Full Judgment Text
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 5622 OF 2009
CCE, AURANGABAD …APPELLANT(S)
VERSUS
M/S VIDEOCON INDUSTRIES LTD.
THR. ITS DIRECTOR …RESPONDENT(S)
WITH
CIVIL APPEAL NO(S). 8026 OF 2022
J U D G M E N T
S. RAVINDRA BHAT, J.
1. These appeals, by the revenue, challenge two orders by the Customs,
Excise and Service Tax Appellate Tribunal (‘CESTAT’ hereafter).
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2. In the first appeal , the assessee is M/s Videocon International (hereafter
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“Videocon”). CESTAT, by its impugned order in the first appeal, allowed
Videocon’s appeal and held that the LCD panels imported by it are classifiable
Signature Not Verified
in Chapter Heading (“CH”) 9013.8010 [of the First Schedule to the Customs
Digitally signed by
Harshita Uppal
Date: 2023.03.29
17:01:06 IST
Reason:
1 CA 5622/2009
2 Dated 06.01.2009 in Order No. A/46/09/CSTB/C-II
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Tariff Act, 1975 (hereafter “CTA”)], as Liquid Crystal Devices- as opposed to
the revenue’s stand, that they are classifiable as 85.29 "parts of goods falling
under heading 85.28" [television sets falling in heading 85.28]. Videocon
manufactures TV sets; the LCD panels are used by it, along with other items,
such as printed boards, decoders, etc.
3 4
3. In the second appeal, the revenue is aggrieved by order of the CESTAT
whereby import of LCD panels by the assessee i.e., M/S Harman International
(India) Pvt. Ltd., (hereafter “Harman”) was held to be classifiable under CH
9013.8010, rejecting the revenue’s contention that they were classifiable as “Car
Audio or Video Players” under either CTH 8519 or 8555. The LCD panels, in
this case, were used as part of audio systems in automobiles.
Brief facts
4. In both appeals, the assesses had imported LCD panels/display boards. In
Videocon appeal, Videocon claimed that the imported goods fell in the relevant
entry in CH 9013.8010. That entry reads as follows:
“9013.8010 Liquid crystal devices (LCD)”
The Chapter Heading read as follows:
“9013 Liquid crystal Devices not constituting articles provided for more
specifically in other headings; Lasers, other than Laser Diodes; other
optical appliances and instruments, not specified or included elsewhere in
this chapter”
Whereas, the revenue contended that the LCD panels were to be
classified as CH 8529, which reads as follows:
3 CA 8026/2022
4 Dated 09.11.2021 in Order No. A/87132/2021 in Customs Appeal No. 85003/2019
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“Chapter 8529. "Parts suitable for use solely or principally with the
apparatus of heading 8525 to 8528”
CH 8528 reads as follows:
“8528 Monitors and projectors, not incorporating Television reception
apparatus, reception apparatus for television, whether or not incorporating
radio-broadcast receivers or sound or video recording or reproducing
apparatus”
5. The revenue claimed that the goods were improperly classified; a show
cause notice was issued. The Deputy Commissioner, who adjudicated them,
ruled against the assessee and held that the goods were classifiable under CH
8529. 9090. The assessee’s appeal succeeded, and the Commissioner directed a
remand. The Dy. Commissioner, after remand, confirmed the show cause
notice, and affirmed the classification proposed by it; the assessee appealed
against this order, unsuccessfully. The Commissioner (Appeals) rejected its
appeal. It, therefore, approached the CESTAT, which by the impugned order,
set aside the demand, and upheld the assessee’s plea that the proper
classification of the goods was in CH 9013.8010.
6. In the Harman appeal too, the assessee claimed that the imported items
i.e., LCD panels [declared before the customs authorities as “Liquid Crystal
Devices-TFT-LCD 4.8 in” ] for car audio assemblies, were properly classifiable
in CH 9013.8010. Its contention was rejected by the revenue authorities, who
classified it as “ Sound Recording or Reproducing Apparatus” in CH 8519, and
fell in CH 8522, item 8522.9000. CH 8522 reads as follows:
“8522 Parts and accessories suitable for use solely or principally with the
apparatus of headings 8519 or 8521”
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The litigation history in Harman’s case followed a trajectory similar to
Videocon’s; ultimately, by the impugned order, CESTAT upheld its contention
that the goods, meant for use in car audio systems, were classifiable in CH
9013.8010.
Contention of parties
7. Ms. Nisha Bagchi, learned counsel appearing for the revenue, argued that
the findings of the CESTAT are erroneous. She argued that the literature and
other documents reveal that the LCD panels have specific model numbers. She
pointed to the fact that the websites of the manufacturers of the imported
articles are meant for use in LCD TVs. It was undeniable that the imported
items were used in the manufacture of LCD TVs. Some, however, were used in
manufacturing monitors, though they were not sold in the market. Therefore, the
goods were LCD devices principally used in the manufacture of LCD TVs.
