The honourable Gujarat High Court has directed the Centre to check its definition of ‘textile’. Notably, this is for the purpose of levying excise duty after the revenue authority treated agro shade net and geogrid as plastic materials.

Recently, the central excise commissioner, Ahmedabad, issued notice to CTM Technical Textiles Ltd. to shell out Rs. 3.65 crore duty and penalty of equal amount for manufacturing agro shade nets and geo grids since 2007.

It was said these goods could be termed as articles of plastics because both the products are made of HDPE strips of less than 5 mm width. They are not made out of textile material.

The Central Government relied on a circular issued in 1992 by the Central Board of Excise and Customs and a 1994 trade notice issued by the Ahmedabad district collector.

On the other hand, CTM Technical Textiles argued that both the items were exempted from excise duty. Moreover, it is the only company out of hundred others producing these materials to have been asked to pay duty.

The matter was brought to the court which noticed that the excise commissioner refused to believe that the material was textile even after the department chemical examiner’s opinion that agro shed net is knitted fabric and geo grid fabric is woven fabric and polyester yarn is used for weaving.

The court said that the raw materials used for both the products include High Density Polyethelene (HDPE) strips, which is a plastic material. However, plastic is used in textile fabric – polyester, telelene, nylon fabrics, etc.

The High Court reminded the revenue authority that it is not the material that is used that defines textile, but it is the process of manufacturing that defines what is textile. The HC cited the definition of textile as made by the Supreme Court for the purpose of taxation.

The High Court ordered the Union of India to re-look into its definitions with observation, “Prima facie, it appears that the understanding of the word ‘textiles’ in common parlance has not been considered by the Board as well as by the Ahmedabad Collector while issuing the impugned Order and the Trade Notice, respectively. Instead of considering the method of weaving as a relevant factor, the nature of the raw material seems to have been taken into consideration while issuing such Order and Trade Notice.”

It is also pertinent to mention here that the High Court pulled up the revenue authority for seeking to levy duty only on one company and that too by not following proper procedure. It quashed the notice and ordered the excise commissioner to take a fresh decision on the issue after hearing the company.