CUSTOMS AUTHORITY FOR ADVANCE RULINGS

NEW CUSTOM HOUSE, BALLARD ESTATE, MUMBAD 400 001

E-MAIL: cus-advrulings.mum@gov.in

Application No. CAAR/CUS/APPL/55/2023 - O/o Commr-CAAR-MUMBAI

Ruling

M/s. NZ Seasonal Wear Private Limited (having IEC No 0309045983 and hereinafter referred to as 'the applicant', in short) filed an application (CAAR-I) for advance ruling before the Customs Authority for Advance Rulings, Mumbai (CAAR in short). The said application was received in the secretariat of the CAAR, Mumbai on 10.04.2023 along with its enclosures in terms of Section 2811 (1) of the Customs Act, 1962 (hereinafter referred to as the 'Act' also). The applicant is seeking advance ruling on the classification ofw PVC raincoats' for exports through the port of Nhava Sheva.

2. Applicant has stated as follows in the statement of relevant facts having a bearing on the qucstion(s) on which advance ruling is required:

2.1. That the Applicant is, inter alia, engaged in the business of manufacturing and sale of seasonal wear products (i.e. rainwear and winter wear). The Applicant is manufacturing and distributing Coated Fabric Raincoats and PVC Raincoats. Now the Applicant wants to export PVC raincoats. A PVC raincoat is a waterproof outer jacket made from polyvinyl chloride (PVC). The slick, non-pcrmeablc surface of PVC makes it a popular material for raincoats.

The product, is inter alia, made from huge PVC rolls/sheets. The said PVC rolls undergoes panel cutting process (i.e. the huge rolls/ sheets are cut into smaller sheets for front & back portion, sleeves, pockets, etc.). The said small PVC sheets arc generally not stitched with a needle and thread. Since PVC is nonporous, a needle would leave a large hole that would allow water to enter, making for a very ineffective raincoat, and weakening the seam. Instead, PVC scams are generally "welded" with heat, or bonded by chemical means. Either way, the all pieces of materials are melt together, either thermally or chemically, and are permanently bound. Thus, it is a non-woven product. Once all the material are permanently bounded the stitching of front zipper (made from polyester tape/ plastic teeth), draw cord (made from polyester), button (made from plastic or metal) or stopper (made from plastic) is carried out. The finished product is then sent to the packing machine for packing and the final product is ready to be transferred to the warehouse for dispatching the same to various distributors, retailers, wholesaler, etc.

2.2. rhe PVC? raincoats arc made from PVC Sheets and 'Prims: Zipper, Draw Cord, Button & Stopper. The How of process involved in the manufacturing of the PVC raincoats is as follows: PVC Sheet rolls & Trims--> Panel Cutting Process (front, back, sleeves and pockets etc.)--> Printing-->Heat Scaling (Welding)--> Front Zipper Stitching-->Packing (Individual Polybag & Master Carton)-->Transfer to Warehouse and dispatch.

2.3. The Applicant wants to export the PVC raincoats. As per the understanding of the Applicant the said product will be classified under chapter 62 of Customs Tariff Act (USN code 6201) as the same specifically provides an tariff item for raincoats. Section XI of Customs Tariff Act covers Textiles and textile articles. Chapter 62 covers articles of apparel and clothing accessories, not knitted and crocheted. Chapter heading 6201 of chapter 62 which is germane, is reproduced thus:

The applicant further submits that on perusal of the above table, it is seen that Chapter heading 6201 covers "Men's or Boys' Overcoats, Car-Coats, Capes, Cloaks, Anoraks (Including Ski-jackets), Wind-Cheaters, Wind-Jackets and Similar Articles, Other Than Those of Heading 6203." Thus, it would include raincoats not knitted and crocheted made up of: (i) wool or fine animal hair; (ii) of cotton; (iii) of man-made fibers and (iv) other textile materials. In light of the above facts and circumstances, the Applicant has approached the customs authority for advance ruling to know the correct classification of the PVC raincoats under the customs Tariff i.e., whether the goods/products, in question, would merit classification under IISN code 392690 or IISN code 6201.

