Commissioner Of Customs (Import) vs. M/S Welkin Foods

2026 INSC 19
REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5531 OF 2025


COMMISSIONER OF CUSTOMS (IMPORT) …APPELLANT


VERSUS

M/S WELKIN FOODS …RESPONDENT





J U D G M E N T

Signature Not Verified
Digitally signed by
VISHAL ANAND
Date: 2026.01.06
15:52:00 IST
Reason:

J.B. PARDIWALA, J.

For the convenience of exposition, this judgment is divided into the
following parts:

INDEX
A. FACTUAL MATRIX .................................................................. 3
B. SUBMISSIONS ON BEHALF OF THE APPELLANT ................... 11
C. SUBMISSIONS ON BEHALF OF THE RESPONDENT ............... 14
D. ISSUE TO BE DETERMINED ................................................. 16
E. ANALYSIS ............................................................................ 16
I LASSIFICATION UNDER THE CT AND THE CT
. C A , 1962 A , 1975 ........ 17
(a) General Rules of Interpretation ............................................. 20
(b) Role of HSN Explanatory Notes ............................................. 26
II . A PPLICABILITY OF THE C OMMON P ARLANCE TEST IN CLASSIFICATION
DISPUTES .................................................................................. 28
(a) Cases where the common parlance test was applied .............. 29
(b) Cases where the common parlance test was not applied ........ 45
(c) Summary .............................................................................. 59
III . C ONSIDERATION OF ‘ USE ’ WHEN DETERMINING CLASSIFICATION UNDER
THE A CT , 1975 ......................................................................... 63
(a) Consideration of ‘Use’ – Indian Perspective ........................ 64
(b) Consideration of Use – USA and EU perspective .................... 82
IV . R ELEVANT P ROVISIONS ........................................................... 85
(a) Relevant provisions relating to Aluminium Structures ........... 86
(b) Relevant provisions relating to Parts of Agricultural Machinery
................................................................................................. 87
V PPLICATION TO THE FACTS AT HAND
. A ........................................ 92
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(a) Whether subject goods can be classified as ‘Aluminium
Structures’ under CTI 76109010 ............................................... 93
(b) Whether subject goods can be classified as ‘Parts of Agriculture
Machinery’ under CTI 84369900 ................................................ 95
F. CONCLUSION ..................................................................... 105
















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1. This appeal arises from the Judgment and Final Order No.
55604/2024 dated 19.04.2024 passed by the Customs, Excise and
Service Tax Appellate Tribunal, Principal Bench, New Delhi
(hereinafter referred to as “ CESTAT ”), in Customs Appeal No.
50542 of 2021, wherein the tribunal allowed the appeal and
thereby held that the aluminium shelves imported by the
respondent should be classified under Customs Tariff Item
84369900, as ‘parts’ of agricultural machinery, as opposed to
Customs Tariff Item 76109010, as aluminium structures.

2. Customs Tariff Item (hereinafter “ CTI ”) 84369900 carries a nil rate
of duty, whereas CTI 76109010 attracts a basic customs duty of
10%, a countervailing duty of 12.5%, a customs cess of 3%, and an
additional customs duty of 4% respectively.
A. Factual Matrix
3. M/s Welkin Foods, the respondent, imported aluminium shelving
along with a floor drain and an automatic watering system and filed
a Bill of Entry No. 7399702 dated 09.11.2016 under Section 46 of
the Customs Act, 1962 (hereinafter referred to as “ the Act, 1962 ”).
In the said bill of entry, the respondent declared and classified the
imported goods as follows:

Civil Appeal No. 5531 of 2025 Page 3 of 109

4. The appellant accepted the classification of floor drain and
automatic watering system under CTI 84369900 as ‘parts’ of
agricultural machinery. However, the Audit Scrutiny revealed that
the aluminium shelving (hereinafter referred to as “ the Subject
Goods ”) was a type of aluminium structure and not a ‘part’ of any
agricultural machinery & therefore, the revenue ought to have
classified the subject goods under CTI 76109010, which would
attract a basic customs duty rate of 10%, a countervailing duty rate
of 12.5%, customs cess at 3%, and additional customs duty at 4%.
The misclassification caused a short levy of duty amounting to INR
21,01,983, which was recoverable from the Respondent under
Section 28(1) of the Act, 1962, along with interest under Section
28AA of the Act, 1962.
5. Chapter Heading 7610 and Chapter Heading 8436 respectively,
along with their respective sub-headings and tariff items, as
specified in the First Schedule of the Customs Tariff Act, 1975
(hereinafter referred to as “ the Act, 1975 ”), are outlined below:
Chapter Heading 7610

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Chapter Heading 8436

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6. Consequently, a notice dated 08.08.2018 under Section 28(1) of the
Act, 1962 was issued to the respondent, calling upon to show cause
as to why (i) the subject goods should not be classified under CTI
76109010 instead of CTI 84369900 and charged to duty as
applicable to the goods of that tariff item; and (ii) the duty short
levied amounting to INR 21,01,983/- should not be recovered from
it under Section 28(1) of the Act, 1962, along with interest under
Section 28AA of the Act, 1962.
7. The show cause notice referred to above was adjudicated by the
Joint Commissioner of Customs, ICD - Import, Tughlakabad. Vide
the Adjudication Order No. 25/2019/JC/KK/ICD/TKD dated
28.02.2019, the Joint Commissioner held that the subject goods
were liable to be classified under CTI 76109010 (hereinafter
referred to as “ Order-in-Original ”). The Joint Commissioner’s
decision was based on the following aspects: (i) the subject goods
were structures of aluminium which were to be fixed or installed at
a location; (ii) CTI 7610 does not exclude aluminium structures
based on their end use and covers all types of aluminium
structures regardless of their use or design; (iii) the subject goods
did not display characteristics of a machine, which is necessary for
classification under CTI 8436, i.e., agricultural/horticultural
machinery; and (iv) CTI 8436 does not encompass every individual
component that is essential for mushroom cultivation.
8. Consequently, the Joint Commissioner confirmed the demand of
duty of INR 21,01,983/- along with interest in respect of Bill of
Entry No. 7399702 dated 09.11.2016.
9. Being dissatisfied with the Order-in-Original, the respondent
preferred an appeal to the Commissioner of Customs (Appeals).
Vide the Order in Appeal No. CC(A)CUS/D-
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II/Import/ICD/TKD/1237/2020-21 dated 28.12.2020, the
Commissioner of Customs (Appeals) affirmed the Order-in-Original
(hereinafter referred to as “ Order-in-Appeal ”). In the Order in
Appeal, the Commissioner of Customs (Appeals), while agreeing
with the line of reasoning assigned in the Order-in-Original, also
noted: (i) the subject goods could not have been classified under
Chapter Heading 8436 solely because they could be integrated with
various other machines used in the mushroom cultivation process;
and (ii) the subject goods cannot be said to possess characteristics
of a machine or a ‘part’ of one.
10. It is relevant to note that in both the Order-in-Original and Order-
in-Appeal, respectively, the decision to classify the subject goods
under CTI 76109010 was based on the application of General Rule
of Interpretation No.1, i.e., GRI 1.
11. The respondent preferred an appeal before the CESTAT. The
CESTAT disagreed with the two authorities below and allowed the
appeal. The relevant findings of the CESTAT are as follows:
“10. [...] The goods imported by the appellant apparently are
the aluminium shelves/racks which are imported by the
appellant for using the same after integrating with the other
two imported goods (drains and automatic watering system)
for mushroom growing. it is also nowhere been denied that
the other activities essential for mushroom growing that is
the climate control equipments, the compost spreading
equipments, the insecticide praying equipments etc. are also
to be fastened on the imported aluminium shelves. No
doubt, all these machines are to be integrated subsequent
to the import but we observe that the goods are imported
from the person, who exclusively deals in the structures
specific to mushroom growing industry. The importer-
appellant is also in the business of growing mushrooms.
There is also no denial to the fact that the aluminium
shelves imported cannot be used as any other aluminium
structures for any other purpose.
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11. From the general rule of interpretation, as discussed
above, it is clear that the goods have to be classified to the
more appropriate category instead of being covered under
the generic category. Chapter 76 is generic to all aluminium
structures but chapter 84 is specific for any machine/
device of any metal which is used for agriculture purpose.
There can be no denial that growing mushroom is an
agricultural or horticultural activity and the product
imported is crucial and specific for the said activity that the
product is specifically' designed part of mushroom growing
apparatus.

12. No doubt, the goods under Chapter 84 have first to be a
machine or mechanical appliance. For the purpose, we
foremost look into the dictionary meaning of these words.

13. As per Oxford dictionary machine is a piece of
equipment with moving parts that is designed to do a
particular job by the use of power (any kind). Similar is the
definition in the Cambridge dictionary. The dictionary
meaning of mechanical device is that it is an instrument
/apparatus or devise for a particular purpose or use. As
already observed above, the aluminium shelves/ the
impugned goods have no purpose other than a specific one
of being used in the mushroom growing industry.
Admittedly, the two other imported goods i.e. drain and
automatic watering system have to be integrated on these
aluminium shelves. Department, has admitted these two to
be covered under CTH 84369900. Though these two
apparatuses along with two others are to be integrated on
the mushroom shelving, post import but we observe that the
aluminium shelve itself is so designed with such
specifications, as may permit these specific integrations.
The brochure of product Info also mentions the model of the
goods as mechanization/ planting machine. Thus, we hold
that the goods in question is not aluminium shelve in generic
but is a mushroom growing rack specifically; though is
made of aluminium but it is a mechanical appliance used
for agriculture purpose.

14. Chapter 76 is all about anything made of aluminium. On
the contrary chapter 84 is about mechanical appliances of
whatsoever metal but specific for agricultural use. There is
no denial to the fact that the aluminium shelving in question
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is not known to the common trade parlance as a mere
aluminium structure but is specifically known as Mushroom
growing rack.

15. Hence, we hold that the goods under question as
imported by appellant (mushroom shelving) are classifiable
under CTH 84369900. Appellant is held to have rightly
classified the same under CTH 84369900 [...]”
(Emphasis Supplied)
Thus, while allowing the appeal, the CESTAT relied on the following
aspects of the matter: (i) the respondent is involved in mushroom
cultivation and got the subject goods imported from a party who
exclusively deals in structures specific to the mushroom cultivation
industry; (ii) the subject goods are specifically designed to integrate
with other machinery used in mushroom cultivation and are not
simply aluminium shelves but mechanical appliances used for
agricultural purposes; (iii) the subject goods are essential for
mushroom growing and are designed as part of the mushroom
growing apparatus; (iv) the subject goods cannot be used as
aluminium structures for any purpose other than their specific use
in the mushroom growing industry; (v) in common trade parlance,
the subject goods are known not as mere aluminium racks but as
mushroom growing racks; and (vi) Chapter 76 covers all aluminium
structures generally, whereas Chapter 84 specifically pertains to
any machine or device made of metal used for agricultural
purposes.
12. As is evident from the paragraphs above, the CESTAT in its
impugned judgment relied on the General Rule of Interpretation
No.3, i.e., GRI 3, to classify the subject goods under CTI 84369900.
13. In view of the aforesaid, the appellant is before this Court with the
present appeal.
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B. Submissions on behalf of the Appellant
14. Mr. Siddhant Kohli, the learned counsel appearing on behalf of the
appellant, submitted the following:
a. End use is irrelevant
• It is well established that the taxable event for customs duty
occurs at the time of import, not at the time of use. The
condition of the article at the time of import is the crucial
factor for classifying the product. Therefore, the end use of
a product does not determine its classification for customs
duty purposes. Reliance is placed on Dunlop India Ltd vs
Union of India, reported in (1976) 2 SCC 241 , Indian
Aluminium Cables Ltd vs Union of India & Ors , reported
in (1985) 3 SCC 284 , Shantilal Khushaldass & Bros.
Pvt. Ltd. & Anr v. Assistant Collector of Customs, Goa ,
reported in (1998) 9 SCC 180 , Union of India & Anr v.
V.M. Salgaoncar and Bros. Ltd. & Ors , reported in
(1998) 4 SCC 263, and Akbar Badrudin Giwani v.
Collector of Customs, Bombay , reported in (1990) 2 SCC
203.
• The subject goods, at the time of import, were in the form of
aluminium shelves, which are structures made of
aluminium. At this stage, the goods cannot be classified as
‘agricultural machines’ because they are neither attached
to any other machinery nor can they be used independently
for mushroom cultivation.
• The CESTAT, in its impugned judgment, relied on the end-
use of the subject goods as declared by the respondent to
classify it as a ‘part’ of agricultural machinery, thereby
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clearly contradicting the established position of law. The fact
that the subject goods are ultimately used to cultivate
mushrooms after being attached to other machines once
imported cannot influence their classification for customs
duty purposes.
b. Subject goods are not agricultural machines or ‘parts’
of agricultural machinery
• Subject goods could never have been classified as machines or
machine parts. Dictionary definitions of the word ‘Machine’
indicate that a machine consists of moving parts that use
power to carry out a specific task. The subject goods lack any
moving parts and do not transmit force, motion, or energy
through them to accomplish a task.

• The impugned judgment recognises that a machine, by
definition, should include the components listed above.
However, the CESTAT failed to take into account the legal
implications of this definition while resolving the
classification dispute, as it failed to apply the definition to
the specific facts of the case.

• Merely because the subject goods are used as a base or
structure for other machines to be clamped onto them, the
shelves themselves would not become an ‘agricultural
machine’ or a ‘part’ of one. In the case of Saraswati Sugar
Mills v. Commissioner of Central Excise, Delhi-III ,
reported in (2014) 15 SCC 625 , this Court addressed a
similar question: can iron and steel structures supporting
a plant be considered component parts of a ‘sugar
manufacturing plant’? The Court ruled in the negative.
Therefore, subject goods cannot be regarded as a ‘part’ of an
Civil Appeal No. 5531 of 2025 Page 12 of 109


agricultural machine, as they are the structures on which
the machines are placed.
c. Subject goods are more appropriately classifiable
under CTI 76109010
• Aluminium shelves exhibit characteristics of a ‘structure’,
such as their arrangement of parts, immobility, and function
as a supporting base. Therefore, they should be classified as
aluminium structures.
• Such an interpretation is also supported by the Explanatory
Notes of the Harmonised System Nomenclature. The
explanatory note applicable to Chapter Heading 7610 reads
as follows:
“This heading covers complete or incomplete metal
structures, as well as parts of structures. For the
purpose of this heading, these structures are
characterised by the fact that once they are put in
position, they generally remain in that position. They
are usually made up from bars, rods, tubes, angles,
shapes, sections, sheets, plates, wide flats including
so-called universal plates, hoop, strip, forgings or
castings, by riveting, bolting, welding, etc. Parts of
structures include clamps and other devices
specially designed for assembling metal structural
elements of round cross- section (tubular or other).
These devices usually have protuberances with
tapped holes in which screws are inserted, at the
time of assembly, to fix the clamps to the tubing.”

• The subject goods in this case serve as a foundational
structure upon which compost is levelled, and a series of
machines or devices are attached to it for mushroom
cultivation. This includes head-filling machines for laying
layers of compost on the shelves and machines for
spraying water, fertilisers, and insecticides. Once
positioned, the subject goods generally remain in place.
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They are constructed from shapes, sections, sheets, and
plates, joined by riveting, bolting, welding, etc. They
feature protuberances with tapped holes, where screws are
inserted during assembly to secure the clamps to the
tubing. Consequently, they possess all the defining
features of a ‘structure’.
d. Subject goods are not incomplete articles which bears
the essential character of the complete article
•
Rule 2(a) of the General Rules for Interpretation states that
a reference to an article shall include a reference to an
incomplete article, provided that the incomplete article has
the essential character of the complete article.
• In this case, the subject goods, even if considered part of
another incomplete article, do not possess the essential
characteristics related to agricultural machinery and
cannot be classified as an agricultural machine.