LCD TV is an apparatus covered specifically under heading 85.25 & 85.28.
8. Counsel argued that heading 90.13 covers only those articles which are
not provided for more specifically in other headings. In the present case, LCDs
are specifically mentioned as parts of LCD TVs in heading 85.29. Therefore,
they cannot be classified under heading 90.13. Reliance was placed on G.S.
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Auto International Ltd v Collector of Central Excise . It was emphasized that in
G.S. Auto (supra) , this court held that the true test for classification is the test of
commercial identity and not functional test. Therefore, the correct question is
5 [2003] 1 S.C.R. 372: 2003 (152) ELT 3 (SC)
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how the articles are referred to in the market by those who deal with them,
whether for purchase, sale or otherwise. The commercial parlance test,
therefore, is determinative. Counsel submitted that the court in GS Auto (supra)
referred to Notes 2(b) and (3) of Section XVII and observed that a joint reading
of the notes would show that the expression "parts of general use" throughout
the schedule, meant, articles of Heading No. 7318 and similar articles of other
base metal, and the expression 'part and accessories' in Chapter Heading 87.08
did not apply to parts or accessories unsuitable for use solely or primarily with
articles of CH 87.08 which related to parts and accessories of motor vehicles of
CH 87.01 to 87.05. For the purposes of classification under CH 87.08, the test
to be applied is whether the goods are suitable for use solely or primarily with
articles of CH Nos.87.01 to 87.05; if the answer is in the affirmative, the goods
will be classifiable under CH 87.08, but if the answer is in the negative, they
would have to be classified under CH 73.18.
9. It is urged that on an application of similar logic even if LCDs are
covered by CH 90.13, yet, they have to be classified under heading 85.29 since
these are solely or principally used for manufacture of LCD TVs and
commercially known as parts of TVs.
10. Learned counsel referred to Chapter Note 2(b) (of Chapter 90) relating to
classification of parts and accessories if suitable for use solely or principally
with a particular kind of machine, instrument or apparatus or with a number of
machines, are to be classified with that machine, instrument or apparatus of that
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kind. In view of this note, LCDs for computer monitor are classifiable as part of
computer monitor, and the various general application and special application
monitors will alone be classifiable under Chapter Heading 90.13. The example
given for such LCD panels were panel for video games, medical monitoring and
industrial test and control, etc., which are not part of any particular equipment
or machine but can be used in an assortment of machines. It was submitted that
the assessee's plea about classification of different parts in various Chapter
Headings other than Chapter 84 and 85, is irrelevant as the various
notes/explanatory notes of all sections, chapters, and headings are unique to the
respective sections or chapters or headings and cannot be generalized or
interchanged or applied to with other sections, chapters or headings, unless
specified in the tariff/explanatory notes or by any other legislation. The absence
of explanatory note stating the parts of LCD TVs will not be classifiable under
Chapter Heading 85.29 if it is specifically specified under any other chapter
heading (in this case, Chapter Heading 90.13), the assessee cannot rely on notes
relating to other sections and chapters.
11. Lastly, Ms. Bagchi, anticipating reliance- by the assessee upon the
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judgment of this court, in Secure Meters v Commissioner of Customs -
submitted that the ratio of that case cannot be applied to the facts of this case
because, firstly, the competing entries (in that case) fell within the same chapter,
and secondly, that the factual basis in the present case, is stronger, because the
6 [2015] 6 S.C.R. 219: 2015 (14) SCC 239
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websites of the manufacturers, clearly reveal that the imported goods were
meant principally to be used in television sets. Section note 2 (b) applies in this
case because the item in question was not specifically classifiable under its
headings, because it is principally meant for use in television sets .
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12. In the second appeal concerning import by Harman International, the
revenue argues that the items are LCD attached with inseparable PCBs. Both
were part of one equipment, though it was declared as LCDs. Counsel pointed
out that Harman, in its letter (dated 19.08.2016) stated that it manufactured Car
Audio/infotainment items and supplied them to auto manufacturers; the
shipment contained LCDs used in its manufacturing process of car audio
assembly. Further, it was stated that the items were assembled with the
importer’s assembled PCBs to give different outputs on car audio screen and
was designed specifically to suit end product requirements and could not be
used separately as an accessory but was an essential part of its manufactured
product. Thus, LCD panels were specifically designed in a particular manner to
be used only in car audio/infotainment systems. They were, consequently,
specific parts of car audio/infotainment systems and cannot be used otherwise.
13. Counsel urged that the goods were articles described specifically as parts
of 'Sound Recording and Reproducing Apparatus' covered under CTH 8522 and
because they are constituting articles described more specifically in other
headings, there was no scope of their being covered under CTH 9013 8010. It
7 CA 8026/2022
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was urged, that like in Videocon, the manufacturer’s literature described the
goods specifically as 'LCD Module'.
