Dismissed

TN/AAAR/03/2019(AR) of M/s Rmkv Fabrics Private Limited

GST AAAR13 May 2019TN/AAAR/03/2019(AR)

Case brief

AI extract

What is this about?

This appeal challenges the advance ruling classification of semi-stitched salwar/churidar sets as fabrics under GST. The Appellate Authority upheld the original ruling, holding that semi-stitched tops and hemmed dupattas impart the essential character of made-up garments, making them taxable under heading 6211 of the Customs Tariff.

What did the court decide?

The appeal was rejected; the original advance ruling classifying the goods as garments under CTH 6211 was upheld.

TN/AAAR/03/2019(AR) of M/s Rmkv Fabrics Private Limited — Specific Performance | GST AAAR (2019)

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A.R.Appeal No. 2/2O|9|AAAR

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Date: 13.O5.2O19

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BEFORE THE BENCH OF

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Thiru. M. AJIT KUMAR, MEMBER

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Dr. T.V. SOMANATHAN, MEMBER

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oRDER_in_ Appeat No.-AAAR/O372919 1O*, (Passed by Tamilnadu state Appellate Auihority for Advance Ruling under section 101(1) of the Tamilnadu Goods and Services Tax Act, 2orrl Preamble

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1' In terms of section ro2 of the central Goods & services Tax Act 2ol7/Tamilnadu Goods & services Tax Act 2or7("the Act", in short), this order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned. officer, the jurisjictional ofltcer or the applicant within a period of six months from the date of the order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the appellant has been given an opportunity of being heard.

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under section 103(1) of the Act, this Advance ruling pronounced by the Appellate Authority under chapter XVII of the Act shall be binding only

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(a)' on the applicant who had sought it in respect of any matter referred to in sub-section (2) of Section 9T for advance ruling; (b)' on the concerned officer or the jurisdictional officer in respect of the applicant.

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C tr,- vrrusr i ^DsuLrurl i0c (2y of tne Act, thrs advance ruling shall be binding unless the law, facts or circumstances supporting the said advance ruling have changed.

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Under Section 104(1) of the Act, where the Appenate Authority finds that advance ruling pronounced by it under sub-sectioo 1r1 or Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void sb_ initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appelrant as if such advance ruling has never been made.

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Name and address of the appettant M/s. RmKV Fabrics private Lilrrited

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Page 1 of 15

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	I76F,2"a&3'dFloor,TrivandrumRoad, Palayamkottai627OO3
GSTINorUserID	33AAFCR4O22HTZR
AdvanceRulingOrderagainst whichappealisfiled	2/AAR/2019dt. 2r.Or.2079
Dateoffilingappeal	01.03.2019
Representedby	M/s.Swamy Associates
JurisdictionalAuthority-Centre	Commissioner of C.Ex.andGST,Madurai
Jurlscllcttonal AuthoriW-State	TheAssistantCommissioner(ST), Palayamkottai Assessment Circle
Whetherpaymentoffeesforfiling appealisdischarged.Ifyes,the amountandchallandetails	Yes. PaymentofRs.20000/-madevide challansNo.HDFC19O233OO4T3943& HDFC19023300478281 dated26.02.2019

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At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and senrice Tax Act.

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The subject appeal is filed under Section 100(1) of the Tamilnadu Goods & Services Tax Act 2o|7/Central Goods & Services Tax Act 2017 (hereinafter referred tothe Act) by M/s. RmKV Fabrics Private Limited, I76F,2'a & 3..r Floor, Trivandrum Road, Vannarpettai, Palayamkottai 627003 (hereinafter referred to as 'RmKV' or 'AppellantJ. The Appellant is registered under GST vide GSTIN 33AAFCR4O22H1ZR. The aooeal is fileri asainsr rhc orrlcr Nc- 2,r-a-a-e- /21!9 datcd 2I'OI.2ol9 passed by the Tamilnadu State Authority for Advance ruling on the application for advance ruling filed by the Appellant.

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2' The Appellant are engaged in the trading of readymade garments, fabrics and other similar items and have their showrooms at Tirunelveli, Chennai and Coimbatore. They sought Advance Ruling on Whether the Salwar / Churidhar sets, comprising of three pieces of cloths viz., tops, Bottom and Dupatta, whether

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Page 2 of 16

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partially stitched/neck work done, or not would remain as "fabrics" under Chapters 50,52,54,55 based on the constituent material and attract a total 5%o GST; or they are classifiable und.er Chapters 61 to 63, thereby attracting a total of 5o/o if their sale price is less than Rs. 1,000/- and 12% GST if their sale price is more than Rs. 1,000/-.