C. Submissions on behalf of the Respondent
15. Mr. Salil Arora, the learned counsel appearing on behalf of the
respondent, submitted the following:
a. As per Note 5 of Section XVI to the First Schedule of the Act,
1975, the expression ‘machine’ encompasses any machine,
machinery, plant, equipment, apparatus, or appliance
under Chapter 84. This definition is broad and not limited
solely to machines with moving parts. It also does not specify
that ‘machine’ includes electrical appliances that require
power to operate, contrary to the department’s incorrect
interpretation. The imported goods must be considered as a
whole, as they form part of a plant and not in isolation.
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b. Note 1(f) of Section XV to the First Schedule of the Act, 1975,
clearly excludes machinery, mechanical appliances, and
electrical goods of Section XVI. Chapter Heading 7610 falls
under Section XV, while Chapter Heading 8436 falls under
Section XVI. Therefore, in accordance with Note 1(f), goods
classified under Chapter Heading 8436 are excluded from
being classified under Chapter Heading 7610.
c. CESTAT classified the subject goods based on the general
rules of interpretation, which require goods to be classified
under the most specific category rather than a generic one.
While Chapter 76 generally covers all aluminium structures,
Chapter 84 specifically relates to machines or devices made
of any metal used for agricultural purposes. Mushroom
cultivation is an agricultural or horticultural activity, and the
subject goods are essential components, specifically
designed for a mushroom-growing apparatus. Hence, its
classification under Chapter 84 is more appropriate.
Reliance was placed on Dunlop India ( supra ) and Indian
Aluminium Cables ( supra ) , which held that when an article
can be classified under a specific item in the Tariff Schedule
by all standards, denying it the specific classification and
consigning it to the residual item would go against the very
principles of classification.
d. The subject goods should be regarded as ‘parts’ of the
mushroom-growing apparatus. Reliance was placed on (i)
ICAR (Indian Council of Agricultural Research) Directorate’s
certificate dated 29.08.2019, which stated that the subject
goods are an integral part of the mushroom unit, and (ii)
Dharti Dredging and Infrastructure Ltd vs
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Commissioner of Customs and Central Excise, Guntur,
reported in (2023) 18 SCC 103 , in which this Court held that
the test for classification for ‘parts’ is whether the good in
question is essential for the functioning of a product.
e. End Use of the articles can be considered when classifying
items under the Act, 1975. Reliance was placed on the
judgment of this Court in Collector of Customs vs
Kumudam Publications (P) Ltd reported in (1998) 9 SCC
339 .

f. CESTAT, after considering the materials on record, rightly
concluded that the subject goods serve no purpose other
than their specific use in the mushroom growing industry,
as they were designed with such specifications to enable
integration with other machines involved in mushroom
cultivation. Consequently, there are no good or valid
grounds to set aside the impugned judgment.
D. Issue to be Determined
16. Having heard the learned counsel appearing for the parties and
having gone through the materials on record, the following question
falls for our consideration:
• Whether the subject goods should be classified as ‘parts’ of
machines or mechanical appliances of Chapter 84 under CTI
84369900 or as aluminium structures of Chapter 76 under CTI
76109010?
E. Analysis
17. We recognise that classification disputes, particularly in the
Harmonised System Nomenclature (hereinafter referred to as
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“ HSN ”) era, are inherently complex and require careful
consideration of an intricate set of notes and interpretation rules.
Given this complexity, and to accurately resolve the issue before
us, we find it essential to first examine the specific aspects relevant
to classification disputes, such as:
a. First, when addressing classification disputes under
taxation law, this Court has often had to resort to the
common parlance or trade parlance test to interpret the
meaning of words in the statute. However, the adoption of
the common parlance or trade parlance test is often heavily
contested. Therefore, it is vital for us to consider and
determine the circumstances in which this Court has, in
various decisions, deemed it appropriate to rely on the
common parlance test and those in which it has not. This
will help us understand whether, in the facts of this case,
the common or trade parlance test should be applied to
interpret the meaning of the words in the tariff heading.
b. Secondly, as contested in this case, the consideration of
end use as a factor for determining classification is a
contentious issue in many classification disputes.
Consequently, it is essential to understand whether end
use can be taken into account when dealing with
classification disputes of imported goods under the First
Schedule of the Act, 1975, and if so, what principles govern
such consideration.
18. Before addressing the specific issues referred to above, we find it
appropriate and necessary to discuss certain fundamental
concepts related to the classification of goods imported into India.
i. Classification under the Act, 1962 and the Act, 1975
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19. Section 12 (1) of the Act, 1962, serves as the primary charging
section for customs duties in India. It states as follows:
12. Dutiable goods - (1) Except as otherwise provided in this
Act, or any other law for the time being in force, duties of
customs shall be levied at such rates as may be specified
under the [Customs Tariff Act, 1975 (51 of 1975)], or any
other law for the time being in force, on goods imported into,
or exported from India.

20. The Act, 1975, came into force on 02.08.1976, replacing the Indian
Tariff Act, 1934, and its amending acts. The First Schedule of the
Act, 1975, now governs the classification of imported goods in
India. Whereas the Second Schedule of the Act, 1975 deals with
export tariff. Section 2 of the Act, 1975, states that the rates at
which customs duties are levied under the Act, 1962, are specified
in the First and Second Schedules of the Act, 1975, respectively. It
states as follows:
2. Duties specified in the Schedules to be levied. - The rates
at which duties of customs shall be levied under the
Customs Act, 1962 (52 of 1962), are specified in the First
and Second Schedules.
21. Section 2 of the Act, 1975, is subordinate to Section 12 of the Act,
1962, and does not operate as an independent charging section.
The provisions of both Acts must necessarily be read together.
22. The First Schedule of the Act, 1975, was originally based on the
Brussels Tariff Nomenclature. By Act 8 of 1986, this was amended
to adopt the Harmonised Commodity Description and Coding
System, commonly known as the Harmonised System
Nomenclature. The HSN is an internationally standardised
classification system developed by the World Customs
Organisation. It provides a structured way to classify traded goods
using a standardised numerical code framework. The HSN
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comprises more than 5,000 commodity groups, each identified by
a six-digit code, arranged in a logical and legal framework
supported by well-defined rules to achieve uniform classification.
23. The HSN is utilised by over 200 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.
24. 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.
25. 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-digit
(Heading) and 6-digit (Sub-heading) levels. Member countries of
WHO are permitted to extend the codes to any level, provided that
no changes are made at the 4-digit or 6-digit levels. India has
developed an 8-digit classification to specify particular statistical
codes for indigenous products and also to monitor the trade
volumes.
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26. Customs classification is best described as the process of
identifying the appropriate heading, subheading, or tariff item for
a good. This is the most crucial step in the customs law, as it is not
just an administrative task. Instead, the classification determines
the legal and financial treatment of the goods in question, including
the applicable duty rate and eligibility for exemptions.
(a) General Rules of Interpretation
27. The First Schedule of the Act, 1975, outlines the principles that
govern the classification of goods under the schedule and are
commonly referred to as the General Rules for Interpretation
(hereinafter referred to as “ GRI ”). They are as follows:
1. The titles of Sections, Chapters and Sub-Chapters are
provided for ease of reference only; for legal purposes,
classification shall be determined according to the terms of
the headings and any relative Section or Chapter Notes and,
provided such headings or Notes do not otherwise require,
according to the following provisions.
2. (a) Any reference in a heading to an article shall be taken
to include a reference to that article incomplete or unfinished,
provided that, as presented, the incomplete or unfinished
article has the essential character of the complete or finished
article. It shall also be taken to include a reference to that
article complete or finished (or falling to be classified as
complete or, finished by virtue of this rule), presented
unassembled or disassembled.
2. (b) Any reference in a heading to a material or substance
shall be taken to include a reference to mixtures or
combinations of that material or substance with other
materials or substances. Any reference to goods of a given
material or substance shall be taken to include a reference to
goods consisting 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,
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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.
4. Goods which cannot be classified in accordance with the
above rules shall be classified under the heading appropriate
to the goods to which they are most akin.
5. In addition to the foregoing provisions, the following rules
shall apply in respect of the goods referred to therein:
(a) camera cases, musical instrument cases, gun cases,
drawing instrument cases, necklace cases and similar
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;
(b) 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.
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6. For legal purposes, the classification of goods in the sub-
headings of a heading shall be determined according to the
terms of those sub-headings and any related subheading
Notes and, mutatis mutandis, to the above rules, on the
understanding that only sub-headings at the same level are
comparable. For the purposes of this rule the relative Section
and Chapter Notes also apply, unless the context otherwise
requires.
28. GRI 1 is the fundamental rule for effectively navigating the HSN.
The influence of GRI 1 is pervasive and forms the basis for customs
classification of goods under the Act, 1975. GRI 1 states that: (i)
headings of sections, chapters and subchapters are for reference
only and (ii) for legal purposes, the classification shall be
determined by the terms of headings and the relevant section or
chapter notes. Thus, GRI 1 essentially establishes the primacy of
the notes and terms of headings for determining the classification
of a product.
29. GRI 2 (a) is expanding the terms of a heading to include (i)
incomplete or 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. [See Collector of Customs,
Bangalore & Anr v. Maestro Motors Ltd. & Anr , reported in
(2005) 9 SCC 412, Commissioner of Customs, New Delhi v.
Sony India Limited , reported in (2008) 13 SCC 145 and Salora
International Limited v. Commissioner of Central Excise, New
Delhi , reported in (2012) 9 SCC 662 ]
30. GRI 2 (b) deals with mixtures consisting of different materials or
substances and goods that are produced from different materials
or substances. GRI 2 (b) states that a reference in a heading to: (i)
to a material or substance shall be taken to include a reference to
Civil Appeal No. 5531 of 2025 Page 22 of 109


mixtures or combinations of that material or substance with other
materials or substances and (ii) goods of a given material or
substance shall include a reference to goods consisting wholly or
partly of such materials or substance. Lastly, those mixtures or
goods that consist of mixtures of different materials or substances
are classified according to GRI 3.
31. 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
under two or more headings. Such classification shall be based on
the following
a. As per GRI 3(a), a heading with a more specific description
of goods is preferred to a heading with a more general
description of goods. However, GRI 3(a) cannot be applied
to decide classification when two or more headings each
refer to only part 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. Each of those headings is to be
regarded as equally specific in relation to those goods, even
if one gives a more complete or precise description of the
goods. The decision of classification will then be made
based on GRI 3(b) or GRI 3(c). [See CCEC & ST,
Vishakhapatnam v. Jocil Limited , reported in (2011) 1
SCC 681 ]
b. GRI 3(b) concerns the decision for mixtures and goods that
consist of different materials or components and for goods
put up in sets for retail sale, which cannot be classified by
reference to GRI 3(a). The classification shall be
determined by the material, substance or component that
gives them their essential character, insofar as this
Civil Appeal No. 5531 of 2025 Page 23 of 109


criterion is applicable. The criterion that gives goods their
essential character differs according to the type of goods.
The material or substance, its contents, its amount, its
weight, its value or the value of a material for its usage can
determine this.
c. GRI 3(c) is applicable only when a classification according
to GRI 3(a) and GRI 3(b) was not possible. Consequently,
the goods are placed in the heading which occurs last in
numerical order among those which equally merit
consideration.
32. GRI 4 is invoked very rarely, as many classification disputes are
resolved through the application of GRIs 1-3, thereby making it
needless to invoke GRI 4. GRI 3 and GRI 4 are mutually exclusive,
as once the analysis enters the arena of GRI 3, GRI 4 cannot be
invoked, as the dispute would ultimately be resolved by GRI 3(c).
GRI 4 is essentially a failsafe rule, an option of last resort, intended
to ensure that an HSN provision can be found for even the most
unusual product. Under GRI 4, goods are classified under the
heading appropriate to the goods to which they are most akin.
Thus, kinship is the sole evaluative criterion allowed under GRI 4.
33. GRI 5 is a special rule of interpretation that pertains only to the
classification of cases and packing materials.
34. GRI 6 is a procedural rule that explains how to classify a good after
the correct 4-digit heading has already been found. In simple
terms, it states that the exact same principles from GRI 1 to 5 must
be applied again, mutatis mutandis, to determine the correct
subheading within that heading. Classification at the sub-heading
level is governed by the specific terms of the sub-headings and any
Civil Appeal No. 5531 of 2025 Page 24 of 109


sub-heading notes, with the critical condition that only sub-
headings at the same level can be compared.

35. The primary purpose of the GRIs is to establish mandatory
boundaries for any classification inquiry, ensuring a structured,
uniform, and predictable approach to classification. It is essential
not to treat these GRIs as a menu of options that can be invoked
randomly, but rather as a legal framework that dictates a precise
and sequential methodology for classifying all goods.
36. This Court has repeatedly reiterated that GRIs 1-4 must be applied
sequentially. [See Commissioner of Central Excise, Nagpur v.
Simplex Mills Co. Ltd. , reported in (2005) 3 SCC 51 and Secure
Meters Limited v. Commissioner of Customs, New Delhi ,
reported in (2015) 14 SCC 239 ]. GRI 1, which gives primacy to the
headings and notes, is the non-negotiable starting point. GRI 2,
which deals with incomplete, unassembled or composite goods or
mixtures, often acts as an extension of GRI 1, by deeming the
headings to include incomplete/unassembled goods or mixtures or
combinations of a material or substance. GRI 3 is only invoked
when the application of GRI 1 and/or GRI 2 results in a good being
prima facie classifiable under two or more competing headings. GRI
3 exists solely to resolve this tie. GRI 4, the rule of last resort, is
mutually exclusive to GRI 3 and is only invoked if GRI 1 and 2 have
failed to find even one possible heading for the good. To illustrate,
let us take the analogy of “locked doorways”:
a. Classification begins and, in most cases, ends at the first
door: GRI 1.
b. If, upon applying GRI 1 and/or GRI 2, the result is a tie
between two or more headings, the key to the GRI 3 door
is granted to find the tie-breaker. Further, once the door to
Civil Appeal No. 5531 of 2025 Page 25 of 109


GRI 3 is unlocked, the subsequent doors to GRI 3(b) and
GRI 3(c) are also unlocked in a sequential manner, i.e., the
door to GRI 3(b) unlocks only when the dispute is not
resolved through application of GRI 3(a), and similarly door
to GRI 3(c) unlocks only when the dispute is not resolved
through application of GRI 3(b)
c. If, upon applying GRI 1 and/or GRI 2, the result seems to
be that no heading applies at all, the key to the GRI 4 door
is granted to find the “most akin” good.
(b) Role of HSN Explanatory Notes
37. The official interpretation of the HSN is provided in the
Explanatory Notes published by the World Customs Organisation
(hereinafter “ Explanatory Notes ”). Therefore, these Explanatory
Notes form the foundation for interpreting the HSN. Given their
importance for classification, it is apposite to understand how they
can be used when addressing questions of classification under the
First Schedule of the Act, 1975.
38. This Court, in Commissioner of Central Excise, Salem v.
Madhan Agro Industries (India) Private Ltd. , reported in 2024
SCC OnLine SC 3775 , while dealing with a classification dispute
under excise law, made the following pertinent observations
regarding consideration of the Explanatory Notes:

Civil Appeal No. 5531 of 2025 Page 26 of 109

(Emphasis Supplied)
Thus, in Madhan Agro ( supra ), this Court clarified the applicability
of the Explanatory Notes. Their application is governed by a single,
critical condition of ‘alignment’. This test is met when the domestic
tariff entry (in the First Schedule of the Act, 1975) is fully aligned
with the corresponding HSN heading, and no explicit deviation or
contrary legislative intent is found in the Act, 1975. Where such
alignment exists, the Explanatory Notes are to be treated as binding
guidance. The rationale is based on the legislative intent. Since the
First Schedule of the Act, 1975 was amended to be in accordance
with the HSN, the Explanatory Notes, being the official,
international interpretation, are the most authentic guide to
understanding the scope of the headings.
Civil Appeal No. 5531 of 2025 Page 27 of 109



39. In the present case, this condition of alignment is satisfied. Upon
examining the competing headings (Chapter Heading 7610 and
Chapter Heading 8436), along with their subheadings and the
relevant section and chapter notes in the First Schedule of the Act,
1975, it is found that they are identical to their counterparts in the
HSN. As no explicit statutory deviation has been shown to exist,
there can be no doubt that the Explanatory Notes can be
considered as binding guidance to resolve the classification dispute
before us.

ii. Applicability of the Common Parlance test in
classification disputes

40. It is a well-established principle of statutory interpretation, as
repeatedly affirmed by this Court, that when a particular term in a
taxing statute is not defined, it should be understood in the sense
recognised by those who deal with it. The common parlance, trade
parlance, and popular parlance tests are all iterations of this
fundamental rule. For the sake of ease of reference, we would
generally refer to the test as the ‘common parlance test’. However,
it is clarified that any reference to ‘common parlance’ shall be
construed to include trade, commercial, or popular parlance, if the
context may require so.
41. 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. [See Indo
International Industries v. Commissioner of Sales Tax, Uttar
Civil Appeal No. 5531 of 2025 Page 28 of 109


Pradesh , reported in (1981) 2 SCC 528 , Pappu Sweets and
Biscuits v. Commissioner of Trade Tax, U.P. , reported in (1998)
7 SCC 228 , Asian Paints India Ltd v. Collector of Central
Excise , reported in (1988) 2 SCC 470, and United Offset Process
(P.) Ltd v. Asst. Collector of Customs, Bombay , reported in 1989
Supp (1) SCC 131 ]
42. For the purposes of understanding the considerations that weighed
with this Court while applying the common parlance test in
classification disputes, it is necessary to analyse the relevant case
law carefully. For the clarity of exposition, the case law discussed
is divided into two broad categories: (a) cases where the common
parlance test was applied; and (b) cases where the common
parlance test was not applied.
(a) Cases where the common parlance test was applied
43. In Dunlop India ( supra ), a three-judge bench of this Court
considered a dispute regarding the customs classification of Vinyl
Pyridine Latex, a type of rubber. In this case, one of the contentions
on the part of the Revenue was that the said good could be
classified as a ‘resin’ based on its technical meaning. The Court,
dismissing the Revenue's claim, held that the meaning assigned to
articles in a fiscal statute must align with how people involved in
trade and commerce, who are familiar with the subject, generally
understand and treat them. Technical and scientific tests should
be applied only within limits. The Court’s observations are as
follows:

Civil Appeal No. 5531 of 2025 Page 29 of 109

(Emphasis Supplied)

