Polypropylene Leno Bags Are Plastic, Not Textile Products For GST Classification: Calcutta High Court

The Calcutta High Court has recently dismissed Mega Flex Plastics Limited's challenge to a GST ruling that treated its polypropylene leno bags as plastic products rather than textile products.

A Division Bench of Justice Debangsu Basak and Justice Md. Shabbar Rashidi upheld the order of the Appellate Authority for Advance Ruling (AAAR) and a Single Judge's decision refusing to interfere with it.

At the heart of the case was the classification of polypropylene leno bags made by weaving polypropylene strips into fabric and then converting that fabric into bags. Mega Flex Plastics maintained that the product was a textile item because it was manufactured from woven polypropylene fabric. GST authorities took a different view and treated the bags as plastic products.

In support of its case, the company relied on an earlier ruling of the West Bengal Authority for Advance Ruling, which had said that such bags could be treated as textile products where they were made from woven polypropylene fabric using strips not exceeding 5 mm in width and were not impregnated, coated, covered, or laminated with plastic.

It also relied on test reports from the Central Institute of Plastics Engineering and Technology, the Indian Institute of Technology and Indian Oil Corporation, as well as Bureau of Indian Standards specifications, in support of its contention that the bags were manufactured from synthetic woven fabric.

The GST authorities opposed the claim, contending that polypropylene is a variety of plastic and relying on the Madhya Pradesh High Court's decision in Raj Pack Well Limited, which dealt with sacks manufactured from similar materials.

The Division Bench noted that while the bags were manufactured using plastic granules as raw material, they could be treated as synthetic textile products only if the strips used in weaving satisfied prescribed technical requirements.

“The strips that the appellant used for the manufacture of the sacks have been concurrently held by the Appellate AAR as well as the Writ Court not to qualify as synthetic textile. We have no material before us to arrive at a different finding than the concurrent findings of the Appellate AAR and the learned Single Judge.”, the court held.

The court noted that there was no material before it to depart from the findings already recorded by the Appellate Authority for Advance Ruling and the Single Judge that the strips used by the company did not qualify as synthetic textile material.

The Bench also considered how the products are understood in the market.

“The sacks manufactured by the appellant are commonly known in the market as plastic sacks. They are not known as synthetic textile sacks or textile sacks.”, the court noted.

Referring to Raj Pack Well Limited, the Court noted that sacks manufactured from similar materials had been treated as plastic products and that such products were known in common parlance as plastic woven sacks.

Finding no reason to differ from the conclusions reached by the Appellate Authority for Advance Ruling and the Single Judge, the Court dismissed the appeal.

For Appellants: Advocate Vinay Kumar Shraff, Advocate Rahul Dhanuka, Advocate Dev Agarwal, Advocate Niraj Baheti.

For Union of India: Advocate Tirtha Pati Acharya, Advocate Anindya Sundar Das.

For State: Advocate Tanoy Chakraborty, Advocate Saptak Sanyal.

For CGST Authorities: Advocate Uday Sankar Bhattacharya, Advocate Tapan Bhanja.