14. Mr. Vivek Singh, learned Senior counsel (appearing in the Videocon
appeal), submitted that the view taken by CESTAT is correct. Goods are
admittedly liquid crystal device; they are specifically covered by the entry
heading 90.13 as it is not described more specifically in any other heading. The
entry referred to by the revenue i.e., Chapter Heading 8529 relates to parts
suitable for use solely or principally with the parts of heading nos.85.25 to
85.28, which inter alia includes LCD TV, cannot be considered as a specific
heading.
15. It was argued that Section Note 1(m) to Section XVI clearly excludes
articles of Chapter 90. Therefore, first, it has to be specifically held that the
LCD panels are not covered by Chapter 90. The revenue does not deny that
LCD panels are covered by Chapter Heading 90.13. This heading, according to
the revenue, covers only LCD panels meant for general use and are
interchangeable and not what are principally meant for use in TVs. It is argued
that tariff entry 90.13 refers to LCDs which do not constitute articles provided
for more specifically in other headings . The entry relied on by the revenue is
8529, which deals with parts suitable for use “solely or principally with the
apparatus” of Heading 8525 to 8528. This entry is not confined to LCD panels
meant for use in TVs only but to several other parts which go into the making of
LCD TV like TV tuners, PCB boards, switches, connectors, speakers, etc., all of
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which will be classifiable under heading 8529. The heading referring to parts
cannot be treated as heading covering the LCDs more specifically.
16. It is submitted that the description under heading 8529 is general and not
specific, whereas the description under heading 90.13 is more specific. LCDs
consist of items like LCD TV, (referred to under Chapter Heading 8528.7218
and 8528.7510) and indicator panels incorporating LCDs (referred to in entry
8531.2000) and other items which are specifically provided for. The Supreme
Court decision in G.S. Auto (supra) is in the context of Section XVII where
Note 2 and 3 provides:
"2 The expression parts' and 'parts and accessories' do not apply to the
following articles, whether or not they are identifiable as for the goods this
section:
(a)
(b) Parts of general use, as defined in Note 2 to Section XV, of base metal
(Section XV), or similar goods of plastics (Chapter 39)"
"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 se of that
part of accessory."
17. It was argued that the section notes clearly provide that the word “parts
and accessories” will not apply to parts of general use as defined in Note 2 to
Section XV of base metal, and it was in view of this note that this Court held that
parts which are suitable for use solely or principally with articles of Chapters 86
to 88 are to be treated as parts and accessories of articles falling under Chapter
86 to 88 in terms of Note 3. These notes are missing from Section XVI and are,
therefore, irrelevant. Chapter notes/section notes and explanatory notes are
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unique to the respective section, chapters and headings they deal with and
cannot be generalized or interchanged. Consequently, classification has
reference to section and chapter notes of the section to which the goods belong,
i.e., Section XVI. Section Note 2(a) and 2(b) in Section XVI are different from
Section Notes of Section XVII. According to Section Note 2(a) of Section XVI
the parts which are goods included in any of the headings of Chapter 84 or 85
are, in all cases, to be classified in their respective headings, and it is only when
the parts are not classifiable as per Section Note 2(a) that Section Note 2(b) is
attracted. Therefore, even though a part is suitable for use or solely with a
particular kind of machine finds mention under any headings in Chapter 84 or
85, it will then get classified under that heading and not as a part of apparatus or
a machine.
18. Learned senior counsel relied on the decision of this court in Secure
Meters (supra) and urged that the distinction sought to be made by the revenue,
with this case, is on untenable grounds. It was argued that though the competing
entries were in Heading 90, nevertheless, the article was LC Displays, but used
in meters. This clearly undermined the revenue’s argument that LCD sets were
meant principally for TVs. They have multiple uses; if the revenue is correct,
each such use would then be a “principal” use. In that event, the Chapter
Heading would be rendered redundant.
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19. Mr. V. Lakshmikumaran, learned counsel appearing in Harman, adopted
the submissions made by Mr. Vivek Singh. He additionally relied on Rule 1 of
the General Rules of Interpretation, which provides that:
“Classification of goods in this Schedule shall be governed by the following
principles:
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.”
It was argued that in terms of Rule 1, since classification of a 'Liquid
Crystal Device' is specifically provided for by nomenclature under tariff item
9013 8010, the LCDs imported by the assessee were correctly classifiable under
tariff item 9013 8010, in terms of the nomenclature of the item.