44. In Oswal Agro Mills Ltd & Ors v. Collector of Central Excise &
Ors , reported in 1993 Supp (3) SCC 716 , this Court examined
whether a ‘toilet soap’ could be classified as a ‘household soap’
under the Central Excises and Salt Act of 1944. Before its
Civil Appeal No. 5531 of 2025 Page 30 of 109


amendment in 1964, Tariff Item 15 classified soaps as: (i) Soap,
household and laundry, (ii) Soap, toilet, and (iii) Soap, other than
household, laundry, or toilet. After the 1964 amendment, Tariff
Item classified soaps as: (i) Soap, household and laundry, and (ii)
other sorts. Consequently, the specific category for ‘toilet soaps’
was abolished, raising the issue of whether ‘toilet soaps’ should be
classified as ‘household soaps’ or as ‘other sorts’. It is in this
context that the Court made the following relevant observations:
“4. The provisions of the tariff do not determine the relevant
entity of the goods. They deal whether and under what
entry, the identified entity attracts duty. The goods are to be
identified and then to find the appropriate heading, sub-
heading under which the identified goods/products would
be classified. To find the appropriate classification
description employed in the tariff nomenclature should be
appreciated having regard to the terms of the headings read
with the relevant provisions or statutory rules or
interpretation put up thereon. For exigibility to excise duty
the entity must be specified in positive terms under a
particular tariff entry. In its absence it must be deduced
from a proper construction of the tariff entry. There is neither
intendment nor equity in a taxing statute. Nothing is
implied. Neither can we insert nor can we delete anything
but it should be interpreted and construed as per the words
the legislature has chosen to employ in the Act or rules.
There is no room for assumption or presumptions. The object
of the Parliament has to be gathered from the language used
in the statute. The contention that toilet soap is
commercially different from household and laundry soaps,
as could be seen from the opening words of Entry 15, needs
careful analysis. [...] Let us, therefore, consider the meaning
of the word soap “household”. The word household signifies
a family living together. In the simplistic language toilet
soap being used by the family as household soap is too
simplification to reach a conclusion. Therefore, one has to
gather its meaning in the legal setting to discover the object
which the Act seeks to serve and the purpose of the
amendment brought about. The task of interpretation of the
statute is not a mechanical one. It is more than mere reading
of mathematical formula. It is an attempt to discover the
Civil Appeal No. 5531 of 2025 Page 31 of 109

5. In Ramavatar Budhaiprasad v. Assistant STO , another
Constitution Bench was to consider whether “betel leaves”
are “vegetable” within the meaning of Item 6 of Second
Schedule to the M.P. Sales Tax Act. It was contended that
betel leaves are vegetable and, therefore, they are exempted
from the payment of sales tax. While construing Item 6, this
Court held that the words must be construed not in any
technical sense nor from the botanical point of view but as
understood in common parlance. It has not been defined in
the Act and being a word of every day use it must be
construed in its popular sense meaning “that sense which
people conversant with the subject-matter with which the
statute is dealing would attribute to it”. It is to be construed
as understood in common language. Therefore, betel leaves
were held to be not vegetable. The term ‘vegetables’ is to be
understood as commonly understood denoting those
classes of vegetable matter which are grown in kitchen
gardens and are used for the table. The same view was
reiterated in Motipur Zamindary Co. (Pvt.) Ltd. v. State of
Bihar and State of W.B. v. Washi Ahmed . In Washi Ahmed
case green ginger was held to be vegetable within the
meaning of the word used in common parlance. In Motipur
Zamindary case it was held that sugar-cane was not
vegetable. In Porritts & Spencer (Asia) Ltd. v. State of
Haryana this Court held that ‘Dryer felts’ are not textiles. In
that context the principle of understanding the meaning of
the word in common parlance was adopted. In Indo
International Industries v. CST this Court held that: (SCC p.
530, para 4)
“It is well-settled that in interpreting items in
statutes like the Excise Tax Acts or Sales Tax Acts,
whose primary object is to raise revenue and for
which purpose they classify diverse products,
articles and substances resort should be had not
to the scientific and technical meaning of the terms
or expression used but to their popular meaning,
that is to say, the meaning attached to them by
those dealing in them. If any term or expression
Civil Appeal No. 5531 of 2025 Page 32 of 109


has been defined in the enactment then it must be
understood in the sense in which it is defined but
in the absence of any definition being given in the
enactment the meaning of the term in common
parlance or commercial parlance has to be
adopted.”
(emphasis supplied)
In that case the clinical syringes manufactured and sold by
the assessee were not considered as ‘glassware’ falling
within Entry 39 of the First Schedule of the Act. In
commercial sense glassware would never comprise of
articles like clinical syringes etc., or specialised significance
and utility. Same view was reiterated in P.A. Thillai
Chidambara Nadar v. Addl. Appellate Asstt. Commissioner,
Madurai that coconut is neither a fresh fruit nor a vegetable.
[...]

6. In Shri Bharuch Coconut Trading Co. v. Municipal Corpn.
of the City of Ahmedabad this Court applied the test as
“would a householder when asked to bring some fresh fruits
or some vegetables for evening meal, bring coconut too as
vegetable? Obviously the answer is in the negative”. Again
when a person goes to a commercial market ask for
coconuts, “no one will consider brown coconut to be
vegetable or fresh fruit, no householder would purchase it
as a fruit. Therefore, the meaning of the word brown
coconut, whether it is a green fruit has to be understood in
its ordinary commercial parlance”. Accordingly it was held
that brown coconut was not green fruit. [...] The general
purpose or common use of the product though may not be
conclusive but may be relevant to classify it in a tariff entry
when it was not specifically enumerated in a particular
entry or sub-entry. [...] In Anant B. Timbodia v. Union of
India this Court was to consider whether imported cloves
fell within Item 169 in List 8 of Appendix 6 or para 167 of
Chapter 8 of Import and Export Policy 1990-93. Para 167 of
Chapter 8 of Import Policy clearly provided the heading —
Import of Spices includes cloves, cinnamon/cassia, nutmeg
and mace. Therefore, it was held that import permit is
necessary. The doctrine of popular sense or trade or its use
in making medicine as crude drug was not accepted.
Dictionary meaning or meaning given in Indian
Pharmaceutical Codex was not accepted as given in view of
specific enumeration.[...]
Civil Appeal No. 5531 of 2025 Page 33 of 109


xxx

(Emphasis Supplied)
45. In Oswal Agro ( supra ), the Court applied the common parlance
test to determine that toilet soap should be classified as a
‘household soap’. It is relevant to note that in all the cases
referenced by the Court where the common parlance test was
applied, the focus was on understanding whether, in everyday
language, the goods would fall under the specified tariff item
category, such as whether a brown coconut would be called a fruit
or a vegetable, or whether betel leaves would be considered
vegetables in common parlance. This Court in Oswal Agro ( supra )
also adopted a similar approach by asking whether, in common
parlance, ‘toilet soap’ would be categorised as ‘household soap’.
46. Furthermore, this Court in Oswal Agro ( supra ) sounded a few
notes of caution to be observed when courts apply the common
Civil Appeal No. 5531 of 2025 Page 34 of 109


parlance test. These are: first, the common parlance test cannot be
applied if there is a specific enumeration of the goods within a
category by the legislature; secondly, while interpreting terms in a
tariff item, an overly simplified approach should be avoided, and
the words should be understood within their legal context.
47. In Union of India & Ors v. Garware Nylons Ltd & Ors , reported
in (1996) 10 SCC 413 , the respondents manufactured ‘Nylon Yarn’
and ‘Nylon Twine’. Under Item 18 of the First Schedule of the
Central Excise and Salt Act, 1944, excise duty was payable on
‘Nylon Yarn’. A notification issued under Rule 8 of the Excise Rules
provided that ‘Nylon Yarn’, intended for use in making fishing nets
and parachute cords, was exempt from paying excise duty in excess
of Rs 4 per kg under Item 18. The respondents therein argued that
the ‘Nylon Twine’ they manufactured was used for making fishing
nets. Before 1975, they were permitted to clear Nylon Twine,
manufactured by them, by paying excise duty as specified under
the exemption notification. Subsequently, when the new item,
namely Item 68 (a residuary entry), was introduced into the Act, it
was contended by the Excise authorities that ‘Nylon Twine’
produced by the respondents was not covered by Item 18.
According to the revenue, ‘Nylon Twine’ and ‘Nylon Yarn’ were two
separate items, with Item 18 covering only ‘Nylon Yarn’, not ‘Nylon
Twine’. The authorities sought to impose excise duty on ‘Nylon
Twine’ under Item 68. The respondents, however, contested the
classification under Item 68, arguing that ‘Nylon Twine’ was
considered a kind of ‘Nylon Yarn’ by traders and those dealing with
the subject matter. The Court, applying the trade parlance test,
concluded that there was sufficient evidence to establish that, in
trade parlance, ‘Nylon Twine’ was regarded as a type of ‘Nylon Yarn’
Civil Appeal No. 5531 of 2025 Page 35 of 109


and was therefore classifiable under Item 18. The relevant
observations of the Court are as follows:
“9. [...] In this case, clinching evidence is afforded to
demonstrate that trade and industry which deals with the
goods, consider “Nylon Twine” as a kind of “Nylon Yarn”.
10. There are innumerable decisions of this Court which
have laid down the test or the principles to be borne in mind
in construing the items or entries in Fiscal Statutes. In a
recent decision in Indian Cable Co. Ltd. v. CCE a three-
member Bench stated the law thus: (SCC p. 615, para 5)
“… in construing the relevant item or entry, in fiscal
statutes, if it is one of everyday use, the authority
concerned must normally, construe it, as to how it
is understood in common parlance or in the
commercial world or trade circles. It must be given
its popular meaning. The meaning given in the
dictionary must not prevail. Nor should the entry
be understood in any technical or botanical or
scientific sense. In the case of technical words, it
may call for a different approach. The approach to
be made in such cases has been stated by Lord
Esher in Unwin v. Hanson [(1891) 2 QB 115 : 65
LT 511 : 60 LJQB 531] thus:
‘If the Act is directed to dealing with matters
affecting everybody generally, the words used
have the meaning attached to them in the common
and ordinary use of language. If the Act is one
passed with reference to a particular trade,
business, or transaction, and words are used
which everybody conversant with that trade,
business or transaction knows and understands
to have a particular meaning in it then the words
are to be construed as having that particular
meaning, though it may differ from the common or
ordinary meaning of the words.’
We would only add that there should be material
to enter appropriate finding in the case.
The material may be either oral or documentary
evidence.”
xxx
Civil Appeal No. 5531 of 2025 Page 36 of 109


12. The law on the point as laid down by this Court (in
various decisions) has been summarised in the
book Principles of Statutory Interpretation (Sixth Edition —
1996) by Justice G.P. Singh, at pp. 67, 70, 72 and 73, thus:

“[...]
*
As a necessary consequence of the principle that
words are understood in their ordinary or natural
meaning in relation to the subject-matter, in
legislation relating to a particular trade, business,
profession, art or science, words having a special
meaning in that context are understood in that
sense. Such a special meaning is called the
technical meaning to distinguish it from the more
common meaning that the word may have. The
Supreme Court ‘has consistently taken the view
that, in determining the meaning or connotation of
words and expressions describing an article in a
tariff schedule, one principle which is fairly well
settled is that those words and expressions should
be construed in the sense in which they are
understood in the trade by the dealer and the
consumer. The reason is that it is they who are
concerned with it, and, it is the sense in which they
understood it which constitutes the definitive index
of legislative intention’.”
13. Stated briefly, we should understand, the expression
occurring in Item 18 of the Act, in the sense, in which the
persons who deal in such goods understand it normally.
14. In this case, apart from the meaning given to the words
‘Yarn’, ‘Twine’ etc., in the standard works referred to by the
High Court, two items of evidence stand out prominent and
clinch the issue. The first is, an order received by the
assessee from the Director of Fisheries, Madras which goes
to show that Nylon Twine is considered as a type of Nylon
Yarn used for making fishing nets. The second is, two
affidavits filed by the assessees before the authorities —
one from the Managing Director of Maharashtra Rajya
Machimar Sekhari Sangh Limited and another from a
partner of Maharashtra Fishing Material Company, wherein
it is stated that ‘Twine’ is a category of ‘Yarn’. What is more
— the assessees made available the above persons who
have sworn to the affidavits for cross-examination at the
Civil Appeal No. 5531 of 2025 Page 37 of 109


time of the hearing of the applications, but the Revenue did
not cross-examine them. The trade enquiry received by the
assessees and also the affidavits conclusively point out that
Nylon Twine is considered as a kind of “Nylon Yarn” in the
particular trade by persons conversant with the subject-
matter. The Revenue has not let in any material to the
contra.”
(Emphasis Supplied)
48. The Court’s observations in Garware Nylons ( supra ) are
significant for two reasons:

a. First, it clarifies when the common understanding of the
term should be adopted, as opposed to when its trade
understanding must be applied. The choice is not arbitrary
but rather determined by the statutory context and the
audience to whom the tariff item is addressed. When a
statute or tariff is general in nature and does not indicate a
particular industry or trade circle, the common parlance
understanding is appropriate. However, when a tariff item is
specific to a particular industry, as was the case in Garware
Nylons ( supra ), the term must be understood as it is used
within that specific trade circle.

b. Secondly, the Court highlighted that when a party asserts a
meaning of a term based on common or trade parlance, it
must present satisfactory evidence to support that claim. A
dispute over classification cannot be resolved without such
evidence.

49. The issue of classifying ‘soft-serve’ served at restaurants or outlets,
popularly known as ‘McDonald's’, under the Central Excise Tariff
Act, 1985, was considered by this Court in Commissioner of
Central Excise, New Delhi v. Connaught Plaza Restaurant
Civil Appeal No. 5531 of 2025 Page 38 of 109


Private Limited , reported in (2012) 13 SCC 639 . The revenue
contended that ‘soft-serve’ should be classified under Heading
21.05 (Ice cream and other edible ice). In contrast, the respondent
argued that ‘soft-serve’ was classifiable under Heading 04.04 (Other
dairy produce) or Heading 2108.91(Edible preparations not
elsewhere specified or included). The Customs, Excise and Gold
(Control) Appellate Tribunal, New Delhi, relying on the technical
meaning and specifications of the product ‘ice cream’, concluded
that ‘soft-serve’ could not be classified as ice cream. The Tribunal
declined to apply the common parlance test to determine the
classification of ‘soft-serve’.

50. To fortify its claim for classification under Heading 04.04 (or
Heading 2108.91), the respondent relied on the following points: (i)
‘soft-serve’ is a product distinct and separate from ‘ice cream’
because, worldwide, ‘ice-cream’ is generally understood to contain
more than 5% milk fat, whereas’ soft serve’ does not exceed 5%; (ii)
‘soft serve’ cannot be considered ‘ice cream’ in common parlance
since it is marketed globally by the assessee as ‘soft serve’; and (iii)
‘ice cream’ should be understood in its scientific and technical
sense. Conversely, the Revenue argued that “soft serve” is
recognised as “ice cream” in common parlance. The Court observed
that, to determine the appropriate heading, it was necessary to first
understand the true scope of the relevant headings. None of the
terms in the relevant heading was defined, nor was any technical or
scientific meaning provided in the chapter notes. In this context,
the Court examined whether, in the absence of a statutory
definition, the term “ice cream” under Heading 21.05 should be
interpreted according to its scientific and technical meaning or in
line with its common parlance understanding. After reviewing a
series of decisions by this Court concerning the application of the
Civil Appeal No. 5531 of 2025 Page 39 of 109


common parlance test, the Court made the following pertinent
observations.
“33. Therefore, what flows from a reading of the
aforementioned decisions is that in the absence of a
statutory definition in precise terms; words, entries and
items in taxing statutes must be construed in terms of their
commercial or trade understanding, or according to their
popular meaning. In other words they have to be
constructed in the sense that the people conversant with the
subject-matter of the statute, would attribute to it. Resort to
rigid interpretation in terms of scientific and technical
meanings should be avoided in such circumstances. This,
however, is by no means an absolute rule. When the
legislature has expressed a contrary intention, such as by
providing a statutory definition of the particular entry, word
or item in specific, scientific or technical terms, then,
interpretation ought to be in accordance with the scientific
and technical meaning and not according to common
parlance understanding.

34. In the light of these principles, we may now advert to
the question at hand viz. classification of “soft-serve” under
the appropriate heading. As aforesaid, the Tribunal has
held that in view of the technical literature and stringent
provisions of the PFA, “soft-serve” cannot be classified as
“ice-cream” under Entry 21.05 of the Tariff Act. We are of
the opinion, that in the absence of a technical or scientific
meaning or definition of the term “ice-cream” or “soft-serve”,
the Tribunal should have examined the issue at hand on the
touchstone of the common parlance test.

35. As noted before, Headings 04.04 and 21.05 have been
couched in non-technical terms. Heading 04.04 reads “other
dairy produce; Edible products of animal origin, not
elsewhere specified or included” whereas Heading 21.05
reads “ice-cream and other edible ice”. Neither the headings
nor the chapter notes/section notes explicitly define the
entries in a scientific or technical sense. Further, there is no
mention of any specifications in respect of either of the
entries. Hence, we are unable to accept the argument that
since “soft-serve” is distinct from “ice-cream” due to a
difference in its milk fat content, the same must be
construed in the scientific sense for the purpose of
Civil Appeal No. 5531 of 2025 Page 40 of 109


classification. The statutory context of these entries is clear
and does not demand a scientific interpretation of any of the
headings. Therefore, in the absence of any statutory
definition or technical description, we see no reason to
deviate from the application of the common parlance
principle in construing whether the term “ice-cream” under
Heading 21.05 is broad enough to include “soft-serve”
within its import.

