2003 (1) TMI 700 - SC - Central Excise

Classification follows market test: threaded parts recognizable as machine components are not bolts, nuts or screws under Tariff Item 52

G.S. AUTO INTERNATIONAL LTD. Versus COLLECTOR OF C. EX., CHANDIGARH

SC held that classification must follow the commercial-identity (market) test: mere presence of threads does not make an item a bolt, nut or screw if it ... Classification of certain good - manufactured - Functional Test Or Commercial Identity test - fifteen parts and accessories of Motor Vehicles and Tractors - whether the goods in question can appropriately be classified under Tariff Item 52 or not having been specified elsewhere, they fall under Tariff Item 68. In construing these items, what is the proper test to be applied? - HELD THAT:- From a perusal of the Trade Notice, two aspects become apparent. The first is that mere existence of threads would not render an article as a bolt, nut or screw so long as that is recognisable as component part of an instrument, apparatus, appliance or machine and the second is that the expression used in Tariff Item 52 is intended to cover only those which are known as bolt, nuts and screws in the market. The Trade Notice re-affirms the commercial identity of goods test. Keeping these two aspects in view, if one applies the afore-mentioned test, one cannot identify, sell or purchase the goods in question as nuts, bolts, etc. The decision of this Court in Purewal Associates Limited [1996 (10) TMI 74 - SUPREME COURT] furnishes a good example of application of the test on the findings of fact recorded by the Tribunal. With regard to the parts of the watches, various types of screws were recognised as component parts of instruments and they were held not to fall under Tariff Item 52; in regard to bolts and screws used in motors, as it was found that they were not manufactured as component parts of automobile, so they were held as classifiable under Tariff Item 52. It cannot but be concluded that the goods in question, which are found to be parts of automobile were wrongly classified under Tariff Item 52 by the Tribunal and were rightly classified as falling under Tariff Item 68. Issues Involved:1. Classification of goods manufactured by the assessee.2. Application of functional test vs. commercial identity test for classification.3. Classification under pre-1986 and post-1986 Central Excise Tariff.Summary:Issue 1: Classification of Goods Manufactured by the AssesseeThe appeals concern the classification of thirty-two items manufactured by the assessee. The Tribunal initially classified these items under Tariff Item 52 of the First Schedule to the Central Excise Act, 1944, based on the functional test, identifying them as component parts of motor vehicles with a fastening function. However, for a different period, the Tribunal later classified the same goods under Tariff Item 68, recognizing them as specialized parts for automobiles, not general fasteners.Issue 2: Application of Functional Test vs. Commercial Identity Test for ClassificationThe Tribunal's initial classification under Tariff Item 52 was based on the functional test. However, the Supreme Court emphasized the commercial identity test, as established in Purewal Associates Limited v. Collector of Central Excise, which determines classification based on how goods are referred to in the market. The Court held that the goods in question, being specialized parts for automobiles, should not be classified as general nuts and bolts under Tariff Item 52 but under Tariff Item 68.Issue 3: Classification under Pre-1986 and Post-1986 Central Excise TariffFor the post-1986 period, the classification was contested between Chapter Heading 73.18 and Chapter Heading 87.08 of the Central Excise Tariff Act, 1985. The Tribunal, applying the commercial identity test, classified the goods under Chapter Heading 87.08, suitable for use primarily with motor vehicles, rather than under Chapter Heading 73.18, which pertains to general screws, bolts, and nuts.Conclusion:The Supreme Court set aside the Tribunal's initial classification under Tariff Item 52 and upheld the classification under Tariff Item 68 for the pre-1986 period. For the post-1986 period, the Court confirmed the classification under Chapter Heading 87.08. The appeals filed by the assessee were allowed, and those by the Revenue were dismissed with costs.