TaxTMI 
TaxTMI 
2026 (7) TMI 1863
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....r Auto Parts Private Limited (hereinafter referred to as 'TKAP'), having their Registered Office at Bidadi, Ramanagara District, Karnataka, is a joint venture of Toyota Motor Corporation, Japan (TMC, Japan), Aisin Seiki Co. Ltd, Japan (Aisin, Japan) and M/s Kirloskar Systems Limited, India (Kirloskar, India). TKAP is engaged, inter-alia, in the manufacture of automobile parts, namely, "Transmission/Transaxles" commonly known as Gear Boxes and "Rear Axle Assemblies with Differential" commonly known as Read Axle. 3. DRI, Hyderabad Zonal Unit, on the basis of intelligence that indicated that TKAP has imported 'Final Gear Kit, Differential' from TMC, classifying under tariff item 84834000 and paid Basic Customs Duty @ 7.5% and IGST @ 18% vide Sl.No. 369A of Notification No.01/2017Integrated Tax(Rate), instead of classifying under tariff item 87085000 and paying BCD @ 15% and IGST @ 28% (Schedule IV. S.No.170), addressed a letter dated 31.12.2021 to TKAP calling for relevant documents. In response, TKAP vide letter dated 21.01.2022 furnished copies of blanket purchase order, brief description on the nature of business & manufacturing process, relevant Bills of Entry pages of impo....
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....ion. 5. The SCN also proposed to impose penalty on, Shri. Vijay Shettigar, Manager (Production Control and Logistics) of TKAP under section 112(a), 114AA and 117 of the Act for his deliberate acts of omission and commission and false statement, and on Shri. K. N. Prasad, Managing Director of TKAP under section 112(a) and 114AA of the Act for his deliberate acts of omission and commission. 6. After due process of law, the adjudicating authority passed the impugned order, inter-alia, holding that harmonious reading of the two customs tariff headings shows that, if the gears are of general purpose and used in machinery etc., they are classifiable under CTH 8483, whereas, if they are principally and solely meant for vehicles, they are rightly classifiable under CTH 8708. That the gears, gearing and gear pinion principally and solely used in the vehicles merit classification under CTH 8708 and not under 8483. The impugned imported goods merit classification under CTH 8708 and further the item gear, differential ring has already obtained the essential characteristics of a gear used in rear axle assembly and 8708 is more appropriate classification for the said item also. That the tr....
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.... Paperbook) Consists of 2 types of gears namely Ring Gear and Pinion Gear. They are not assembled or housed in housing. They are intended to be used as an input for the manufacture and assembly of differential assembly. 8483 4000 8708 5000 Gear, Differential Side (pictures are available at Pg. No. 209 of Appeal Paperbook) These type of Gears facilitate transfer of power from the engines to the wheels. Each wheel axle is attached to a differential side gear which meshes with the differential pinions. 8483 4000 8708 5000 Pinion, Differential (pictures are available at Pg. No. 210 of Appeal Paper book) The pinion gear along with ring gear and side gear are the key component of the differentials of the vehicle and translates the transmission rotation 90 degrees from the driveshaft to the axle shafts, which in turn spin the wheels. The differentials allows wheels on the same axle to rotate at different speeds. When the vehicle goes around a corner the wheel on the outside must travel faster than the wheel on the inside. This function is considered as the 'Differential' 8483 4000 8708 5000 Rotor, Skid Control RR (pictures are available at Pg. N....
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....nclature in Heading 8483. e) HSN Explanatory Notes to Heading 8483 provided in para (C) under the heading "Gears and gearing including friction gears and Chain sprocket" states that the basic gear is the toothed wheel, cylinder, cone, rack or worm, etc. In the present case, on a perusal of the products, it can be seen that the imported goods are also in the form of toothed wheels and therefore, the imported goods are specifically covered under Heading 8483. The relevant portion of the HSN Explanatory Notes to Heading 8483 is extracted below: "(C) GEARS AND GEARING INCLUDING FRICTION GEARS AND CHAIN SPROCKETS The basic gear is the toothed wheel, cylinder, cone, rack or worm, etc. In an assembly of such gears, the teeth of one engage with the teeth of another so that the rotary movement of the first is transmitted to the next, and so on. According to the relative number of teeth in the separate units, the rotary movement may be transmitted at the same rate, omit a faster or slower rate; according to the type of gear and the angle at which it meshes with the next, the direction of transmission may be changed, or rotary movement converted into a linear movement or ....
