Integrated functional unit principle supports classifying composite dairy machinery by principal function, not as a standalone packing machine.

A composite imported plant comprising processing equipment and an aseptic pouch packing machine was treated as an integrated dairy machinery unit because it operated through a common control system and performed a single dairy processing function. Applying Section XVI Notes 3, 4 and 5 and the functional unit principle, the whole plant was classified by its principal function under Heading 8434, not as a standalone packing machine under Heading 8422. The text also notes that an earlier unchallenged classification order on the same bill of entry and machinery had attained finality, which further weakened the Revenue's contrary challenge.

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Issues: (i) Whether the imported machinery, consisting of processing equipment and an aseptic pouch packing machine, was classifiable as an integrated dairy machinery under Heading 8434 or as a packing machine under Heading 8422. (ii) Whether the earlier unchallenged classification order had attained finality so as to preclude the Revenue's challenge.

Issue (i): Whether the imported machinery, consisting of processing equipment and an aseptic pouch packing machine, was classifiable as an integrated dairy machinery under Heading 8434 or as a packing machine under Heading 8422.

Analysis: The machinery was found to be a composite and interconnected plant functioning through a common control system and intended to perform a single defined dairy processing function. The packing machine was part of the integrated setup and not an independent machine with a separate commercial identity. Applying Notes 3, 4 and 5 of Section XVI of the Customs Tariff, together with the functional unit principle in the Harmonized System Explanatory Notes, the whole plant was required to be classified according to its principal function. The machinery was therefore treated as dairy machinery rather than as a standalone packing machine.

Conclusion: The goods were correctly classifiable under Heading 8434 and not under Heading 8422.

Issue (ii): Whether the earlier unchallenged classification order had attained finality so as to preclude the Revenue's challenge.

Analysis: A subsequent adjudication on the same bill of entry and same machinery had already accepted the assessee's classification and dropped the demand, and the Revenue did not challenge that order. In that situation, the classification issue was treated as having reached finality, reinforcing the view that the present departmental appeal could not succeed.

Conclusion: The earlier classification determination had attained finality against the Revenue's challenge.

Final Conclusion: The Revenue's appeal failed and the classification in favour of the assessee was maintained, with the impugned order left undisturbed.

Ratio Decidendi: A composite machine forming an integrated functional unit must be classified according to its principal function, and where an unchallenged order on the same goods has attained finality, a contrary departmental challenge is unsustainable.

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