TaxTMI 
TaxTMI 
2026 (1) TMI 1240
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....nai it was found that the importer had filed exbond bills of entry for clearance for a part of the goods. The department was of the opinion that there are various types of interactive devices known by various names in the industry i.e. Interactive Whiteboard / Smartboard, Interactive Flat Panel Display etc. which are advanced technology devices used in conferences, classroom teachings etc. The essential functions of these device was felt to be that of a display monitor with an independent function which can act as an output device of a computer. The officers were of the opinion that the device could function individually with inputs from other sources as pen drives or from inputs from the internet sources etc., thus its main function is that of a monitor and not an ADP machine and the goods were classifiable as monitors for automatic data processing machines. After due process of law, the Ld. Commissioner of Customs classified the Interactive Flat Panel and its parts and accessories under CTI 8528 5900 and 8529 9090 respectively. He demanded differential duty of Rs.34,89,01,972/- under section 28(8) with applicable interest under section 28AA of the Customs Act, 1962 besides imposi....
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....ods under CTH 8471. The judgment referred to the decision of the Mumbai Bench of the Tribunal in the case of Cloud walker Streaming Technologies reported in (2023) 4 Centax 226 (Tri - Mum.) with approval. Further written submissions dated 05.08.2025 were submitted during the hearing on 06.08.2025. The Ld. Counsel prayed that the impugned order may be set aside and the appeal may be allowed. 3.2 The Ld. A. R. Shri Anoop Singh, submitted that the imported Interactive Flat Panel, with added features and integrated software, is primarily used for display purposes in settings like schools and hospitals. Although capable of receiving various signals and performing data processing, its main function remains display, so it should be classified under CTI 8528 5900 rather than as an ADP machine. The following legal precedents were cited to support his submissions that classification depends on the primary functional character of the goods, and similar products have previously been classified under CTH 8528. (i) Atul Glass Industries Ltd. vs. Collector of Central Excise [1986 (25) ELT. 473 (S.C.)) and (ii) Real Optical Co. vs. Appellate Collector of Customs (2001 (129) E.....
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....F CUSTOMS (IMPORT) Vs M/S WELKIN FOODS [2026 INSC 19 / CIVIL APPEAL NO. 5531 OF 2025, Dated: 06.01.2026], had an occasion to examine the specific aspects relevant to classification disputes, which included the common parlance or trade parlance test to interpret the meaning of words in the statutes, the consideration of end use as a factor for determining classification and the role of Harmonised System Nomenclature (HSN), which comprises more than 5,000 commodity groups and is utilised by over 200 countries as a foundation for their Customs tariff and ensures uniformity in customs procedures. The Apex Court held: "26. Customs classification is best described as the process of identifying the appropriate heading, subheading, or tariff item for a good. This is the most crucial step in the customs law, as it is not just an administrative task. Instead, the classification determines the legal and financial treatment of the goods in question, including the applicable duty rate and eligibility for exemptions. *****. *****. ***** 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 cl....
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....uidance. In effect, the legislative intention to depart from the HSN must be clear and unambiguous. For instance, in Camlin Ltd. v. Commissioner of Central Excise, Mumbai, this court found that there was an inconsistency between the Central Excise Tariff description and the entry in the HSN and, therefore, reliance upon the HSN entry was held to be invalid. It was affirmed that it is only when the entry in the HSN and the tariff description in the First Schedule to the Act of 1985 are aligned that reliance would be placed upon the HSN for the purpose of classification of such goods under the correct tariff description." (Emphasis Supplied in the judgment) Thus, in Madhan Agro (supra), this Court clarified the applicability of the Explanatory Notes. Their application is governed by a single, critical condition of 'alignment'. This test is met when the domestic tariff entry (in the First Schedule of the Act, 1975) is fully aligned with the corresponding HSN heading, and no explicit deviation or contrary legislative intent is found in the Act, 1975. Where such alignment exists, the Explanatory Notes are to be treated as binding guidance. The rationale is based on the legis....
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....s 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 statutory guidance. d. When interpreting terms in a tariff item by relying on the basis of common or trade parlance, an overly simplified approach should be avoided, and the words should be understood within their legal context. Further, when a party asserts a meaning of a term based on common or trade parlance, it must present satisfactory evidence to support that claim. e. When a tariff item is general in nature and does not indicate a particular industry or trade circle, the common parlance understanding of that term is appropriate. However, when a tariff item is specific to a particular industry, the term must be understood as it is used within that specific trade circle. f. The common or trade parlance test cannot be used to override the clear mandate of the statute. Specifically: i. The test cannot be applied in....
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....ssify goods based on their 'intended use', then the following conditions must be fulfilled: i. First, the tariff heading under which the importer seeks to classify should allow consideration of 'use' as a relevant factor; ii. Secondly, if such a tariff heading allows for consideration of 'use', the 'use' mentioned in the tariff heading and the 'intended use' claimed by the importer must be consistent. iii. Lastly, the intended use as claimed by the importer: 1. should be inherent in the goods in question and should be discernible from their objective characteristics and properties, which include, among other things, factors such as function, design and composition; and 2. should conform to the standard of use established for that entry. e. When a tariff heading contains both an eo nomine component and a use component, both criteria must be satisfied. An importer cannot rely on the use criterion to ignore the product's fundamental eo nomine identity." (emphasis added) 7. We find that the main classification dispute between the parties is between CTI 8471 4900 (appellant) and CTI 8528 5900 (revenue). It is the depa....