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.... namely, a. The parts or accessories must not be excluded by the terms of Note 2 to this Section; and b. They must be suitable for use solely or principally with the articles of chapter 86 to 88; c. They must not be more specifically included elsewhere in the nomenclature. 11. Further, the functions of the subject goods have not been disputed by the department in the impugned show cause notice and therefore there is no doubt that the subject goods are integral to the transmission function performed by the motor vehicle engine. Referring to Note 2(e) of Section XVII which states that those machines which are integral part of engines and are classifiable under Heading 8483 are excluded from Section XVII, it is argued that therefore the imported goods are not classifiable under Heading 8708. Reliance is placed on the decision in Hero Motorcorp Ltd. v. Commissioner of Customs (NS-I), Raigad, 2022 (379) E.L.T. 214 (Tri. - Mumbai). Drawing attention to a pictorial representation of the working and transfer of power as below:- it is argued that in the present case, the rotational force generated by the engine is transferred to the gear box which is further....
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....s- a process which must be done on merits. Reliance was also placed on the decisions in S.T. Enterprises v CC, 2021 (378) ELT 514 (Tri-Chennai) and Ayush Business Overseas v Commissioner, 2021 (378) ELT A 142 (SC). 16. Further contentions were raised emphasising that: a) Interest on IGST demand cannot be recovered in the absence of substantive provisions for levy of interest, placing reliance on the decisions in India Carbon Ltd v. State of Assam, (1997) 6 SCC 479, which relied upon an earlier decision in J. K. Synthetics Ltd v. CTO, (1994) 4 SCC 276, V.V.S Sugars v Govt. of A.P & Ors, (1999) 4 SCC 192, Pioneer Silk Mills Pvt Ltd v. UOI, 1995 (80) ELT 507(Del), Mahindra & Mahindra Ltd v. UOI, 2022 (10) TMI 212- Bombay High Court, A.R. Sulphonates Pvt Ltd v. UOI, 2025 (4) TMI 578-Bombay High Court, Chiripal Poly Films Ltd v CC, Ahmedabad, 2024 (9) TMI 940-CESTAT Ahmedabad, M/s. Suraydev Alloys and Power (P) Ltd v. Principal Commissioner of Customs (Audit), Chennai, 2025 (8) TMI 1356-CESTAT Chennai and M/s. Flextronics Technology India Pvt Ltd v. Commissioner of Customs, Cheennai-VII Commissionerate, 2025 (3) TMI 695- CESTAT Chennai. b) That the entire exercise i....
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....ble to confiscation under Section 111(m) of the Act, consequently no penal provisions could be invoked for penalties on any of the appellants. g) That in imposing penalty on TKAP under Section 114A the impugned order has traversed beyond the SCN as the SCN proposed only penalty under section 112(a). Reliance was placed on the decisions in Commr. of Customs, Mumbai v. Toyo Engineering India Ltd. reported at 2006 (201) ELT 513 (SC) and Commissioner of C. Ex. v. Brindavan Beverages (P.) Ltd. reported at 2007 (213) 487 (S.C.). That in any case since the goods could not have been held liable for confiscation under Section 111(m) due to wrong classification especially when the appellant has been adopted the same classification historically, the penalty under Section 112(a) could not be imposed the company (main appellant) h) That since duty demand is unsustainable, penalty is not imposable. That when the issue involved is one involving interpretation as to the applicable classification, penalty is not imposable. Reliance is placed on the decisions in CCE v H.M.M. Ltd, 1995 (76) ELT 497 (SC), CCE v. Balakrishna Industries, 2006 (201) ELT 325 (SC) and Whiteline Chemicals ....