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2'I The Appellant has stated that one of the products being sold by them is Salwar / churidar sets, comprising of three piece of cloths viz., Top, Bottom and Dupatta' They enclosed photographs of the subject items for reference, and described as follows :-

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1. Both Top and Bottom not stitched- a model where no stitching has been done and the Top is merely cut into size;

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1. Top Semi-stitched and Bottom not stitched- a model where the Top is semi-stitched, requiring further cutting and stitching to size;

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1. Top stitched but bottom not stitched- a model where the Top is completely stitched but the bottom is not stitched; and

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1. Top Neck-worked; Both Top and Bottom not stitched-a model where both the Top and Bottom are not stitched but only the neck portion is cut and design made

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They have stated that these Salwar / Churidar Sets are nothing but three different pieces of fabrics cut from the lengthy fabrics which has to be ultimately stitched into a complete Salwar / Churidar Set and hence can be classified as uFabrics", based on the constituent materials. In some of the sets, certain degree of stitching or neck work is done. These items cannot be worn as such and requires further stitching according to the measurement of the user. They are essentially in the form of fabric and have not attained the characteristics of an article like that of a readymade shirt or pant. They relied on the circular issued by i-irc cerrirai tsoarri of r,xcrse and customs No.557 /s3/2ooo dated 03.11.2000, wherein it is clarified that Dhotis and Sarees are classifiable as fabrics only and stated that the same rationale would hold good for Salwar and Churidar sets also. Also, as per circular issued by the CBIC, No 13/ 13/2017 dated 2T.lo.2orr, cut pieces of Fabrics are classifiable under chapters 50 to 55 of First Schedule to the Customs Tariff Act 1975 on the basis of their constituent materials and attract a uniform GST rate of Soh with no refund of the unutilized input tax credit. The

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Page 3 of 16

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applicant has sought the correct classification of these items and applicable rate of GST.

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The original authority for Advance Ruling has ruled as follows:

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Model 1 salwar/chudidar sets supplied by the applicant, Both rop and Bottom not stitched consisting of three pieces of fabrics (Top/Bottom/Dupatta) where no stitching has been done and the pieces are merely cut into fabrics from bales/than, is classifiable as fabric Chapter 50 to 55 depending on the material.

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Model 2 salwar/chudidar sets supplied by the applicant, Top semi - stitched and bottom not stitched consisting of bottom and dupatta fabrics cut from bales/than and the Top has already been partially cut into shape but requires further cutting and stitching to size, is classifiable as made up articles under Tariff heading 62Lr42/62tr43/62rr4g depending on the material.

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Model 3 Salwar/chudidar sets supplied by the applicant, Top stitched but bottom not stitched consisting of bottom and dupatta fabrics cut from bales/than and the Top fully stitched is classifiable as made up articles under Tariff heading 62rt42/621143/621 149 depending on the material.

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Model 4 Salwar/chudidar sets supplied by the applicant, Top Neck - worked, Both rop and Bottom not stitched consisting of bottom and dupatta fabrics cut from bales/than and the Top has neck portion cut and design worked into it is classifiable as made up articles under Tariff heading 621142/621143/621149 depending on the material.

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). l''or Model I salwar/chudidar sets supplied by the applicant, the applicable rate of tax would be 2.so/o CGST as per applicable Sl.no (depending on the material) in Schedule I of Notification l/2OI7 -Central Tax (Rate) dt. 28.06.2017 as amended and 2.soh SGST as per applicable sl.no (depending on the material) in Schedule I of Notification No. tr(2)/crR/532(d-4)/2017 vide G.o. (Ms) No.62 dated 29.06.2or7.

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For Model 2,3 and 4 salwar/chudidar sets supplied by the applicant, the applicable rate of tax for such articles of sale value not exceeding Rs 1OO0

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Page 4 of 16

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per piece, would be 2.5% CGST as per sl.no 223 in schedule I of Notification I/2017 -Central Tax(Rate) dt. 28.06.2017 as amended and 2.5o/o SGST as per sl.no 223 in schedule I of Notification No. rl(21/crR/532(d-41/2017 vide G.o. (Ms) No. 62 dated 29.06.2017 and the applicable rate of tax for such articles of sale value exceeding Rs 1000 per piece, would be 6oh CGST as per Sl.no 170 in Schedule II of Notification I/2017 -Central Tax(Rate) dt. 28.06.2017 as amended and, 60/o SGST as per Sl.no 170 in Schedule II of Notification No. II(2)/CTR/532(d-41/2OfT vide G.O. (Ms) No. 62 dated 29.06.2OI7.

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Aggrieved by the above decision as to the classification and rate of GST

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applicable for the products of Model 2, 3 and. 4, the Appellant has filed the present appeal. The grounds of appeal are as follows:

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and in some of the sets, certain degree of stitching or neck-work is done. These items cannot be worn as such and requires further stitching according to the measurements of the user. They are essentially in the form of fabric only and not attained the characteristics of an article of apparel like that of a shirt or pant or readymade Churidars wherein both the top and bottom are fully stitched and ready to wear.

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and Customs bearing No. 557/53/2OOO dated 03.11.2000, in the context of classification of dhotis and saree under the erstwhile Central Excise Tariff, wherein it has been clarified that they are classifiable as fabrics only. The same rationale would hold goods for the salwar/ churidar sets also.

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t'e=-ring llc' !3/13i2C17 datcd 27.iC.2Ai7, *ircrcirr ii- is ciariiieci rhat "Mere cutting and packing of fabrics of different lengths from bundles or thans will not change the nature of these goods and such pieces of fabrics would continue to be classifiable under the respective heading as the fabric and attract the 5% GST rate."

