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2026 (1) TMI 348
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....plied 45 (e) Summary 59 III. CONSIDERATION OF 'USE' WHEN DETERMINING CLASSIFICATION UNDER THE ACT, 1975 63 (f) Consideration of 'Use' - Indian Perspective 64 (g) Consideration of Use - USA and EU perspective 82 IV. RELEVANT PROVISIONS 85 (h) Relevant provisions relating to Aluminium Structures 86 (i) Relevant provisions relating to Parts of Agricultural Machinery. 87 V. APPLICATION TO THE FACTS AT HAND 92 (j) Whether subject goods can be classified as 'Aluminium Structures' under CTI 76109010 93 (k) Whether subject goods can be classified as 'Parts of Agriculture Machinery' under CTI 84369900 95 F. CONCLUSION 105 1. This appeal arises from the Judgment and Final Order No. 55604/2024 dated 19.04.2024 passed by the Customs, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi (hereinafter referred to as "CESTAT"), in Customs Appeal No. 50542 of 2021, wherein the tribunal allowed the appeal and thereby held that the aluminium shelves imported by the respondent should be classified under Customs Tariff Item 84369900, as 'parts' of agricultural machinery, as opposed ....
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....-sections, towers, lattice masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, balustrades, pillars and columns); aluminium plates, rods, profiles, tubes and the like, prepared for use in structures 7610 10 00 - Doors, windows and their frames and thresholds for doors Kg. 10% - 7610 90 - Other: 7610 90 10 --- Structures Kg. 10% - 7610 90 20 --- Parts of structures, not elsewhere specified: 7610 90 21 --- Portable bridge Kg. 10% - 7610 90 29 --- Other Kg. 10% - 7610 90 30 --- Aluminium plates, rods, profiled, tubes and the like, prepared for use in structure Kg. 10% - 7610 90 90 --- Other Kg. 10% - Chapter Heading 8436 Tariff Item Description of goods Unit Rate of duty 8436 Other agricultural, horticultural, forestry, poultry-keeping or bee-keeping machinery, including germination plant fitted with mechanical or thermal equipment; poultry incubators and brooders &nb....
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....fied with the Order-in-Original, the respondent preferred an appeal to the Commissioner of Customs (Appeals). Vide the Order in Appeal No. CC(A)CUS/D-II/Import/ICD/TKD/1237/2020-21 dated 28.12.2020, the Commissioner of Customs (Appeals) affirmed the Order-in-Original (hereinafter referred to as "Order-in-Appeal"). In the Order in Appeal, the Commissioner of Customs (Appeals), while agreeing with the line of reasoning assigned in the Order-in-Original, also noted: (i) the subject goods could not have been classified under Chapter Heading 8436 solely because they could be integrated with various other machines used in the mushroom cultivation process; and (ii) the subject goods cannot be said to possess characteristics of a machine or a 'part' of one. 10. It is relevant to note that in both the Order-in-Original and Order-in-Appeal, respectively, the decision to classify the subject goods under CTI 76109010 was based on the application of General Rule of Interpretation No. 1, i.e., GRI 1. 11. The respondent preferred an appeal before the CESTAT. The CESTAT disagreed with the two authorities below and allowed the appeal. The relevant findings of the CESTAT are ....
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.... admitted these two to be covered under CTH 84369900. Though these two apparatuses along with two others are to be integrated on the mushroom shelving, post import but we observe that the aluminium shelve itself is so designed with such specifications, as may permit these specific integrations. The brochure of product Info also mentions the model of the goods as mechanization/ planting machine. Thus, we hold that the goods in question is not aluminium shelve in generic but is a mushroom growing rack specifically; though is made of aluminium but it is a mechanical appliance used for agriculture purpose. 14. Chapter 76 is all about anything made of aluminium. On the contrary chapter 84 is about mechanical appliances of whatsoever metal but specific for agricultural use. There is no denial to the fact that the aluminium shelving in question is not known to the common trade parlance as a mere aluminium structure but is specifically known as Mushroom growing rack. 15. Hence, we hold that the goods under question as imported by appellant (mushroom shelving) are classifiable under CTH 84369900. Appellant is held to have rightly classified the same under CTH 84369900 [.......
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....203. * The subject goods, at the time of import, were in the form of aluminium shelves, which are structures made of aluminium. At this stage, the goods cannot be classified as 'agricultural machines' because they are neither attached to any other machinery nor can they be used independently for mushroom cultivation. * The CESTAT, in its impugned judgment, relied on the end-use of the subject goods as declared by the respondent to classify it as a 'part' of agricultural machinery, thereby clearly contradicting the established position of law. The fact that the subject goods are ultimately used to cultivate mushrooms after being attached to other machines once imported cannot influence their classification for customs duty purposes. b. Subject goods are not agricultural machines or 'parts' of agricultural machinery * Subject goods could never have been classified as machines or machine parts. Dictionary definitions of the word 'Machine' indicate that a machine consists of moving parts that use power to carry out a specific task. The subject goods lack any moving parts and do not transmit force, motion, or energy through them to accomplish a task. ....
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.... for mushroom cultivation. This includes head-filling machines for laying layers of compost on the shelves and machines for spraying water, fertilisers, and insecticides. Once positioned, the subject goods generally remain in place. They are constructed from shapes, sections, sheets, and plates, joined by riveting, bolting, welding, etc. They feature protuberances with tapped holes, where screws are inserted during assembly to secure the clamps to the tubing. Consequently, they possess all the defining features of a 'structure'. d. Subject goods are not incomplete articles which bears the essential character of the complete article * Rule 2(a) of the General Rules for Interpretation states that a reference to an article shall include a reference to an incomplete article, provided that the incomplete article has the essential character of the complete article. * In this case, the subject goods, even if considered part of another incomplete article, do not possess the essential characteristics related to agricultural machinery and cannot be classified as an agricultural machine. C. Submissions on behalf of the Respondent 15. Mr. Salil Arora, ....
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....ich this Court held that the test for classification for 'parts' is whether the good in question is essential for the functioning of a product. e. End Use of the articles can be considered when classifying items under the Act, 1975. Reliance was placed on the judgment of this Court in Collector of Customs vs Kumudam Publications (P) Ltd reported in (1998) 9 SCC 339. f. CESTAT, after considering the materials on record, rightly concluded that the subject goods serve no purpose other than their specific use in the mushroom growing industry, as they were designed with such specifications to enable integration with other machines involved in mushroom cultivation. Consequently, there are no good or valid grounds to set aside the impugned judgment. D. Issue to be Determined 16. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the following question falls for our consideration: • Whether the subject goods should be classified as 'parts' of machines or mechanical appliances of Chapter 84 under CTI 84369900 or as aluminium structures of Chapter 76 under CTI 76109010? E. Analysis 17. We reco....