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....2(a) of the Customs Act, 1962. Reliance was placed on the decision in Carpenter Classic Exim Pvt Ltd. vs. Commissioner of Customs, Bangalore, 2006 (200) ELT 593 (Tri-Bang), maintained by Supreme Court in 2009 (235) ELT 201 (SC). It was also contended that it is a settled position of law that personal penalty cannot be imposed on employees when the issue involved is one of classification and interpretation of exemption provisions and reliance was placed on the decision in Komatsu India Pvt. Ltd. V. CCE, 2017 (345) E.L.T. 256 (Tri. - Mumbai). It was therefore prayed that the appeals be allowed with consequential relief. REVENUE'S CONTENTIONS 20. Shri. C. Dhanasekharan, Ld. Special Counsel for the Respondent, made submissions as under: a) The Adjudicating Authority has correctly determined, based on the technical literature, supplier's documents and the end use of the imported items that they were classifiable under chapter 8708. b) The Adjudicating Authority has considered CTH 8708, the relevant section/chapter notes from the Customs Tariff Act, 1975 (Customs Tariff), the HSN Explanatory Notes, Note 2 to Section XVII of HSN and the three tests formulated by th....
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....52) ELT 3 (SC) in support of his contentions. ANALYSIS AND REASONINGS. 22. We have heard the rival submissions at length and carefully perused the material available on record including the images and technical specifications. 23. The issues that arise for our determination are: A) Whether the 'Final gear kit, Differential' and other parts of differential, imported by the main appellant TKAP are classifiable under CTI 84834000 as declared or under CTI 87085000 as reclassified by the Department? and B) Whether the consequent reassessment and demand of differential duty, liability to confiscation and resultant redemption fine as well as penalties imposed on the appellants are tenable? 24. The indisputable facts that come to the fore from the materials available on record are: a) TKAP is a joint venture among TMC, Japan, Aisin, Japan and Kirloskar, India. b) TKAP is engaged in the manufacture of automotive parts, components etc., inter-alia, 'Rear Axle Assembly with Differential' and Gear Boxes. c) TKAP has entered into an agreement captioned 'Toyota Components Supply Agreement for TKAP-made Unit Parts' with TMC, Japan on 26th d....
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.... i.e., Toyota Innova Crysta only and not for any other purpose and the same is part of rear axle assembly and not a part of gear box. c) Invoices and Sea Waybills indicated that the impugned goods are parts and components for automobiles and not general-purpose machinery parts and are finished parts for differential assembly. d) Toyota Innova Crysta is rear wheel drive vehicle which has engine in the front side of the vehicle. Engine is followed by Transmission/Gear Box which is connected to propeller shaft. Propeller shaft is connected to 'differential assembly' of rear axle through Pinion gear of 'Final Gear kit, Differential'. e) There was no mention about differentials, drive/non-driving axles and parts thereof under chapter 84. f) Gear boxes and differentials designed for use in automobiles do not fall under heading 84.83 and the same are excluded by virtue of HSN explanatory notes to Heading 84.83 g) Customs Tariff and HSN Explanatory Notes specifically covered drive-axle with differentials & parts thereof used in motor vehicles under 87085000. h) Supplier of 'Final Gear Kit, Differential' i.e., TMC, Japan, manufacturer of....
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....n the manufacture of shaft sub-assembly. The shaft-assembly will be further used for the manufacture of Rear Axle. TKAP has stated in the reply that the ring gear, pinion gear and side gear are the key component of the differential of the vehicle and translates the transmission rotation 90 degrees from the drive shaft to the axle shafts, which in turn spins the wheels. It allows the wheels on the same axle to rotate at different speeds. When the vehicle goes around a corner the wheel on the outside must travel faster than the wheel on the inside. This function is considered as the 'Differential'. B) Gear Box Assembly: Gearboxes are essentially multiple open gear sets contained in a housing. It is a mechanical device used to increase the output torque or to change the speed (RPM) of a motor. The following impugned goods are used in the manufacture of Gear Box: a) Pinion, Differential: The 'Pinion, Differential' having part no.4134152100 is used in the manufacture of the gear box. b) Gear, Differential Side: The 'Gear, Differential Side' having part no. 4133152090 is used in the manufacture of gear box. c) Gear, Differential Ring: The 'Gea....