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notice of Directorate of Commercial Taxes and the said department vide Trade circular No. 16l2ol8(circular No. 13/13/2}17-GST) dated

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Page 5 of 16

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r7.o9.2or8 has clarified that "Mere cutting and packing of fabrics of different lengths from bundles or thans will not change the nature of these goods and such pieces of fabrics would continue to be classifiable under the respective heading as the fabric and attract the 5% GST rate."

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'' Another clarification on this issue was issued by CBIC vide Circular No. 80/5412O18-GST dated 3I.72.2OI8, in which it was further clarified that "any embroidery on a fabric piece or certain embellishment thereon does not change the basic nature of their being a fabric"

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comprising of three sets of fabrics for Tops, Bottom and Duppata, whether partially stitched/ neck work d.one or not, would remain classified as fabrics, under chapters 50,s2,54,s5 only based on the constituent material and attract a total 5% GST and are not classiliable under Chapters 61 to 63 and thereby attracting a total 5% GST if their sale price is less than Rs. 1000/- and attracting I2o/o GST, if their sale price is more than Rs. 1000/-

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to Chapter Note 7 of Section XI of Customs Tariff covering "Textile & Textile Articles" of Chapter 5O to Chapter 62 wherein the meaning of "made up" is given. As per the chapter note T(a) -^umade up" means, cut otherwise than into squares or rectangles; chapter note 7(fl to section XI of customs Tariff "made up" means, sewing, gumming or otherwise. chapter Note B(a) of the customs Tariff, it was specified that "made-up, cannot be classified under Chapters 50 to 60. Further, General Rule 2 of the Interpretation of Customs tariff was relied upon to substantiate that any unfinished goods or incomplete articles has the essential character of the complete or finished article, should be classified under the appropriate heading of sfinishp.{ aftiCle'.

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Based on the description in Chapter notes, the authorities have ruled that the fabrics cut into pieces otherwise than into squares or rectangles, are to be termed as "made up" therefore excluded from crH s0 to 60 as "fabrics" and fall under CTH 621 1;

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The products specified in S.No. 2 to 4 above are semi-finished such as neck work done, embellishment done, part of the article of the complete set was stitched, hence this products should be appropriately classifiable

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Page 6 of 16

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under the heads of articles of particular made ups. This observation of the lower authorities is not sustainable for a reason that though these articles are incomplete or unfinished, the same has not attained the essential character of^.READy MADE GARMENTS oR CHURIDHAR SETS". Unless the semi finished products/articles attains the essential character, the same cannot be called as a "CoMPLBTE LADIES GARMENTS, in order to classify them under appropriate heading under CTH 62 i 1.

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these products only as "fabric, and not as ready made garments as it cannot be worn without undergoing the process of stitching. Merely it is cut into shapes other than squares or rectangles or neck work is done and top is finished or semi-finished, the same cannot be used as in where condition since the other parts of the fabric is required to be stitched in order to use the same as a COMPLETE SET. Further, the customers/end users shall also term this as^ufabricn which is subject to stitching according to their sizes/shapes and designs and without such stitching it cannot be called as 'Churidar Materials". once this doubt has been raised by the Trade, the mater was taken up for discussion by the GST council and accordingly various clarifications were issued by the CBIC and DCT as above and clarified to trade that these "unstitched salwar suits, are classifiable as "fabrics" and attract S% GST.

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The appellant has prayed to set aside/modify the impugned advance ruling passed by the Authority for Advance Ruling.

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PERSONAL HEARING:

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5' The Appellant was granted personal hearing as required under law heforc rhis Appeltste Authc;t1- oi' 25:r'Ayrii 2oi9. The nutnorzecr representative of the Appellant Shri. M. Karthikeyan, Advocate and shri. K. Hariharan appeared for the hearing. They produced samples of Model_2 and Model_3 types. In respect of Model-2 the bottom was unstitched and Top semi-stitched and in Model-3 Top is stitched, duppatta hemmed but the bottom unstitched. They did not produce a sample of Model-4 during the hearing. The learned representatives reiterated the written submissions submitted along with the Appeal Application filed by them.

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6' It was observed from the samples produced before us and the images given in their written submissions that each set consists of three pieces. The bottom piece is unstitched in the sample model sets produced. The duppatta is hemmed/knotted requiring no further work on the same. One of the Top is fully stitched and the other Top is Semi-stitched.

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DISCUSSION:

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7 ' We have carefully considered the various submissions made by the Appellant and the applicable statutory'provisions. The issue before us for determination is the classification of the Model 2[Top semi-stitched and bottom not stitchedl, Model 3 [Top stitched but bottom not stitched] and Model 4 [Top Neck-worked; Both Top and Bottom not stitchedl Salwar/Churidar sets with duppatta hemmed/knotted, traded by them, as to whether they are to be classified as "Fabrics" under Chapters 50 to 55 depending on the constituent material or as "articles of apparel and made up textile articles" under Chapter 61,62 and 63 and the applicable appropriate rate of GST.

