Supreme Court upholds Gujarat HC Ruling on GST Classification of ‘Fusible Interlining Cloth’ [Read Judgement]

The Supreme Court of India dismissed the Revenue’s Special Leave Petition (SLP) challenging a Gujarat High Court decision on the classification of ‘fusible interlining cloth’ under the Goods and Services Tax (GST) Tariff, thereby affirming that such fabric does not fall under Heading 5903.

Girish Pravinbhai Rathod (Jay Ambey), the respondent, is engaged in the manufacture of fusible interlining cloth used in garments such as collars and cuffs. The petitioner had approached the Advance Ruling Authority under the GST regime seeking classification of their product. The Authority for Advance Ruling (AAR) ruled that the cloth was classifiable under Heading 5903 of Chapter 59 of the GST Tariff, which pertains to textile fabrics impregnated, coated, covered, or laminated with plastics. This view was upheld by the Appellate Authority for Advance Ruling (AAAR).

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Aggrieved by the ruling, the respondent filed a petition before the Gujarat High Court. The High Court examined the ATIRA (Ahmedabad Textile Industry's Research Association) test report submitted by the petitioner and noted that the fabric in question was only partially coated with plastic and that the coating was not visible to the naked eye.

The High Court explained that according to Chapter Note 2(a)(1) and 2(a)(4) of Chapter 59, such fabrics are excluded from Heading 5903 and are instead classifiable under Chapters 50 to 55, 58, or 60, depending on the base fabric. The court further held that the authorities had erred in relying on circulars that had already been quashed or contradicted by other judicial pronouncements.

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The Gujarat High Court quashed the order of the AAAR and directed that the product be classified under the appropriate chapter (50–55, 58, or 60) and not under Heading 5903.

The Union of India and others, representing the Revenue, filed an SLP against this judgment. The revenue argued that the classification under Heading 5903 was valid and that the High Court had misinterpreted the chapter notes and applicable circulars.

The Supreme Court bench comprising Justices J.B. Pardiwala and R. Mahadevan dismissed the SLP on two grounds: (i) a 225-day delay in filing the petition that was not satisfactorily explained, and (ii) lack of merit in the challenge to the High Court’s ruling.

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The court upheld the Gujarat High Court's interpretation of the GST Tariff, ruling in favor of the manufacturer and affirming that partially coated fabrics not visibly covered in plastic to the naked eye fall outside the scope of Heading 5903.

To Read the full text of the Judgement CLICK HERE

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