TaxTMI 
TaxTMI 
2026 (9) TMI 1764
X X X X Extracts X X X X
X X X X Extracts X X X X
....umbai, held that, "'Split systems' are air conditioners that have two parts and these operate together to cool space. Likewise, it may heat space also without compromising conformity with the description corresponding to heading no. 84151010 of the First Schedule to Customs Tariff Act, 1975. It is only by exclusion from this description that the impugned order could have attempted an alternative classification." 1.2. The Bench further observed that, in another decision of this Tribunal, namely, M/s ETA General Pvt. Ltd. v. Commissioner of Customs, Chennai-II-2016 (341) E.L.T. 140 (Tri. - Chennai), the Chennai Bench of the Tribunal held that, "the more specific entry of two ton (2) capacity split air-conditioner appearing in CTH 84158310 excludes the general entry of split air-conditioner specified in 84151010*** It can be irresistibly be concluded that mere assertion without meeting common parlance test and elementary principles of jurisprudence that Genereliaspecialibus non derogant - "General things do not derogate for special", appellant fails to succeed since two ton split air-conditioner subscribes to the CTH 8415 83 10 instead of the CTH 8415 10 10" 1.3. Observing the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lised by over 187 countries as a foundation for their Customs tariff and ensures uniformity in customs procedures, promoting international trade by providing a common language for identifying and categorising goods across various jurisdictions. In the First Schedule of the Act, 1975, commodities are arranged in a fixed pattern with the duty rates specified against each item. The First Schedule is divided into sections, which are further subdivided into chapters. Each section and chapter also includes its respective notes, known as Section Notes and Chapter Notes, respectively. The First Schedule of the Act, 1975, consists of 21 Sections and 98 chapters. 4.3 A section is a group consisting of a number of chapters which codify a particular class of goods. The Section Notes clarify the scope of chapters, headings, and other elements. The chapters include chapter notes and a brief description of commodities, arranged at four-digit, six-digit, and eight-digit levels. Each four-digit code is called a 'heading', each six-digit code is called a 'subheading', and an eight-digit code is called a 'Tariff Item'. The HSN provides commodity/product codes and descriptions only up to the 4-digi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e correct tariff description." Thus, in Madhan Agro (supra), the Apex 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 Customs Tariff Act, 1975. Where such alignment exists, the Explanatory Notes are to be treated as binding guidance. The rationale is based on the legislative intent. 4.5 Another important criterion for determining the classification of goods is the General Rules for the Interpretation (hereinafter referred to as the "GRI"). These Rules lay down the principles governing the classification of goods and are incorporated in the First Schedule to the Customs Tariff Act, 1975.: "Rule 1: Classification to be made as per Heading: The title attached to the section, chapter, and sub-chapter are provided for guidance only. The classification of goods shall be made based on the description of heading read with relevant section and chapter notes and provid....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Department tried to classify it under subheading 3204.19[pigments and preparation based thereon other than those in unformulated and unstandardised or unprepared form, not ready for use]. The Tribunal in the case applied Rule 2(a) to classify goods under entry 9609.00 as unfinished good only required to be given necessary shape to turn into the final product. 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. GRI 2 (a) is expanding the terms of a heading to include (i) incomplete or unfinished goods, as long as the essential character of the complete or finished article is obvious from the goods as presented at the time of importation; or (ii) goods presented in unassembled or disassembled form. [Refer to Collector of Customs, Bangalore & Anr v. Maestro Moto....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rule 3 (a): Primacy of specific Entry over generic Entry: This rule provides that the Heading that provides the more specific description shall be preferred over an entry with generic description. In case of Jyoti Industries-2000 (115) E.L.T. 559 (Tribunal), it was held that Kitchen sink is more appropriately covered under "sanitaryware" (i.e. CTH 7324 [Sanitary ware and parts thereof]) which is a specific description than "household articles of iron and steel" (i.e. CTH 7323 [Household articles of iron and steel]) which is a general description. The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods GRI 3 is the rule that acts as a tie breaker when, by application of GRI 2(b) or for any other reason, goods are, prima facie, classifiable und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an determine this. Rule 3(c): If both Mixtures are Specific: The later is preferred. It simply means that when the goods can equally be classified under two entries, then the later Entry shall be preferred over the former. When goods cannot be classified by reference to Rule 3 (a) or Rule 3(b), they shall be classified under the heading which occurs last in the numerical order among those which equally merit consideration. In the case of Mahindra & Mahindra-(1999) 109 ELT 739, this Tribunal held that the goods concerned were equally classifiable under Entry 87.03 and CTH 87.04, applying the Rule 3(c) later Entry that entry 87.04 was applied for Classification. When goods cannot be classified by reference to Rule 3(a) or Rule 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration 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 Rule 4: Classification as Akin Goods: Goods....