20. It was argued that Tariff Item 9013 8010 prescribes a more specific
description and is to be preferred over any other heading, whereas tariff heading
8522 provides a general description, as parts and accessories suitable for use,
“solely or principally” with the apparatus of CH 8519 or 8521. The further
submission of Mr. Laxmikumaran is that the expression “parts and accessories”
used in CH 8522 excludes articles covered under Chapter 90 of the Tariff,
whether or not they are identifiable as for the goods falling under Section XVI
of the Tariff and that even if any article is identifiable as a “part or/and
accessories for the goods of Section XVI, it shall be excluded from the term
“parts and accessories”. Learned counsel relied upon the judgment reported in
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Collector of Central Excise v Delton Cables Ltd & Anr where, the court dealt
with section Notes 2 (a) and 2 (b) to Chapter 85 and held that Note 2 (b) applies
only if the item is not specifically classifiable under their respective headings. It
was argued, therefore, in the present case, that Note 1 (m) to Chapter 85
specifically excluded from its operation, goods falling in Chapter 90. In such
circumstances, LCD panels were complete articles capable of multiple uses, and
not solely or principally in some articles. It was additionally urged that the facts
found, clearly showed that the PCBs attached to the LCD panels imported by
the assessee were meant to act as voltage stabilizers.
The provisions
21. First, it would be necessary to refer to the relevant norms of
interpretation under First Schedule of the CTA, i.e. “The General Rules of
Interpretation of this Schedule”. Rules 1, 2 and 3 are relevant and are extracted
below:
THE FIRST SCHEDULE—IMPORT TARIFF (See Section 2) GENERAL
RULES FOR “THE INTERPRETATION OF THIS SCHEDULE
Classification of goods in this Schedule shall be governed by the following
principles:
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.
8 2005 (12) SCC 284
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(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 wholly or partly of such material or substance. The classification
of goods consisting of more than one material or substance shall be
according to the principles of rule 3.
3. When by application of rule 2(b) or for any other reason, goods are,
prima facie, classifiable under two or more headings, classification shall be
effected as follows:
(a) 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.
(b) mixtures, composite goods consisting of different materials or made up
of different components, and goods put up in sets for retail sale, which
cannot be classified by reference to (a), shall be classified, as if they
consisted of the material or component which gives them their essential
character, insofar as this criterion is applicable.
(c) when goods cannot be classified by reference to (a) or (b), they shall be
classified under the heading which occurs last in numerical order among
those which equally merit consideration.”
Chapter 85 falls in Section XVI, the heading of which reads as follows:
“CHAPTER 85 Machinery and Mechanical Appliances; Electrical
Equipment; Parts thereof; Sound Recorders and Reproducers, Television
Image and Sound Recorders and Reproducers, and Parts and Accessories of
Such Articles
NOTE 1. This Chapter does not cover:
(a)xxxxxxxxxxx
xxxxxx
(m) Articles of Chapter 90…
xxxxxx xxxxxx xxxxxx
1. Subject to Note 1 to this Section, Note 1 to Chapter 84 and to 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, 8485, 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, 8448, 8466, 8473, 8503, 8522, 8529 or 8538
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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 8485 or
8548”
Chapter Heading 90, which falls in Section XVII, reads as follows:
“CHAPTER 90
“Optical, Photographic, Cinematographic, Measuring, Checking,
Precision, Medical or Surgical Instruments and Apparatus; Parts and
Accessories Thereof”
Note 2 to Chapter 90 reads as follows:
2. Subject to Note 1 above, parts and accessories for machines, apparatus,
instruments or articles of this Chapter are to be classified according to the
following rules:
(a) Parts and accessories which are goods included in any of the headings
of this Chapter or of Chapter 84, 85 or 91 (other than heading 4[8487],
8548 or 9033) are in all cases to be classified in their respective headings;
(b) Other parts and accessories, if suitable for use solely or principally with
a particular kind of machine, instrument or apparatus, or with a number of
machines, instruments or apparatus of the same heading (including a
machine, instrument or apparatus of heading 9010, 9013 or 9031) are to be
classified with the machines, instruments or apparatus of that kind;
(c) All other parts and accessories are to be classified in heading 9033.”
