Calcutta High Court Upholds Plastic Classification of Polypropylene Leno Bags for GST:

The Calcutta High Court on 19 May upheld the classification of polypropylene leno bags under Tariff Heading 3923 2900 as articles of plastics and dismissed the appeal filed by Mega Flex Plastics Limited against the ruling of the West Bengal Appellate Authority for Advance Ruling (AAAR). A Division Bench comprising Justice Debangsu Basak and Justice Md. Shabbar Rashidi held that the assessee could not seek a different classification under the GST regime after consistently declaring the same product as plastic goods for claiming export benefits under the earlier indirect tax framework. The Court highlighted that:

“The appellant had voluntarily classified the goods under Chapter 39 and availed export incentives on such basis. In absence of any cogent reason, the classification cannot now be altered merely to obtain a different tax treatment.”

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Mega Flex Plastics Limited, engaged in the manufacture of polypropylene leno bags used for packaging agricultural produce, had historically classified the products under Chapter Heading 3923 2900 of the Central Excise Tariff Act, 1985. The company had also claimed duty drawback benefits on export consignments based on the same classification. After the implementation of GST, the assessee sought reclassification of the products under Tariff Heading 6305 33 00 as textile packing material before the West Bengal Authority for Advance Ruling (AAR). The AAR rejected the claim and held that the products continued to fall within Chapter 39 relating to plastics. The Appellate Authority for Advance Ruling affirmed the ruling, following which the assessee approached the High Court.

Before the High Court, the appellant contended that polypropylene strips used in the manufacture of leno bags should be treated as textile material falling under Chapter 63. The Revenue, however, argued that the appellant had itself consistently classified the products as plastic goods and had derived statutory export benefits under that heading for several years.

The Bench observed that a taxpayer cannot selectively alter classification positions depending upon changing tax consequences while continuing to manufacture the same product in the same manner.

The Court relied upon the decision of the Madhya Pradesh High Court in Raj Pack Well Limited and held that polymer-based leno bags are appropriately classifiable under Chapter 39 as articles of plastics. It further noted that the assessee failed to establish any material change in the composition or nature of the goods to justify reclassification under Heading 6305 33 00.

Thus, the Division Bench dismissed the appeal and upheld the orders passed by the AAR, AAAR and the learned Single Judge, confirming that polypropylene leno bags manufactured by the appellant remain classifiable under Tariff Heading 3923 2900 as plastic articles.

To Read Full Judgment, Download PDF Given Below