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....975, now governs the classification of imported goods in India. Whereas the Second Schedule of the Act, 1975 deals with export tariff. Section 2 of the Act, 1975, states that the rates at which customs duties are levied under the Act, 1962, are specified in the First and Second Schedules of the Act, 1975, respectively. It states as follows: 2. Duties specified in the Schedules to be levied. - The rates at which duties of customs shall be levied under the Customs Act, 1962 (52 of 1962), are specified in the First and Second Schedules. 21. Section 2 of the Act, 1975, is subordinate to Section 12 of the Act, 1962, and does not operate as an independent charging section. The provisions of both Acts must necessarily be read together. 22. The First Schedule of the Act, 1975, was originally based on the Brussels Tariff Nomenclature. By Act 8 of 1986, this was amended to adopt the Harmonised Commodity Description and Coding System, commonly known as the Harmonised System Nomenclature. The HSN is an internationally standardised classification system developed by the World Customs Organisation. It provides a structured way to classify traded goods using a standardised numerica....
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....nterpretation (hereinafter referred to as "GRI"). They are as follows: 1. The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions. 2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or, finished by virtue of this rule), presented unassembled or disassembled. 2. (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting who....
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....s provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use. 6. For legal purposes, the classification of goods in the sub-headings of a heading shall be determined according to the terms of those sub-headings and any related subheading Notes and, mutatis mutandis, to the above rules, on the understanding that only sub-headings at the same level are comparable. For the purposes of this rule the relative Section and Chapter Notes also apply, unless the context otherwise requires. 28. GRI 1 is the fundamental rule for effectively navigating the HSN. The influence of GRI 1 is pervasive and forms the basis for customs classification of goods under the Act, 1975. GRI 1 states that: (i) headings of sections, chapters and subchapters are for reference only and (ii) for legal purposes, the classification shall be determined by the terms of headings and the relevant section or chapter notes. Thus, GRI 1 essentially establishes the primacy of the notes and terms of headings for determining the classification of a product. 29. GRI 2 (a) is expanding the terms of a heading to include (i) incomplete or unf....
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....t that gives them their essential character, insofar as this criterion is applicable. The criterion that gives goods their essential character differs according to the type of goods. The material or substance, its contents, its amount, its weight, its value or the value of a material for its usage can determine this. c. GRI 3(c) is applicable only when a classification according to GRI 3(a) and GRI 3(b) was not possible. Consequently, the goods are placed in the heading which occurs last in numerical order among those which equally merit consideration. 32. GRI 4 is invoked very rarely, as many classification disputes are resolved through the application of GRIs 1-3, thereby making it needless to invoke GRI 4. GRI 3 and GRI 4 are mutually exclusive, as once the analysis enters the arena of GRI 3, GRI 4 cannot be invoked, as the dispute would ultimately be resolved by GRI 3(c). GRI 4 is essentially a failsafe rule, an option of last resort, intended to ensure that an HSN provision can be found for even the most unusual product. Under GRI 4, goods are classified under the heading appropriate to the goods to which they are most akin. Thus, kinship is the sole evaluative cri....
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.... 3(c) are also unlocked in a sequential manner, i.e., the door to GRI 3(b) unlocks only when the dispute is not resolved through application of GRI 3(a), and similarly door to GRI 3(c) unlocks only when the dispute is not resolved through application of GRI 3(b) c. If, upon applying GRI 1 and/or GRI 2, the result seems to be that no heading applies at all, the key to the GRI 4 door is granted to find the "most akin" good. (b) Role of HSN Explanatory Notes 37. The official interpretation of the HSN is provided in the Explanatory Notes published by the World Customs Organisation (hereinafter "Explanatory Notes"). Therefore, these Explanatory Notes form the foundation for interpreting the HSN. Given their importance for classification, it is apposite to understand how they can be used when addressing questions of classification under the First Schedule of the Act, 1975. 38. This Court, in Commissioner of Central Excise, Salem v. Madhan Agro Industries (India) Private Ltd., reported in 2024 SCC OnLine SC 3775, while dealing with a classification dispute under excise law, made the following pertinent observations regarding consideration of the Explanatory Notes: ....
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....1975 was amended to be in accordance with the HSN, the Explanatory Notes, being the official, international interpretation, are the most authentic guide to understanding the scope of the headings. 39. In the present case, this condition of alignment is satisfied. Upon examining the competing headings (Chapter Heading 7610 and Chapter Heading 8436), along with their subheadings and the relevant section and chapter notes in the First Schedule of the Act, 1975, it is found that they are identical to their counterparts in the HSN. As no explicit statutory deviation has been shown to exist, there can be no doubt that the Explanatory Notes can be considered as binding guidance to resolve the classification dispute before us. ii. Applicability of the Common Parlance test in classification disputes 40. It is a well-established principle of statutory interpretation, as repeatedly affirmed by this Court, that when a particular term in a taxing statute is not defined, it should be understood in the sense recognised by those who deal with it. The common parlance, trade parlance, and popular parlance tests are all iterations of this fundamental rule. For the sake of ease of reference, ....
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.... and its popular meaning should commend itself to the authority. 30. Dealing with the meaning of the term "vegetables" in the Excise Tax Act in King v. Planters Nut and Chocolate Company Limited [1951 Canada Law Reports 122] the Exchequer Court observed as follows: "Now the statute affects nearly everyone, the producer or manufacturer, the importer, wholesaler and retailer, and finally, the consumer who, in the last analysis, pays the tax. Parliament would not suppose in an Act of this character that manufacturers, producers, importers, consumers, and others who would be affected by the Act, would be botanists. The object of the Excise Tax Act is to raise revenue, and for this purpose to class substances according to the general usage and known denominations of trade. In my view, therefore, it is not the botanist's conception as to what constitutes a 'fruit' or 'vegetable' which must govern the interpretation to be placed on the words, but rather what would ordinarily in matters of commerce in Canada be included therein. Botanically, oranges and lemons are berries, but otherwise no one would consider them as such." The Exchequer Court also referred to....