3. Statement containing the applicant's interpretation of law and/or facts, as the ease may be, in respect of the questions(s) on which advance ruling is required:

The Applicant submits that PVC raincoat will be covered under HSN code 6201. Section Note 14 to Section XI reads thus: "74. Unless the context otherwise requires, textile garments of different headings are to he classified in their own headings even ifput up in sets for retail sale. For the purposes of this Note, the expression "textile garments" means garments of headings 6101 to 6114 and headings 6201 to 6211". On perusal of the above section note, it is clear that the "textile garments" covered under the said section XI will be classified under that particular heading of section XI only. Further, the applicant submits that it is well settled that the Section Notes and Chapter Notes in the Customs Tariff Act arc a part of the statutory tariff and thus, relevant in the matter of classification of goods, 'fhc relevant headings in the tariff have to be interpreted and applied in the light of Section Notes and Chapter Notes which are statutory and binding like the headings themselves. These Section Notes and Chapter Notes sometimes expand and sometimes restrict the scope of certain headings. (See: Saurashtra Chemicals 1986 (23)ELT 283). In other words, the scheme of the Customs Tariff Act is to determine the coverage of the respective headings in the light of the Section Notes and Chapter Notes. In this sense, the Section Notes and Chapter Notes have an over-riding force on the respective headings.

However, the term "textile" or "textile material" has not been defined under the Custom Tariff Act, though the expression "textile fabrics" is clarified under Note 1 of Chapter 59 as the expression applicable only to the woven fabrics of Chapters 50 to 55 and Headings 5803 and 5806, etc. Hence, one would have to look at the ordinary meaning of the said term as understood in commercial and general parlance. "Encyclopaedia of Textiles, Fibres and Nonwoven Fabrics" edited by Martin Grayson and published by Wiley-Inter Science Publication has defined the term 'textile material'. The term 'textile material' as defined in this publication is as follows: Textile materials are among the most ubiquitous in society. They provide shelter and protection from the environment in the form of apparel, they provide comfort and decoration in the form of household textiles such as sheets, upholstery, carpeting, drapery and wall covering, and they have variety of industrial functions as tire reinforcement, tenting, filter media, conveyor belts, insulation, etc. Textile materials are produced from fibres (finite lengths) and filaments (continuous lengths) by a variety of processes to form woven, knitted and nonwoven (felt-like) fabrics. In the ease of woven and knitted fabrics, the fibres and filaments arc formed into intermediate continuous length structures known as yarns, which arc then either interlaced by weaving or interloped by knitting into planar flexible sheet like structures known as fabrics. Nonwoven fabrics arc formed directly from fibres and filaments by chemically or physically bonding or interlocking fibres that have been arranged in a planar configuration (see Nonwoven textile fabrics, Tire cords). Textile fibres may be classified into two main categories and into a number of subcatcgorics, as indicated in Table-1. The generic names of man-made fibres arc defined and controlled by the Federal Trade commission (1) With the exception of glass and asbestos fibres and the speciality metallic and ceramic fibres, textile fibres arc formed from organic polymers. Cellulose (gv) and proteins (gv) arc the only important natural polymers in naturally occurring fibres (sec Biopolymers).

Table 1. Classification of Textile Fibres

Naturally occurring fibres vegetable (based on cellulose), cotton, linen, hemp, jute, namicanimal (based on proteins), wood, mohair, vicuna, other animal hairs, silk mineral, asbestos Man-made fibres based on natural organic polymers rayon, regenerated cellulose acclatc, partially acetylated cellulose derivative azlon, regenerated protein based on synthetic organic polymers acrylic, based on polyacrylonitrile (also modacrylic) aramid, based on aromatic polyamides nylon, based on aliphatic polyamides olefin, based on polyolefins (polypropylene) polyester, based on polyester of an aromatic dicarboxylic and a dihydricalcohol spandex based on segmented polyurethane vinyon based on polyvinyl chloride based on inorganic substances glass metallic ceramic.

"Textile 'Ferms and Definitions, Tenth Edition" published by the Textile Institute has also defined the term 'textile'. The Textile Institute is an international organisation governed by a Council representing members throughout the world. The term 'textile' as per this publication is defined as follows: "A textile was originally a woven fabric but the terms textile and the plural textiles are now also applied to fibres, filaments and yarns, natural and manufactured and most products for which these are a principal raw material.

Note: This definition embraces, for example, fibre based products in the following categories, threads, cords, ropes and braids; woven, knitted and nonwoven fabrics, lace, nets and embroidery, hosiery, knitwear and made up apparel; household textiles, soft furnishings and upholstery; carpets and other floorcoverings; technical, industrial and engineering textiles including geotextiles and medical textiles.