36. The assessee has averred that “soft-serve” cannot be
regarded as “ice-cream” since the former is marketed and
sold around the world as “soft-serve”. We do not see any
merit in this averment. The manner in which a product may
be marketed by a manufacturer, does not necessarily play
a decisive role in affecting the commercial understanding of
such a product. What matters is the way in which the
consumer perceives the product at the end of the day
notwithstanding marketing strategies. Needless to say the
common parlance test operates on the standard of an
average reasonable person who is not expected to be aware
of technical details relating to the goods. It is highly unlikely
that such a person who walks into a “McDonalds” outlet
with the intention of enjoying an “ice-cream”, “softy” or
“soft-serve”, if at all these are to be construed as distinct
products, in the first place, will be aware of intricate details
such as the percentage of milk fat content, milk non-solid
fats, stabilisers, emulsifiers or the manufacturing process,
much less its technical distinction from “ice-cream”. On the
contrary, such a person would enter the outlet with the
intention of simply having an “ice-cream” or a “softy ice-
cream”, oblivious of its technical composition. The true
character of a product cannot be veiled behind a charade of
terminology which is used to market a product. In other
words, mere semantics cannot change the nature of a
product in terms of how it is perceived by persons in the
market, when the issue at hand is one of excise
classification.
xxx
50. In view of the aforegoing discussion, we are of the
opinion that the Tribunal erred in law in classifying “soft-
serve” under Tariff Sub-Heading 2108.91, as “Edible
preparations not elsewhere specified or included”, “not
bearing a brand name”. We hold that “soft-serve” marketed
by the assessee, during the relevant period, is to be
Civil Appeal No. 5531 of 2025 Page 41 of 109


classified under Tariff Sub-Heading 2105.00 as “ice-
cream”.”
(Emphasis Supplied)


51. The Court in Connaught Plaza ( supra ), after examining the tariff
headings and relevant section and chapter notes, concluded that
the term “ice cream” should be interpreted using the common
parlance test rather than adopting a scientific or technical
meaning. Notably, the Court applied the common parlance test not
only because there was no specific definition, but also because the
statutory context, including the heading, section, and chapter
notes, provided no guidance on how to interpret ‘ice cream’. In this
context of statutory flexibility, the Court employed the common
parlance test to determine whether “soft serve” qualifies as “ice
cream” under the Central Excise Tariff Act, 1985. Furthermore,
notably, the Court also held that mere marketing alone could not
lead a subject item to develop a separate meaning distinct from its
common parlance.
52. In Commissioner of Customs and Central Excise, Amritsar
(Punjab) v. D.L. Steels & Ors , reported in (2023) 17 SCC 358 ,
this Court examined a classification dispute concerning dried
pomegranate seeds, locally known as “anardana”. The respondent
had imported “anardana” from Pakistan. Heading 0813 in the
schedule of the Act, 1975, covers the dried form of all items falling
within Headings 0807 to 0810. The revenue argued that since the
imported product is essentially a dried form of the fruit
pomegranate (which falls under heading 0810), it should be
classified under heading 0813. The Court first observed that, for
classification under Chapter 8, a fruit must be edible, and thus the
key question before it was whether the source fruit, in this case
“daru” or wild pomegranate, was edible. Relying on the common
Civil Appeal No. 5531 of 2025 Page 42 of 109


parlance test, the Court accepted the CESTAT’s finding that wild
pomegranate was not consumed as a fruit. Accordingly, the Court
refused to classify the imported good under Heading 0813. The
relevant observations made by the Court are as follows:

“Thus, courts have turned to, and parties have
argued for, various other tests to determine
Civil Appeal No. 5531 of 2025 Page 43 of 109

xxx
23. In favour of the appellant's claim, it must be highlighted
that pomegranates, along with some other fruits, are
expressly included in Clause 7 to the Explanatory Notes to
Sub-Heading 0810.90. Consequently, it can be argued with
Civil Appeal No. 5531 of 2025 Page 44 of 109

xxx
31. In the context of the present case, once we accept the
finding of fact recorded by CESTAT that “anardana” is a
dried product of local “daru” or wild pomegranate, which
grows in mid hill conditions and which fruit in its fresh form
is different from the pomegranate included in Clause 7 to
Heading 08.10, as this wild pomegranate is not consumed
as a fresh fruit, the contention of the Revenue must fail. [...]”
(Emphasis Supplied)
(b) Cases where the common parlance test was not
applied
53. In Akbar Badrudin ( supra ) , the appellant had imported certain
stones and had taken due care before importing to ensure that
Civil Appeal No. 5531 of 2025 Page 45 of 109


those stones were not marble, as they were a restricted item under
Item 62, Appendix 2, Part B of the Import and Export Policy April
1988–March 1991. In Entry 62, the restricted item was described
as follows: “ marble/granite/onyx ”. However, after the import, the
customs authorities classified those goods as marble on the basis
that, in common parlance, they were known as marble and their
end use was similar to that of marble. Conversely, the appellant
therein contended that the imported goods should be classified as
‘slabs of calcareous stones (other than marble)’ and not as ‘marble’
under Tariff Item 25.15 in Appendix 1-B, Schedule I to the Import
(Control) Order, 1955. Tariff Item 25.15 was worded as follows:
“ Marble, travertine, ecassine, and other calcareous monumental or
building stone of an apparent specific gravity of 2.5 or more and
alabaster, whether or not roughly trimmed or merely cut, by sawing
or otherwise, into blocks or slabs of a rectangular (including square)
shape.” The core issue before the Court was whether the common
parlance meaning of the term ‘marble’ should be adopted. In other
words, the Court was left to consider the broader question of when
the undefined terms within the customs tariff schedule should be
interpreted according to their common parlance meaning and
when their scientific and technical meanings should be applied. It
is in this context that the Court made the following pertinent
observations:
“36. In deciding this question the first thing that requires to
be noted is that Entry 25.15 refers specifically not only to
marble but also to other calcareous stones whereas Entry
62 refers to the restricted item marble only. It does not refer
to any other stones such as ecaussine, travertine or other
calcareous monumental or building stone of a certain
specific gravity. Therefore, on a plain reading of these two
entries it is apparent that travertine, ecaussine and other
calcareous monumental or building stones are not intended
to be included in ‘marble’ as referred to in Entry 62 of
Civil Appeal No. 5531 of 2025 Page 46 of 109

“that if a statute contains language which is
capable of being construed in a popular sense such
statute is not to be construed according to the strict
or technical meaning of the language contained in
it, but is to be construed in its popular sense,
meaning of course, by the words ‘popular sense’,
that sense which people conversant with the
subject matter with which the statute is dealing
would attribute to it.” But “if a word in its popular
sense and read in an ordinary way is capable of
two constructions, it is wise to adopt such a
Civil Appeal No. 5531 of 2025 Page 47 of 109

xxx
Civil Appeal No. 5531 of 2025 Page 48 of 109


48. On a conspectus of all these decisions mentioned
hereinbefore the position which thus emerges is that when
the expression ‘marble’ has not been defined in the Customs
Tariff Act as well as in the Customs Act or in the relevant
notification regarding the restriction on import of marble in
the List of Restricted Articles, it is necessary to decide the
significance and true meaning of the word ‘marble’ as used
in the ITC Schedule as well as in the List of Restricted Items,
Customs Tariff Act and the Customs Act not in its popular
sense i.e. people who are dealing with this trade meant the
same or what that term is commercially known in trade
parlance but it has to be given a meaning in the context in
which this word has been used in the ITC Schedule as well
as in the List of Restricted Items of Import. It is also
necessary to decide whether the word ‘marble’ as stated in
the ITC Schedule refers to only marble or includes
travertine, ecaussine, alabaster and other calcareous
monumental or building stones and can be termed as
marble in the commercial sense or in trade nomenclature so
as to bring the same within the restricted Item 62 of
Appendix 2 of the Import and Export Policy for April 1988 —
March 1991. We have already stated hereinbefore that in
the List of Restricted Items under Item 62 only marble has
been mentioned and not the other stones including
calcareous stone used for building or monumental purposes
which have been left out. Therefore, per se it may be difficult
to say that marble includes the other calcareous stones
mentioned in the ITC Schedule. [...]
xxx
55. It is apparent from all these reports that the calcareous
stone of specific gravity of 2.5 is not marble technically and
scientifically. The finding of the Appellate Tribunal is,
therefore, not sustainable. It is, of course, well settled that
in taxing statue the words used are to be understood in the
common parlance or commercial parlance but such a trade
understanding or commercial nomenclature can be given
only in cases where the word in the tariff entry has not been
used in a scientific or technical sense and where there is no
conflict between the words used in the tariff entry and any
other entry in the Tariff Schedule. In the instant case, in the
Tariff Entry 25.15 in the ITC Schedule, Appendix 1 2DB,
marble, travertine, ecaussine, alabaster and other
calcareous stones of an apparent specific gravity of 2.5 or
more have been mentioned whereas in Entry 62 only the
word marble has been mentioned as a restricted item for
Civil Appeal No. 5531 of 2025 Page 49 of 109


import, the other calcareous stones such as travertine,
ecaussine, alabaster etc. have not been mentioned in Entry
62. In these circumstances, some significance has to be
attached to the omission of the words travertine, ecaussine
and other calcareous monumental or building stones of an
apparent specific gravity of 2.5 or more and alabaster from
the ITC Schedule in Entry 62 of Part B, Appendix 2 of Import
and Export Policy for April 1988 — March 1991. The only
natural meaning that follows from this is that Entry 62 is
confined only to marble as it is understood in a petrological
or geological sense and as defined by the Indian Standards
Institute and not as mentioned in the opinion given by the
Indian Bureau of Mines on visual observation and it does
not extend to or apply to other calcareous stones mentioned
in the ITC Schedule. Moreover, the commercial nomenclature
or trade meaning cannot be given to marble inasmuch as
such a meaning if given will render otiose, redundant the
terms travertine, ecaussine, alabaster and other calcareous
monumental or building stone of an apparent specific
gravity of 2.5 or more whether or not roughly trimmed or
merely cut by sawing. [...]”

(Emphasis Supplied)
54. The Court in Akbar Badrudin ( supr a) declined to interpret the
words by applying the common parlance test, as doing so would
have rendered certain other terms of the tariff item completely
otiose. From the paragraphs above, this Court made it clear that it
would not apply the common or trade parlance tests to determine
the meaning of the terms if: (i) such application contradicts the
statutory context in which the word was used, (ii) such application
conflicts with the clear intention expressed by the statute, or (iii)
the statute itself employs the words in a scientific or technical
sense.

55. The issue before a three-judge bench of this Court, of which one of
us (R. Mahadevan, J.) was a member, in Madhan Agro ( supra ), was
whether pure coconut oil, packaged and sold in small quantities
Civil Appeal No. 5531 of 2025 Page 50 of 109


ranging from 5 ml to 2 litres, should be classified as ‘Edible oil’
under the Heading 1513 ( Coconut (Copra) oil, etc. ) or as ‘Hair oil’
under the Heading 3305 ( Preparations for use on the hair ) of the first
schedule to the Central Excise Tariff Act, 1985. It is not necessary
to set out in detail the factual context of the case for the purposes
herein. It is only important to note the Court’s rejection of the
reliance placed by the Revenue on the common parlance test. The
Court observed that the common parlance 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 the ordinary sense
approach would not be applicable.
36. However, we find that the reliance presently placed by
the Revenue upon the “common parlance test” is utterly
misplaced. The said test would have to be understood in the
proper perspective and cannot be brought into play when
there is no ambiguity and there is no difference in the clear
heading in the First Schedule and the corresponding entry
in the HSN. In Commissioner of Central Excise, New
Delhi v. Connaught Plaza Restaurant P. Ltd., New Delhi,
this court observed that classification of excisable goods
Civil Appeal No. 5531 of 2025 Page 51 of 109


shall be determined according to the headings and
corresponding Chapter or Section Notes but where these are
not clearly determinative of the proper classification, the
same shall be effected according to the general rules of
interpretation and according to the common parlance
understanding of such goods. It was pointed out that fiscal
statutes are framed at a point of time but are meant to apply
for significant periods of time thereafter and they cannot,
therefore, be expected to keep up with nuances and niceties.
It was held that the terms of the statutes must be adapted
to developments of contemporary times rather than being
held entirely inapplicable and it is for this precise reason
that courts apply the “common parlance test” every time
parties attempt to differentiate their products on the basis
of subtle and finer characteristics .
37. Earlier, in Alpine Industries v. Collector of Central
Excise, New Delhi, this court observed that, in interpreting
tariff entries in taxation statues like the Excise Act, where
the primary object is to raise revenue and, for that purpose,
various products are differently classified, the entries must
not be understood in their scientific/technical sense and
must be construed as per their popular meaning, i.e., the
meaning that would be attached to them by those using the
product. However, as already noted above, this exercise
would be undertaken when a product is not clearly defined
or specifically dealt with in the headings in the First
Schedule to the Act of 1985 and the corresponding HSN
entries.
38. Long prior thereto, in Indo International
Industries v. Commissioner of Sales Tax, Uttar Pradesh,
this court held that any term or expression defined in a
taxing statute must be understood in the light of the
definitions given in the Act, in the absence of which the
meaning of the term as understood in common parlance or
commercial parlance must be adopted.”
(Emphasis Supplied)
56. In Madhan Agro ( supra ), after thoroughly examining the relevant
headings, section notes, chapter notes, and Explanatory Notes, this
Court concluded that the criteria as provided by the statute itself
must be met to classify the goods as ‘cosmetics’ under Heading
Civil Appeal No. 5531 of 2025 Page 52 of 109


3305. These criteria include: (i) the good must be suitable for use
as a hair oil; (ii) it had to be put up in packing of a kind sold by
retail for such use; and (iii) if the products are suitable for other
uses then are in packing of a kind sold to consumers and are put
up with labels, literature, or other indications that that they are for
use as a cosmetic, or they are put up in a form clearly specialized
to such use. In such cases, if the common parlance test is applied
to decide on classification without considering these established
criteria, it would amount to a flagrant disregard of the statutory
provisions. This holds particularly true in the HSN era, where GRI
1 explicitly states that the classification of a good should prioritise
chapter headings, chapter notes, and section notes. It is only when
(i) no clear pathway exists to determine classification under a
chapter heading, i.e., absence of a definition or criterion, and (ii)
there is ambiguity regarding the meaning and scope of a tariff item,
that the possibility of invoking the common parlance test arises.
57. In Chemical and Fibres of India Ltd & Ors. v. Union of India
& Ors, reported in (1997) 2 SCC 664 , this Court was faced with
the question of whether polymer chips manufactured by the
assesses and used by them in the production of nylon yarn could
be classified, for the purpose of levying excise duty, under Item 15-
A in Schedule I to the Central Excises and Salt Act, 1944, as it
stood during the period from 1962 to 1972. Item 15-A was amended
in 1964. Before its amendment, the heading of the item read:
Plastics, All Sorts. It was the contention of the assesses that the
polymer chips manufactured by them were not known in the trade
as plastics and, therefore, could not be classified under Entry 15-
A. It was argued on behalf of the Revenue that the chemical
composition of the polymer chips is similar to that of the material
used in the plastic industry, and thus, based on its chemical
Civil Appeal No. 5531 of 2025 Page 53 of 109


composition, it can be appropriately classified as a plastic. For the
period before the amendment, the Court applied the trade parlance
test and held that the polymer chips were not referred to as plastic
in the trade. The Court made the following observations:
“13. [...] Entry 15-A does not use any scientific or technical
term. It deals with “plastics, all sorts”. As Encyclopaedia
Britannica has described, the term “plastic” is a commercial
classification. When this kind of a term in commercial use is
used in an excise entry which deals with marketable
commodities which are manufactured and which are
subject to the levy of excise, we will have to examine that
term in the light of how it is understood in the trade. If,
however, strictly technical or scientific words are used, the
approach for their interpretation may be different.
xxx

18. In the present case, since Entry 15-A as it then stood,
uses a commercial term “plastics” which is well known in
the trade and is used in the trade, we should not go into the
technical analysis of the composition and character of a
plastic product. We should go by the meaning which is
attached to the term “plastics” in the trade parlance.
Plastics as understood in the trade covers all kinds of
synthetic materials. As the Encyclopaedia Britannica sets
out very clearly, there is a distinction made in commercial
parlance between materials used in the production of
plastics and materials used in the production of fibres, films
or rubber although they may share certain structural
features. The assessee has also filed affidavits from people
in the trade to say that polymer chips of the kind
manufactured by the assessee are not considered as
plastics by those dealing in plastics.”
(Emphasis Supplied)