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....but it should be interpreted and construed as per the words the legislature has chosen to employ in the Act or rules. There is no room for assumption or presumptions. The object of the Parliament has to be gathered from the language used in the statute. The contention that toilet soap is commercially different from household and laundry soaps, as could be seen from the opening words of Entry 15, needs careful analysis. [...] Let us, therefore, consider the meaning of the word soap "household". The word household signifies a family living together. In the simplistic language toilet soap being used by the family as household soap is too simplification to reach a conclusion. Therefore, one has to gather its meaning in the legal setting to discover the object which the Act seeks to serve and the purpose of the amendment brought about. The task of interpretation of the statute is not a mechanical one. It is more than mere reading of mathematical formula. It is an attempt to discover the intention of the legislature from the language used by it, keeping always in mind, that the language is at best an imperfect instrument for the expression of actual human thoughts. It is also idle to exp....
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....nce has to be adopted." (emphasis supplied) In that case the clinical syringes manufactured and sold by the assessee were not considered as 'glassware' falling within Entry 39 of the First Schedule of the Act. In commercial sense glassware would never comprise of articles like clinical syringes etc., or specialised significance and utility. Same view was reiterated in P.A. Thillai Chidambara Nadar v. Addl. Appellate Asstt. Commissioner, Madurai that coconut is neither a fresh fruit nor a vegetable. [...] 6. In Shri Bharuch Coconut Trading Co. v. Municipal Corpn. of the City of Ahmedabad this Court applied the test as "would a householder when asked to bring some fresh fruits or some vegetables for evening meal, bring coconut too as vegetable? Obviously the answer is in the negative". Again when a person goes to a commercial market ask for coconuts, "no one will consider brown coconut to be vegetable or fresh fruit, no householder would purchase it as a fruit. Therefore, the meaning of the word brown coconut, whether it is a green fruit has to be understood in its ordinary commercial parlance". Accordingly it was held that brown coconut was not green fruit....
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.... the specified tariff item category, such as whether a brown coconut would be called a fruit or a vegetable, or whether betel leaves would be considered vegetables in common parlance. This Court in Oswal Agro (supra) also adopted a similar approach by asking whether, in common parlance, 'toilet soap' would be categorised as 'household soap'. 46. Furthermore, this Court in Oswal Agro (supra) sounded a few notes of caution to be observed when courts apply the common parlance test. These are: first, the common parlance test cannot be applied if there is a specific enumeration of the goods within a category by the legislature; secondly, while interpreting terms in a tariff item, an overly simplified approach should be avoided, and the words should be understood within their legal context. 47. In Union of India & Ors v. Garware Nylons Ltd & Ors, reported in (1996) 10 SCC 413, the respondents manufactured 'Nylon Yarn' and 'Nylon Twine'. Under Item 18 of the First Schedule of the Central Excise and Salt Act, 1944, excise duty was payable on 'Nylon Yarn'. A notification issued under Rule 8 of the Excise Rules provided that 'Nylon Yarn', intended for use in making fishing nets and par....
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....ing with matters affecting everybody generally, the words used have the meaning attached to them in the common and ordinary use of language. If the Act is one passed with reference to a particular trade, business, or transaction, and words are used which everybody conversant with that trade, business or transaction knows and understands to have a particular meaning in it then the words are to be construed as having that particular meaning, though it may differ from the common or ordinary meaning of the words.' We would only add that there should be material to enter appropriate finding in the case. The material may be either oral or documentary evidence." xxx 12. The law on the point as laid down by this Court (in various decisions) has been summarised in the book Principles of Statutory Interpretation (Sixth Edition - 1996) by Justice G.P. Singh, at pp. 67, 70, 72 and 73, thus: "[...] *** As a necessary consequence of the principle that words are understood in their ordinary or natural meaning in relation to the subject-matter, in legislation relating to a particular trade, business, profession, art or science, words having a s....
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....utory context and the audience to whom the tariff item is addressed. When a statute or tariff is general in nature and does not indicate a particular industry or trade circle, the common parlance understanding is appropriate. However, when a tariff item is specific to a particular industry, as was the case in Garware Nylons (supra), the term must be understood as it is used within that specific trade circle. b. Secondly, the Court highlighted that when a party asserts a meaning of a term based on common or trade parlance, it must present satisfactory evidence to support that claim. A dispute over classification cannot be resolved without such evidence. 49. The issue of classifying 'soft-serve' served at restaurants or outlets, popularly known as 'McDonald's', under the Central Excise Tariff Act, 1985, was considered by this Court in Commissioner of Central Excise, New Delhi v. Connaught Plaza Restaurant Private Limited, reported in (2012) 13 SCC 639. The revenue contended that 'soft-serve' should be classified under Heading 21.05 (Ice cream and other edible ice). In contrast, the respondent argued that 'soft-serve' was classifiable under Heading 04.04 (Other dairy p....
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....e has expressed a contrary intention, such as by providing a statutory definition of the particular entry, word or item in specific, scientific or technical terms, then, interpretation ought to be in accordance with the scientific and technical meaning and not according to common parlance understanding. 34. In the light of these principles, we may now advert to the question at hand viz. classification of "soft-serve" under the appropriate heading. As aforesaid, the Tribunal has held that in view of the technical literature and stringent provisions of the PFA, "soft-serve" cannot be classified as "ice-cream" under Entry 21.05 of the Tariff Act. We are of the opinion, that in the absence of a technical or scientific meaning or definition of the term "ice-cream" or "soft-serve", the Tribunal should have examined the issue at hand on the touchstone of the common parlance test. 35. As noted before, Headings 04.04 and 21.05 have been couched in non-technical terms. Heading 04.04 reads "other dairy produce; Edible products of animal origin, not elsewhere specified or included" whereas Heading 21.05 reads "ice-cream and other edible ice". Neither the headings nor the chap....
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.... 50. In view of the aforegoing discussion, we are of the opinion that the Tribunal erred in law in classifying "soft-serve" under Tariff Sub-Heading 2108.91, as "Edible preparations not elsewhere specified or included", "not bearing a brand name". We hold that "soft-serve" marketed by the assessee, during the relevant period, is to be classified under Tariff Sub-Heading 2105.00 as "ice-cream"." (Emphasis Supplied) 51. The Court in Connaught Plaza (supra), after examining the tariff headings and relevant section and chapter notes, concluded that the term "ice cream" should be interpreted using the common parlance test rather than adopting a scientific or technical meaning. Notably, the Court applied the common parlance test not only because there was no specific definition, but also because the statutory context, including the heading, section, and chapter notes, provided no guidance on how to interpret 'ice cream'. In this context of statutory flexibility, the Court employed the common parlance test to determine whether "soft serve" qualifies as "ice cream" under the Central Excise Tariff Act, 1985. Furthermore, notably, the Court also held that mere marketing alone ....