The applicant further submitted that in the instant ease, it can be noted that the raincoats made out of PVC do not involve any weaving of the PVC filaments extruded from the granules, it is important to understand the meaning oflhe term 'fibre', to conclude that the PVC raincoat is produced of textile material or not. The term 'fibre', yet again, is not statutorily defined. However, from the extract of "Encyclopaedia" of Textile Fibres and non-woven fabrics" reproduced above, it is evident that textile fibres may be classified into two main categories i.e. naturally occurring fibres and manmade fibres as indicated in Table-1 of the extract. It can be seen that man-made fibres includes fibres which are based on polyvinyl chloride i.e. PVC. The "Textile Terms and Definitions Tenth Edition" published by the textile institute has an entire flow chart of classification of textile fibres given. From the flow chart, it is evident that textile fibres can be classified mainly into natural or manmade fibres. Further, manmade fibres include fibres made from synthetic polymer which further includes polyvinyl derivatives. Further, polyvinyl derivatives include chloro-fibrc which arc manufactured from PVC. Therefore, textile fibres includes fibres of PVC.

At this stage, the appellant has referred the judgment of the Hon'ble Supreme Court in ease of Porritts & Spencer (Asia) Etd. - 1983 (13) E.L.T. 1607 (S.C.). In that ease, the Apex Court held that the word "textiles" was derived from the Eatin "texere" which meant "to weave", and it meant any woven fabrics. It is further held that when yarn of any material and description was woven into fabrics, what came out into being was a "textile" and it was known as such. Phenomenal advancement in science and

technology resulting in a large variety of fabrics manufactured from materials till then unknown or un-thought of and new techniques invented for making fabric out of yarn have also been taken into consideration by the Hon'ble Supreme Court while laying down the law that any woven fabrics were "textiles" irrespective of the materials used, technique of weaving adopted and the end-use of the product. Further, it was held that, Plastic is a well-known textile material and various varieties of yarns and fabrics arc produced out of plastic materials, namely, terclenc, polyester, nylon, acrylic, texturized yarns, silicon yarns, etc.

The applicant submitted that in the instant ease, PVC raincoats are made of PVC material. PVC material normally consists of strong synthetic plastic polymer. Thus, on the conjoint reading of the above provisions and the characteristics of the product, it is safe to infer that raincoat is made of textile material. Once it is so, it would fall out of Chapter 39 of the Tariff. Heading to chapter heading 6201 oftheTariff. It is well settled that the HSN Explanatory Notes arc a safe guide to understand the meaning of the terms and classification under the Customs Tariff Act. Judgment of the I lon'ble Supreme Court in the case of CCE v/s Woodkraft

1995 3 SCC 454 refers. Explanatory notes to chapter 62.01 reads thus:

The provisions of the Explanatory Note to heading 61.01 apply, mutatis mutandis, to the articles of this heading. However, the heading docs not cover garments made up of fabrics of heading 56.02, 56.03, 59.03, 59.06 or 59.07 (heading 62.10)

Therefore, let us look at Explanatory notes of Chapter 61.01. It reads thus:

61.01 - Men's or boys' overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets) wind-cheaters, wind-jackets and similar articles, knitted or crocheted, other than those of heading 61.03.

6101.20 - Of cotton

6101.30 - Of man-made fibres

6101.90 - Of other textile materials

This heading covers a category of knitted or crocheted garments for men or boys, characterised by the fact that they are generally worn over all other clothing for protection against the weather.

It includes:

Overcoats, raincoats, car-coats, capes including ponchos, cloaks, anoraks including skijackets, wind-cheaters, wind-jacket and similar articles, such as three-quarter coats, greatcoats, hooded capes, duffel coats, trench coats, gabardines, park, padded, waistcoats.

The heading does not include:

(a) Garments of heading 61.03.

(b) Garments made up of knitted or crocheted fabrics of heading 59.03, 59.06 or 59.07 (heading 61.13).

The applicant submitted that thus, on plain perusal of the above HSN Explanatory notes, it is evident that overcoats, raincoats, wind cheaters, wind jackets and similar articles which are used for protection against weather would be classified under chapter 62.01. Therefore, even going by the HSN Explanatory notes, the subject product would be classifiable under chapter heading 6201.

Chapter heading 6201 specifically covers raincoats. It is well settled that specific heading would prevail over general. Even in terms of Rule 3(a) of the General Rules of Interpretation of the Customs Tariff Act, 1975, the heading which provides the most specific description shall be preferred to headings providing a more general description. This view has been endorsed by the Hon'ble Apex Court in the case of Commercial fax Officer V. Binani Cement Limited reported in 2014 (3) SCR 1.