58. Following the amendment, the heading of the item read as follows:
Artificial or synthetic resins, plastic materials, and articles thereof.
Clause (1) of the item referred to artificial or synthetic resins and
plastic materials in any form, some of which were described in sub-
clauses (i), (ii), and (iii). These sub-clauses detail the technical
Civil Appeal No. 5531 of 2025 Page 54 of 109


processes by which the end product is produced. For example, sub-
clause (i) mentions processes such as condensation,
polycondensation, and polyaddition, along with the resulting
products. Sub-clause (ii) refers, inter alia, to polyamides. The Court
acknowledged that after the amendment, the tariff item included
technical and scientific terms and, therefore, resolved the disputes
by interpreting the meaning of the words used therein with the
assistance of technical literature and dictionaries.
59. This Court, in Reliance Cellulose Products Ltd., Hyderabad &
Anr vs Collector of Central Excise, Hyderabad & Anr , reported
in (1997) 6 SCC 464 , examined the legal position regarding the
classification of sodium carboxymethyl cellulose under the Central
Excise Tariff Act, 1985. The department wished to classify it under
Item 15-A(1) as Artificial or synthetic resins, plastic materials, and
articles thereof, while the assessees sought classification under
Item 68, the residuary head. This Court upheld the tribunal's order,
which classified the said goods under Item 15-A based on evidence
that included technical literature. Addressing the assessees
contention that the tribunal failed to consider how the products of
the appellants were known in the trade, the Court held as follows:
“15. The next contention of the appellant was that the
Tribunal has failed to consider the way the products of the
appellants were known in the trade. It is well settled that
excisable commodities have to be understood in the sense
in which the market understands them and have to be
classified accordingly. This proposition may generally be
held to be right but when a technical or scientific term has
been used by the legislature, it must be presumed that the
legislature has used the term in their technical sense. Tariff
Entry 15-A as it stood after its amendment made on 1-3-
1982 was:

“Regenerated cellulose, cellulose nitrate, cellulose
acetate and ethers and other chemical derivatives
Civil Appeal No. 5531 of 2025 Page 55 of 109


of cellulose, plasticide or not (for example
collodions, celluloid).”
16. Regenerated cellulose, cellulose nitrate, cellulose
acetate and ethers as well as other chemicals which were
derivatives of cellulose have to be understood in the
technical sense of the terms. Moreover, it has not been
shown that there is a special meaning given to the product
of the appellant in the market.
xxx
20. In other words, if the word used in a fiscal statute is
understood in common parlance or in the commercial world
in a particular sense, it must be taken that the Excise Act
has used that word in the commonly understood sense.
That sense cannot be taken away by attributing a technical
meaning to the word. But if the legislature itself has adopted
a technical term, then that technical term has to be
understood in the technical sense. In other words, if in the
fiscal statute, the article in question falls within the ambit of
a technical term used under a particular entry, then that
article cannot be taken away from that entry and placed
under the residuary entry on the pretext that the article,
even though it comes within the ambit of the technical term
used in a particular entry, has acquired some other meaning
in market parlance. For example, if a type of explosive (RDX)
is known in the market as Kala Sabun by a section of the
people who uses these explosives, the manufacturer or
importer of these explosives cannot claim that the explosives
must be classified as soap and not as explosive.
xxx
22. [...] Cellulose ether has been made specifically taxable
under Entry 15-A(1). The product manufactured by the
appellant is sodium carboxymethyl cellulose which has
been tested and found to be cellulose ether. The question is
whether this product will come under Entry 15-A(1). It is not
the case of the appellant that this product is known in the
market by some other name and that name is to be found in
some other entry. The Tribunal was right in holding that
SCMC manufactured by the appellant answered the
description “Cellulose Ether” and as such was assessable
under Entry 15-A(1).”
(Emphasis Supplied)
60. Both in Chemical and Fibres of India ( supra ) and Reliance
Cellulose ( supra ), respectively, the Court’s approach of not
Civil Appeal No. 5531 of 2025 Page 56 of 109


applying common parlance was based on the fact that the relevant
tariff items used scientific or technical terms. It is natural that
scientific or technical terms would lack common or commercial
meaning. To illustrate, the Court in R eliance Cellulose ( supra )
observed that the “cellulose ether,” unlike “plastic,” lacked a
common or commercial meaning. The Court in Reliance Cellulose
( supra ) also sounded a note of caution that while dealing with
classification involving tariff headings that use scientific or
technical terms, if fiscal law specifically classifies an item under a
technical term in one category, the same should not be moved to
another category just because people in the market use a different
name for it . Doing so would go against the legislative intent, as the
legislature itself had adopted a technical term, expecting it to be
understood in the technical sense.
61. In Indian Tool Manufacturers v. CCE, reported in 1994 Supp (3)
SCC 632 , a three-Judge bench of this Court examined the
classification of ‘Throw Away Inserts’ and primarily considered
whether such ‘Throw Away Inserts’ could be classified as ‘Tool Tips’.
The appellant challenged this, relying on the market parlance test,
arguing that a customer seeking to buy ‘Throw Away Inserts’ would
not ask for Tool Tips, and vice versa. Rejecting this contention, the
Court made the following observation:
“12.That may be the position. But that will not solve the
controversy in this case. If there is a general heading for the
purpose of levy of Excise Duty, then every variety of goods
falling under that general heading will have to be taxed
under that heading. The fact that a particular variety is
known by a particular name in the market will not take it
out of the general heading. For example, when duty is
leviable on biscuits, then every variety of biscuits will be
taxed under that heading. A particular type of thin crisp
biscuits is known in the market as 'wafer', but basically it
is a biscuit. It was held by the Andhra Pradesh High Court
Civil Appeal No. 5531 of 2025 Page 57 of 109


in the case of International Foods v. Collector of Central
Excise, Hyderabad (1978) E.L.T. (J 50), that 'wafer' was a
kind of biscuit, although it may be different in size and
shape from an ordinary biscuit. A pear-shaped drinking
glass with a small opening is known as 'snifter'. Because of
that, 'snifter' will not cease to be a drinking glass. [...]”
(Emphasis Supplied)
62. In O.K Play (India) Ltd v. Commissioner of Central Excise,
Delhi-III, Gurgaon , reported in (2005) 2 SCC 460 , this Court
again observed that it would not be prudent to determine the
classification of goods solely based on the name used to refer to
such products in trade or common parlance. If the common
parlance or trade parlance test is applied based on such a notion,
i.e., the name used to refer to the product in common parlance or
trade parlance, then the entire rationale behind classification might
be vitiated. If such an application were permitted, importers or
manufacturers could simply alter the names of the products to
achieve classification under the preferred category.
63. Tribunals frequently encounter classification disputes in which
the importer or manufacturer asserts that the subject goods
possess a distinct commercial identity, warranting a classification
that is independent of their common or popular understanding.
Upon reviewing this Court’s observations in Connaught Plaza
( supra ), R eliance Cellulose ( supra ) and O.K Play ( supra ),
respectively, the following settled principles emerge regarding such
claims of separate commercial identity: (i) first, if the importer or
manufacturer claims that a special meaning is attributed to the
goods in the market, then the burden lies on such importer or
manufacturer to prove this specialised meaning, distinct from its
common or commercial understanding; and (ii) secondly, such a
Civil Appeal No. 5531 of 2025 Page 58 of 109


specialised meaning cannot be established solely on the basis of
the product’s marketing and nomenclature in the market.

64. As per this Court’s observations in Indian Tool Manufacturers
(supra), it is clear that the mere fact that a product constitutes a
sub-type of a broader category does not, by itself, establish a
separate commercial identity for classification purposes. To
succeed in such a claim, the importer or manufacturer must
establish that the product has undergone such a substantial
transformation that it can no longer be identified with the general
class of goods of a category, but must instead be recognised as a
distinct commercial entity.

65. We wish to emphasise that the operative standard is one of
‘substantial’ transformation, rather than merely ‘incidental’
modification. Simple incidental changes, which do not
fundamentally alter the nature and character of the goods, do not
suffice to remove a product from the grasp of its general class or
the common or commercial meaning associated with that class.
While the determination of a substantial transformation is
inherently fact-specific, as is evident from this court’s ruling in
Indian Tool Manufacturers (supra), the inquiry must focus on
whether there are major differences in the design, utility, nature,
character, and functions of the good [See Camelbak Products,
LLC v. United States , reported in 649 F.3d 1361 ].
(c) Summary
66. Based on the aforementioned case law, the following governing
principles can be culled out with regard to the application of the
common or trade parlance test while dealing with classification
disputes under taxation laws:
Civil Appeal No. 5531 of 2025 Page 59 of 109



a. The common or trade parlance test must be applied
restrictively. Its function is limited to ascertaining the
common or commercial meaning of a term found within a
tariff heading or its defining criterion.
b. The trade or common parlance test can be invoked when
dealing with a classification dispute only when the following
conditions are satisfied.
i. The governing statute, including the relevant tariff
heading, Section Notes, Chapter Notes, or HSN
Explanatory Notes, does not provide any explicit
definition or clear criteria for determining the meaning
and scope of the tariff item in question.
ii. The tariff heading does not include scientific or
technical terms, or the words used in the heading are
not employed in a specialised, technical context.
iii. The application of the common parlance test must not
contradict or run counter to the overall statutory
framework and the contextual manner in which the
term was used by the legislature.
Thus, broadly speaking, the common or trade parlance test
cannot be invoked where the statute, either explicitly or
implicitly, provides definitive guidance. Explicit statutory
guidance exists where the legislature provides a specific
definition or a clear criterion for a term within the Act itself.
Conversely, implicit guidance is found where the terms
employed are scientific or technical in nature, or where the
statutory context indicates that the words must be construed
in a technical sense. It is only in a state of statutory silence,
where the legislative intent remains unexpressed, that the
Civil Appeal No. 5531 of 2025 Page 60 of 109


tribunals or courts may resort to the common or trade
parlance test.

c. In the contemporary HSN-based classification regime, the
common or trade parlance test cannot serve as a measure of
first resort. It should only be employed after a thorough review
of all relevant material confirms the absence of statutory
guidance.
d. When interpreting terms in a tariff item by relying on the basis
of common or trade parlance, an overly simplified approach
should be avoided, and the words should be understood
within their legal context. Further, when a party asserts a
meaning of a term based on common or trade parlance, it
must present satisfactory evidence to support that claim.
e. When a tariff item is general in nature and does not indicate
a particular industry or trade circle, the common parlance
understanding of that term is appropriate. However, when a
tariff item is specific to a particular industry, the term must
be understood as it is used within that specific trade circle.
f. The common or trade parlance test cannot be used to override
the clear mandate of the statute. Specifically:
i. The test cannot be applied in a way that results in the
reclassification of a good that is clearly identifiable
under a particular heading according to the statute,
simply because that good is marketed or called by a
different name in trade or common parlance.
ii. Conversely, the test cannot be used to challenge the
classification of goods under a statutory heading if those
goods retain the essential characteristics defined by that
heading, even if they have a unique or specialised trade
name.
Civil Appeal No. 5531 of 2025 Page 61 of 109


In other words, the character and nature of the product
cannot be veiled behind a charade of terminology which is
used to market the product or refer to it in common or
commercial circles.
g. To establish a separate commercial identity, it is essential to
demonstrate that the good has undergone such a substantial
transformation that it can no longer be characterised as a
mere sub-type or category of a broader class and thus falls
outside the ambit of the common or commercial
understanding associated with such a class of goods.
67. Furthermore, examining the case law where the common or trade
parlance test was applied by this Court reveals a clear judicial
approach. The Court generally does not undertake an academic
exercise to define the general term in dispute. In Connaught Plaza
( supra ), Oswal Agro ( supra ), and D.L. Steels ( supra ) for example,
the Court did not seek to define ‘ice cream,’ ‘household soap,’ or
‘edible fruit’ respectively. Such an exercise was unnecessary because
the broad meaning of these terms was not disputed. Instead, the
Court's focus was on determining the scope of the term, that is,
whether the good in question fell within that term according to its
common or trade understanding. The question was whether ‘soft
serve’ is regarded as ‘ice cream’ by the public, or if ‘wild pomegranate’
is commonly understood as an ‘edible fruit’. It is in this context that
the Court ascertains the ‘meaning’ of a tariff term, not by giving a
dictionary definition but by defining its scope and limits within a
specific dispute.
68. This reliance on common or trade parlance tests while addressing
classification disputes under taxation statutes, such as the Act,
1975, is not unique to India. In fact, a review of foreign jurisprudence
Civil Appeal No. 5531 of 2025 Page 62 of 109


reveals that courts in both the United States and the European
Union apply the common or trade parlance test in a broadly similar
manner, considering comparable factors and considerations. [See
Skatteministeriet Departementet v Global Gravity ApS, Case C-
788/21, Kreyenhop & Kluge GmbH & Co. KG v Hauptzollamt
Hannover , Case C-471/17 and Len-Ron Mfg. Co. v. United States,
334 F.3d 1304, 1309 (Fed.Cir.2003)]
iii. Consideration of ‘use’ when determining classification
under the Act, 1975

69. Whether or not the purpose for which goods are used can be
considered while deciding on their classification under fiscal statutes
is often a highly debatable issue. As with all classification disputes,
the parties’ position regarding use depends on a single factor: the
rate of the taxable duty. Importers, manufacturers, and traders will
invoke ‘use’ when it allows them to have the goods taxed at a lower
rate. Conversely, the revenue authorities will seek to invoke use
when they see the possibility of taxing the goods at a higher rate.
70. In this case, a similar situation is unfolding. Invoking ‘use’, the
respondents wish to classify the subject goods as a ‘part’ of
agricultural machinery due to the nil rate of customs duty payable
under such a classification. Conversely, the revenue is contesting
such invocation of ‘use’ and instead seeks to classify the subject
goods as ‘aluminium structures’ de hors such consideration of use,
as the same would attract a higher rate of customs duty. To
determine whether ‘use’ can be invoked in this case and what type
of considerations should be taken into account, it is first prudent to
examine how this Court has approached the ‘use’ factor in
classification disputes.
Civil Appeal No. 5531 of 2025 Page 63 of 109



(a) Consideration of ‘Use’ – Indian Perspective
Explicit Reference to ‘Use’ or ‘Adaptation’ in the Tariff Heading

71. In Dunlop India (supra), the primary question before a three-judge
bench of this Court was whether Vinyl Pyridine Latex, a form of
rubber, should be classified as ‘raw rubber’ or ‘synthetic resin’ under
the Indian Tariff Act, 1934. Vinyl Pyridine Latex met all criteria to be
classified as rubber and was recognised internationally as synthetic
rubber latex. However, the Department’s classification was primarily
influenced by the article’s ultimate use. It argued that Vinyl Pyridine
Latex was neither designed for nor intended to be used as rubber.
Instead, Vinyl Pyridine Latex was used as an adhesive in tyre
manufacturing and was rarely employed for the purposes typical of
rubber. The appellate authority rejected classification as ‘raw rubber’
based on this reasoning. This Court allowed the appeal, holding that
Vinyl Pyridine Latex should be classified as ‘raw rubber’.
72. In Dunlop India (supra), this Court had declined to deny the
classification of Vinyl Pyridine Latex as ‘raw rubber’ solely based on
end use, as the same was irrelevant in the context of the tariff entry
concerning ‘raw rubber’, i.e, the entry didn’t refer to use or
adaptation. Therefore, the Court held that the use of an article for
classification under customs law is only relevant if the entry referred
to the “use or adaptation”. If such a reference is absent from the
entry, use cannot be regarded as a relevant factor for the purposes
of classification. The Court also acknowledged that the ‘taxable
event’ occurs when the goods are imported into the country, and
consequently, what matters is the condition of the goods at the time
of import. The relevant observations made by this Court are
produced herein.
“23. [...] Then comes the crucial conclusion of the authority:
Civil Appeal No. 5531 of 2025 Page 64 of 109

xxx
26. To revert to the order of the authority, it is clear that the
authority would have found no difficulty in coming to the
conclusion that V.P. Latex in view of chemical composition
and physical properties is rubber raw, if the same were
commercially used as rubber. The authority, therefore, was
principally influenced to come to its decision on the sole
basis of the ultimate use of the imported article in the trade.
xxx
28. The relevant taxing event is the importing into or
exporting from India. Condition of the article at the time of
importing is a material factor for the purpose of
classification as to under what head, duty will be leviable.
The reason given by the authority that V.P. Latex when
coagulated as solid rubber cannot be commercially used as
an economic proposition, as even admitted by the
appellants, is an extraneous consideration in dealing with
the matter. [...]
xxx
40. We are clearly of opinion that in the state of the
evidence before the Revisional Authority no reasonable
person could come to the conclusion that V.P. Latex would
not come under rubber raw. The basis of the reason with
Civil Appeal No. 5531 of 2025 Page 65 of 109


