Page 135 - GSTL_23rd July 2020_Vol 38_Part 4

2020 ] IN RE : SADGURU SEVA PARIDHAN PVT. LTD. 501
the Central Excise Tariff Act, 1985. The said Chapter Note 2(c)
was, therefore, deleted by the Finance Act, 1995, CBEC, however,
maintained that fusible interlining cloth partially coated with
plastic was to be treated as an exception and would continue to be
classified under Heading 5903.
(iv) The difference arises from the application of the provisions of the
Explanatory Notes to the HSN Code. In the said Explanatory
Notes to Chapter 59, textile fabrics which were spattered by
spraying with visible particles of thermoplastic material and were
capable of providing a bond to other fabrics or materials on the
application of heat and pressure were classifiable under Heading
5903. According to CBEC Circular No. 433/66/98-CX-6, dated
27-11-1998, such classification should be treated as an exception to
Chapter Note 2(a)(4) to Chapter 59.
(v) While striking down the above mentioned Circular No.
433/66/98-CX-6, dated 27-11-1998 as ultra vires and contrary to
Section 37B of the Central Excise Act, 1944, the Ld. Single Bench
of Madras High Court in the case of Madura Coats reported in
2004 (163) E.L.T. 164 (Mad.), took no notice of the applicability of
the Explanatory Notes to the HSN Code in deciding a classifica-
tion issue under the Excise Tariff. Although not stated explicitly,
the Court held the interpretation of the law, as made in Circular
No. 5/89, dated 15-6-1989, a binding legal provision, and the con-
trary view is illegal and ultra vires.
(vi) Upon appeal, the division Bench of the Madras High Court, in its
order dated 5-1-2009 in WA No. 507 of 2005, refrained from ex-
pressing any view on the legality of the said Circular so that the
assessing office could apply his judgment without any bias. The
Court however, set aside the impugned Circular that the as-
sessing officer had quoted in a show cause notice in violation of
the provisions of Section 37B of the CEA’ 44. Such setting aside of
the impugned Circular restored the SCN. The Division Bench
however, categorically stated that it was not done on the ground
that the circular is ultra vires.
(vii) It therefore, appears that reference to the Single Bench judgment
in the above-mentioned case does not help in deciding the classi-
fication of the applicant’s product. The fact that CBEC appealed
against the Single Bench judgment in 2005 also indicates that it
continues defending Circular No. 433/66/98-CX-6, dated 27-11-
1998 and has not made any further course correction. Circular No.
433/66/98-CX-6, dated 27-11-1998, therefore, reflects CBEC’s
view on the classification of fusible interlining, cloth as on dale.
(Viii) It appears from the production process described above that fusi-
ble interlining cloth satisfies the conditions for placing it in the
category of the above exception.
(ix) Nowhere in its application or submissions - written or oral - the
GST LAW TIMES  23rd July 2020  135