X X X X Extracts X X X X
X X X X Extracts X X X X
....king materials. As per Rule 5(a), packing containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character. Rule 5(b) states that subject to the provisions of (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use. Rule 6: Goods are Comparable at the same level only for Classification: The Chapter will be compared with the Chapter; then the Heading will be compared with the Heading, followed by the sub- heading will be compared with the sub- heading. Sub- headings under the same heading are compared with each other and not sub- headings under another heading. Hon'ble Supreme Court has repeatedly reiterated that GRIs 1-4 must b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....I 1 and 2 have failed to find even one possible heading for the good. 4.6. Common Parlance test also applies to classification disputes: The common parlance includes trade parlance, and popular parlance tests. The rationale behind this principle is that the purpose of a fiscal statute is to generate revenue, and the legislature assumes it is addressing the public and traders, not scientists or technical experts. Therefore, the terms used in the statute are based on the understanding of those dealing with the said goods. If a specific scientific meaning had been intended, the statute would have included an explicit definition to that effect. We draw support from Asian Paints India Ltd v. Collector of Central Excise-(1988) 2 SCC 470, and United Offset Process (P.) Ltd v. Asst. Collector of Customs, Bombay-1989 Supp (1) SCC 131. 4.6.1. However, it is absolutely necessary to depart from the trade meaning or commercial nomenclature test where the trade or commercial meaning does not fit within the scheme of the statutory provisions. The Hon'ble Apex Court in Akbar Badruddin Jiwani-1990 (47) E.L.T. 161 (SC), referring to the observation of Pollock, B. in Grenfell v. Inland Reven....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... test cannot be applied when there is no ambiguity and no difference in the clear heading in the first schedule and the corresponding entry in the HSN. The relevant observation made by the Court is as follows: "35. We may now deal with the next point-the "common parlance test". A well-settled principle of interpretation of taxing statutes is that words therein must be construed in consonance with their commonly accepted meaning in the trade and their popular meaning. When a word is not explicitly defined or there is ambiguity as to its meaning, it must be interpreted for the purpose of classification in the popular sense, which is the sense attributed to it by those who are conversant with the subject-matter that the statute is dealing with. This principle, known as the "common parlance test", serves as good 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 2 tones and ductless, are as below: Table I Chapter 84 Machinery and mechanical appliances Tariff Item Description of goods unit Rate of duty Standard Pre fer ent ial are as (1) (2) (3) (4) (5) 8415 Air conditioning machines, comprising a motor-driven fan and elements for changing the temperature and humidity, including those machines in which the humidity cannot be separately regulated 8415 10 - Window or wall types, self- contained or "split-system" 841510 10 - - - Split system u 10% 8415 10 90 - - - Other u 10% 8415 20 - Of a kind used for persons in motor vehicles 8415 20 10 - - - For buses u 8415 20 90 - - - Other u 10% ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which has "-". C. Triple Dash or Quadruple Dash : Where the description of an article or group of articles is preceded by "---" or "----", the said article or group of articles shall be taken to be a sub-classification of the immediately preceding description of the article or group of articles which has "-" or "--". 5.3. The list of tariff provisions is divided into Sections, Chapters and Sub-Chapters. The "heading", in respect of goods, means a description in list of tariff provisions accompanied by a four-digit number and includes all sub-headings of tariff items the first four-digits of which correspond to that number. The "sub-heading", in respect of goods, means a description in the list of tariff provisions accompanied by a six-digit number and includes all tariff items the first six-digits of which correspond to that number. The "tariff item" means a description of goods in the list of tariff provisions accompanying eight-digit number and the rate of customs duty. 5.4. Single dash (-) at the beginning of description of any article in Tariff indicates a group, while two dashes (- -) at the beginning indicate a sub-group. The single dash (-) indicates primary classific....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 8415 10, dealing with window or wall types, self-contained or "split system", the second class of goods is dealt by Tariff Heading 8415 20 and that is of a kind used for person in motor vehicles. The third category is under CTH 841581 specifying the goods as "Others, Incorporating a refrigerating unit and a valve for reversal of the cooling or heat cycle (reversible heat pumps)" under other category. The fourth category comes under the CTH 841582 dealing with "other, incorporating a refrigerating unit". This category has two classifications viz. "Split air-conditioner two tonnes and above" under CTH 84158210, and the other under CTH 84158290. The fifth category is the goods "Not incorporating a refrigerating unit" comes under CTH841583. The last category of sub-classification belonging to the class 8415 is 84159000 which relates to "parts". 7.1. The first category of goods windows or wall types, self-contained or split system dealt by CTH 8415 10 covers two types of goods under CTH 8415 10 10 and 8415 10 90. Those are split system and other respectively. Appellant claims that its goods fall under CTH 84151010 being preceded by (-) which is window or wall types self-contained o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8415 82 10 as claimed by the Department, fall under the same Heading 8415, the most appropriate entry is the one covering split air conditioners of a specified capacity of 2 tons and above and incorporating a refrigerating unit. We also take note of the technical write-up relating to the imported ductless split air-conditioners of 2-tonne capacity, comprising "one indoor unit" and "one outdoor unit", as submitted vide the post-hearing written submission dated 11.08.2026 (pages 32-37). Upon perusal thereof, we find that the impugned goods are described as "ductless split-system air conditioners" designed exclusively for cooling-only operation and do not contain a heat reversal valve or heat pump functionality. In view of the foregoing, we find that the subject goods do not fall within the scope of sub heading CTSH 841581, which contemplates air-conditioning machines incorporating a valve for reversal of the cooling or heat cycle, i.e., reversible heat pumps. It is undisputed that imported split air conditioner has two units, one being the condensing unit and the other the evaporating unit. The impugned goods have a refrigerating unit, and their specified capacity of 2 tons is not in....