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....ible" and "inedible" fruits. Etymologically, the word "edible" derives from the Latin word "edibilis" which means "eatable". The word "edible" as per Webster's New International Dictionary means "fit to be eaten as food; eatable; esculent". The Concise Oxford English Dictionary defines edible as "fit to be eaten". The phrase "fit to be eaten" can imply an absence of harmful effects. However, while the word "edible" seems simple, it warrants elaboration as over-simplification will be problematic. 19. Ben Baumgartner, in his article, has referred to several judgments of different courts in the United States of America to argue that the decisions have culminated in the various tests and parameters to determine the meaning of the word "edible". These are extracted below: "Thus, courts have turned to, and parties have argued for, various other tests to determine whether a good is edible. Such tests include : (1) whether the good appears edible to the senses, (2) whether the good provides nourishment, (3) whether the good's constituent parts are edible, (4) whether the good is principally used as food, (5) whether the....
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....Arils are the sweet, juicy, and crunchy covering that encase the seeds. However, the finding of CESTAT is that wild pomegranates from which "anardana" is made are different from the pomegranate fruit. This finding of fact is supported by considerable literature which states that "anardana" is prepared by dehydrating the arils of wild pomegranates, and not from the pomegranate which is eaten as a fresh fruit. The conventional utilisation of the wild pomegranate fruit lies in drying the seeds along with pulp to make "anardana". The wild pomegranate fruit is widely found on the hilly slopes of the Himalayas. It contains high acid content along with other quality characteristics, which distinguishes it from the pomegranate fruit which is consumed as a fresh fruit. The dried wild pomegranate arils have a distinct tart and sour flavour, owing to the high acid content, which gives it the commercial value. "Anardana", therefore, can be defined as sun-dried seeds of ripe sour pomegranate, and is predominantly used as an acidulant in Indian and Persian cuisines, and for its health benefits in the Ayurvedic system of medicine. xxx 31. In the context of the present case, once....
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....stone of a certain specific gravity. Therefore, on a plain reading of these two entries it is apparent that travertine, ecaussine and other calcareous monumental or building stones are not intended to be included in 'marble' as referred to in Entry 62 of Appendix 2 as a restricted item. Moreover, the calcareous stones as mentioned in ITC Schedule has to be taken in scientific and technical sense as therein the said stone has been described as of an apparent specific gravity of 2.5 or more. Therefore, the word 'marble' has to be interpreted, in our considered opinion, in the scientific or technical sense and not in the sense as commercially understood or as meant in the trade parlance. There is no doubt that the general principle of interpretation of tariff entries occurring in a text (sic tax) statute is of a commercial nomenclature and understanding between persons in the trade but it is also a settled legal position that the said doctrine of commercial nomenclature or trade understanding should be departed from in a case where the statutory content in which the tariff entry appears, requires such a departure. In other words, in cases where the application of commercial meaning or....
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....plied and therefore green tea leaves were tea even though they might not be tea as known in the market 44. In Cannanore Spinning and Weaving Mills Ltd. v. Collector of Customs and Central Excise, Cochin this Court held that the word 'hank' occurring in a Central Excise Notification could not be interpreted according to the well settled commercial meaning of that term which was accepted by all persons in the trade, inasmuch as the said commercial meaning would militate against the statutory context of the said exemption notification issued in June 1962. The word 'hank' as used in the notification meant a 'coil of yarn' and nothing more. 45. In Collector of Central Excise v. Krishna Carbon Paper Co. it has been observed by this Court that it is a well settled principle of construction that where the word has a scientific or technical meaning and also an ordinary meaning according to common parlance, it is in the latter sense that in a taxing statute the word must be held to have been used, unless contrary intention is clearly expressed by the legislature. It has also been observed that whether the general principle of interpretation was applicable or not depended on....
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....vertine, ecaussine, alabaster and other calcareous stones of an apparent specific gravity of 2.5 or more have been mentioned whereas in Entry 62 only the word marble has been mentioned as a restricted item for import, the other calcareous stones such as travertine, ecaussine, alabaster etc. have not been mentioned in Entry 62. In these circumstances, some significance has to be attached to the omission of the words travertine, ecaussine and other calcareous monumental or building stones of an apparent specific gravity of 2.5 or more and alabaster from the ITC Schedule in Entry 62 of Part B, Appendix 2 of Import and Export Policy for April 1988 - March 1991. The only natural meaning that follows from this is that Entry 62 is confined only to marble as it is understood in a petrological or geological sense and as defined by the Indian Standards Institute and not as mentioned in the opinion given by the Indian Bureau of Mines on visual observation and it does not extend to or apply to other calcareous stones mentioned in the ITC Schedule. Moreover, the commercial nomenclature or trade meaning cannot be given to marble inasmuch as such a meaning if given will render otiose, redundant t....
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....od fiscal policy so as to not put people in doubt or quandary about their tax liability. The test is an extension of the general principle of interpretation of statutes for deciphering the mind of the law-maker but it is subject to certain exceptions-for example, when there is an artificial definition or special meaning attached to the word in the statute itself, whereby the ordinary sense approach would not be applicable. 36. However, we find that the reliance presently placed by the Revenue upon the "common parlance test" is utterly misplaced. The said test would have to be understood in the proper perspective and cannot be brought into play when there is no ambiguity and there is no difference in the clear heading in the First Schedule and the corresponding entry in the HSN. In Commissioner of Central Excise, New Delhi v. Connaught Plaza Restaurant P. Ltd., New Delhi, this court observed that classification of excisable goods shall be determined according to the headings and corresponding Chapter or Section Notes but where these are not clearly determinative of the proper classification, the same shall be effected according to the general rules of interpretation and acc....
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....ut up in a form clearly specialized to such use. In such cases, if the common parlance test is applied to decide on classification without considering these established criteria, it would amount to a flagrant disregard of the statutory provisions. This holds particularly true in the HSN era, where GRI 1 explicitly states that the classification of a good should prioritise chapter headings, chapter notes, and section notes. It is only when (i) no clear pathway exists to determine classification under a chapter heading, i.e., absence of a definition or criterion, and (ii) there is ambiguity regarding the meaning and scope of a tariff item, that the possibility of invoking the common parlance test arises. 57. In Chemical and Fibres of India Ltd & Ors. v. Union of India & Ors, reported in (1997) 2 SCC 664, this Court was faced with the question of whether polymer chips manufactured by the assesses and used by them in the production of nylon yarn could be classified, for the purpose of levying excise duty, under Item 15-A in Schedule I to the Central Excises and Salt Act, 1944, as it stood during the period from 1962 to 1972. Item 15-A was amended in 1964. Before it....