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....he Importer's argument is accepted then every gear is covered under CTH 8483 and then sub-headings 870840 & 870850 will become redundant. On plain reading of the relevant explanatory notes, I find that gears, gearing, pinion gear are also mentioned under CTH 8483 and the same are also mentioned as parts under CTH 8708. Harmonious reading of these two customs tariff headings shows that, if the gears are of general purpose and used in machinery etc. they are rightly classifiable under CTH 8483 where as if they are principally and solely meant for vehicles, they are rightly classifiable under CTH 8708. ..." 30. The Adjudicator also negatived the contentions of TKAP that the impugned goods stood excluded from the CTH 8708 by virtue of the explanatory notes to Section XVII of HSN, while placing reliance on the statements of the personnel of TKAP as well as the rulings referred by DRI in support of his findings while passing the impugned order. Thus, the submissions of the importer in support of its contentions did not find favour with the Adjudicating Authority. 31. Before proceeding further, it is apposite to take note of the relevant Section Notes and Chapter Headings of the com....
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....9); (p) articles of Chapter 95; or (q) typewriter or similar ribbons, whether or not on spools or in cartridges (classified according to their constituent material, or in heading 9612 if inked or otherwise prepared for giving impressions), or monopods, bipods, tripods and similar articles, of heading 9620. 2.Subject to Note 1 to this Section, Note 1 to Chapter 84 and Note 1 to Chapter 85, parts of machines (not being parts of the articles of heading 8484, 8544, 8545, 8546 or 8547) are to be classified according to the following rules: (a) parts which are goods included in any of the headings of Chapter 84 or 85 (other than headings 8409, 8431, 8448, 8466, 8473, 8487, 8503, 8522, 8529, 8538 and 8548) are in all cases to be classified in their respective headings: (b) other parts, if suitable for use solely or principally with a particular kind of machine, or with 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 heading 8409, 8431, 8448, 8466. 8473, 8503, 8522, 8529 or 8538 as appropriate, However, parts which are equally suitable for use princi....
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.... 7.5% - 8483 30 00 - Bearing housings, not incorporating ball or roller bearings; plain shaft bearings u 7.5% - 8483 40 00 - Gears and gearing, other than toothed wheels, chain sprockets and other transmission elements presented separately; ball or roller screw; gear boxes and other speed changers, including torque converters u 7.5% - 8483 50 - Flywheels and pulleys, including pulley blocks 8483 50 10 --- Pulleys, power transmission u 7.5% - 8483 50 90 --- Other u 7.5% - 8483 60 - Clutches and shaft couplings (including universal joints): 8483 60 10 --- Flexible coupling u 7.5% - 8483 60 20 --- Fluid coupling u 7.5% - 8483 60 90 --- Other u 7.5% - 8483 90 00 - Toothed wheels, chain sprockets and other transmission elements presented separately; parts u 7.5% 34. The relevant extracts of Section XVI, from the HSN Explanatory Notes, 2022 Edition, are as under: "SECTION XVI MACHINERY AND MECHANICAL APPLIANCES; ELECTRICAL EQUIPMENT; PARTS THEREOF; SOUND RECORDERS AND REPRO....
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....d by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, then the whole falls to be classified in the heading appropriate to that function. 5. -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. 6.- xxxxx GENERAL (I) GENERAL CONTENT OF THE SECTION (A) Subject to certain exclusions provided for in the Notes to this Section and to Chapters 84 and 85 and apart from goods covered more specifically in other Sections, this Section covers all mechanical or electrical machinery, plant, equipment, apparatus and appliances and parts thereof, together with certain apparatus and plant which is neither mechanical nor electrical (such as boilers and boiler house plant, filtering apparatus, etc.) and parts of such apparatus and plant. The main exclusions from the Section are: (a) Spools, cops, bobbins, reels, etc., of any material (classified according to their constituent material). How....
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....the next, the direction of transmission may be changed, or a rotary movement converted into a linear movement or vice versa (as with a rack and pinion). The group covers all types of gears including simple cog wheels, bevel gears, conical gears, helical gears, worms, rack and pinion gears, differential gears, etc., and assemblies of such gears. It also covers toothed and similar wheels for use with transmission chains. The group also covers friction gears. These are wheels, discs or cylinders, which, when mounted one on the driving shaft and one on the driven shaft, transmit the movement by friction between them. They are usually of cast iron, in certain cases being covered with leather, wood, bonded fibres or other material to increase the friction. XXXXX XXXXX PARTS Subject to the general provisions regarding the classification of parts (see the General Explanatory Note to Section XVI), the heading also covers parts of the goods covered by this heading. The heading also excludes: (a) Pieces roughly shaped by forging, of heading 72.07. (b) Transmission equipment of the kinds described above (gear boxes, tra....