Analysis and Conclusions
22. On a reading of the General Interpretive rules and the notes to the
concerned chapters (85 and 90, in the present case), it is evident that:
(a) classification has to be in accord with “the terms of the headings and
any relative Section or Chapter Notes” (Note 1)
(b) Reference in a heading to “an article” includes “that article
incomplete or unfinished” provided, such incomplete or unfinished article
has “the essential character of the complete or finished article.” [Note
2(a)]
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| (c) If on an application of Rule 2(a), an article is classifiable in more than<br>one heading “the heading which provides the most specific description<br>shall be preferred to headings providing a more general description.”<br>[Note 3 (a)] | |||
|---|---|---|---|
| 23. Note 1 (m) to Chapter 85 excludes “(m) Articles of Chapter 90…” The<br>revenue relies on Note 2 (b) to Chapter 85, which says “other parts and<br>accessories, “if suitable for use solely or principally with a particular kind of<br>machine, instrument or apparatus, or with a number of machines, instruments<br>or apparatus of the same heading” and then enumerates heading 9013, to say<br>that Chapter 85 would cover the present case. | |||
| 24. The correct manner of interpreting the notes, chapters, and the General<br>rules of interpretation was explained by this court, in Commissioner of Central<br>Excise, Nagpur v Simplex Mills Co. Ltd.,9 where the Court held that the Rules<br>for the Interpretation of the Schedule to the CET Act are framed pursuant to the<br>powers under Section 2 of that Act. The court observed: | |||
| “The Rules for the Interpretation of the Schedule to the Central Excise<br>Tariff Act, 1985 have been framed pursuant to the powers under Section 2<br>of that Act. According to Rule 1 titles of sections and chapters in the<br>Schedule are provided for ease of reference only. But for legal purposes,<br>classification ‘shall be determined according to the terms of the headings<br>and any relevant section or chapter notes’. If neither the heading nor the<br>notes suffice to clarify the scope of a heading, then it must be construed<br>according to the other following provisions contained in the Rules. Rule 1<br>gives primacy to the section and chapter notes along with terms of the<br>headings. They should be first applied. If no clear picture emerges then only<br>can one resort to the subsequent rules. The appellants have relied upon Rule<br>3. Rule 3 must be understood only in the context of sub-rule (b) of Rule 2<br>which says inter alia that the classification of goods consisting of more than<br>one material or substance shall be according to the principles contained in<br>Rule 3. Therefore when goods are prima facie, classifiable under two or |
9 [2005] 2 S.C.R. 441: (2005) 3 SCC 51
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| more headings, classification shall be effected according to sub-rules (a),<br>(b) and (c) of Rule 3 and in that order.” | ||||
|---|---|---|---|---|
| 25. The difficulty in accepting the revenue’s argument, in this case, is that it<br>jumps over interpretive instructions. One, General Note (1) states that<br>classification has to be in consonance with terms and headings in chapter notes.<br>Two, Rule 3 (a) categorically enjoins that in regard to classification, the heading<br>providing for a “more” specific description prevails over the general one.<br>Three, Note 1 (m) – in Chapter 85 excludes the application of articles falling in<br>Chapter 90. In this court’s opinion, this note, along with the General Note 3 (a)<br>[of the General Rules of Interpretation] that headings that are specifically<br>provided, should be preferred over the general ones, is decisive. Thus, the<br>revenue’s contention that by virtue of Note 2 (b) to Chapter 85, the goods are to<br>be classified based on their principal or sole use is insubstantial because of the<br>clear mandate of Note 1 (m), which excludes Chapter 90 goods (which includes<br>LCD panels). More importantly, Note 2 opens with the expression “subject to<br>Note 1”. This subordinates the entire subject matter in Note 2; it is only where<br>the article is a “part” which acts as an accessory, that the enumerated portions of<br>Chapter 85 come into play. Such an interpretation is plainly untenable. In<br>Commissioner of Central Excise, Delhi-III vs. UNI Products India Ltd.,10 this<br>court had to consider whether “car matting” fell within Chapter 57 of the I | ||||
| Schedule to the CET Act | per | heading “Carpets and Other Textile Floor |
10 [2020] 13 S.C.R. 295: 2020 (19) SCC 742
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| Coverings” or were to be classified under Chapter 87, as “vehicles other than | |||
|---|---|---|---|
| railway or tramway rolling-stock and parts and accessories thereof”. The court | |||
| held that the item fell within the description “car matting”: | |||
| held that the item fell within the description “car matting”: | |||