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....ed to artificial or synthetic resins and plastic materials in any form, some of which were described in sub-clauses (i), (ii), and (iii). These sub-clauses detail the technical processes by which the end product is produced. For example, sub-clause (i) mentions processes such as condensation, polycondensation, and polyaddition, along with the resulting products. Sub-clause (ii) refers, inter alia, to polyamides. The Court acknowledged that after the amendment, the tariff item included technical and scientific terms and, therefore, resolved the disputes by interpreting the meaning of the words used therein with the assistance of technical literature and dictionaries. 59. This Court, in Reliance Cellulose Products Ltd., Hyderabad & Anr vs Collector of Central Excise, Hyderabad & Anr, reported in (1997) 6 SCC 464, examined the legal position regarding the classification of sodium carboxymethyl cellulose under the Central Excise Tariff Act, 1985. The department wished to classify it under Item 15-A(1) as Artificial or synthetic resins, plastic materials, and articles thereof, while the assessees sought classification under Item 68, the residuary head. This Court upheld the tribunal&....
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....mporter of these explosives cannot claim that the explosives must be classified as soap and not as explosive. xxx 22. [...] Cellulose ether has been made specifically taxable under Entry 15-A(1). The product manufactured by the appellant is sodium carboxymethyl cellulose which has been tested and found to be cellulose ether. The question is whether this product will come under Entry 15-A(1). It is not the case of the appellant that this product is known in the market by some other name and that name is to be found in some other entry. The Tribunal was right in holding that SCMC manufactured by the appellant answered the description "Cellulose Ether" and as such was assessable under Entry 15-A(1)." (Emphasis Supplied) 60. Both in Chemical and Fibres of India (supra) and Reliance Cellulose (supra), respectively, the Court's approach of not applying common parlance was based on the fact that the relevant tariff items used scientific or technical terms. It is natural that scientific or technical terms would lack common or commercial meaning. To illustrate, the Court in Reliance Cellulose (supra) observed that the "cellulose ether," unlike "plastic," lacked....
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.... products in trade or common parlance. If the common parlance or trade parlance test is applied based on such a notion, i.e., the name used to refer to the product in common parlance or trade parlance, then the entire rationale behind classification might be vitiated. If such an application were permitted, importers or manufacturers could simply alter the names of the products to achieve classification under the preferred category. 63. Tribunals frequently encounter classification disputes in which the importer or manufacturer asserts that the subject goods possess a distinct commercial identity, warranting a classification that is independent of their common or popular understanding. Upon reviewing this Court's observations in Connaught Plaza (supra), Reliance Cellulose (supra) and O.K Play (supra), respectively, the following settled principles emerge regarding such claims of separate commercial identity: (i) first, if the importer or manufacturer claims that a special meaning is attributed to the goods in the market, then the burden lies on such importer or manufacturer to prove this specialised meaning, distinct from its common or commercial understanding; and ....
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....s used in the heading are not employed in a specialised, technical context. iii. The application of the common parlance test must not contradict or run counter to the overall statutory framework and the contextual manner in which the term was used by the legislature. Thus, broadly speaking, the common or trade parlance test cannot be invoked where the statute, either explicitly or implicitly, provides definitive guidance. Explicit statutory guidance exists where the legislature provides a specific definition or a clear criterion for a term within the Act itself. Conversely, implicit guidance is found where the terms employed are scientific or technical in nature, or where the statutory context indicates that the words must be construed in a technical sense. It is only in a state of statutory silence, where the legislative intent remains unexpressed, that the tribunals or courts may resort to the common or trade parlance test. c. In the contemporary HSN-based classification regime, the common or trade parlance test cannot serve as a measure of first resort. It should only be employed after a thorough review of all relevant material confirms the absence of ....
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.... disputed. Instead, the Court's focus was on determining the scope of the term, that is, whether the good in question fell within that term according to its common or trade understanding. The question was whether 'soft serve' is regarded as 'ice cream' by the public, or if 'wild pomegranate' is commonly understood as an 'edible fruit'. It is in this context that the Court ascertains the 'meaning' of a tariff term, not by giving a dictionary definition but by defining its scope and limits within a specific dispute. 68. This reliance on common or trade parlance tests while addressing classification disputes under taxation statutes, such as the Act, 1975, is not unique to India. In fact, a review of foreign jurisprudence reveals that courts in both the United States and the European Union apply the common or trade parlance test in a broadly similar manner, considering comparable factors and considerations. [See Skatteministeriet Departementet v Global Gravity ApS, Case C-788/21, Kreyenhop & Kluge GmbH & Co. KG v Hauptzollamt Hannover, Case C-471/17 and Len-Ron Mfg. Co. v. United States, 334 F.3d 1304, 1309 (Fed.Cir.2003)] iii. Consideration of 'use' when determining classifi....
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....sed on end use, as the same was irrelevant in the context of the tariff entry concerning 'raw rubber', i.e, the entry didn't refer to use or adaptation. Therefore, the Court held that the use of an article for classification under customs law is only relevant if the entry referred to the "use or adaptation". If such a reference is absent from the entry, use cannot be regarded as a relevant factor for the purposes of classification. The Court also acknowledged that the 'taxable event' occurs when the goods are imported into the country, and consequently, what matters is the condition of the goods at the time of import. The relevant observations made by this Court are produced herein. "23. [...] Then comes the crucial conclusion of the authority: "If V.P. Latex was designed for or intended to be used as rubber, there would have been no difficulty in classifying it under Item 39 ICT. In fact synthetic rubber itself has been classified as raw rubber only because synthetic rubber serves exactly the same purpose as crude rubber in all its industrial uses and has no practical difference from the latter. Pyratex V.P. Latex is designed for use as an adhesive in the manufac....
