Circular Issued by TRU is Set Aside as Power to Issue Instructions or Directions to Central Tax Officers is Vested Exclusively in CBIC | HC

Case Details: Association of Technical Textiles Manufacturers and Processors v. Union of India - [2023] 156 taxmann.com 421 (Delhi)

Judiciary and Counsel Details

• • Yashwant Varma & Dharmesh Sharma, JJ.
  • V. Lakshmikumaran & Kunal Kapoor, Advs. for the Petitioner.
  • Shubhra Parashar, Virendra Pratap Singh Charak, Yash Hari Dixit, Pushpender Singh Charak, Jitendra Kumar Tripathi, Akash Vajpai & Shweta Shandilya, Advs. for the Respondent.

Facts of the Case

The petitioners includes association of technical textiles manufacturers and a member of the said association. The writ petition was filed to seek relief against Circular No. 80/54/2018-GST dated 31-12-2018, issued by the Tax Research Unit (TRU) regarding the classification of polypropylene woven and non-woven bags under the Customs Tariff Act.

The TRU clarified that polypropylene bags fall under Tariff Heading 3923. The petitioners argue that polypropylene non-woven fabric is a textile and bags should not be classified as plastics, but should be classified under Chapter 56 (Textiles and Textile Articles), specifically Tariff Heading 5603. The petitioners question the TRU’s authority to issue such clarifications, contending that only the CBIC has the power under Section 168 of the CGST Act to issue directives.

High Court Held

The High Court held that the TRU lacks the authority to issue the challenged clarification. The High Court further examined the classification issue and emphasized on the exclusion of textiles from Chapter 39. However, the court refrains from giving a definitive opinion on the classification issue due to inadequate material and industry-wide ramifications. It stresses the importance of avoiding classification rulings based on tenuous and inadequate material. The court quashes the impugned circular and leaves the issue of classification open for consideration by the competent authority in appropriate proceedings.