regard to the end use of the article is absolutely irrelevant
in the context of the entry where there is no reference to the
use or adaptation of the article. The orders of the authority
are, therefore, set aside. In the result the appeals are
allowed with costs.”
(Emphasis Supplied)
73. While the judgment of this Court in Dunlop India (supra) was
delivered in the pre-HSN era, it laid down two principles governing
classification under the customs law which remain relevant even in
the HSN era. They are: (i) evaluation and classification of goods
based on their condition at the time of import, generally referred to
as the ‘as imported’ principle; and (ii) consideration of ‘use’ only
when reference to use or adaptation is provided in the tariff
heading. It is apposite to discuss a few other judgments of this
Court to understand how the aforementioned principle concerning
‘use’ has been applied while dealing with classification disputes
under various fiscal statutes.
74. In Indian Aluminium Cables ( supra ), this Court addressed the
classification of ‘Properzi Rods’. The department argued that
Properzi Rods were ‘aluminium wire rods’ and thus fell under Entry
No. 27(a)(ii) of the First Schedule to the Central Excises and Salt
Act, 1944. Entry No. 27(a)(ii) states: Aluminium – wire bars, wire
rods, and castings, not otherwise specified. Conversely, the
appellants maintained that Properzi Rods were a distinct product,
not commercially known as wire rods, differing in manufacturing
process and use, and therefore should be classified under the
residuary heading, namely Entry No. 68. The Court dismissed the
appeal, ruling that Properzi Rods are a species of “wire rods” and
correctly fall under Entry No. 27(a)(ii). Moreover, the Court held
that the use to which a product is put “ cannot necessarily be
Civil Appeal No. 5531 of 2025 Page 66 of 109


determinative of the classification of that product under a fiscal
schedule like the Central Excise Tariff”. According to the Court,
what was more significant was to ascertain if the “ broad description
of the article fits with the expression used in the Tariff”.
75. In Indian Aluminium Cables ( supra ), this Court’s reluctance to
consider the use of the subject article must be understood in the
context of the entry being dealt with therein, i.e., Entry No. 27(a)(ii).
Like in Dunlop India (supra), this Court in Indian Aluminium
Cables ( supra ) was also dealing with an ‘eo-nomine’ tariff entry. An
eo-nomine tariff entry is one that describes a commodity by a name
rather than by its use. Generally, an eo-nomine tariff entry, with
no terms of limitation, will usually include all forms of a named
article. On examining Entry No. 27(a)(ii), it is clear that it covers all
forms of aluminium wire bars, aluminium wire rods, and
aluminium casting, regardless of their use. Consequently, the
Court concluded that ‘Properzi Rods’ were nothing but a species of
aluminium wire rods.
76. In Kumudam Publications ( supra ) this Court was tasked with
determining the correct classification of printing plates imported by
the assessees under the Act, 1975. It was the Department’s case
that these goods fell under Chapter 37.01/08. On the other hand,
the assessees contended that the printing plates were properly
classifiable under Chapter Heading 84.34. Chapter Heading
37.01/08 broadly covered photographic plates and films, whereas
Chapter Heading 84.34 pertained to machinery, apparatus, and
accessories for printing purposes, including printing blocks, plates,
and cylinders. The Court classified the goods under Chapter 84.34,
after coming to the conclusion that the imported goods, in terms of
their end use, character and nature, were goods employed in the
Civil Appeal No. 5531 of 2025 Page 67 of 109


printing of newspapers and magazines. The Court further held,
citing Indian Tool Manufacturers ( supra ), that the end use or
function of a good is not always irrelevant for classification
purposes. The Court’s approach was aligned with the principle
established in Dunlop India (supra), especially since the case
involved Chapter Heading 84.34, which expressly included
references to use, as it covered various machinery and apparatus
prepared ‘for printing purposes’.
77. The principle established in Dunlop India (supra), which limits the
consideration of ‘use’ to cases where the tariff entry itself explicitly
refers to use or adaptation, must be interpreted within the
framework of the HSN. Under the HSN, GRI 1 gives legal force to
the Section and Chapter Notes, which frequently contain binding
definitions or specific criteria for classification. It is plausible, and
in fact common, that such statutory definitions or criteria explicitly
mention ‘use’. In these cases, ‘use’ becomes a relevant
consideration for classification, not in breach of the principle from
Dunlop India (supra), but as a natural outcome of the statutory
text.
78. A clear illustration of the aforesaid is the catena of decisions of this
Court concerning the classification of goods as ‘Medicaments’
under the Central Excise Tariff Act, 1985. We are not presently
concerned with the specific facts of those cases or all the factors
that this Court considered while resolving the classification
disputes in those cases. Our focus is solely on the fact that, for the
purposes of chapter heading 30.03, medicaments were referred to
as goods for “therapeutic or prophylactic uses”. Therefore, it is clear
that ‘use’ is a relevant consideration while determining a goods
classification under chapter heading 30.03. Accordingly, in such
Civil Appeal No. 5531 of 2025 Page 68 of 109


cases, the Court examined whether the goods in question were
primarily intended for “therapeutic or prophylactic uses”. [See
Commissioner of Customs, Central Excise and Service Tax v.
Ashwani Homeo Pharmacy , reported in 2023 SCC OnLine SC
558 , Puma Ayurvedic Herbal (P) Ltd v. Commissioner, Central
Excise, Nagpur , reported in (2006) 3 SCC 266 & Commissioner
of Central Excise v. Wockhardt Life Sciences Limited , reported
in (2012) 5 SCC 585 ]
‘Use’ or ‘Adaptation’ inherent in the Tariff Heading

79. In Indian Tool Manufacturers ( supra ), this Court examined
whether “Throw Away Inserts” should be classified under Tariff
Item No. 51A (iii) or Tariff Item No. 62 of the Central Excises and
Salt Act, 1944. At the relevant time, the tariff items stated: (a)
51A(iii) - Tools designed to be fitted into hand tools, machine tools,
or tools falling under Sub-item (ii), including dies for wire drawing,
extrusion dies for metals, and rock drilling bits ; and (b) 62. Tool Tips,
in any form or size, unmounted, of sintered carbides of metals such
as tungsten, molybdenum, and vanadium. The Court observed that
to determine whether the ‘Throw Away Inserts’ fall under the
category of Tool Tips, the nature and function of such inserts had
to be examined. In this context, the Court made the following
observations.
“9. A distinction has been drawn between “Tools, designed
to be fitted in hand tools, machine tools and tools of other
specified categories” under one heading, “Tool Tips in any
form or size” under the other heading. In order to find out
whether “Throw Away Inserts” manufactured by the
appellants fall in the category of Tool Tips or Tools, the
essential characteristics of the Inserts will have to be
examined. There is no dispute that the Throw Away Inserts
are unmounted and are of “sintered carbides of metals such
as tungsten, molybdenum and vanadium”. Therefore, the
Civil Appeal No. 5531 of 2025 Page 69 of 109


only question that remains to be considered is whether a
“Throw Away Insert” is a variety of Tool Tip. This
controversy is basically one of fact. The Tribunal has
pointed out that an insert is multi-edged, detachable and
has a shorter life span. It has to be thrown away when its
edges get blunted. The edge of an ordinary Tool Tip can,
however, be sharpened and used again.
xxx
13. The finding of the Department which has been upheld
by the Tribunal is that both Tool Tips as well as Throw
Away Inserts were Carbide Tips for machining of metal. The
Inserts had shorter functional life and were replaceable. The
Tool Tip had one cutting edge while the Insert had multiple
cutting edges. These facts did not alter in any way the basic
character and function of the two articles. Both were tips
meant for machining of metal. Both were manufactured by
the same process and had been made out of same metals.
The Inserts were clamped on the holders. The ordinary Tool
Tips were brazed on the holders. This will not take the
Inserts out of the amplitude of the description in Tariff Item
62 “Tool Tips in any from or size …”. This wide description
will encompass every type of Tool Tips detachable or
otherwise. Whether a Tool Tip is brazed on a tool handle or
clamped on a tool handle will not alter its basic character,
function or use. The form of the Tool Tip is also immaterial.
The detachable Tool Tip is only a variety of Tool Tips and
the fact that it is identified by the name “Throw Away
Insert” will not take it out of the ambit of the heading “Tool
Tips in any form or size …”.
xxx
15. The assessee has been unable to bring to the notice of
the Court anything to show that the nature and function or
composition of a Throw Away Insert is in any way different
from an ordinary Tool Tip. The highest that can be said for
the appellants is that a Throw Away Insert is a detachable
Tool Tip with multiple edges.

Civil Appeal No. 5531 of 2025 Page 70 of 109

80. This Court, in Commissioner of Central Excise, Delhi vs Carrier
Air con Ltd , reported in (2006) 5 SCC 596 , examined the legal
position surrounding the classification of chillers. It was the
assessee’s contention that the chillers should be classified under
Chapter Heading 84.18 of the Central Excise Tariff Act, 1985,
which covers “Refrigerators, freezers and other refrigerating or
freezing equipment, electric or other; heat pumps other than air
conditioning machines of Heading 84.15.” On the other hand, the
Revenue submitted that chillers should be classified under Chapter
Heading 84.15, which pertains to ‘Air-conditioning machines’ as
parts of air conditioning machines. The rationale behind the
Revenue’s classification was that 90% of the chillers manufactured
by the assessee were being used in air conditioning units. Rejecting
this submission of the Revenue, the Court made the following
pertinent observations:
“ 13. From the above, it is established that the primary
function of the chiller is to refrigerate or chill water/liquid
irrespective of the industrial or other application which the
chilled water is put to. Air-conditioning system is just one
amongst the various industrial applications in relation to
which chillers are used. Only because 90% of the chillers
manufactured by the respondent are used in the air-
conditioning systems cannot be the basis for classification
of the chillers as parts of air-conditioning system
classifiable under Heading 84.15.

14. End use to which the product is put to by itself cannot
be determinative of the classification of the product.
See Indian Aluminium Cables Ltd. v. Union of India. There
are a number of factors which have to be taken into
consideration for determining the classification of a product.
For the purposes of classification the relevant factors inter
alia are statutory fiscal entry, the basic character, function
Civil Appeal No. 5531 of 2025 Page 71 of 109


and use of the goods. When a commodity falls within a tariff
entry by virtue of the purpose for which it is put to
(sic produced), the end use to which the product is put to,
cannot determine the classification of that product.

15. Tariff Heading 84.15 covers air conditioning machines
which control and maintain temperature and humidity in
closed places. The main function of air-conditioning system
is to control temperature which is not done by a chiller. A
reading of Tariff Entry 84.15 would show that it is intended
to cover only those machines which comprise elements for
changing temperature and humidity and chillers would fall
outside the purview of the said entry. The function of the
chiller is only to chill water or bring it to a very low
temperature, and it is the air-handling unit having an
independent and distinct function which produces the effect
of air conditioning, controlling the temperature and the
humidity. The chiller itself does not do any air conditioning
as it is designed only to refrigerate or produce chilled
water/liquid.
16. Revenue is classifying the impugned chillers as parts of
the air-conditioning system as the same are used in central
air-conditioning plants of star hotels, airports, hospitals,
large office complexes and large establishments. The use of
the chillers in the air-conditioning system would not take
away the primary or basic function of the chiller which is to
produce chilled water by using a refrigerating circuit.
Heading 84.18 covers refrigerators, freezers and other
refrigerating or freezing equipment. Accordingly, the chillers
in question shall fall under specific Heading 84.18 of the
Tariff Act. This view is supported by the explanatory notes
of HSN below Heading 84.15. HSN provides that:
“If presented as separate elements, the
components of air conditioning machines are
classified in accordance with the provisions of Note
2(a) to Section 16 (Headings 84.14, 84.18, 84.19,
84.21, 84.79, etc.)….”
“Chillers” manufactured by the respondent are cleared
as separate elements and not as (sic part of) air
conditioning machines, therefore, the same have to be
classified under Tariff Entry 84.18 as refrigerating or
freezing equipments as the basic function of the chillers
Civil Appeal No. 5531 of 2025 Page 72 of 109


is to chill the water or liquid. Chillers manufactured by
the respondent cannot be classified under Heading
84.15 simply because 90% of the chillers manufactured
by the respondent were being used in the
commissioning of central air-conditioning plant. End
use to which the product manufactured is put to, cannot
determine the classification of the product when the
product manufactured falls under a specific heading.
17. Chillers in the domestic and international trade
parlance are known as refrigerating equipments. The
trade identifies chillers as refrigerating machinery on
the basis of their function of chilling water using
refrigerating circuit. Even by testing them from the
commercial parlance test as well the chillers would not
be classifiable under Chapter Heading 84.15.”
(Emphasis Supplied)

81. This Court’s observations in Indian Tool Manufacturers ( supra )
and Aircon ( supra ), at first blush, seem to be at odds with the use
principle established in Dunlop India ( supra ). This is because the
tariff headings considered there seem to be ‘eo-nomine’ headings,
such as ‘tool tips’, and ‘air conditioning machines’, which restrict
the consideration of how the goods are intended to be used for
classification purposes. However, this Court appears to have taken
into account the intended use of the goods by considering the
‘function’ of those goods. As laid down above, an eo-nomine
provision describes a good by its name, not by its use, and thus
functions that a good performs are irrelevant considerations when
dealing with eo-nomine tariff provisions. However, the Court’s
approach in Indian Tool Manufacturers ( supra ) and Aircon
( supra ) is not in breach of the principle set out in Dunlop India
( supra ), as it is clear that the tariff headings in consideration therein
refer to use or adaptation that is inherent. Thus, reference to use
or adaptation in a tariff heading can be explicit or implicit.
Civil Appeal No. 5531 of 2025 Page 73 of 109



82. Let us examine this concept of inherent use more carefully. An
inherent reference to ‘use’ or ‘adaptation’ in a tariff heading may
possibly be present in these two scenarios:
a. Firstly, the language of the tariff heading or the supporting
chapter and section notes is inherently indicative of
consideration of use. For example, a heading that reads as
‘refrigerating or freezing equipment’ or ‘tool tips’ inherently
refers to ‘use’ in the form of ‘function’ (refrigeration or
freezing and cutting or working point of a larger tool,
respectively). Consequently, use can be considered a factor
when classifying goods under this heading. Another example
is the heading, which reads, “Motor vehicles principally
designed for the transport of goods.” This clearly indicates
consideration of “use” (transportation of goods), albeit such
consideration of use should be primarily derived from the
design features of the good.
b. Secondly, in cases where the common or commercial
meaning adduced to the eo-nomine good provided for in the
tariff heading is such that the ‘use’ of the article is an
important and defining component of an article’s identity.
For example, the common parlance meaning of ‘air
conditioning machines’ would indicate that the ‘use’ of an
‘air conditioning machine’ is an important and defining
component of its identity.
83. The core method used in Aircon ( supra ) to identify the intended use
of goods was through examining the product's function. This is
because a product's function is often the clearest indicator of its
intended use [See Atul Glass Industries (Pvt) Ltd. & Ors v.
Collector of Central Excise & Ors, reported in (1986) 3 SCC 480
Civil Appeal No. 5531 of 2025 Page 74 of 109


& Thermax Ltd v. Commissioner of Central Excise, Pune-1 ,
reported in (2022) 17 SCC 68 ]. This function-focused approach
offers one way to determine intended use. However, it should be
noted that function is not the only criterion. Depending on the
specific tariff item and relevant statutory context, intended use can
also be assessed through other objective factors, such as design
features and composition. These factors may be considered
individually or together, as demonstrated in Indian Tool
Manufacturers ( supra ), where the Court examined not only the
function but also the design features of the throw-away inserts.
Actual Use and Objective Characteristics and Properties

84. Furthermore, two other aspects that are clearly evident after
reading the Court’s observations in Indian Tool Manufacturers
( supra ) and Aircon ( supra ) are as follows: (i) the actual use to which
a product is put is irrelevant for determining classification and only
intended use can be considered and (ii) if an imported or
manufacturer wishes to classify based on the intended use of the
product, then such ‘intended use’ must be inherent in the product
and should be discernible from the objective characteristics and
properties of the good in question.
85. The twin factors mentioned should be regarded as fundamental
principles while determining the classification of a product under
the First Schedule of the Act, 1975. This is because, according to
Section 12 of the Act, 1962, it is evident that the goods are taxable
at the point of import. Therefore, as recognised by this Court in
Dunlop India ( supra ), what is crucial is the condition of the goods
at the time of import, which is the taxable event under the Act,
1962. By excluding consideration of actual use and subjective
intentions regarding use, it is ensured that classification aligns with
Civil Appeal No. 5531 of 2025 Page 75 of 109


the taxable event. Actual use can be considered only in those rare
instances where there is overwhelming statutory evidence to that
effect.
86. Furthermore, relying on ‘objective characteristics and properties’
ensures legal certainty and ease of verification. The core of the
principles outlined above is to prevent ‘subjectivity’ from influencing
classification disputes. Reckless and unfounded consideration of
subjective elements can lead to a cascade of issues in classification,
as such elements may be used as a shield to import goods at a lower
duty.
Standard of Intended Use