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....rincipally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory. 4. For the purposes of this Section: (a) Vehicles specially constructed to travel on both road and rail are classified under the appropriate heading of Chapter 87, (b) Amphibious motor vehicles are classified under the appropriate heading of Chapter 87; (c) Aircraft specially constructed so that they can also be used as road vehicles are classified under the appropriate heading of Chapter 88. 5. xxxxx 37. The extract of Tariff Heading 8708 of the Customs Tariff, 1975, is as under: CHAPTER 87 Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof Tariff Item Description of goods Unit Rate of duty Standard Preferential Areas (1) (2) (3) (4) (5) 8708 Parts and accessories of the motor vehicles of headings 8701 to 8705 8708 10 -Bumpers and parts thereof &n....
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....s of this Section; articles of heading 84.81 or 84.82 or provided they constitute integral parts of engines or motors, articles of heading 84.83; (n) Electrical machinery or equipment (Chapter 85); (o) Articles of Chapter 90; (p) Articles of Chapter 91; (ij) Arms (Chapter 93); (k) Luminaires and lighting fittings or parts thereof of heading 94.05; or (l) Brushes of a kind used as parts of vehicles (heading 96.03). 3. References in Chapters 86 to 88 to "parts" or "accessories" do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory. 4. For the purposes of this Section: (a) Vehicles specially constructed to travel on both road and rail are classified under the appropriate heading of Chapter 87, (b) Amphibious motor vehicles are classified under the appropriate heading of Chapter 87; (c) Aircraft specially constructed....
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....r Section. Under Section Note 3, parts and accessories which are not suitable for use solely or principally with the articles of Chapters 86 to 88 are excluded from those Chapters. The effect of Note 3 is therefore that when a part or accessory can fall in one or more other Sections as well as in Section XVII, its final classification is determined by its principal use. Thus, the steering gear, braking systems, road wheels, mudguards, etc., used on many of the mobile machines falling in Chapter 84, are virtually identical with those used on the lorries of Chapter 87, and since their principal use is with lorries, such parts and accessories are classified in this Section. (2) Parts and accessories classifiable in two or more headings of the Section Certain parts and accessories are suitable for use on more than one type of vehicle (motor cars, aircraft, motorcycles, etc.); examples of such goods include brakes, steering systems, wheels, axles, etc. Such parts and accessories are to be classified in the heading relating to the parts and accessories of the vehicles with which they are principally used. (C) Parts and accessories covered more....
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....wheels, steering columns and steering boxes; parts thereof 8708.95 -- Safety airbags with inflater system; parts thereof 8708.99 -- Other This heading covers parts and accessories of the motor vehicles of headings 87.01 to 87.05 provided the parts and accessories fulfil both the following conditions: (i) They must be identifiable as being suitable for use solely or principally with the above-mentioned vehicles: and (ii) They must not be excluded by the provisions of the Notes to Section XVII (see the corresponding General Explanatory Note). Parts and accessories of this heading include: (A) Assembled motor vehicle chassis-frames (whether or not fitted with wheels but without engines) and parts thereof (side-members, braces, cross-members; suspension mountings; supports and brackets for the coachwork, engine, running-boards, battery or fuel tanks etc. xxxxxx xxxxxx xxxxxx (D) Gear boxes (transmissions) of all types (mechanical, overdrive. Preselector, electro-mechanical, automatic, etc.); torque converters; gear box (transmission) casings: shafts (other than internal parts of engines o....
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....motors, whether or not they are identifiable as for the goods of this section. G) As per Note 3 of Section XVII of the Customs Tariff, the references in Chapter 86 to 88 to "parts" or "accessories" do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those chapters. H) Heading 8708 has the description of goods "Parts and accessories of the motor vehicles of heading 8701 to 8705" and the tariff item 8708 40 00 has the description of goods "Gear boxes and part thereof" while the tariff item 8708 50 00 has the description of goods "Drive -axles with differential, whether or not provided with other transmission components, non-driving axles; parts thereof. I) The HSN explanatory notes to Heading 87.08 of Chapter 87 stipulates what are the Parts and accessories that the heading includes and at paragraph (D) thereunder indicates, inter-alia, Gear boxes (transmissions) of all types (mechanical, overdrive. Preselector, electro-mechanical, automatic, etc.), shafts (other than internal parts of engines or motors), gear pinions; at paragraph (E) indicates, inter-alia, Drive-axles, with differential; non-drivi....