| “25. We do not find any error in such reasoning. Chapter 87 of the Central<br>Excise Tariff of India does not contain car mats as an independent tariff<br>entry. We have reproduced earlier the various parts and accessories listed<br>against tariff entry 8708. All of them are mechanical components, and<br>revenue want car mats to be included under the residuary sub-head "other"<br>in the same list. The HSN Explanatory Notes dealing with interpretation of<br>the Rules specifically exclude "tufted textile carpets, identifiable for use in<br>motor cars" from 87.08 and place them under heading 57.03. Revenue's<br>argument is that the Explanatory Notes have persuasive value only. But the<br>level or quality of such persuasive value is very strong, as observed in the<br>judgments of this Court to which we have already referred. Moreover, the<br>Commissioner himself has referred to the Explanatory Notes in the order-<br>in-original while dealing with the Respondent's stand. Thus, we see no<br>reason as to why we should make a departure from the general trend of<br>taking assistance of these Explanatory Notes to resolve entry related<br>dispute. Now, on referring to these Explanatory Notes, we find that one<br>category of carpets [Textile carpets (Chapter 57)] has been excluded<br>specifically from parts and accessories. In our opinion, the subject-item<br>does not satisfy the third condition specified in Section XVII of the<br>Explanatory Notes in relation to "III-Parts and Accessories". A plain<br>reading of Clause (C) thereof, which we have quoted above, excludes<br>"textile carpets" (Chapter 57).<br>26. The main argument of the Appellant is that because the car mats are<br>made specifically for cars and are used also in cars, they should be<br>identified as parts and accessories. But if we go by that logic, textile carpets<br>could not have been excluded from Parts and Accessories. We have referred<br>to such exclusion in the preceding paragraph. It has also been urged on<br>behalf of the revenue that these items are not commonly identified as carpets<br>but are different products. The Tribunal on detailed analysis on various<br>entries, Rules and Notes have found they fit the description of goods under<br>chapter heading 570390.90. We accept this finding of the Tribunal. Once<br>the subject goods are found to come within the ambit of that sub-heading,<br>for the sole reason that they are exclusively made for cars and not for<br>"home use" (in broad terms), those goods cannot be transplanted to the<br>residual entry against the heading 8708. As we find the subject-goods come<br>under the chapter-heading 570390.90, and the other entry under the same<br>Chapter forming the subject of dispute in the second order of the<br>Commissioner, in our opinion, there is no necessity to import the "common<br>parlance" test or any other similar device of construction for identifying the<br>position of these goods against the relevant tariff entries.” | “25. We do not find any error in such reasoning. Chapter 87 of the Central<br>Excise Tariff of India does not contain car mats as an independent tariff<br>entry. We have reproduced earlier the various parts and accessories listed<br>against tariff entry 8708. All of them are mechanical components, and<br>revenue want car mats to be included under the residuary sub-head "other"<br>in the same list. The HSN Explanatory Notes dealing with interpretation of<br>the Rules specifically exclude "tufted textile carpets, identifiable for use in<br>motor cars" from 87.08 and place them under heading 57.03. Revenue's<br>argument is that the Explanatory Notes have persuasive value only. But the<br>level or quality of such persuasive value is very strong, as observed in the<br>judgments of this Court to which we have already referred. Moreover, the<br>Commissioner himself has referred to the Explanatory Notes in the order-<br>in-original while dealing with the Respondent's stand. Thus, we see no<br>reason as to why we should make a departure from the general trend of<br>taking assistance of these Explanatory Notes to resolve entry related<br>dispute. Now, on referring to these Explanatory Notes, we find that one<br>category of carpets [Textile carpets (Chapter 57)] has been excluded<br>specifically from parts and accessories. In our opinion, the subject-item<br>does not satisfy the third condition specified in Section XVII of the<br>Explanatory Notes in relation to "III-Parts and Accessories". A plain<br>reading of Clause (C) thereof, which we have quoted above, excludes<br>"textile carpets" (Chapter 57). | ||
| 26. The main argument of the Appellant is that because the car mats are<br>made specifically for cars and are used also in cars, they should be<br>identified as parts and accessories. But if we go by that logic, textile carpets<br>could not have been excluded from Parts and Accessories. We have referred<br>to such exclusion in the preceding paragraph. It has also been urged on<br>behalf of the revenue that these items are not commonly identified as carpets<br>but are different products. The Tribunal on detailed analysis on various<br>entries, Rules and Notes have found they fit the description of goods under<br>chapter heading 570390.90. We accept this finding of the Tribunal. Once<br>the subject goods are found to come within the ambit of that sub-heading,<br>for the sole reason that they are exclusively made for cars and not for<br>"home use" (in broad terms), those goods cannot be transplanted to the<br>residual entry against the heading 8708. As we find the subject-goods come<br>under the chapter-heading 570390.90, and the other entry under the same<br>Chapter forming the subject of dispute in the second order of the<br>Commissioner, in our opinion, there is no necessity to import the "common<br>parlance" test or any other similar device of construction for identifying the<br>position of these goods against the relevant tariff entries.” | |||
18
| 26. In the decision reported as Delton Cables Ltd (supra) too, this court had<br>emphasized on the rule of classification of the goods in accordance with a<br>specific description and observed that: | |||
|---|---|---|---|