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8' From the submissions, it is seen that the appellant are engaged in the trading of readymade garments, fabrics and other similar items. The product under consideration is the Salwar/ Churidar sets with duppatta containing three different pieces in a set, of which some piece have to be ultimately stitched to size to make a finished Salwar/Churidar set. The different models being sold by the applicant are

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1. Both Top and Bottom not stitched- a model where no stitching has been done and the Top is merely cut into size;

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1. Top Semi-stitched and Bottom not stitched- a model where the Top is semi-stitched, requiring further cutting and stitching to size(sample producedl:

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1. Top stitched but bottom not stitched- a model where the Top is

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completely stitched but the bottom is not stitched (sample produced); and

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1. Top Neck-worked; Both Top and Bottom not stitched-a model where both the Top and Bottom are not stitched but only the neck portion is cut and design made

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In the two sample model sets that were produced at the time of personal hearing, it was noticed that one of the three piece in the set, i.e., the duppatta, in all cases, Page 8 of 16

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were either hemmed or knotted and had already attained the linal characteristics of a duppatta and did not require any further finishing. The original authority after due consideration of the various clarifications and materials furnished, has ruled that except Model- 1 set, which consists of three pieces of fabrics with/without certain embellishments, the other models being 'Top semi-stitched and bottom not stitched', Top stitched but bottom not stitched' and "lop Neckworked; Both Top and Bottom not stitched'are sets containing 'made up'articles of textiles for Top of salwar suit and pieces of fabrics for Bottom and Dupatta of Salwar suit. Applying General Rule 2 for the interpretation of Customs Tariff the original authorities has classified these products under chapter heading 62Il - Other garments, women's or girls. The appellant is in appeal before us against the ruling in respect of Model 2, 3, and.4 sets of Salwar/ churidar.

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8.1 The Appellants'main grounds in this appeal are

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These articles are incomplete or unfinished and the same has not attained the essential character of 'Ready Made Garments or churidhar sets'. Unless the semi finished products/articles attains the essential character, the same cannot be called as a 'complete Ladies garments, classifiable under CTH 6211.

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In Trade parlance, these goods are supplied as "fabric", which is subject to stitching according to the size/ shape and designs of the end user and therefore it cannot be termed as ready-made garments and only called as "churidar materials". once this doubt was raised by the Trade, the matter was taken up for discussion by the GST council and accordingly clarifications were issued that "unstitched salwar suits'are classifiable as "fabrics" and attract S% GST.

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9- The ccntc::tio;ls of iL-.c App.lla.rri .rs i-akerr orre by one ror conslcleratron. The first contention is that the products under consideration are incomplete or unfinished and the same has not attained the essential character to be called as a 'Complete Ladies garments' and classified under CTH 6211. In this connection, we find that, it is to be examined whether CTH 6211 covers only 'Complete Ladies garments' or the heading also covers 'incomplete or unfinished articles listed in the CTH 6211'as the products under consideration are in,incomplete or unfinished' state.

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Page 9 of 15

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9.1 For the purposes of GST, in terms of expranation (iii) and (iv) to Notification No. 1/2017 - Central Tax (Rate) dt. 28-06-2OI7, tariff heading, subheading, heading and chapter shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 and the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall be applied for the interpretation and classification of goods.

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9.I CTH 6211 of the Customs Tariff is reproduced below for ease of reference:

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62Il

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62Il	Tx-ecx surrs,sKrslTrs.d\D s$fvlt-EAR;OTEER GARIIE:iTS ,9rl.innr.ecr"'
6?11l100	Mcn'sorboys'	u	25^o./o
611112 00	Wornen'sor giris'	u	.150,o
6t.11 2000	Skisuits	u	l5%
	Other garments,nenkorbors
6.1113:00 6llIt300 6lll1900	Ofcotton Ofnran-made fibres Ofothertextilernaterials Other garments,v.omen's or girls':		25o.'borRs.135 perpiece. rrhichever ishigher 2,s9.i'orRs.135 per piecc. *-hicher.erishigher l5^q;
6.t114:	Ofcottan:
6lll{2l0	Kurtaandsalwarrvithorrvithout
6211{t90	duppatta Other		25%oorRs.135 perpiece. q'hicher.erishigher 25V"or Rs.l35perpiece. uhichever ishigher
621143 00	Ofman-made fibres		25liorR.s.135perpiece. rvhicheverishigher
6211-19	OfOthertextilematerials:
61114910	Ofrvoolor fineanimalhair		259';
6tlI^,r990	Other		.259';

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From the above, it is seen that '---Kurta and salwar with or without duppatta'is specified under the heading '-Other garments, women's or girls' and depending on the constituent material the product is classifiable under 'CTH 6211 4...,. It is further to be examined, whether, the said CTH covers only 'Complete Ladies Garments' or it includes 'incomplete or unfinished suits' also. The Customs Tariff is based on Hannonious System of Nomenclature(HSN) and therefore the Explanatorynotes of HSN is a guide to resolve issues of Classification. Rule (1) of the General rules for Interpretation states as follows:

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Page 10 of 16

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Rtit-L l

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-[he title"s of Sections., chapters a,nd sutr-Chapter_s are proride4 for ease of refcrencc onlr,: for an-1 require, acc()rding legal purposes. relafiro section classificatiln to thc or-chaplcr.\otfollot,ing rirriit pr,nisirrirs. " r ?-.tii-ln"a.r""o'r.ai"g "na,^{pro;iA;t;ilrili-;lit',gr'"t} tr ti* ierms of tlre^{\oresdorrr.,r} hea'ingi^orher\r.ise nnd

¶82

The Explanatory notes as per HSN to the above Rule is as follows:

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F]XPI-A\ATf}TT} N()'rE

¶84

lll lheNiltrrcrlclaturdstllt{\tllirrs}s{frnirtick',n;rl}rrgtxrrish.rrr<lit:ilirtlrrlcn}rli{ni.lr;;rt1lr lii:iili,;,Jll'':i i:lli:i.lilrtl";il;;0,]hlf:i'."',d ','t"-t^{t ,'1ir}i:fi lttxrtls^{h',:n.nir,,.'r.i,:li rhcr} cl"rr iiii lu "i,',,, rtt,rnv^r.i. ^-rsr;-" 111,i,.g'ugr'. rhr raricrl ""u "",tirtti,.itttii1llft".tj,lil,i.lol srr{:h rit:* ir io iii,li iiriirr.:l;;,r;,.;, iii",,, irlt .r r,:, ie rhNr: ,tr,.,fiirtTi;itili"j';,,i"t.tn*' '"t' (lli Rule I tregins thcttj lirre hr rrtnl'lirhirrJ: trhsr lha ritlcs lre pnr?rtlctl .'lirr r{* . r,l'rullr,..rr.c. iuli.'-. lht"r, ;rlri.irdirrr1l,.. lir.e rro leg,tt^.heairng (,r; .j;;.;l;I;,;, I IIli I hr- rl,..orril 1r.i'r ufiirir !{ult, Irr.r.irlcr iiurl cllisrilicr;irrlr ri1;1fl l}j (l(}icrrlrlrf{l f-al llct0rrling i{r llrt {t"rnrr of thc heirrlin;:s arrrl rrrrv rt.l:ili1,t] 5rati(n} r)r I h,rll!)r \r1ldr5. ""^{::1,':,,;l';'li:'illl'i,l-l,lllll::Ti;1i.."5::1".1::,,,Yi.n"esdo not orheris requrrc} tlVl Prr i:ii'tt (lIIl i.]i is sell-cr irJr:nr. and crarry. grrod$, lrr.' f ll5iil;r.d irr ihe .rrierrili:1rrrr, 'i{lt'tti rcJ{rrlls. l" rrr', fi:rthci.r.ir"ni.lemti,i r1 rl-niterprc;rii,ne ttilt.". ic r.- lrrc h.:sr:r ljj;lli']A ii,l,i, Jrlt^{iirrrt rrrrir:rl} ;rrn,il i1i'.ill":,i"'',""'r,,r., J ar { hiltr(rr rrr l\tl lrr prrl'u11,,", illll tirl: llll -Iite crrrtcqri0!l "t:!tIlVi(led sil(h lrglr.lrrlr: rr \uir! drr rrrrt ltlrtrlrist rtcrritt.'l{i[!;-.q{i.;,,lif i;l:}"i];i.iif, ':,:lr,ili:,1;.,1iIi:i'1tl,ii;iiil:':i drtcrr'ltriltg tliisqilic:r:tirr. l.n' erumple.'tit- r"'rtii"i"i'l r, rrr" N*,i.io'- ir.,i",.r.:"ir,,ii r.rrl.rirr lrlmlirry-s rrltlt orrlv i;,?,'1fi ff ilj:;;., :iiilliiii"^{;:i;il'i;iiill, iliilll,'''i;;,1;i,t'''t"11,.:r.:iii ,lr:;l:i:l':11} (bl 'fhe i. .f ,rrri.i tcfitrr:rr.:r 5'. ,llc.,t'l\ llr;rt tl Ilule I i rrr tlrc d,\pr€ir;:(ll .-;iccor.tlirrt: ro llrr [rr(i!,i5ir)rrs rrl,Rrrlc;_ ]. " t il:i;. pii(r!!!trd itrt'rrrplelr i,r rtrrllrrislrt'r:l (t,.1t.. .r hi..rr:k: ',!ilh,\rt ::,rrtrllr, :rrill i:, i;:::.:11).t]l_,;(ttl((l!rrtt.r\r"nrhlcr{^{r-,r rl;scisrrrrhlerlf .g.,: lrrrlcL'. irr,lris(rnl)le(l} r,r l'i,l;iiilililiill;iri,^{.':x'.ilI'l;?;i.,''i,;'1fl.1"",::li";l,"lJ,'t::,J..'i,;:ll:'l:;,,:,,',ljil:i;'l';} i!i ''pitrt9" ol thrrsc gtxtilr;r:"i!!i! ilii+;ll fi *i,',Xt ;i:.;;,1,;ii.frl';i.l'":i',;i.:iill':ii;;,';"'s;i'J:.L;';,;; rrthrrrvise reqrrirr