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....s given, namely, that when a part or accessory can fall in one or more other Sections as well as in Section XVII, its final classification is determined by its principal use. It is further explained as regards parts and accessories classifiable in two or more headings of the Section, they are to be classified in the heading relating to the parts and accessories of the vehicles with which they are principally used. O) In the paragraph (C)" Parts and accessories covered more specifically elsewhere in the Nomenclature", it is stipulated that parts and accessories, even if identifiable as for the articles of this Section, are excluded if they are covered more specifically by another heading elsewhere in the Nomenclature and examples pertaining to such exclusions and the headings in which they are more specifically covered are given. 40. At this juncture, it is apposite to note that the Honourable Supreme Court, in the case of Commissioner of Customs (Import) v. M/s. Welkin Foods, reported as 2026 INSC 19, has analysed the entire gamut of the fundamental concepts that govern classification of goods imported into India, including the General Rules for the Interpretation of Fi....
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....d 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: "16. Ergo, in resolving disputes relating to tariff description and classification, a ready reckoner is the internationally accepted nomenclature in the HSN. That being said, we must hasten to reiterate what was pointed out in Wood Craft Products Ltd.. If the headings/entries in the First Schedule to the Act of 1985 are different from the headings/entries in the HSN or if they are not fully aligned, reliance cannot be placed upon the HSN for the purpose of classifying those goods under the Act of 1985. 17....
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....how to interpret the First Schedule of the Import Tariff, is specified therein, under the title, "General Rules for the Interpretation of This Schedule". It is stipulated that classification of goods in the Schedule shall be governed by the principles stated therein. Rule 1 of these rules state that the titles of Sections, Chapters and SubChapters are provided for easy 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 heading or notes do not otherwise require, according to the following provisions. When we peruse the Tariff, it can be seen that the it groups the goods in Sections, Chapters and sub-Chapters which have been given titles that indicate the categories or types of goods that they cover. Understandably, the variety is so vast that it would be impossible to cover or cite all of them fully detailed in the title. Hence the stipulation in Rule 1 that the titles are provided for ease of reference only. They have no legal bearing on classification. Thus, the mandate of Rule 1 is that for legal purposes, classification shall be determined according to the t....
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....t govern classification of goods in the aforesaid pellucid terms, by the Hon'ble Supreme Court in Welkin Foods case as extensively reproduced supra, it is evident that the sentence "Therefore, classification has to be determined both according to the terms of the Headings and according to the provisions of the rules unless, a particular Heading or Note excludes the application of rules other than Rule 1" as held in the Khandelwal Judgement of the Hon'ble Apex court as reproduced above, does not lend itself to an understanding divested of the context in which it was explained, that is while examining the phrase "and, provided such Headings or Notes do not otherwise require". Therefore the former sentence can be understood to be stating that it does not necessarily mean that it should always be an explicit exclusion in as many words, but if the particular Heading or Note categorically states that it applies only to certain goods, then the remaining rules will not come into play so as to bring it within their fold given the non-negotiable primacy of GRI 1, and likewise, if the particular Heading or Note categorically excludes certain goods then the remaining GIR rules cannot be banked....
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....o the Harmonized Commodity Description and Coding System of the World Customs Organization, seventh edition (2022) produced by the appellant that the said embargo is verbatim stated in the Note 1 (l) of Section XVI thereof at page XVI-1. The Explanatory Notes to Section XVI under heading 'General' under sub-heading '(I) General Content of the Section', at page XVI-2, in (A), inter-alia, lists the main exclusions from the section and at page XVI-3, under (e), reiterates that Articles of Section XVII are excluded. 43. Section XVII of the Customs Tariff covers Chapter 86, 87, 88 and 89. Thus, if the impugned goods are articles under Chapter 87, they would get ousted from Chapter 86 per the said Note 1(l) of Section XVI of the Customs Tariff as well as the HSN explanatory notes. 44. It is the case of the Revenue that, since Heading 8708 has the description of the goods "Parts and accessories of the motor vehicles of heading 8701 to 8705", and Tariff item 87085000 has against it the description of goods as "Drive-axles with differential, whether or not provided with other transmission components, non-driving axles; parts thereof", the impugned goods being parts of rear axle assemb....
