2026-VIL-332-GSTAT-SHM
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  2. 2026-VIL-332-GSTAT-SHM

SGST Tribunal

GST - Non-speaking and unreasoned orders - Sections 75(6) and 107(12) of CGST Act, 2017 - Appellant is a manufacturer of PP non-woven fabric bags against whom a SCN proposed re-classification of the goods from Tariff Heading 6305 to Tariff Heading 3923. The adjudicating authority confirmed the re-classification along with differential tax, interest and penalty - Appellant contended that both orders are non-speaking and unreasoned, and that the SCN was issued with a pre-determined conclusion and without any proper inquiry - Whether the orders of the adjudicating authority and the FAA are sustainable under Sections 75(6) and 107(12) or are liable to be quashed as non-speaking and unreasoned - HELD - The adjudicating authority passed a mechanical order without an independent evaluation of the facts or setting forth the grounds forming the basis of its decision. The FAA was under a mandatory obligation to pass a reasoned order setting out the points for determination, the decision thereon and the reasons for it. The FAA merely recorded a few submissions of the Appellant in one paragraph and dismissed them in the next paragraph in agreement with the original authority - The order contains no independent analysis of the contentions, no formulation of points for determination, and is silent on the technical reports and precedents cited by the Appellant. Recording reasoned findings on each contention is not a mere procedural formality but is vital in quasi-judicial orders. A mechanical affirmation reduces the statutory right of appeal to an empty formality and inflicts a fatal blow to the principles of natural justice. The concluding paragraphs of the SCN reflect a pre-judged conclusion and a closed mind. A notice whose language reads like a decision rather than a proposal amounts to a denial of natural justice and renders the subsequent adjudication bad in law - Both orders are non-speaking, unreasoned and bad in law, are quashed – The appeal is allowed - Classification of PP non-woven fabric bags - Tariff Headings 6305 and 3923 - Appellant manufactures bags by cutting and ultrasonic sealing of PP non-woven fabric, which is produced from PP granules through a spunbond extrusion process. Revenue contended that the bags are articles of plastic because the main raw material is PP granules - Appellant contended that the immediate raw material is non-woven fabric classifiable as textile under Tariff Heading 5603 - Whether PP non-woven fabric bags are classifiable as made-up textile articles under Tariff Heading 6305 or as articles of plastics under Tariff Heading 3923 - HELD - The Revenue cannot adopt a double standard by taxing one taxpayer at a higher rate while allowing a similarly placed manufacturer in the same jurisdiction to clear identical bags under a lower rate. Such hostile discrimination without any differentia violates Article 14 of the Constitution of India - The immediate and direct raw material of the bags is PP non-woven fabric, a distinct intermediate product with its own commercial identity, and not PP granules. The authorities below erred in treating the bags as manufactured directly from plastic granules - The Revenue has itself accepted the classification of the intermediate product as textile under Tariff Heading 5603. The test of character, name and marketability shows that the granules lose their original identity and emerge as a textile fabric - The CBIC Circular no 80/54/2018-GST was aimed at conventional laminated plastic bags and cannot override the Chapter Notes or enhance the rate of tax without authority of law, as a circular contrary to the statutory provisions has no legal existence. Even if both Headings were applicable, Rule 3(a) of the General Rules of Interpretation requires the specific description to be preferred over the general description - The bags are correctly classifiable under Tariff Heading 6305. The order of the FAA is set aside and the appeal is allowed
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