¶85

As per the above Rule, classification is to be determined based on the terms of the heading and any related Section/Chapter Note. CTH 6211 specifies ,Kurta and salwar with or without duppatta'. To ascertain whether the incomplete or unfinished goods will also be classified under the said crH, as per the explanation (V) above, it is to be seen if the goods fulfill the terms of Rule 2(a). Rule (2)(a) of the General Rules for Interpretation states as follows:

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Page 11 of 16

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'l ' (a) Any reference in a headrng to an article shall be takeir io include a reference to that article incomplcte or unfinished. pror,ided that. as presented the incomplae or unfinishcdarticleshaethe essential characterofthe complctcor furishcdarticle. It shallalsobe takentoinclude areference to thatarticle conplete or finished {or falling to be classified as complete or finished by r,irtue of this rule). presanted unassembled or disassembled.

¶88

The Explanatory Notes to the above rule, as per HSN is as follows:

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EXPI,ANATORY NO'I'E

¶90

RI_;Itr 2^(a) (Incomplete or unfinished articles)

¶91

(l) 'l'he {lrst part 0f Rule .? (a) extends lhc scopc of any hcading wbich refcrrs ro a particular article to cover not only the complcte articli bul alsd that arrrilc incomplete or uiflnished. provided that, as presinted, it has the csscntial character of the complete or finished amclc.

¶92

(ll)^{'l'hc.provir;rons} of this-Rule also apply to blank unlcss thcsc are specrfied in a particular heading. The term "blank" rneans'an aniclc, not readv for d'irect usc. hiyjns the cplr()x.lmate shape or outlinc of thc linishcd anicle or pari antl which can onlr- be-usetj, other than tn exceptional cascs, for complction into the iinished article or parr (c.s . bottle prefoms of plastics being intcrmcdiatr-; protlucts lraving tubular shap,:, with on'c ciosed t:nu and. onc.Open end threaded io secure a serc\t' tvpc closure. thc portron bclorv the thrcaded end being intended to be expantled to a desir6d size and shapej.

¶93

Semi-tnanufacltlres not.vct having thc cssential shape of thc finishcd articles (such as is gcncralh fie case witb bars, di:cs, tubes. etc.) are ncit regarclcd as "bianks".

¶94

(lll) ln vietv of the scope of the.hcadings of Sectionsl to Vl. this pa* of the Rules tlocs not nomally apph, to goods of rhcse Seitions.

¶95

flv) Scvcral cascs covcrud bv lh-c.Rulc arg cited in the Ceneral l:rplanarory Nores lo Sections or^{('haprers (r} g.. Seciioir XVI, and Chuptr,.n 61. 62. 86. S; ani 901

¶96

As per the explanation above, if the incomplete or unfinished article has the essential character of the complete or finished article, then the heading referring to a particular article covers such incomplete or unfinished article also. It is further stated that several cases covered in this Rule are cited in the General Explanatory Notes to Sections and Chapters. The General Explanatory Notes to Cirapi"cr 62 sr.ales as loiiows:

¶97

{;ti}:tL{L

¶98

1'hi; {'h.tptcr Lr}\rl'.i it)l:n:t, u'rtrI't!'n'i rx'thildrr:n'i ilr1rcl*l nf app.rr',.-1. c}lt.hing arcet;s6rics antl ll:t'l.^j'laltF.rrcl 'r^{of tkrlhing.a{ccttsori-cs, niadr' lrp of thcfirblrc,ittrrlLrtfiugr,vaddur.qbur} rt:.'litrlillg lt.ll t}r il'|lli\rr,!'r)() (rl ('he|lcr., iil l,r r{r, iX-.rnri i.) \ rth thc rrr:rption rrr.thc.rriicltr i): nL.trrtlg ar,: r ".' .lrti('rc\ rf 11pp;111r. r'hrrhing irc( r.{r{)ri('\ utrrJ p,rrlr trtatlt' ,rf'Ilrittcd rrt 1:111i[1..1g11 nl;ltc'ri;l itrr. ercluded tjonr rh'ji' (lh;:ptrlt..

¶99

Page 12 of 15

¶100

FJ'r"rppliL'r111rjl of Nr)lc l4.f.-, scctll)fr X[. garmcnts rf diflircrrt ]rcadings irrc r' lrr. classif-rcrl in fiih sx['ul'ssir]r1 "rr-xrilc-^l!tt $l $anrrrs" t'gffi ,n",.ns I'rl g"imcnrs^lriln{:, ,,iiti.-aiii.'i;i.iii',,', l:;l,lhiffi o:- r r iliil1ffi l:

¶101

-l hi:i tlh;rptcf erlJil,r crrrl,ct'x ut:tinfshr:tl ilr i::rrrnrr.lr:lt: rrrrr.li,c ,rf rk,, t,;,.,r ,r.....-.:L -, -rcc1111u1'-i;,;iuii"i.,,?.,rlllil,:j:li'J'li'"-i'f illitU:t,il*iil,tir"-iir,,l;"i;;;;i,;i;^{i'{:!l!ilf,!;,!,-i'i1,,,:.f,1,[1;,liil,lu:il::n0,1,1.,,'i;,!:]:,;} f1u,.1;"^{r': lrr',,i' i,i.:ii"16"1..} 1,r,;,i;,,:i,:'h,,,. ,h.. ii';;'l;,;;',,;i;iii''il.l,.,r""r, p.rls.r'g*.,uni,",,,1'lli,,ti,;,',:lL:,1,1"^{the sarrichcadrngi} ;rs th' (othti ld;;in;" ,,lt,"".iiri['rii.'i;il.:';i;rsifiert in hc$dine or.r {]"'*' nr-rr knrllcd or elrurltctctl

¶102

From the above, it is clear that this chapter covers unfinished or incomplete articles of the kind described in the heading provided the products have the essential character of the articles concerned.

¶103

9'2 The appellants in their grounds of appeal has stated that the products has not attained the essential character of "Ready Made Garments or churidhar Sets" but has not elaborated the grounds. They have stated that further stitching to size is required and the set is known in common parlance as ,unstitched Salwar materials'' we find that the products under consideration are sets consisting of three pieces of cloth 1. Top, 2. Bottom and 3. Duppatta. In Model 2, theTop is semi-stitched and duppatta knotted/stitched and the bottom is unstitched; Model- 3, Top is completely stitched and duppatta knotted/stitched and bottom is unstitched; Model-4, Top is Neck-worked and both top & bottom unstitched(not displayed during the Personal hearing). It is agreed that in the sets under consideration, the Salwar (bottom) requires stitching and the Kurta(Top) is to be stitched to size but mere stitching / Stitching to size do not take away the characteristics of the garments being Salwar/ churidar sets. It will not be out of context to mention that in the Model 2 and 3 displayed during the hearing, it was observed that the duppatta which is one of the pieces in the Set is hemmed/knotted and in a ready to wear condition. The sets can be used only as 'churidars' and cannot be used as any other garments or termed as ,fabrics,. I'rrerelore we find that the sets which are in approximate shape/outline of the finished goods, more so with one piece in ready to wear cond.ition, have the essential character of 'finished goods' and in view of interpretative Rule 2(a) are classified as 'Kurta and Salwar with or without dupatta'under crH 6211.

¶104

10' The second contention of the appellant is that once the trade raised the doubt, that, in trade parlance, these goods are supplied as .fabric', which is subject to stitching according to the size/ shape and designs of the end user and therefore it cannot be termed as read.y-made garments and only called as

¶105

page 13 of lG

¶106

"Churidar materials', the matter was taken up for discussion by the GST council and accordingly clarifications were issued that "unstitched salwar suits' are classifiable as^*fabrics" and attract 5% GST.

¶107

10.1 It is seen that CBIC vide Circular No. I3/2O|T dated 22.1O.2Ot7 has clarified that 'Mere cutting and packing of fabrics into pieces of different lengths from bundles or thans, will not change the nature of these goods and such pieces of fabrics would continue to be classifiable under the respective heading as the fabric and attract the 5% GST. Further to this clarification, on the doubts raised by the Trade as to the applicable rate of tax and on the classification, when the embroidered fabric with certain embellishment are sold in three pieces(suit salwar and duppatta fabric), the issue was discussed by the Fitment Committee which furnished the comments as below:

¶108

l-t Ernbroidered Issue l. Fabrics of all kind attract GST at the rate of 59lo_
fabric sold in l cluification f Gmcnts and made up attt.act GST at thc ratc of
thre piecc for j rcgrding 59t u'ha value is less thm Rs 1000 pcr piccc and
lady suits 't applicable rate 1292o whcn thc raluc cxcccds lf 7o.
"1. Doubts hale riscn as regards applicable rates
qden the cmbroidcrcd fabric rvith ccrtain
ernbellishment like gota etc. are sold in three pieces
{suit sahva and dupatta fabric).
+- Errlia a clarit'ication rvas isrued to the effect tlrar
l-abrics cut ro size tbr salrvr suits etc. continue to
be tabric nd aftract GST at the rate of 59,i
imespectire ofprice.
Horvcvcr. norv doubt has bccn raiscd about tlucc
piece falxic sold in a pack as ladies salrva suit,
u,hcrr such labric is embroidered rvould fall under
the category ofrnade up or fabric.
Fitrnent Committee s'as of the view that eren in
threc picces the itcms rcnrain fabric. To be a
Samiltrmade up- it has to be more than rnere
fabric. lvladc up aniclc in Chaptd 63 covcrs pieces
rvhich har-c undcrgonc somc rrorking. such as
hemine or fonnation of necklirres- intcnded tbr
the manufacture of garmcnts but not yct
sufficiently complercd ro be idmritjablc as
gaments or parts of garmcnts. Thus, merc fabric.
even if embroidered or has stitching of lace md
tiklii etc.. and evar if sold in three piece fabric as
ladics suit ect. rvill continue to classifiablc as t-abric
(as esscntial chaactcr of fabrics ia not altcred) and
attract -5?.ir GST.