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....ly referred to as the 'as imported' principle; and (ii) consideration of 'use' only when reference to use or adaptation is provided in the tariff heading. It is apposite to discuss a few other judgments of this Court to understand how the aforementioned principle concerning 'use' has been applied while dealing with classification disputes under various fiscal statutes. 74. In Indian Aluminium Cables (supra), this Court addressed the classification of 'Properzi Rods'. The department argued that Properzi Rods were 'aluminium wire rods' and thus fell under Entry No. 27(a)(ii) of the First Schedule to the Central Excises and Salt Act, 1944. Entry No. 27(a)(ii) states: Aluminium - wire bars, wire rods, and castings, not otherwise specified. Conversely, the appellants maintained that Properzi Rods were a distinct product, not commercially known as wire rods, differing in manufacturing process and use, and therefore should be classified under the residuary heading, namely Entry No. 68. The Court dismissed the appeal, ruling that Properzi Rods are a species of "wire rods" and correctly fall under Entry No. 27(a)(ii). Moreover, the Court held that the use to which a product is put "canno....
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....ra), which limits the consideration of 'use' to cases where the tariff entry itself explicitly refers to use or adaptation, must be interpreted within the framework of the HSN. Under the HSN, GRI 1 gives legal force to the Section and Chapter Notes, which frequently contain binding definitions or specific criteria for classification. It is plausible, and in fact common, that such statutory definitions or criteria explicitly mention 'use'. In these cases, 'use' becomes a relevant consideration for classification, not in breach of the principle from Dunlop India (supra), but as a natural outcome of the statutory text. 78. A clear illustration of the aforesaid is the catena of decisions of this Court concerning the classification of goods as 'Medicaments' under the Central Excise Tariff Act, 1985. We are not presently concerned with the specific facts of those cases or all the factors that this Court considered while resolving the classification disputes in those cases. Our focus is solely on the fact that, for the purposes of chapter heading 30.03, medicaments were referred to as goods for "therapeutic or prophylactic uses". Therefore, it is clear that 'use' is a relevant consider....
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....inding of the Department which has been upheld by the Tribunal is that both Tool Tips as well as Throw Away Inserts were Carbide Tips for machining of metal. The Inserts had shorter functional life and were replaceable. The Tool Tip had one cutting edge while the Insert had multiple cutting edges. These facts did not alter in any way the basic character and function of the two articles. Both were tips meant for machining of metal. Both were manufactured by the same process and had been made out of same metals. The Inserts were clamped on the holders. The ordinary Tool Tips were brazed on the holders. This will not take the Inserts out of the amplitude of the description in Tariff Item 62 "Tool Tips in any from or size ...". This wide description will encompass every type of Tool Tips detachable or otherwise. Whether a Tool Tip is brazed on a tool handle or clamped on a tool handle will not alter its basic character, function or use. The form of the Tool Tip is also immaterial. The detachable Tool Tip is only a variety of Tool Tips and the fact that it is identified by the name "Throw Away Insert" will not take it out of the ambit of the heading "Tool Tips in any form or size ...". ....
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....the classification of the product. See Indian Aluminium Cables Ltd. v. Union of India. There are a number of factors which have to be taken into consideration for determining the classification of a product. For the purposes of classification the relevant factors inter alia are statutory fiscal entry, the basic character, function and use of the goods. When a commodity falls within a tariff entry by virtue of the purpose for which it is put to (sic produced), the end use to which the product is put to, cannot determine the classification of that product. 15. Tariff Heading 84.15 covers air conditioning machines which control and maintain temperature and humidity in closed places. The main function of air-conditioning system is to control temperature which is not done by a chiller. A reading of Tariff Entry 84.15 would show that it is intended to cover only those machines which comprise elements for changing temperature and humidity and chillers would fall outside the purview of the said entry. The function of the chiller is only to chill water or bring it to a very low temperature, and it is the air-handling unit having an independent and distinct function which produces t....
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.... Dunlop India (supra). This is because the tariff headings considered there seem to be 'eo-nomine' headings, such as 'tool tips', and 'air conditioning machines', which restrict the consideration of how the goods are intended to be used for classification purposes. However, this Court appears to have taken into account the intended use of the goods by considering the 'function' of those goods. As laid down above, an eo-nomine provision describes a good by its name, not by its use, and thus functions that a good performs are irrelevant considerations when dealing with eo-nomine tariff provisions. However, the Court's approach in Indian Tool Manufacturers (supra) and Aircon (supra) is not in breach of the principle set out in Dunlop India (supra), as it is clear that the tariff headings in consideration therein refer to use or adaptation that is inherent. Thus, reference to use or adaptation in a tariff heading can be explicit or implicit. 82. Let us examine this concept of inherent use more carefully. An inherent reference to 'use' or 'adaptation' in a tariff heading may possibly be present in these two scenarios: a. Firstly, the language of the tariff heading or the sup....
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....fication and only intended use can be considered and (ii) if an imported or manufacturer wishes to classify based on the intended use of the product, then such 'intended use' must be inherent in the product and should be discernible from the objective characteristics and properties of the good in question. 85. The twin factors mentioned should be regarded as fundamental principles while determining the classification of a product under the First Schedule of the Act, 1975. This is because, according to Section 12 of the Act, 1962, it is evident that the goods are taxable at the point of import. Therefore, as recognised by this Court in Dunlop India (supra), what is crucial is the condition of the goods at the time of import, which is the taxable event under the Act, 1962. By excluding consideration of actual use and subjective intentions regarding use, it is ensured that classification aligns with the taxable event. Actual use can be considered only in those rare instances where there is overwhelming statutory evidence to that effect. 86. Furthermore, relying on 'objective characteristics and properties' ensures legal certainty and ease of verification. The core of th....
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....so clarify that, where the statute is silent as to the applicable standard of use for headings, then the statutory context of the said tariff heading, i.e., the relevant section and chapter notes, have to be perused to gauge the legislative intent with regard to standard of use i.e. whether the standard of use is that of simpliciter use, principal use or sole use. Generally, consideration of 'use' in most situations would involve providing proof of at least 'principal' use. Interlinking consideration of 'use' and the common and commercial meaning of a good 90. From the preceding discussion, it is evident that the consideration of 'use' and the common or commercial meaning of a good are often inextricably linked. In many instances, the two do not operate in isolation but rather reinforce one another to provide a comprehensive understanding of a product's identity. This interlinkage manifests in two primary ways. 91. First, in cases involving explicit 'use' provisions, the common or commercial meaning is frequently employed to define the scope of the 'use' mandated by the statute. For instance, where a heading provides for "chemicals to be used for industrial purposes", ....