4. A personal hearing in the matter was conducted on 23.01.2024 in the office of CAAR, Mumbai. During the personal hearing the authorised representative of M/s. NZ Seasonal Wear Private Limited, Shri. Bharat Raichandani, Advocate reiterated the content of the application filed in this matter. He contended that their product wind-chcatcr/rain-coat made of PVC merit classification under Customs Tariff heading 6201 more particularly under 6201 40 10 or 6201 40 90. Nobody appeared for personal hearing from the department side either physically or through c-hcaring mode, The office of the CAAR, Mumbai has not received any relevant records/comments on the subject application from the concerned jurisdiction i.e. Nhava Sheva (Exports), JNCH till date.

Further, vidc E-mail dated 13.02.2024, the applicant has clarified that the 'PVC raincoats' proposed to be exported by them falls under HSN 6201 for Men's or Boy's Ovcrcoats/raincoats etc.

5. I have taken into consideration all the materials placed on record in respect of the subject goods including the submissions made by the applicant during the course of personal hearing. I therefore proceed to decide the present applications regarding classification of"PVC raincoats" on the basis of the information on record as well as the existing legal framework having bearing on the classification of the products in question under the first schedule of the Customs Tariff Act, 1975.

5.1 The applicant has sought advance ruling to know the correct classification of the PVC raincoats under the customs Tariff i.e., whether the goods/products, in question, would merit classification under HSN code 392690 or HSN code 6201. Second para of Note 1 of the Chapter Notes to Chapter 39 reads as "Throughout this Schedule any reference to "plastics" also includes vulcanized fibre. The expression, however, does not apply to materials regarded as textile materials of Section XT\

Further, Note 2 ibid states that:

"This Chapter docs not cover:..............

(p) goods of Section XI (textiles and textile articles)".

Therefore, on plain reading of these provisions of Chapter Notes of Chapter 39 it is amply clear that the product in question i.e. PVC raincoats arc not covered under any of the headings of the Chapter 39. The applicant has explained the manufacturing process of PVC raincoats whereby it is evident that the products to be exported by the applicant is raincoat which can be said readymade garment. The fact that raincoat is made of PVC does not render it to be considered as article of plastic. Thus, classifying PVC raincoat under Chapter 39 is not apropos to the provisions of Chapter Notes of Chapter 39.

5.2 Note 1 of Section XI states that:

"This Section does not cover:.............

(h) woven, knitted or crocheted fabrics, felt or non-wovens, impregnated, coated, covered or laminated with plastics, or articles thereof, of Chapter 39".

This provision cannot eliminate the PVC raincoat from being classified under the chapters of Section XI, although, PVC raincoat is declared by the applicant as non-woven, but, it is made of PVC and not merely impregnated, coated, covered or laminated with plastics, or articles thereof. Thus, PVC raincoat remains classifiable under the chapters of Section XI. Further, Section Note 14 to Section XI reads thus: "14. Unless the context otherwise requires, textile garments ofdifferent headings are to be classified in their own headings even if put up in sets for retail sale. For the purposes of this Note, the expression "textile garments" means garments of headings 6101 to 6114 and headings 6201 to 6211 I concur with the understanding of the applicant that on perusal of the above section note, it is clear that the "textile garments" covered under the said section XI will be classified under that particular heading of section XI only.

5.3 The applicant has submitted that to manufacture PVC raincoat the small PVC sheets arc generally not stitched with a needle and thread. Since PVC is nonporous, a needle would leave a large hole that would allow water to enter, making for a very ineffective raincoat, and weakening the scam. Instead, PVC seams arc generally "welded" (sealed) with heat, or bonded by chemical means. Either way, the all pieces of materials arc melt together, cither thermally or chemically, and arc permanently bound. Thus, it is a non-woven product. Chapter Note 1 of Chapter 61 states that "This Chapter applies only to made up knitted or crocheted articles". Therefore, by applying this chapter note 1 ibid it is amply clear that PVC raincoat can not be classified under heading 6101: Men's or boys' overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets) wind-cheaters, wind-jackets and similar articles, knitted or crocheted, other than those of heading 61.03. Articles covered under heading 6103 are also knitted or crocheted.

5.4 Heading 6201 covers Men's or boys' overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets), wind-cheaters, wind-jackets and similar articles, other than those of hcading62.03. Heading 6203 covers Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear). Plain reading of these two headings makes it clear that heading 6201 is the most suitable heading to cover raincoat, moreover, CTI 6201 4010 specifically covers --- Overcoats, raincoats, car-coats, capes, cloaks and similar articles (of man-made fibres).

6. On the basis of foregoing discussions and findings, I rule that the subject 'PVC raincoats' merit classification under CTH 6201 and more specifically under CTI 6201 4010 of the first schedule of the Customs Tariff Act, 1975.

(P K Rameshwaram)

Customs Authority for Advance Rulings, Mumbai