¶109

The committee has stated that even in three pieces the items remain fabric, if embroidered or has stitching of lace and tikki etc., and to be a garment/made up, it must have undergone some working, intended for manufacture of garments. the above comments were placed before the 31"t GST council Meeting and was accepted by the council and thereupon, CBIC has issued a circular No 80/54/2O18-GST dt 31.12.2O18, the effective portion of which is as follows:

¶110

10.3 Earlier, uide Ciranlar no. 13/13/2017-CGST dated 27th October 2017. it has been claified that mere packing of fabncs into pieces of different lengths will not

¶111

Page 14 of 16

¶112

change the nature of these goods and such pieces of fabrics would continue to be classifiable under the respectiue heading as the fabic and. attract the S% GST rate. This clarification would. equallg applg to three pieces of fabics sold in a pack as ladies salwar suit. Ang embroidery on a fabric piece or certain embellishment thereon does not change the basic nature of their being a fabric. The chapter 63 couers garment, including the unstitched" garments which maa or may not be sulficiently completed to be id.entifiable as garments or parts of garments. Howeuer, heading 6307 would not auer a fabric pieces or a set of pre-packed fabnc pieces, euen if embroidered or embellished.. such set of fabic pieces would" attract GST ot the rate of 50,4."

¶113

ro.2 From the above, it is evident that to be a garment /made up, the product has to be more than mere fabric. It is further commented that Made up article in chapter 63 covers pieces which have undergone some working, such as hemming or formation of necklines and intended for the manufacture of garments but not yet sufficiently completed to be identifiable as garments or parts of garments. In the case at hand it is already established that the products are incomplete or unlinished 'salwar/Churidar Sets', which requires further stitching to size/design. The products are not simply fabrics with certain embellishments but containing Top which are Semi-stitched, stitched and neck-line formed/ dupatta hemmed/knotted, which are without ambiguity cannot be considered as mere 'Fabrics'but more appropriately termed as ,garments'or ,part of garments,.

¶114

1o'3 Thus the Model 2, 3 and.4 under consideration, being Sets of three pieces consisting of (1) unstitched salwar(bottom), (2) laced/hemmed/knotted duppata and (3)semi-stitched / Fully stitched Kurta(Top) / Top with defined neckline are 'garments' and not mere 'fabric' in three pieces. These are covered under specific entry in the customs Tariff- crH 6211, as the heading includes,salwars,of various materials. As per Notification No. 01/2017-c.T.(Rate) dated 28.06.2017 as amended and schedule I of Notification No. rr(21/crR/sg2(d_4)/2017 vide G.o. /l\il-l Nr^ e^ va uqluu s^L^-l z7'ww'zvt ^^ ^z ^^-/ or Iamll Nadu Government as amended, the subject goods are liable to GST @ 5%[cGST-2.so/o and sGST -2.s'h], if the sale Varue is less than Rs. 10oo/- per piece and @ 12%[CGST-6oh and SGST-6%], if the sale value is more than Rs. rooo/- per piece. we find that the lower authoritgr, has considered the above and accordingly pronounced the ruling and do not find anv reason to interfere with the same.

¶115

Page 15 of 16

¶116

In view of the above we,^pass the following Order:

¶117

ORDER

¶118

For reasons discussed above, we do not find any reason to interfere with the Order of the Advance Ruling Authority in this matter. The subject appeal is disposed of accordingly.

¶119

I i : ' '' t"'r "\ ) -'-'^{'-' t} . -t,1'-'--} i,r -^{- -'-tt'.v.soMANATHAN)} (M. AJrT KUMAR) Commissioner of Commercial Taxes, Pr.Chief Commissioner of GST & Excise Tamilnadu /Member tu\AR Chennai Zone / Member AAAR

¶120

¶121

To APPILLATE M/s. RmKV Fabrics Private Limited, AUTHORITY^FOR I76F, 2"d Floor, 3'd Floor, (By Speed *frDXeTE$"f^uutr'tc Trivandrum Road. Vannarapettai, Palayamkottai, Tamil Nadu - 62T OO3. 1 3 t.{AY 2019 Copy to GOODS ANO $ERVIGE^TA)( 1. Additional Chief Secretary/Commissioner of C gndahlhqeD filnhn, Ezhilagam, Chepauk, Chennai- 600 005.

¶122

The Principal chief commissioner of GST & central Excise, 26/1, Mahatma Gandhi Road, Nungambakkam, Chennai-600034.

¶123

The Authority for Advance Ruling , Tamil Nadu O/o the Authority for Advance Ruling, No.1, PAPJM Building , Greams Road, Chennai-600 006.

¶124

The Assistant Commissioner (ST) Palayamkottai Assessment Circle, Commercial Tax Building, Reserve Line Road, Palayamkottai, Tirunelveli - 627 OO2.

¶125

The commissioner of GST & c.Ex., chennai south commissionerate 6. Master flle/ Sp{re-2

¶126

Page 16 of 16

TN/AAAR/03/2019(AR) of M/s Rmkv Fabrics Private Limited

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TN/AAAR/03/2019(AR) of M/s Rmkv Fabrics Private Limited

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