2025 (9) TMI 1287 - AT - Customs

Imported glass articles classifiable under Heading 7018 (sub-heading 7018 10 20) when not pierced; appeal dismissed following updated HSN notes

M/s VMB Impex Versus Commissioner of Customs Hyderabad – Customs

CESTAT Hyderabad (AT) dismissed the appellant's appeal, holding imported glass articles are classifiable under Heading 7018 (sub-heading 7018 10 20) where ... Classification of imported glass articles - classified under Heading 7018 (sub-heading 7018 10 20) of the Customs Tariff when they are not pierced or not - HELD THAT:- On perusal of the order of coordinate bench at Bangalore in the appellant’s own case [2015 (8) TMI 1065 - CESTAT BANGALORE] and it is found that in respect of some goods, which were importer earlier, it was held in favour of the appellant. In that case, department had relied on the opinion given by Indian Institute of Gemology, New Delhi, and classified the goods under CTH 70181020, as claimed by the appellant. It is also found that the department had preferred to appeal, which was dismissed by Hon’ble Supreme Court. The customs tariff was different when the order of the Tribunal in the case of M/s Art Beads Pvt Ltd. [2013 (9) TMI 463 - CESTAT MUMBAI]] was passed and even when the Hon’ble High Court passed the judgment in the case of M/s Starlite Corporation [1985 (12) TMI 61 - HIGH COURT OF JUDICATURE AT BOMBAY]. In both these cases, the classification was not examined in terms of new customs tariff and HSN explanatory notes were not brought to the knowledge of the Courts. In view of these facts and circumstances, it is unable to consider the orders in the appellant’s own case. Accordingly, the decision of coordinate bench at Ahmedabad in the case of Asia World Exports [2024 (1) TMI 405 - CESTAT AHMEDABAD] is applicable and relying on the same, it is found that there is no merit in the appeal filed by the appellant and accordingly, it is liable to be dismissed. Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported glass articles qualify as 'Beads' under Heading 7018 (sub-heading 7018 10 20) of the Customs Tariff when they are not pierced. 2. The extent to which HSN explanatory notes govern tariff classification and whether they require piercing as an essential characteristic of 'Glass beads'. 3. The evidentiary weight to be accorded to a scientific test report classifying the goods as 'glass chatons' rather than 'beads'. 4. Whether earlier judicial/tribunal decisions in favour of the importer (including a decision upheld by the Apex Court) are binding or distinguishable in light of HSN explanatory notes and changed tariff nomenclature. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Whether non-pierced imported glass articles are 'Beads' under sub-heading 7018 10 20 Legal framework: Classification is governed by the Customs Tariff structured on the Harmonised System (HSN); sub-heading 7018 10 20 covers 'Beads'. HSN explanatory notes are an authoritative interpretative aid for identifying the characteristic features of goods falling under HSN headings and sub-headings. Precedent treatment: Earlier tribunal and High Court decisions accepted classification of similar imported items as 'beads' in contexts predating the current HSN-based tariff structure; those decisions relied on different standards (e.g., ISI specifications or common parlance) and did not engage HSN explanatory notes. Interpretation and reasoning: The Court examines the HSN explanatory note for Heading 7018 which describes glass beads as 'small pierced balls' produced by cutting tubes and subsequently forming spherical pierced items. That descriptive note indicates that piercing is a defining characteristic of glass beads for the purposes of the HSN classification. Given that the imported goods lack piercing, they do not meet the HSN description of beads. Ratio vs. Obiter: Ratio - Piercing is an essential characteristic of 'Glass beads' under the applicable HSN explanatory notes; therefore non-pierced glass articles cannot be classified under sub-heading 7018 10 20. Observations about traditional/common-sense definitions and ISI specifications are treated as obiter when they conflict with HSN explanatory notes. Conclusion: The imported non-pierced glass articles do not qualify as 'Beads' under sub-heading 7018 10 20 and cannot be classified thereunder. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Primacy and application of HSN explanatory notes in tariff classification Legal framework: The Central/Customs tariff is to be interpreted in harmony with the internationally accepted Harmonised System. Explanatory notes to HSN are a primary and reliable guide for ascertaining meaning of expressions in the tariff and for resolving classification disputes unless the statute indicates a contrary intention. Precedent treatment: The Court relies on established authorities emphasising that HSN nomenclature and its explanatory notes are the proper interpretive aid for tariff classification and should prevail over other glossaries (e.g., ISI) or earlier decisions made without reference to HSN notes. Interpretation and reasoning: The Court notes that earlier decisions which favored classification as beads did not engage HSN explanatory notes (because they predated the current HSN-based tariff or the notes were not placed before the court). Given the express HSN description of beads as pierced, those earlier decisions are not persuasive for present classification where the HSN notes apply. Ratio vs. Obiter: Ratio - HSN explanatory notes must be given due weight and, where they provide a clear descriptive criterion, such criteria are determinative for classification. Obiter - comments that common parlance or other standards may be relevant in absence of HSN guidance. Conclusion: HSN explanatory notes govern the interpretation of 'Beads' for tariff classification and, in this case, direct that piercing is a necessary attribute; hence HSN notes control and are determinative. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Weight of scientific/expert test report classifying the goods as 'chatons' vs. 'beads' Legal framework: Classification may consider expert/scientific reports as evidence of physical characteristics of imported goods; such evidence is to be read in light of applicable tariff definitions and explanatory notes. Precedent treatment: The revenue relied on an earlier opinion by an institute of gemology (finding the goods to be 'chatons' and not beads); earlier tribunal decisions sometimes set aside orders founded on that opinion when other interpretative approaches were applied. Interpretation and reasoning: The Court acknowledges the expert opinion and notes that it has been relied upon by authorities to distinguish 'chatons' from pierced beads. However, the decisive question is whether the reported physical features match the HSN description of beads. Where the expert report confirms absence of piercing, that factual finding supports classification outside the 'Beads' sub-heading in light of HSN notes. Ratio vs. Obiter: Ratio - An expert report establishing that the goods lack the essential characteristic required by the HSN description (piercing) supports classification outside the heading for beads. Obiter - the relative probative value of the expert report vis-à-vis other documentary or judicial findings in prior cases. Conclusion: The test report's factual finding of non-piercing corroborates the conclusion that the goods are not 'Beads' under the HSN description, and thus classification under the broader 'Other' heading is justified. ISSUE-WISE DETAILED ANALYSIS - Issue 4: Preclusive effect of earlier tribunal/Apex Court decisions in favour of importer Legal framework: Binding precedent operates subject to being on point factually and legally; subsequent enactments or changes in tariff wording/structure (e.g., adoption and explanatory notes of HSN) can render earlier decisions distinguishable. Precedent treatment: Earlier tribunal decisions and an appellate outcome upheld at the Apex Court were invoked by the importer. The Court analyses those decisions and finds they either predate the HSN-based tariff or did not consider HSN explanatory notes; therefore, they do not resolve the present issue where HSN notes apply and specify piercing as essential. Interpretation and reasoning: The Court distinguishes prior favorable decisions on the basis that (a) the tariff structure and applicable explanatory notes have since changed or were not considered, and (b) earlier decisions relied on other definitions (e.g., ISI) or factual matrices different from the present non-pierced goods. The Court further notes that decisions not addressing HSN explanatory notes cannot override the guidance provided by HSN in the current tariff regime. Ratio vs. Obiter: Ratio - Earlier decisions that did not consider HSN explanatory notes and relate to different tariff frameworks are distinguishable and not binding for the present classification question. Obiter - observations in prior cases about utility or use-based definitions where HSN provides a specific structural characteristic. Conclusion: Earlier decisions favouring classification as beads are distinguishable and not controlling; the HSN-based explanatory notes and the facts of non-piercing render those precedents inapplicable to the present case. OVERALL CONCLUSION Given the HSN explanatory note's description of glass beads as 'small pierced balls', the absence of piercing is dispositive: the imported non-pierced glass articles do not fall under sub-heading 7018 10 20 ('Beads') and must be classified otherwise. Expert report evidence of non-piercing supports this classification. Prior decisions favouring classification as beads are distinguishable because they did not apply the current HSN explanatory notes and therefore are not followed.