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....d 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. 47. Therefore, to examine if the impugned goods would get ousted from Chapter 84 per the said Note 1(l) of Section XVI, both in the Customs Tariff as well as that in the HSN pertaining to Section XVI as reproduced supra, it becomes necessary to see whether they are articles under Chapter 87. This necessitates an examination of the tariff heading 8708 of the Customs Tariff and that provided in HSN and also the notes to Section XVII of the Customs Tariff, as well as that provided in the HSN as pertaining to Section XVII. 48. As per Note 2 (e) of Section XVII of the Customs Tariff, the expressions "parts" and "parts and accessories" do not apply to articles of heading 8483, provided they constitute integral parts of engines or motors, whether or not they are identifiable as for the goods of this section. Note 3 further states that references in Chapter 86 to 88 to "parts" or "accessories" do not apply to parts or accessories which are not suitable for use solely or principally with the articles of th....
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....s: gears, gearing, plain shaft bearings: reduction gear assemblies; universal joints). But the heading excludes internal parts of engines, such as connecting-rods, push-rods and valve-lifters of heading 84.09 and crank shafts, cam shafts and flywheels of heading 84.83." This has weighed with the Adjudicating Authority in holding that the impugned goods are includable as parts of rear axle assembly under Tariff Item 87085000. 51. However, directly beneath the HSN chapter heading 87.08 and sub headings along with the description of goods, and preceding the statement "Parts and accessories of this heading include:", there are stipulations in between, which appears to have escaped his attention. These stipulations as given therein are reproduced below: "This heading covers parts and accessories of the motor vehicles of heading 87.01 to 87.05, provided the parts and accessories fulfil both the following conditions: i. They must be identifiable as being suitable for use solely or principally with the above-mentioned vehicles: and (ii) They must not be excluded by the provisions of the Notes to Section XVII (see the corresponding General Explanatory Note).....
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..... Indisputably, these conditions have to be satisfied cumulatively, in order for articles to be considered as parts or accessories of the vehicles, aircrafts or equipment concerned in the chapters 86,87 and 88 of Section XVII. 56. Under this Category "(III) Parts and Accessories", in the paragraph (A) "Parts and accessories excluded by Note 2 to Section XVII", given in page XVII-3 of the 2022 Edition of the Explanatory Notes, the manner in which the exclusion in terms of Note 2 is to be understood is elaborated. In the paragraph (A), at Sl.No.6 a legend "Certain other goods of Chapter 84" is provided and at clause (c) thereof, on page XVII-4, the goods indicated are "Internal parts of engines or motors (crank shafts, cam shafts, flywheels etc.) falling in heading 84.83." This is also found stated in the HSN explanatory notes to Chapter 87 Heading 87.08 that stipulates what the Parts and accessories of this heading include, in paragraph (F) as noticed supra, where it is stated "the heading excludes internal parts of engines, such as connecting-rods, push-rods and valve-lifters of heading 84.09 and crank shafts, cam shafts and flywheels of heading 84.83". Thus, in light of the ....
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.... classifiable under 8708, has, however, considered only the reliance on Note 2(e) to Section XVII. 59. It appears that the stipulations in the paragraph (C) under Category "(III) Parts and Accessories" at page XVII-6, relied upon by the appellant in its reply, which elaborated on the condition "They must not be more specifically included elsewhere in the Nomenclature"; one of the essential conditions that is part of the three conditions required to be cumulatively satisfied to in order for articles to be considered as parts or accessories of the vehicles, aircrafts or equipment concerned in the chapters 86,87 and 88 of Section XVII, and in this case particularly to be considered as parts or accessories of the vehicles in the chapter 87; has escaped his attention. 60. We notice that in paragraph (C) aforementioned, the stipulation is that "Parts and accessories, even if identifiable as for the articles of this Section, are excluded if they are covered more specifically by another heading elsewhere in the Nomenclature." Therefore, parts, as well as accessories, may be identifiable as for the articles of Section XVII. Nevertheless, it is immaterial whether such identification of....
