/fabric fulfills this criteria/ condition also for being classified under Heading 5903.

Criteria 2: As per this criteria, products which cannot, without fracturing, be bent manually around a cylinder of a diameter of 7 mm, at a temperature between 15oC and 30oC would fall under Chapter 39. As per the test result, the product can be bent without fracturing around a cylinder of a diameter 7m or more at temperature between 15 degrees C to 30 degrees C, hence the product/fabric fulfills this criteria/condition also for being classified under Heading 5903.

Criteria 3: As per this criteria, products in which the textile fabric is either completely embedded in plastics or entirely coated or covered on both sides with such material, provided that such coating or covering can be seen with the naked eye with no account being taken of any resulting change of color would fall under Chapter 39. As per the test result, the fabric is not completely embedded in plastic but is covered with plastic polymer on one side, hence the product/fabric fulfills this criteria/condition also for being classified under Heading 5903.

Criteria 4: As per this criteria, fabrics partially coated or partially covered with plastics and bearing designs resulting from these treatments are covered under Chapter 50 to 55, 58 or 60. In other words, fabrics which are not partially coated or not partially “covered with plastics and bearing designs resulting from these treatments are not covered under Chapter 50 to 55, 58 or 60, but under heading 5903. As per the corresponding test result of ATIRA, the fabric of the appellant is covered with plastic on one side and bears a design like a dot matrix design resulting from coating process i.e. it does not mention that the fabric is partially coated or partially covered with Plastics and bears designs resulting from these treatments. The test result also mentions that the said fabric is coated only on one side. On plain reading of the same, we can assume that the said fabric is completely covered or completely coated on one side with plastic polymer and the other side is uncoated. Thus, even when one side of the fabric is comp coated with plastic polymers, it cannot be said to be partially coated or partially covered with plastic polymers. To clarify the issue, we will be required. to refer to thé meaning of ‘partially’ as appearing in the dictionaries. Thé meaning of ‘partially’ as per various dictionaries is mentioned below: –

(I) As per Vocabulary.com, meaning of ‘partially’ is – in part, partly, in some degree

(i) As per Thesaurus.com, meaning of ‘partially’ is – partly, somewhat, fractionally, in some measures, On going through the aforementioned meanings of ‘partially’ appearing in various dictionaries, it can be derived that it stands for ‘a small part’ of the whole OR ‘a small fraction’ of the whole OR ‘a small measure’ of the whole. In the present case, the fabric of the appellant i.e. ‘fusible interlining fabric of cotton’ is the ‘whole’ and only when a small fraction of the fabric OR a small part of the fabric OR a small measure of the fabric is coated with plastic polymer, can it be called as ‘partially coated’ or partially covered’ . Here, we find, that out of the two sides of the fabric, one side is completely coated with plastic polymer but the other side 1s uncoated. Such type of coating cannot be termed as ‘partially’ coated OR ‘partially’ covered with plastic polymer i.e. it would rather be considered as half-coated or half-covered with plastic polymers. Thus, since one of the two sides of the fabric 1a completely covered with plastic polymer as per the ~ aforementioned test result. It cannot be considered to be partially covered or partially coated with plastics by any stretch of imagination. In view of the above, we conclude that the product/fabric fulfills this criteria/ condition also for being classified under “Heading 5903.

Criteria 5: As per this criteria, plates, sheets or strip of cellular plastics, combined with textile fabric, where the textile fabric is present merely for reinforcing purposes would fall under Chapter 39. As per the test results, the fabric is not merely present for reinforcing purposes of plates, sheets or strip of cellular plastics since it contains 85% and more cotton hence the product/fabric fulfills this criteria/ condition also for being classified under Heading 5903.”

9. From the above it is clear that as per the test report of the Atira, the fabric manufactured by the petitioner was partially coated and once the fabric is partially coated, the same would not fall in Chapter 59 but the same would fall under Chapters 52 to 55 as per the exclusion clause as mentioned in Serial No. 125 Chapter Note 2(a) of Chapter 59.

10.  The appellate authority has also not taken into consideration classification issued by Atira dated 23.07.2021 at page 113 of the paper book wherein it is stated as under:

“Dear Sir,

This is in reference to the report no FDA/ 18-19-139 dated 0294 Aug, 2018 sample of cotton interlining fabric received at ATIRA for testing. Further we have tested for following permeability standard test.

The test results are as follows

From above both fabrics shows Air and Water permeability after coasting indicates that coating is done but it is partial in nature. The fabric can be considered as partially coated or partially covered plastics and bearing designs resulting from these treatments (Dot matrix printing process).”

11. It is also apparent from the impugned orders passed by the authority that once the Hon’ble Madras High Court has set aside the Circular No. 4233 dated 27.11.1998 such decision is binding upon the respondent-authority instead of distinguishing the same on the ground that fusible interlining fabric of cotton are classifiable under Heading 5903 and not under Heading 52 to 55 contrary to the test reports placed on record.

12. In view of the above facts impugned orders passed by the advance ruling authority and confirmed by the appellate authority are not tenable and are required to be quashed and set aside and the advance ruling authority to consider and decide the same de novo a fresh after giving opportunity of hearing to the petitioner and after considering the decision relied upon by the petitioner by distinguishing its results relied upon by the advance ruling authority in case of M/s. Goods wear Fashion Ltd. wherein, in similar facts, Advance Ruling Authority of Uttarakhand holding that the specimen fabric i.e. Polyester Viscose Fusing Interlining Woven Fabric partially covered with plastic leads to plastic coated pattern that is visible on its one side does not fall under HSN Code 5903, however, it being partially coated or partially covered with plastics and bearing designs fall under Chapters 502, 55, 58 or 60 as per Chapter Note 2(a)(4) of the Chapter 59 of the GST Tariff. Therefore, on going through the Chapter Note 2(a)(4) of the Chapter Heading 5903 and as per the test report of Atira the specimen fabric i.e. Polyester plus cotton interlining woven fabrics being partially covered with plastic and bearing design resulting from this treatment which leads to the plastic coated pattern which is visible on one side of the fabric will fall under Chapters 502, 55 58 or 60 as per Chapter Note 2(a)(4) of the relevant Chapter 59 of the GST Tariff and not under Chapter 59 Heading 5903 as held by the impugned orders.

13. In view of the foregoing reasons the petition succeeds and is accordingly allowed. Impugned order dated order dated 08.04.2021 passed by the Gujarat Appellate Authority for Advance Ruling Goods and Service Tax is quashed and set aide and the product manufactured by the petitioner being partially covered with plastic coated pattern i.e. visible on one side of the fabric and the same will fall under Chapters 50 to 55 58 or 60 GST Tariff and not under Chapter 59 of Chapter Note 5903 as held by the impugned order. Rule is made absolute to the aforesaid extent. No order as to costs.