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....such as a local or wide area network. vi) All computers have OS that are fixed and copyrighted which cannot be tampered with by the user. The impugned goods have OPS slots for installing other operating software such as Windows. They also permits the user to create and run other applications. It can also perform mathematical functions. vii) The goods are a complete self-contained, large format tablet type computer which is in the trade parlance for convenience sake referred to as interactive displays. The tablet computer which is of a small size also has only a display and other components are in the back of the flat panel. It will be a misnomer to call such a tablet computer as a monitor. In the same way, these goods are computers having large size displays. viii) CTH 8528 only covers monitors which are output devices displaying the output from a separately presented data processing equipment, unlike the impugned goods which are automatic data processing machines. 8. It would be relevant at this stage to reproduce the rival classification headings as claimed by the parties. Appellant Tariff Item Description of Goods Unit Rate of Duty ....
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....he event that the goods cannot be classified solely on the basis of GIR 1, and if the headings and legal notes do not otherwise require, the remaining Rules 2 to 6 may then be applied in sequential order. Rule 1 of the GIR provides that the classification of goods shall be determined according to the terms of the headings of the tariff and any relative Section notes or Chapter notes. 10. The impugned order has referred to Notes of Section XVI in denying the classification of the impugned goods under CTH 8471. We examine the same. As stated by the appellant and demonstrated before us the Interactive Flat Panel under reference have inbuilt CPUs having internal storage capacity capable of storing data. They are not composite machines consisting of two or more machines. Hence the Ld. A.A.'s reference in the OIO to Chapter Note 3 to Section XVI which pertains to composite machines consisting of two or more machines and Section notes 4 of Section XVI which pertains to machines (including a combination of machines) consists of individual components, are not relevant for the classification of the impugned goods and the discussion on the same is an exercise in futility. The impugned orde....
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....tion, a processing programme which requires them to modify their execution, by logical decision during the processing run. B. Automatic data processing machines may be in the form of systems consisting of a variable number of separate units. C. Subject to paragraphs (D) and (B), a unit is to be regarded as being part of an automatic data processing system if it meets all of the following conditions: i. it is of a kind solely or principally used in an automatic data processing system, ii. it is connectable to the central processing unit either directly or through one or more other units; and iii. it is able to accept or deliver data in a form (codes or signals) which can be used by the system. Separately presented units of an automatic data processing machine are to be classified in heading 8471 However, keyboards, X-Y co-ordinate input devices and disk storage units which satisfy the conditions of (ii) and (ii) above, are in all cases to be classified as units of heading 8471. D. Heading 8471 does not cover the following when presented separately, even if they meet all of the conditions set forth in paragraph (....
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....ing machines, albeit with very large screens, satisfy all requirements of Note 6(A) and are not classifiable as monitors and projectors under CTH 8528. Its features are not very different from those of a handheld tablet computer, except for having a much larger screen size. They have the facility to store the processing programme or programmes along with data and the machines are freely programmable in accordance with the requirements of the user. They have been demonstrated to perform arithmetical computations specified by the user. The machine can execute, without human intervention, a processing programme using logical decisions. Revenue has hence failed to discharge its burden and prove that the goods fall under CTH 8528 whereby the appellants classification of the goods at the 4 digit level under CTH 8471 and their parts under CTH 8473 remain undisturbed. The misreading of the Section and Chapter Notes has proved fatal to the Ld. A.A.'s findings. We find that CTI 8471 49 00 opted for by the appellant at the 8 digit level, pertains to other automatic data processing machines, "Presented in the form of systems", may not be the most suitable heading for standalone automatic data ....
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....the Explanatory Notes to the Harmonized Commodity Description and Coding System. The impugned Bills of Entry pertain to the period 09.08.2023 to 19.03.2024. The 2022 Edition of the Explanatory Notes which is relevant to the said period states as under: (B) MONITORS OTHER THAN THOSE CAPABLE OF DIRECTLY CONNECTING TO AND DESIGNED FOR USE WITH AN AUTOMATIC DATA PROCESSING MACHINE OF HEADING 84.71 This group includes monitors which are capable of receiving signals when connected directly to the video camera or recorder by means of composite video, s-video or co-axial cables, so that all the radiofrequency circuits are eliminated. They are typically used by television companies or for closed-circuit television (airports, railway stations, factories, hospitals, etc.). They can, with a particular standard (NTSC, SECAM, PAL, D-MAC, etc.). For reception of coded signals, moreover, have separate inputs for red (R), green (G) and blue (B), or be coded in accordance B signals. They are not fitted with connectors characteristic of data processing systems, and they the monitor must be equipped with a decoding device covering (the separation of) the R. G and do not incorporate t....