87. A further issue concerns the standard of intended use that an
importer must establish. This standard varies, depending on the
exact wording and legal context of the tariff heading itself. The
burden on the importer is to show that the product's intended use,
supported by its objective features, aligns with the specific standard
set by the statute. Let us understand this through a set of
hypothetical illustrations:
a. A tariff heading might cover “Motor vehicles principally
designed for the transport of goods”. If an importer seeks
classification under this heading, it is not enough to merely
prove the vehicle can carry goods. The law itself defines the
standard. The importer must demonstrate, using objective
evidence of the vehicle's design and features, that its
principal use is to transport goods.
b. An importer imports certain LCDs and wants to classify them
under the heading “Electricity meters”. The relevant chapter
contains a note that states parts or accessories must be
Civil Appeal No. 5531 of 2025 Page 76 of 109


classified under the same heading that describes the final
good if they are intended to be used solely in such final good.
In such a situation, to classify the goods under the heading
of “Electricity meters”, the importer has to satisfy that the
LCDs were such that they could solely be used in electricity
meters.
88. Upon a bare textual reading of the several headings and
chapter/section notes in the Act, 1975, it is clear that for headings
in which use is the main consideration or a descriptive factor, the
legislature has generally provided a standard of use that is
necessary to be achieved by a good to be classified in the said
headings. If the notes mandate ‘sole use’, then the good must be
such that it can be used only for the purpose envisaged by the
heading. Alternatively, if the standard is of ‘principal use’, then the
good must be such that it is used predominantly for the purpose
envisaged by the heading. Whether the good meets the standard so
stipulated can only be decided on a case-to-case basis.
89. In the same breath, we must also clarify that, where the statute is
silent as to the applicable standard of use for headings, then the
statutory context of the said tariff heading, i.e., the relevant section
and chapter notes, have to be perused to gauge the legislative intent
with regard to standard of use i.e. whether the standard of use is
that of simpliciter use, principal use or sole use. Generally,
consideration of ‘use’ in most situations would involve providing
proof of at least ‘principal’ use.
Interlinking consideration of ‘use’ and the common and commercial
meaning of a good

90. From the preceding discussion, it is evident that the consideration
Civil Appeal No. 5531 of 2025 Page 77 of 109


of ‘use’ and the common or commercial meaning of a good are often
inextricably linked. In many instances, the two do not operate in
isolation but rather reinforce one another to provide a
comprehensive understanding of a product's identity. This
interlinkage manifests in two primary ways.
91. First, in cases involving explicit ‘use’ provisions, the common or
commercial meaning is frequently employed to define the scope of
the ‘use’ mandated by the statute. For instance, where a heading
provides for “chemicals to be used for industrial purposes”, the
Court must necessarily inquire into the commercial understanding
of the terms “chemical” and “industrial purposes”. Such an inquiry
serves a dual purpose: it ensures the product matches the
threshold of what constitutes a ‘chemical,’ and it clarifies the ambit
of the qualifying use, i.e., what the trade recognises as an ‘industrial
purpose,’ thereby determining if the subject goods fall within the
ambit of the said tariff heading.
92. Second, in provisions where use is inherent to the eo nomine
description, the interlinkage with common or common parlance
may play out in the following ways:
a. In the first instance, the tariff heading itself may employ
descriptors that necessitate a consideration of use, such as
“household soap” or “industrial soap”. When dealing with
such headings, common or commercial understanding is
utilised to determine the scope of these qualifying terms. The
Court applies the parlance test to discern what is recognised
as having a 'household' versus an 'industrial' application,
thereby identifying whether the specific article in issue fits
within that designated category.
Civil Appeal No. 5531 of 2025 Page 78 of 109



b. In the second instance, the common or commercial identity
of a good may be so fundamentally tied to its application that
its very name implies a specific use. Emphasis is on the
aspect that goods identity is ‘fundamentally’ and
‘substantially’ linked to a certain use or adaptation. In such
cases, the trade recognises the article not merely by its
physical composition, but by the use for which it is intended.
93. However, a note of caution must be struck. The invocation of
common or commercial meaning in these interlinked scenarios
must strictly adhere to the broad parameters established in the
preceding sections of this judgment regarding when the common or
trade parlance test can be invoked. Specifically, the common
parlance test cannot be used to override or bypass explicit statutory
guidance. Where the statute, through a Section or a Chapter Note,
provides a definition or a specific criterion, for example, by
prescribing exactly what constitutes “household soap”, “chemical”,
“industrial purposes” and “industrial soap”, there is no occasion to
resort to commercial understanding.
Eo-Nomine component not to be ignored
94. When dealing with eo-nomine tariff headings, which inherently refer
to use, it is important to ensure that the consideration of use is not
done in complete ignorance of the eo-nomine component. To
illustrate, an importer tomorrow cannot classify any product that
regulates temperature as an air conditioning machine. The importer
must demonstrate that the goods are air conditioning machines
and, in doing so, can emphasise their use and function as helpful
tools that assist in this effort. However, apart from use and
function, other factors, such as physical characteristics, also need
to be satisfied for the good in question to be considered as an air
Civil Appeal No. 5531 of 2025 Page 79 of 109


conditioning machine. Let us consider another example: an
importer claims to classify a cardboard box as a bag, as both are
intended for the same purpose. However, despite their similarity in
intended use, objectively, bags and cardboard boxes are distinct
products, and in common parlance, a bag does not encompass a
cardboard box.
95. The above discussion also applies to provisions that explicitly refer
to use but also have an eo-nomine component. For example, if a
tariff heading refers to machinery used for printing purposes, the
court must satisfy itself of a two-fold criterion: (i) the goods are
machinery, and (ii) the goods are capable of being used for printing
purposes.
Summary
96. Based on the aforesaid discussion, the legal position regarding
consideration of use when dealing with classification disputes
under the First Schedule, Act 1975, can be summarised as follows:
a. ‘Use’ can be considered as a relevant factor when dealing
with classification, only if the concerned tariff heading allows
for consideration of ‘use’ or ‘adaptation’, either explicitly or
implicitly.
b. A tariff entry is said to allow consideration of ‘use’ or
‘adaptation’ for classification in the following scenarios:
i. The tariff heading itself explicitly contains a reference
to use or adaptation.
ii. The notes related to a tariff item provide a legal
definition or criterion that includes a reference to use
or adaptation.
Civil Appeal No. 5531 of 2025 Page 80 of 109



iii. Use or adaptation is inherent in the wording of the
tariff entry itself.

iv. The heading is an eo nomine term with no statutory
definition, and based on the common or trade parlance
test, the Court concludes that the common or
commercial meaning of the good includes ‘use’ or
‘adaptation’ of the good as a defining aspect of its
identity.
c. Unless statutory intention to the contrary is proven, an
importer cannot classify goods based on the actual use to
which the goods are put.

d. If the importer wishes to classify goods based on their
‘intended use’, then the following conditions must be
fulfilled:
i. First, the tariff heading under which the importer
seeks to classify should allow consideration of ‘use’ as
a relevant factor;
ii. Secondly, if such a tariff heading allows for
consideration of ‘use’, the ‘use’ mentioned in the tariff
heading and the ‘intended use’ claimed by the importer
must be consistent.
iii. Lastly, the intended use as claimed by the importer:
1. should be inherent in the goods in question and
should be discernible from their objective
characteristics and properties, which include,
among other things, factors such as function,
design and composition; and
Civil Appeal No. 5531 of 2025 Page 81 of 109



2. should conform to the standard of use
established for that entry.

e. When a tariff heading contains both an eo nomine
component and a use component, both criteria must be
satisfied. An importer cannot rely on the use criterion to
ignore the product's fundamental eo nomine identity.
97. We may clarify that our endeavour here is not to establish a
comprehensive framework or a universal test for classification in all
cases. Such an exercise is unfeasible. This Court, on multiple
occasions, had observed that there can be no single test to resolve
classification disputes [See O.K Play ( supra ) & A.Nagraju Bros v.
State of A.P. , reported in 1994 Supp (3) SCC 122 ]. Our present
discussion is broadly limited to understanding in which scenarios
intended use can be considered and vice versa. The exact criterion
for determining such intended use and the test to be applied for
final classification would depend on the type of goods, the wording
of the tariff entries under review, and other relevant material, such
as chapter, section, and explanatory notes. Furthermore, we once
again wish to emphasise that the consideration of intended use
when determining the classification of a good cannot be considered
in isolation from other relevant considerations.
(b) Consideration of Use – USA and EU perspective
98. It is wise not to rely heavily on foreign cases concerning customs
classification disputes, even though the HSN is adopted by most
countries. This is because each nation may introduce specific
additional subheadings, notes, and rules that govern customs
classification under its own law alone. However, with that being
said, it remains undeniable that foreign jurisprudence is especially
Civil Appeal No. 5531 of 2025 Page 82 of 109


valuable for understanding the broad principles related to customs
classification under the HSN regime.

99. In the United States, tariff item provisions are broadly divided into
eo nomine and use provisions [See Clarendon Marketing, Inc. v.
United States , 144 F.3d 1464 (Fed. Cir. 1998) & Carl Zeiss, Inc.
v. United States , 195 F.3d 1375 (Fed. Cir. 1999)]. Traditionally,
use could only be considered under the latter. However, recently,
US courts have also recognised a third category. This category
allows for consideration of use even under eo nomine headings,
provided the term inherently references the product's use. [See
GRK Canada, Ltd. v. United States, 773 F.3d 1282 (Fed. Cir.
2014) & Ford Motor Company v. United States, 926 F.3d 741
(Fed. Cir. 2019)].
100. Further, in the United States, in addition to the GRI’s, customs
classification is also governed by the “ Additional U.S Rules of
Interpretation” . Use provisions are governed by these additional
rules, specifically Rule 1(a) and Rule 1(b).
a. Rule 1(a) deals with principal use and reads as follows: a
tariff classification controlled by use (other than actual use) is
to be determined in accordance with the use in the United
States at, or immediately prior to, the date of importation, of
goods of that class or kind to which the imported goods
belong, and the controlling use is the principal use.
b. Rule 1(b) deals with actual use and reads as follows: a tariff
classification controlled by the actual use to which the
imported goods are put in the United States is satisfied only
if such use is intended at the time of importation, the goods
Civil Appeal No. 5531 of 2025 Page 83 of 109


are so used, and proof thereof is furnished within 3 years
after the date the goods are entered.
Thus, in the United States, use provisions are categorised either
into principal use provisions or actual use provisions.
101. Under European Union law, it is a well-established principle that,
in the interests of legal certainty and ease of verification, the main
criterion for classifying goods for customs purposes is generally
based on their objective characteristics and properties as defined
in the wording of the relevant heading and notes to the sections or
chapters. [See Indurstriemetall Luma GmbH v Hauptzollamt
Duisburg - Case 38/76].

102. In accordance with the above principle, the intended use of a
product can serve as an objective criterion for classification under
European Union Law only if the intended use is inherent to the
product and can be assessed based on the product’s objective
characteristics and properties. [See Hark GmBh & Co. KG Kamin-
und Kachelofenbau v. Hauptzollamt Duisburg - Case C-450/12
& Staaastssecretaris Van Financlen v. TNT Freight
Management (Amsterdam) BV - Case C-291/11] Several factors
relevant for determining intended use include: (i) the methods of
use of the good, i.e., what functions it can perform; (ii) the place of
the good’s use, i.e., where and in which context it can be used; and
(iii) the design of the good, i.e., whether it is specifically designed
for such an intended purpose. [See Nederlandsch BV, Amsterdam
v. Inspector of Customs and Excise, Amsterdam - Case 37/82,
Oliver Medical SIA v. Valsts ieņēmumu dienests - Case C-
547/13 & Pfizer Consumer Healthcare Ltd v. Commissioners
for Her Majesty’s Revenue and Customs – Case C-182/19]
Civil Appeal No. 5531 of 2025 Page 84 of 109



103. The Indian approach to use-based classification is a hybrid
structure that combines elements of the methods used in the
United States and the European Union. In brief, the differences and
similarities are as follows:
a. While the bifurcation of tariff provisions is not as explicitly
distinguished in India as it is in the United States, both
systems appear to follow a similar approach, namely, that
use can only be considered if (i) the tariff entry explicitly
refers to use or adaptation, or (ii) such use is either inherent
in the tariff entry itself or implied by the meaning of the term
within a tariff entry.

b. The approach of the European Union is less focused on
bifurcating the provisions and more on the objective
characteristics and properties of the good in question. Use
could be a factor in determining classification if the use is
inherent to the product and can be identified through its
objective characteristics or properties.
c. Unlike the US, India and the EU do not have separate
governing rules for use provisions. Instead, in both
jurisdictions, the consideration of use is strictly limited to
the intended use, which must be objectively determined
from the product’s inherent characteristics and properties.
iv. Relevant Provisions
104. Based on the discussion in the preceding sections, it is clear that
tariff headings, relevant section, chapter, and explanatory notes
are crucial when determining a classification dispute. Therefore,
for the sake of convenience, we have extrapolated the relevant
headings and notes related to the classification dispute at hand.
Civil Appeal No. 5531 of 2025 Page 85 of 109


(a) Relevant provisions relating to Aluminium
Structures
Relevant Tariff Heading

CTI 76109010 falls under Chapter 76, which covers ‘Aluminium and
Articles thereof’. Chapter 84, in turn, belongs to Section XV of the Act,
1975, which covers ‘ Base Metals and Articles of Base Metal’

Relevant Section Notes – Section XV of the Act, 1975

105. Relevant portions of Section Note 1 of Section XV read as follows:

1. This Section does not cover:
[...]
(f) Articles of Section XVI (machinery, mechanical
appliances and electrical goods);

106. Section Note 3 of Section XV reads as follows:

3. Throughout this Schedule, the expression “base metals”
means: iron and steel, copper, nickel, aluminum, lead, zinc,
tin, tungsten (wolfram), molybdenum, tantalum,
magnesium, cobalt, bismuth, cadmium, titanium, zirconium,
antimony, manganese, beryllium, chromium, germanium,
Civil Appeal No. 5531 of 2025 Page 86 of 109


vanadium, gallium, hafnium, indium, niobium (columbium),
rhenium and thallium.


Relevant HSN Explanatory Notes to Tariff Heading 7610

107. The relevant HSN Explanatory Notes to Tariff Heading 7610 read
as follows:
a. The provisions of the Explanatory Note to heading 73.08
apply, mutatis mutandis, to this heading.

b. The heading excludes: (a) Assembles identifiable as parts
of articles of Chapter 84 to 88 [...]

108. Relevant Explanatory Note to heading 73.08 is as follows:

“This heading covers complete or incomplete metal
structures, as well as parts of structures. For the purpose of
this heading, these structures are characterised by the fact
that once they are put in position, they generally remain in
that position. They are usually made up from bars, rods,
tubes, angles, shapes, sections, sheeets, plates, wide flats
including so-called universal plates, hoop, strip, forgings or
castings, by riveting, bolting, welding, etc. Parts of
structures include clamps and other devices specially
designed for assembling metal structural elements of round
cross-section (tubular or other). These devices usually have
protuberances with tapped holes in which screws are
inserted, at the time of assembly, to fix the clamps to the
tubing.”

(b) Relevant provisions relating to Parts of Agricultural
Machinery
Relevant Tariff Headings

Civil Appeal No. 5531 of 2025 Page 87 of 109

Boilers, Machinery and Mechanical Appliances; Parts Thereof’ . Chapter
84, in turn, belongs to Section XVI of the Act, 1975, which covers
‘ 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’ .

Relevant Section Notes – Section XVI of the Act, 1975

109. Section Note 2 of Section XVI reads as follows:

2. 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, 8050[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
headings 8409, 8431, 8448, 8466, 8473, 8503,
8522, 8529 or 8538 as appropriate. However, parts
which are equally suitable for use principally with
the goods of headings 8517 and 8525 to 8528 are to
be classified in heading 8517;

(c) All other parts are to be classified in heading
8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529 or
8538 as appropriate or, failing that, in heading
8051[8487] or 8548.


110. Section Note 3 of Section XVI reads as follows:
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3. Unless the context otherwise requires, composite machines
consisting of two or more machines fitted together to form a
whole and other machines designed for the purpose of
performing two or more complementary or alternative
functions are to be classified as if consisting only of that
component or as being that machine which performs the
principal function.

111. Section Note 4 of Section XVI reads as follows:

4. Where a machine (including a combination of machines)
consists of individual components (whether separate or
interconnected by piping, by transmission 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 85, then the whole falls to be classified in the
heading appropriate to that function.


112. Section Note 5 of Section XVI reads as follows:

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.

Relevant HSN Explanatory Notes – Section XVI of the Act, 1975
113. The relevant HSN Explanatory Notes to Section XVI are as
follows:
General
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.

b. In general, the goods of this Section may be of any
material. In the great majority of cases they are of base
metal, but the Section also covers certain machinery of
Civil Appeal No. 5531 of 2025 Page 89 of 109


other materials (e.g., pumps wholly of plastics) and parts
of plastics, of wood, precious metals, etc.

Incomplete Machines

c. Throughout the Section any reference to a machine or
apparatus covers not only the complete machine, but also
an incomplete machine (i.e., an assembly of parts so far
advanced that it already has the main essential features
of the complete machine). Thus a machine lacking only a
flywheel, a bed plate, calender rolls, tool holders, etc., is
classified in the same heading as the machine, and not in
any separate heading provided for parts. Similarly a
machine or apparatus normally incorporating an electric
motor (e.g., electro-mechanical hand tools of heading
84.67) is classified in the same heading as the
corresponding complete machine even if presented without
that motor.

Unassembled Machines

d. For convenience of transport many machines and
apparatus are transported in an unassembled state.
Although in effect the goods are then a collection of parts,
they are classified as being the machine in question and
not in any separate heading for parts. The same applies to
an incomplete machine having the features of the complete
machine (see Part (TV) above), presented unassembled see
also in this connection the General Explanatory Notes to
Chapters 84 and 85). However, unassembled components
in excess of the number required for a complete machine
or for an incomplete machine having the characteristics of
a complete machine, are classified in their own appropriate
heading.