| “3. There appears to be no dispute that were it not for Section Note 2(b), the<br>item in question would be classified under Tariff Heading 85.44 as<br>contended by the appellant. Sections Notes 2(a) and (b) respectively provide<br>as follows:<br>“2. (a) Parts which are goods included in any of the headings of Chapter 84<br>or Chapter 85 (other than Headings 84.85 and 85.48) are in all cases to be<br>classified in their respective headings.<br>(b) Other parts, if suitable for use solely or principally with a particular<br>kind of machine, or with a number of machines of the same heading<br>(including a machine of Heading 84.79 or Heading 85.43) are to be<br>classified with the machines of that kind. However, parts which are equally<br>suitable for use principally with the goods of Headings 85.17 and 85.25 to<br>85.28 are to be classified in Heading 85.17.”<br>4. It is clear from a reading of the two clauses to the section note that clause<br>(b) would only apply once it was found that the items in question were not<br>specifically classifiable under their respective headings. As has been clearly<br>said by the Collector (Appeals)<br>“from the sequence of the paragraphs given under Section Note 2 it is clear<br>that the question of switching over to Section Note 2(b) can arise only after<br>ensuring that the parts are not covered by Section Note 2(b) [sic Section<br>Note 2(a).] which begins with the expression “other parts” meaning thereby<br>that the parts which are not covered by Section Note 2(a) would be<br>considered for coverage by Section Note 2(b). One cannot therefore directly<br>jump over to Section Note 2(b) without exhausting the possibility of Section<br>Note 2(a).” | “3. There appears to be no dispute that were it not for Section Note 2(b), the<br>item in question would be classified under Tariff Heading 85.44 as<br>contended by the appellant. Sections Notes 2(a) and (b) respectively provide<br>as follows: | ||
| “2. (a) Parts which are goods included in any of the headings of Chapter 84<br>or Chapter 85 (other than Headings 84.85 and 85.48) are in all cases to be<br>classified in their respective headings. | |||
| (b) Other parts, if suitable for use solely or principally with a particular<br>kind of machine, or with a number of machines of the same heading<br>(including a machine of Heading 84.79 or Heading 85.43) are to be<br>classified with the machines of that kind. However, parts which are equally<br>suitable for use principally with the goods of Headings 85.17 and 85.25 to<br>85.28 are to be classified in Heading 85.17.” | |||
| 4. It is clear from a reading of the two clauses to the section note that clause<br>(b) would only apply once it was found that the items in question were not<br>specifically classifiable under their respective headings. As has been clearly<br>said by the Collector (Appeals) | |||
| “from the sequence of the paragraphs given under Section Note 2 it is clear<br>that the question of switching over to Section Note 2(b) can arise only after<br>ensuring that the parts are not covered by Section Note 2(b) [sic Section<br>Note 2(a).] which begins with the expression “other parts” meaning thereby<br>that the parts which are not covered by Section Note 2(a) would be<br>considered for coverage by Section Note 2(b). One cannot therefore directly<br>jump over to Section Note 2(b) without exhausting the possibility of Section<br>Note 2(a).” | |||
27. M/S Intel Design Systems (India) (P) Ltd. vs. Commissioner of Customs
11
and Central Excise is a decision, where the goods were described as parts of
tanks and other armoured and motorized fighting vehicles, under Heading 8710
was held to fall within Chapter 85. The reasoning of this court, in that case, was
as below:
“4. As per Rule 1 on Interpretive Rules, classification of excisable goods is
to be determined according to the terms of the Heading and in terms of
Section/Chapter notes. Note 2(f) to Section XVII (which governs Chapter
87) excludes the goods viz. electrical machinery and equipment (Chapter
11 [2008] 2 S.C.R. 686: 2008 (3) SCC 258
19
85). The goods in question i.e. contractors, switches, control box etc. are the
goods used for switching, protecting electrical circuits or for making
connections to or in electric circuit. These parts/components are specifically
covered under CSH 8536.90. The CBEC Circular relied upon by the
assessee is not relevant.
5. As per the Explanatory Notes to HSN the parts falling under Chapter
Heading 8710 would be covered under the said chapter, provided they fulfill
both the conditions i.e. they must be identifiable as being suitable for use
solely or principally for such vehicles and that they must not be excluded by
the provisions of Notes to Section XVII. The identifiable parts under the said
heading bodies of armoured vehicles and parts thereof, cover special road
wheels for armoured cars, propulsion wheels for tanks, tracts etc. As per
this requirement, the goods should not only be identifiable to be armoured
vehicles, but it should so not have been excluded by Notes to Section XVII.
The Chapter note 2(f) excludes electrical machinery and equipment falling
under Chapter 85. Explanatory Notes to HSN relating to the parts and
accessories excluded by Note 2 specify items with reference to specific
Chapter Heading as per (7) (a), (k) which excludes photographs and other
current collectors for electric traction vehicles, fuses, switches and other
electric apparatus of Heading No.85.35 or 85.36. The items, therefore,
manufactured by the appellants are identifiable or are in the nature of
goods falling under Chapter Heading 85.36. Since these fall under the
category of excluded goods under Chapter Notes, even though they are used
specifically solely or principally with the armoured vehicles of Chapter
Heading 8710, they are classifiable under Chapter Heading 8536.90 only as
held by the adjudicating authority.”