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....ensure that the consideration of use is not done in complete ignorance of the eo-nomine component. To illustrate, an importer tomorrow cannot classify any product that regulates temperature as an air conditioning machine. The importer must demonstrate that the goods are air conditioning machines and, in doing so, can emphasise their use and function as helpful tools that assist in this effort. However, apart from use and function, other factors, such as physical characteristics, also need to be satisfied for the good in question to be considered as an air conditioning machine. Let us consider another example: an importer claims to classify a cardboard box as a bag, as both are intended for the same purpose. However, despite their similarity in intended use, objectively, bags and cardboard boxes are distinct products, and in common parlance, a bag does not encompass a cardboard box. 95. The above discussion also applies to provisions that explicitly refer to use but also have an eo-nomine component. For example, if a tariff heading refers to machinery used for printing purposes, the court must satisfy itself of a two-fold criterion: (i) the goods are machinery, and ....
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....ental eo nomine identity. 97. We may clarify that our endeavour here is not to establish a comprehensive framework or a universal test for classification in all cases. Such an exercise is unfeasible. This Court, on multiple occasions, had observed that there can be no single test to resolve classification disputes [See O.K Play (supra) & A.Nagraju Bros v. State of A.P., reported in 1994 Supp (3) SCC 122]. Our present discussion is broadly limited to understanding in which scenarios intended use can be considered and vice versa. The exact criterion for determining such intended use and the test to be applied for final classification would depend on the type of goods, the wording of the tariff entries under review, and other relevant material, such as chapter, section, and explanatory notes. Furthermore, we once again wish to emphasise that the consideration of intended use when determining the classification of a good cannot be considered in isolation from other relevant considerations. (b) Consideration of Use - USA and EU perspective 98. It is wise not to rely heavily on foreign cases concerning customs classification disputes, even though the HSN is adopted by most count....
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.... the wording of the relevant heading and notes to the sections or chapters. [See Indurstriemetall Luma GmbH v Hauptzollamt Duisburg - Case 38/76]. 102. In accordance with the above principle, the intended use of a product can serve as an objective criterion for classification under European Union Law only if the intended use is inherent to the product and can be assessed based on the product's objective characteristics and properties. [See Hark GmBh & Co. KG Kamin-und Kachelofenbau v. Hauptzollamt Duisburg - Case C-450/12 & Staaastssecretaris Van Financlen v. TNT Freight Management (Amsterdam) BV - Case C-291/11] Several factors relevant for determining intended use include: (i) the methods of use of the good, i.e., what functions it can perform; (ii) the place of the good's use, i.e., where and in which context it can be used; and (iii) the design of the good, i.e., whether it is specifically designed for such an intended purpose. [See Nederlandsch BV, Amsterdam v. Inspector of Customs and Excise, Amsterdam - Case 37/82, Oliver Medical SIA v. Valsts ieņēmumu dienests - Case C-547/13 & Pfizer Consumer Healthcare Ltd v. Commissioners for Her M....
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....84, in turn, belongs to Section XV of the Act, 1975, which covers 'Base Metals and Articles of Base Metal' Relevant Section Notes - Section XV of the Act, 1975 105. Relevant portions of Section Note 1 of Section XV read as follows: 1. This Section does not cover: [...] (f) Articles of Section XVI (machinery, mechanical appliances and electrical goods); 106. Section Note 3 of Section XV reads as follows: 3. Throughout this Schedule, the expression "base metals" means: iron and steel, copper, nickel, aluminum, lead, zinc, tin, tungsten (wolfram), molybdenum, tantalum, magnesium, cobalt, bismuth, cadmium, titanium, zirconium, antimony, manganese, beryllium, chromium, germanium, vanadium, gallium, hafnium, indium, niobium (columbium), rhenium and thallium. Relevant HSN Explanatory Notes to Tariff Heading 7610 107. The relevant HSN Explanatory Notes to Tariff Heading 7610 read as follows: a. The provisions of the Explanatory Note to heading 73.08 apply, mutatis mutandis, to this heading. b. The heading excludes: (a) Assembles identifiable as parts of articles of Chapter 84 to 88 [...] 108. Relevant Explanatory Note to headin....
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....a number of machines of the same heading (including a machine of heading 8479 or 8543) are to be classified with the machines of that kind or in headings 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate. However, parts which are equally suitable for use principally with the goods of headings 8517 and 8525 to 8528 are to be classified in heading 8517; (c) All other parts are to be classified in heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or 8538 as appropriate or, failing that, in heading 8051[8487] or 8548. 110. Section Note 3 of Section XVI reads as follows: 3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function. 111. Section Note 4 of Section XVI reads as follows: 4. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission ....
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....ny separate heading for parts. The same applies to an incomplete machine having the features of the complete machine (see Part (TV) above), presented unassembled see also in this connection the General Explanatory Notes to Chapters 84 and 85). However, unassembled components in excess of the number required for a complete machine or for an incomplete machine having the characteristics of a complete machine, are classified in their own appropriate heading. Multi-Function Machines and Composite Machines (Section Note 3) e. In general, multi-function machines are classified according to the principal function of the machine. Multi-function machines are, for example, machine-tools for working metal using interchangeable tools, which enable them to carry out different machining operations (e.g., milling, boring, lapping). Where it is not possible to determine the principal function, and where, as provided in Note 3 to the Section, the context does not otherwise require, it is necessary to apply General Interpretative Rule 3(c) f. Composite machines consisting of two or more machines or appliances of different kinds, fitted together to form a whole, consecutive....
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....r example, to closed circuit video-surveillance systems, consisting of a combination of a variable number of television cameras and video monitors connected by coaxial cables to a controller, switchers, audio board/receivers and possibly automatic data processing machines (for saving data) and/or video recorders (for recording pictures). Relevant Chapter Notes - Chapter 84 of the Act, 1975 114. Chapter Note 7 of Chapter 84 reads as follows: 7. A machine which is used for more than one purpose is, for the purposes of classification, to be treated as if its principal purpose were its sole purpose Relevant Explanatory Notes - Chapter 84 of the Act, 1975 115. The relevant HSN Explanatory Notes to Chapter 84 are as follows: a. Heading 84.25 to 84.78 cover machines and apparatus which, with certain exceptions, are classified there by reference to the field of industry in which they are used, regardless of their particular function in that field v. Application to the facts at hand 116. In the present case, the dispute revolves around the classification of aluminium shelves, i.e., subject goods. While the appellant submits that they should be classified ....
