The Shimla Bench of the GST Appellate Tribunal set aside an 18% demand, holding that bags cut from non-woven fabric of heading 5603 are excluded from Chapter 39 despite a CBIC circular.
GSTAT Shimla has held that bags made by cutting and ultrasonically sealing polypropylene (PP) non-woven fabric are made-up textile articles classifiable under heading 6305, and not articles of plastic under heading 3923, even though the fabric is made from PP granules. It set aside an order-in-appeal confirming differential GST at 18% against the 5% the manufacturer had paid. [Veer Plastics Private Limited Unit 4 v. Commissioner of State Taxes & Excise Himachal Pradesh Shimla & Ors., 2026-juristway.com-3302-GSTAT(Shimla)-GST]
The Bench of Hir Bhagat Negi, Member (Technical), and Ajai Kumar Srivastava, Member (Judicial), decided appeal APL/1/SHM/2026, arising from a show cause notice (SCN) dated 25 Nov 2021. The Department’s case rested on PP granules, a plastic polymer, being the primary raw material, and on Circular No. 80/54/2018-GST dated 31 Dec 2018.
The Bench first held both lower orders non-speaking, in breach of Section 75(6) and Section 107(12) of the CGST Act. The appellate order recorded a few submissions in one paragraph and rejected them in the next, without framing points for determination or dealing with the technical reports and precedents cited. The SCN was also held vitiated, as its concluding paragraphs showed it had been issued with a pre-judged conclusion.
On classification, the Bench found that PP granules first undergo a spunbond process to emerge as non-woven fabric under heading 5603, which the appellant sells separately and the Department accepts as a textile. Note 1 and Note 2(p) to Chapter 39 exclude textiles of Section XI, so bags made from that fabric fall under heading 6305. Under Rule 3(a) of the General Rules of Interpretation, the specific heading for textile sacks and bags would in any case prevail over the general heading 3923.
The Bench read Circular No. 80/54/2018-GST as aimed at bags of plastic sheets, adding that a circular cannot override chapter notes or raise a rate without authority of law. It distinguished Raj Pack Well and Mega Flex Plastic Ltd. v. Union of India (2026), which concerned woven sacks made from plastic tapes, and relied on Porritts & Spencer (Asia) Ltd. v. State of Haryana (1985). It also found that the Department had accepted heading 6305 for identical bags of another manufacturer in the same jurisdiction, and held the differential treatment contrary to Article 14.
The order-in-appeal was set aside and the appeal allowed with consequential relief.
2026-juristway.com-3302-GSTAT(Shimla)-GST