| 28. It is, therefore, clear that when goods are excluded from a particular<br>chapter, the “pull in” through a note has to be narrowly construed, as otherwise,<br>the basis of exclusion would be defeated, and the earlier note (of exclusion)<br>rendered redundant. Finally, Secure Meters (supra) is decisive on the question<br>that LCDs are not articles provided “more specifically in other headings”, i.e.,<br>other than 90.13. Furthermore, the fact that LCDs could be used for purposes<br>other than television sets or audio sets is also concluded because, in that<br>decision, its use in meters was in issue. This court held, pertinently, as follows: | ||
|---|---|---|
| “17. Keeping in mind the aforesaid nature of product in question, we revert<br>to the tariff entries. It cannot be disputed that LCDs are specifically<br>provided in Tariff Item 9013. The only condition is that such LCDs should |
20
| not constitute “articles” provided more specifically in other headings. In<br>the present case, it is also not in dispute that LCDs imported by the<br>appellant did not constitute any such “article” which is more specifically<br>provided in other headings. On the contrary, the Revenue wants to include<br>in the same chapter i.e. Chapter 90, though under Entry 9028.90.10 as<br>“parts and accessories”. The only reason for including the goods under<br>Chapter Heading 9028 is that the LCDs were to be used in the electricity<br>supply meters. However, Entry 9028 does not pertain to LCDs but gas,<br>liquid, etc. and includes electricity supply meters as well. Merely because<br>these LCDs are to be used as parts in the said electricity supply meters, can<br>it be said that they are to be included in Entry 9028? Here, Note 2 of this<br>Chapter Notes becomes important since LCDs are used in the electricity<br>supply meters only as parts thereof. Note 2(a) stipulates that parts and<br>accessories which are goods included in the heading of the said chapter i.e.<br>Chapter 90, are to be classified in their respective headings. Going by the<br>plain reading of Note 2(a) it is clear that LCDs, which are goods and are<br>used as parts in the final product mentioned in Chapter 90, namely,<br>electricity supply meters, are to be classified in its respective heading.<br>Respective heading, which is specifically provided is 9013. | ||
|---|---|---|
| 18. It was sought to be argued by Ms Kiran Suri that as per Note 2(b), when<br>these LCDs are used solely for particular instrument, namely, electricity<br>supply meter, it has to be classified with the said meter and, therefore,<br>Chapter Entry 9028 would get attracted. However, this argument loses sight<br>of the fact that Note 2(b) relates to “other parts and accessories”, namely, it<br>would apply to those parts and accessories for which Note 2(a) is<br>inapplicable. Once we find that in the present case Note 2(a) squarely<br>applies, the irresistible conclusion is that the goods will be classified in<br>Tariff Item 9013, which is the specific heading for these goods.” | ||
29. In view of the above decisions and the foregoing reasoning, the
CESTAT’s reasoning and conclusions, in both cases, that the LCD sets were
under Chapter 90, Entry 9013.8010, is sound and unexceptionable.
Consequently, the appeals have to fail and are dismissed, without order on
costs.
.....................................................J.
[S. RAVINDRA BHAT]
21
.....................................................J.
[DIPANKAR DATTA]
New Delhi,
March 29, 2023.
22
ITEM NO.1501 COURT NO.14 SECTION XVII-A
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Civil Appeal No(s). 5622/2009
CCE, AURANGABAD Appellant(s)
VERSUS
M/S VIDEOCON INDUSTRIES LTD. THR. ITS DIRECTOR Respondent(s)
([HEARD BY : HON'BLE S. RAVINDRA BHAT AND HON'BLE DIPANKAR DATTA,
JJ. ]
IA No. 2/2009 - STAY APPLICATION)
WITH
C.A. No. 8026/2022 (XVII-A)
(IA
FOR STAY APPLICATION ON IA 144515/2022
FOR EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT ON IA
144516/2022
IA No. 144516/2022 - EXEMPTION FROM FILING C/C OF THE IMPUGNED
JUDGMENT
IA No. 144515/2022 - STAY APPLICATION)
Date : 29-03-2023 These matters were called on for hearing today.
For Appellant(s) Ms. Alka Agrawal, Adv.
Mr. Mukesh Kumar Maroria, AOR
23
For Respondent(s) Mr. S. S. Shroff, AOR
Mr. V Lakshmikumaran, Adv.
Ms. Charanya Lakshmikumaran, AOR
Ms. Apeksha Mehta, Adv.
Ms. Falguni Gupta, Adv.
Ms. Neha Choudhary, Adv.
Hon’ble Mr. Justice S. Ravindra Bhat pronounced the reportable
judgment of the Bench comprising His Lordship and Hon’ble Mr.
Justice Dipankar Datta.
The Civil Appeals are dismissed with no order as to costs in
terms of the signed reportable judgment.
Pending application(s), if any, are disposed of.
(HARSHITA UPPAL) (MATHEW ABRAHAM)
SENIOR PERSONAL ASSISTANT COURT MASTER (NSH)
(Signed reportable judgment is placed on the file)