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....parlance, the subject goods would be referred to as structures. Therefore, the subject goods are classifiable under CTI 76109010 as Aluminium Structures. 122. However, our finding that the subject goods are classifiable under CTI 76109010 does not, by itself, resolve the dispute at hand. This is because both Section Note 1(f) to Section XV and the Explanatory Note to Chapter Heading 7610 are clear: (1) goods classifiable under Section XVI are excluded from being classified under Section XV, and (2) assemblies identifiable as parts of articles of Chapters 84 to 88 are excluded from being classified under heading 7610. Therefore, if the respondent's classification of the goods as "parts of agricultural machinery" under Chapter Heading 8436 is accepted, the goods would be legally barred from classification under Chapter Heading 7610. [See Intel Design Systems (India) P. Ltd. v. Commissioner of Customs and Central Excise, reported in (2008) 3 SCC 258 & CCE, Aurangabad v. Videocon Industries Ltd., reported in 2023 SCC OnLine SC 357] 123. The reason for excluding goods classifiable under Section XVI from Section XV can be understood from the Explanatory Notes, whi....
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....eniable that the term 'agricultural machinery' inherently refers to 'use'. It pertains to items primarily utilised in agricultural processes. While the First Schedule of the Act, 1975 offers no explicit definition or criteria for classifying goods as 'agricultural machinery', support for this interpretation can be found in the HSN Explanatory Notes, which state that Chapter Heading 8436 belongs to a category of headings that group machinery by the field of industry in which it is used, regardless of its specific function in that field. Such an interpretation aligns perfectly with the common parlance meaning associated with the term 'agricultural machinery'. We have no doubt that, in common parlance, the term 'agricultural machinery' is understood to mean machinery whose principal use is in agricultural processes. 128. Furthermore, upon reviewing Chapter Heading 8436 and the relevant chapter, section, and explanatory notes, it is clear that to be classified under Chapter Heading 8436, the use test must be one of 'principal use', not 'use' simpliciter. The rationale behind this is that a heading that simply refers to a field of industry is inherently broad. If any possible or inci....
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....39;machinery' would include other terms such as 'plant', 'equipment', 'apparatus' or 'appliance'. Section Note 5 states: For the purposes of these Notes, the expression 'machine' means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85. The reason for Note 5 becomes clear when we focus on the words 'for the purposes of these notes'. It is relevant to note that the headings in Chapters 84 and 85, respectively, encompass a broad range of goods, including machines, machinery, plant, equipment, and appliances. Note 5 offers a single umbrella term ('machine') to be used within the other Section Notes, removing the need to list each item separately. 133. It is important to emphasise that tariff headings must be interpreted and construed strictly, i.e., words cannot be added or omitted. Section Note 5 does not modify or broaden the scope of the tariff headings themselves. Therefore, if a specific heading, such as Chapter Heading 8436 in this case, refers solely to 'machinery' its scope is limited to 'machinery' and cannot encompass other types of goods like 'plant'. An item can only be classified as a 'plant' if the relevant h....
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....mmon element is that they are all part of the broader mushroom cultivation process, which is different from fulfilling a specific, unified function. To illustrate, according to the Explanatory Notes, an irrigation system comprising a control station with filters, injectors, metering valves, underground distribution, branch lines, and a surface network would be considered a functional unit. Conversely, closed-circuit video surveillance systems, which include a varying number of television cameras and video monitors connected by coaxial cables to a controller, switchers, audio receiver, and possibly automatic data processing machines (for data storage) and/or video recorders (for recording pictures), would not be regarded as a functional unit. 138. The core of the respondent's argument, as accepted by the CESTAT, is that these custom-made shelves are "parts" because they are designed to allow for the integration of other machines, post importation. Without such integration, these machines would not be able to function and fulfil their primary purpose. 139. This Court has consistently held that a "part" is an integral or constituent component that is essential for the articl....
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.... which merely act as platforms. 142. For the reasons outlined above, we are satisfied that the subject goods do not fall under Chapter Heading 8436. We have established that the 'mushroom growing apparatus' is not classified as 'machinery' and further, that the subject goods are 'structures' rather than 'parts' of machinery. Consequently, we find it unnecessary to determine whether the intended use of the subject goods was apparent through their objective characteristics and properties. 143. We now wish to discuss certain other aspects of the impugned judgment, which we believe rested on flawed and insufficient reasoning. The CESTAT in the impugned judgment based its decision on two ancillary assertions: first, that the goods have "no other purpose" other than being used for mushroom cultivation, and second, that they are known in "trade parlance" as a "mushroom growing apparatus" rather than mere racks. We observe that the impugned judgment provides no reasoning or evidence to substantiate either of these conclusions. 144. The standards of proof required to establish "trade parlance" and "no other purpose" are stringent. The fact that these have been custom-made for integ....
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....ported goods ought to be classified. In such scenarios, the tribunals and courts are tasked with determining the most appropriate heading/sub-heading for the purposes of customs law classification. When undertaking this exercise of determining the most appropriate heading, the tribunals and courts are bound by the GRIs, which are provided for in the First Schedule to the Act, 1975 and ought to be applied sequentially. The GRI 1 forms the basis for classifying goods under the First Schedule of the Act, 1975, and establishes the primacy of the notes and terms of headings in determining classification. Thus, any customs law classification dispute at its core would involve interpreting the tariff headings involved, along with the section and chapter notes relevant to such headings. 149. When interpreting a tariff heading involved in a classification dispute, the tribunal or court may need to invoke and rely on the common or trade parlance test to understand the meaning and scope of the terms used in that tariff heading. After a thorough consideration of this Court's various rulings on this issue, we have succinctly summarised the broad factors that need to be considered in invoking ....
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....ondent's classification of the goods as "parts of agricultural machinery" is accepted, the goods would be legally barred from classification under Chapter Heading CTI 7610901. 153. Chapter Heading 8436 is an eo nomine provision as it refers to goods by their name: 'agricultural machinery'. However, it is undeniable that the term 'agricultural machinery' inherently refers to 'use', i.e, machinery whose principal use is in agricultural processes. 154. For the subject goods to be classified under the CTI 84369900, once again, a two-fold criterion needs to be fulfilled: (i) there needs to be agricultural machinery, i.e., a machinery whose principal use is in the agricultural process, and (ii) the subject goods ought to be considered as 'parts' of such agricultural machinery. 155. The respondent has contended, on the basis of Section Note 5 of Section XVI, that the term "machine" encompasses any machinery, plant, equipment, apparatus, or appliance. It was further contended that the subject goods are part of a mushroom growing plant and should therefore be classified as 'parts' under CTI 84369900. On a close reading of Section Note 5 of Section XVI, it is clear....