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....le assembly, are to be classified thereunder. It is also not in dispute that these are parts and accessories for Toyota Vehicles that come under heading 8703. 63. That said, as observed supra, while noticing the appellant's contest that classification of the impugned goods under chapter 87 is only possible on the satisfaction of the triple conditions for the goods to be classifiable under 8708, the adjudicating authority has however considered only the reliance on Note 2(e) to Section XVII. Hence, the view expressed that if he were to interpret gears and gearing to be solely classifiable under CTH 8483 then "parts thereof" occurring under CTI 87084000 & 87085000 will become redundant, has been so stated, oblivious to the stipulations in the paragraph (C) under Category "(III) Parts and Accessories", and is therefore misplaced. Therefore, we are of the considered view that the finding of the Adjudicating Authority upon taking cognizance of paragraphs (D), (E) and (F) of the HSN explanatory notes to Heading 87.08, that the gears, gearing and gear pinion principally and solely used in the vehicles merit classification under CTH 8708 and not under CTH 8483, has been arrived at witho....
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....pally with the articles of Chapters 86 to 88 also stood satisfied. While the Revenue has deemed to treat the impugned goods as parts of rear axle assembly, given that the specific contentions and explanation of TKAP, referring to the particular part number of some of the impugned goods and distinguishing them as that used in gear boxes, has not been controverted by the Revenue with any evidence, we find that the Revenue has not discharged its onus of proving its proposed classification is attracted and hence we are inclined to accept the contention of TKAP in this regard. 68. No doubt, the explanatory notes to Heading 84.83 also states that the heading excludes Transmission equipment of the kinds gear boxes, transmission shafts, clutches, differentials etc., but which are designed for use solely or principally with vehicles or aircrafts (Section XVII). However, it is not the case of revenue that the impugned goods are "differentials" or "Drive-axles with differential". Revenue is only considering them to be "parts of rear axle assembly". We have already found that the term "articles of Section XVII" would also encompass the "parts" of such articles. Therefore, the exclusions lis....
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....oods are classifiable under Heading 8483 in terms of Rule 1 itself, and we do not find any necessity to revert to the subsequent rules of interpretation. 71. Given that we have determined the classification of the impugned goods on first principles and for the reasons stated above, we also do not find merits in the additional justifications provided by the Adjudicating Authority. The Adjudicating Authority has sought to justify the classification on the ground that the supplier has chosen to classify the impugned goods under Heading 8708. In this regard, we find the reliance placed by the Appellants on the decision in Commissioner of Customs & Central Excise v. Reliance infrastructure, 2022 (1) TMI 1403- CESTAT HYDERABAD, to be apposite. The coordinate bench has in the said decision, observed that the HSN mentioned by such supplier does not estop either the importer or the proper officer or the adjudicating authority from classifying the goods under any other heading, going on to observe that otherwise, anyone can ask the supplier to indicate an incorrect but convenient HSN in the invoice and packing list and reduce the duty liability. The Tribunal has gone on to observe that if....
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..... We have perused the same and while refraining from extracting therefrom to avoid prolixity, find such reliance placed to be appropriate. 72. Ld. Special Counsel for the Respondent has relied upon the decisions in CCE, Shillong v. Wood Craft Products Ltd, 2002 (143) ELT 247 (SC), CC v Business Forms Ltd, 2002 (142) ELT 18 (SC), CCE Delhi v. M/s. Uni Products India Ltd, 2020 (372) ELT 465 (SC) and we find that the emphasis therein is to take assistance of HSN Explanatory notes to resolve entry related disputes, and being a course that we too have adopted in this case, are supportive of our conclusions. As regards the reliance placed on the Judgement of the Hon'ble Apex Court in G.S. Auto International case in support of the contention that goods are to be classified as to how they are referred in the market, we find that in the instant case, as observed supra, there is no reliance on any market enquiry or evidence as to the trade practice being examined or analysed in the impugned order, and as such the reliance is misplaced. That apart, the facts of the said case, as well as the parts under consideration therein, are different from that of the instant case. Moreover, the applic....