Multi-Function Machines and Composite Machines
(Section Note 3)


e. In general, multi-function machines are classified
according to the principal function of the machine. Multi-
function machines are, for example, machine-tools for
working metal using interchangeable tools, which enable
them to carry out different machining operations (e.g.,
milling, boring, lapping). Where it is not possible to
determine the principal function, and where, as provided
Civil Appeal No. 5531 of 2025 Page 90 of 109


in Note 3 to the Section, the context does not otherwise
require, it is necessary to apply General Interpretative Rule
3(c)

f. Composite machines consisting of two or more machines
or appliances of different kinds, fitted together to form a
whole, consecutively or simultaneously performing
separate functions which are generally complementary
and are described in different headings of Section XVI, are
also classified according to the principal function of the
composite machine. The following are examples of such
composite machines: printing machines with a subsidiary
machine for holding the paper (heading 84.43); a
cardboard box making machine combined with an
auxiliary machine for printing a name or simple design
(heading 84.41); industrial furnaces combined with lifting
or handling machinery (heading 84.17 or 85.14); cigarette
making machinery combined with subsidiary packaging
machinery (heading 84.78).

g. For the purposes of the above provisions, machines of
different kinds are taken to be fitted together to form a
whole when incorporated one in the other or mounted one
on the other, or mounted on a common base or frame or in
a common housing. Assemblies of machines should not be
taken to be fitted together to form a whole unless the
machines are designed to be permanently attached either
to each other or to a common base, frame, housing, etc.
This excludes assemblies which are of a temporary nature
or are not normally built as a composite machine.

Functional Units (Section Note 4)

h. This Note applies when a machine (including a
combination of machines) consists of separate components
which are intended to contribute together to a clearly
defined function covered by one of the headings in Chapter
84 or, more frequently, Chapter 85. The whole then falls to
be classified in the heading appropriate to that function,
whether the various components (for convenience or other
reasons) remain separate or are interconnected by piping
(carrying air, compressed gas, oil, etc), by devices used to
transmit power, by electric cables or by other devices

Civil Appeal No. 5531 of 2025 Page 91 of 109



i. For the purposes of this Note, the expression "intended to
contribute together to a clearly defined function" covers
only machines and combinations of machines essential to
the performance of the function specific to the functional
unit as a whole, and thus excludes machines or appliances
fulfilling auxiliary functions and which do not contribute to
the function of the whole.


j. It should be noted that component parts not complying
with the terms of Note 4 to Section XVI fall in their own
appropriate headings. This applies, for example, to closed
circuit video-surveillance systems, consisting of a
combination of a variable number of television cameras
and video monitors connected by coaxial cables to a
controller, switchers, audio board/receivers and possibly
automatic data processing machines (for saving data)
and/or video recorders (for recording pictures).

Relevant Chapter Notes – Chapter 84 of the Act, 1975

114. Chapter Note 7 of Chapter 84 reads as follows:

7. A machine which is used for more than one purpose is, for
the purposes of classification, to be treated as if its principal
purpose were its sole purpose

Relevant Explanatory Notes – Chapter 84 of the Act, 1975

115. The relevant HSN Explanatory Notes to Chapter 84 are as
follows:
a. Heading 84.25 to 84.78 cover machines and apparatus
which, with certain exceptions, are classified there by
reference to the field of industry in which they are used,
regardless of their particular function in that field


v. Application to the facts at hand
116. In the present case, the dispute revolves around the classification
of aluminium shelves, i.e., subject goods. While the appellant
submits that they should be classified under CTI 76109010 as an
‘Aluminium Structure’, the respondent maintains they should be
Civil Appeal No. 5531 of 2025 Page 92 of 109


classified under CTI 84369900 as ‘Parts of Agricultural
Machinery’.
(a) Whether subject goods can be classified as
‘Aluminium Structures’ under CTI 76109010
117. Upon examining Chapter Heading 7610, it is evident that goods
must meet a two-part criterion to be classified under it: firstly,
they must be made of aluminium, and secondly, they must be a
structure or part of such a structure.
118. It is also clear that Chapter Heading 7610 is an eo-nomine
provision and makes no reference to use in any manner
whatsoever, either explicitly or inherently. Thus, Chapter Heading
7610 is purely an eo-nomine provision. As laid down above, an eo-
nomine provision is one that describes a commodity by its name.
A use limitation cannot be imposed on an eo-nomine provision
unless the name inherently suggests use. An eo-nomine provision
would ordinarily include all forms of the name article.
Consequently, Chapter Heading 7610 would cover all forms of
aluminium structures, except for prefabricated buildings of
heading 94.06, which have been excluded by the heading itself.
119. There is no dispute between the parties that the subject goods are
made of aluminium. Therefore, the only remaining question is
whether the subject goods can be classified as structures and
consequently fall under CTI 76109010.
120. There is no explicit definition or criterion provided for determining
what constitutes a structure in the Schedule to the Act, 1975.
Nevertheless, guidance can be found in the Explanatory Notes.
The Explanatory Note to Chapter Heading 7610 states that the
provisions of the Explanatory Note to heading 7308 apply, mutatis
Civil Appeal No. 5531 of 2025 Page 93 of 109


mutandis, to it. The explanatory note to heading 7308, which is
relevant to Chapter Heading 7610, offers a broad criterion for
recognising ‘structures’: firstly, they generally remain in the same
position once assembled, and secondly, they are usually
composed of various prepared components (such as rods, tubes,
plates, etc.) joined by methods like riveting, bolting, or welding.
121. On the basis of examining the objective characteristics and
properties of the subject goods, it is evident that the subject goods
fulfil the characteristics and unquestionably fall within the
category of structures. To further substantiate, we have no doubt
that even in common parlance, the subject goods would be
referred to as structures. Therefore, the subject goods are
classifiable under CTI 76109010 as Aluminium Structures.
122. However, our finding that the subject goods are classifiable under
CTI 76109010 does not, by itself, resolve the dispute at hand. This
is because both Section Note 1(f) to Section XV and the
Explanatory Note to Chapter Heading 7610 are clear: (1) goods
classifiable under Section XVI are excluded from being classified
under Section XV, and (2) assemblies identifiable as parts of
articles of Chapters 84 to 88 are excluded from being classified
under heading 7610. Therefore, if the respondent’s classification
of the goods as “parts of agricultural machinery” under Chapter
Heading 8436 is accepted, the goods would be legally barred from
classification under Chapter Heading 7610. [See Intel Design
Systems (India) P. Ltd. v. Commissioner of Customs and
Central Excise , reported in (2008) 3 SCC 258 & CCE,
Aurangabad v. Videocon Industries Ltd. , reported in 2023 SCC
OnLine SC 357 ]
Civil Appeal No. 5531 of 2025 Page 94 of 109



123. The reason for excluding goods classifiable under Section XVI
from Section XV can be understood from the Explanatory Notes,
which recognise a practical reality: most goods in Section XVI
(Machinery and Electrical Appliances) are, by their nature, made
of base metals (Section XV). Without this specific exclusion, nearly
every machine or electrical appliance would be classified under
Section XV as an ‘article of base metal’. This would render the
specific headings of Chapters 84 and 85 redundant. Thus, the
exclusion note was created to avoid this absurd result and to
ensure that complex articles (like machinery) are not simply
classified based on their material (in Section XV).
(b) Whether subject goods can be classified as ‘Parts of
Agriculture Machinery’ under CTI 84369900
124. We will now examine the respondent’s primary contention: that
the subject goods are classifiable as ‘parts’ under Chapter
Heading 8436, which, if correct, would exclude them from Chapter
Heading 7610. Chapter Heading 8436 covers “ Other agricultural,
horticultural, forestry, poultry-keeping or bee-keeping
machinery ...”. It is important to note that Chapter Heading 8436
does not refer to a single specific article or machine but rather
includes all agricultural, horticultural, forestry, poultry-keeping or
bee-keeping machinery not specifically listed in the other headings
of Chapter 84. From this perspective, the scope of classification
under Chapter Heading 8436 is quite broad.
125. The basis for the respondent to classify the subject goods under
Chapter Heading 8436 is that they are used for mushroom-
cultivating purposes as parts of the mushroom growing
apparatus. However, as stated above, only the intended use can
be considered. Intended use can serve as the basis for
Civil Appeal No. 5531 of 2025 Page 95 of 109


classification only if the following conditions are met: (i) Chapter
Heading 8436 must permit such consideration of use, (ii) the
intended use is identifiable from the objective characteristics and
properties of the subject goods, and (iii) the intended use aligns
with the standard of use specified in Chapter Heading 8436.
126. Chapter Heading 8436 is an eo nomine provision. It refers to goods
by their name: ‘agricultural machinery’. The fact that an entry
does not specify a particular article, but rather a category of
articles, does not change it from an eo nomine provision to a ‘use’
provision. Tariff headings often name broad categories without
losing their eo nomine character.

127. However, it is undeniable that the term ‘agricultural machinery’
inherently refers to ‘use’. It pertains to items primarily utilised in
agricultural processes. While the First Schedule of the Act, 1975
offers no explicit definition or criteria for classifying goods as
‘agricultural machinery’, support for this interpretation can be
found in the HSN Explanatory Notes, which state that Chapter
Heading 8436 belongs to a category of headings that group
machinery by the field of industry in which it is used , regardless of
its specific function in that field. Such an interpretation aligns
perfectly with the common parlance meaning associated with the
term ‘agricultural machinery’. We have no doubt that, in common
parlance, the term ‘agricultural machinery’ is understood to mean
machinery whose principal use is in agricultural processes.
128. Furthermore, upon reviewing Chapter Heading 8436 and the
relevant chapter, section, and explanatory notes, it is clear that to
be classified under Chapter Heading 8436, the use test must be
one of ‘principal use’, not ‘use’ simpliciter. The rationale behind
this is that a heading that simply refers to a field of industry is
Civil Appeal No. 5531 of 2025 Page 96 of 109


inherently broad. If any possible or incidental use in agriculture
were sufficient, it would improperly expand the scope of this
heading, potentially including general-purpose machines.
Therefore, it is essential that the product's objective
characteristics and design clearly demonstrate that it is
principally intended for use in agricultural purposes. This helps
prevent goods with ambiguous or multiple uses from being
incorrectly classified under this heading.
129. We must not forget that Chapter Heading 8436 is, first and
foremost, an eo nomine heading for ‘machinery’. Therefore, the
initial inquiry is to establish whether the subject good is
‘machinery’. Only after its identity as ‘machinery’ is confirmed can
we proceed to consider ‘use’ and to discern whether its objective
properties and characteristics are such that they would point
towards the fact that the principal use of the subject good is as
agricultural machinery.
130. As regards the question whether the subject goods can be
considered as agricultural machinery, we are in complete
agreement with the appellant’s contention that they are not
‘machinery’ in themselves. The term ‘machinery’ is not defined in
the First Schedule of the Act, 1975. While the appellate authorities
and parties have referred to various dictionary definitions, this
Court has repeatedly cautioned against a mechanical reliance on
such meanings, especially when the common understanding of a
term is clear and unambiguous. We have no doubt that in
common parlance, the subject goods are not understood as
‘machinery’. An iron or steel shelf, for example, is universally
understood as a 'structure' or ‘furniture’, not a machine. By the
same logic, these aluminium assemblies are mere structures. To
Civil Appeal No. 5531 of 2025 Page 97 of 109


classify these static, non-moving assemblies as ‘machinery’ is a
classification that defies common sense and is patently absurd.
[See Commissioner of Income Tax, Madras v. Mir Mohammad
Ali , reported in 1964 SCC OnLine SC 199 ]
131. The respondent has contended, on the basis of Section Note 5 of
Section XVI, that the term “machine” encompasses any
machinery, plant, equipment, apparatus, or appliance. It was
further contended that the subject goods are parts of a
mushroom-growing plant and should therefore be classified as
‘parts’ under CTI 84369900.
132. We find no merit in the respondent’s contention that, based on
Section Note 5 of Section XVI, the word 'machinery' would include
other terms such as ‘plant’, ‘equipment’, ‘apparatus’ or ‘appliance’.
Section Note 5 states: For the purposes of these Notes, the
expression ‘machine’ means any machine, machinery, plant,
equipment, apparatus or appliance cited in the headings of Chapter
84 or 85 . The reason for Note 5 becomes clear when we focus on
the words ‘ for the purposes of these notes ’. It is relevant to note
that the headings in Chapters 84 and 85, respectively, encompass
a broad range of goods, including machines, machinery, plant,
equipment, and appliances. Note 5 offers a single umbrella term
(‘machine’) to be used within the other Section Notes, removing
the need to list each item separately.
133. It is important to emphasise that tariff headings must be
interpreted and construed strictly, i.e., words cannot be added or
omitted. Section Note 5 does not modify or broaden the scope of
the tariff headings themselves. Therefore, if a specific heading,
such as Chapter Heading 8436 in this case, refers solely to
‘machinery’ its scope is limited to ‘machinery’ and cannot
Civil Appeal No. 5531 of 2025 Page 98 of 109


encompass other types of goods like ‘plant’. An item can only be
classified as a ‘plant’ if the relevant heading explicitly includes
that term, for example, Chapter Heading 8404 ( Auxiliary plant for
use with Boilers of Heading 8402 or 8403...) and 8419 ( Machinery,
Plant or Laboratory Equipment, Whether or not electrically
heated...) .
134. At this juncture, the respondent may contend that Chapter
Heading 8436 includes ‘ a germination plant’ and therefore it is
possible to classify other ‘plants’ under the scope of Chapter
Heading 8436. Such a contention is legally untenable. In fact, the
specific inclusion of ‘germination plant’ indicates that the
legislature deliberately intended to include this particular item,
which might otherwise have been excluded. This specific
inclusion reinforces the conclusion that other types of ‘plants’ are
not covered by the term ‘machinery’ in the main heading.
135. Having determined that the term ‘machinery’ in Chapter Heading
8436 cannot be extended to include 'plant’, the next question is
whether the mushroom growing apparatus can be considered as
‘machinery’ in its own right. If the apparatus does not qualify as
‘machinery’, then classification under Chapter Heading 8436 fails
at this initial stage.
136. Upon reviewing the record, we find that this mushroom growing
apparatus cannot be classified as ‘machinery’ under Chapter
Heading 8436. In fact, the respondent itself attempted to classify
the apparatus as a ‘plant’, a term we have already recognised as
distinct from ‘machinery’ and not included within this specific
heading. Furthermore, a close examination of the respondent’s
submissions clearly shows that they do not advance a case for
how the mushroom growing apparatus itself meets the essential,
Civil Appeal No. 5531 of 2025 Page 99 of 109


eo nomine, requirement of being ‘machinery’ under Chapter
Heading 8436.

137. The “mushroom growing apparatus” seems to be a combination of
various separate machines. However, on applying the relevant
section notes and Explanatory Notes, it appears to us that
mushroom growing apparatus does not qualify as: (i) a composite
machine, as the different machines are not meant to be fitted
together permanently, or (ii) a functional unit, because all the
machines do not appear to work together towards a single, clearly
defined function. Rather, each machine, i.e., the head filling
machine, the automatic watering system, and the compost
spreading equipment, seems to perform its own independent task.
The only common element is that they are all part of the broader
mushroom cultivation process, which is different from fulfilling a
specific, unified function. To illustrate, according to the
Explanatory Notes, an irrigation system comprising a control
station with filters, injectors, metering valves, underground
distribution, branch lines, and a surface network would be
considered a functional unit. Conversely, closed-circuit video
surveillance systems, which include a varying number of
television cameras and video monitors connected by coaxial cables
to a controller, switchers, audio receiver, and possibly automatic
data processing machines (for data storage) and/or video
recorders (for recording pictures), would not be regarded as a
functional unit.
138. The core of the respondent's argument, as accepted by the
CESTAT, is that these custom-made shelves are “parts” because
they are designed to allow for the integration of other machines,
Civil Appeal No. 5531 of 2025 Page 100 of 109


post importation. Without such integration, these machines
would not be able to function and fulfil their primary purpose.

139. This Court has consistently held that a “part” is an integral or
constituent component that is essential for the article to be
complete and functional. [See Saraswati Sugar Mills v.
Commissioner of Central Excise, Delhi- III, reported in (2014)
15 SCC 625 , and M/s Steel Authority India Ltd. v.
Commissioner of Central Excise and Customs,
Bhubaneswar , reported in 2022 SCC OnLine SC 1232 ]. This
understanding of parts is consistent with the view taken by the
courts in the European Union regarding ‘parts’ when dealing with
classification disputes. [See Unomedical A/S v.
Skatteministeriet , Case C-152/10 & Turbon International
GmbH v. Oberfinanzdirektion Koblenz , Case C-250/05]

140. The subject goods simply do not meet the aforementioned
standard, as each individual machine is self-contained.
Furthermore, we do not believe that merely being custom-made
and providing the ‘means’ for a machine to complete a task
automatically qualifies it as a ‘part’ of such a machine. Such an
interpretation would fundamentally misunderstand what it
means to make something functional. All of the individual
machines are already complete and fully operational on their own;
their mechanical and electrical functions do not rely on
aluminium shelves. These shelves do not contribute to their
operation; they merely serve as a surface for the devices to perform
their functions. A surface supports an object but does not become
a part of it. To illustrate, a car needs a road to operate. One could
even create a custom race track for a specific race car, enabling it
Civil Appeal No. 5531 of 2025 Page 101 of 109


to be driven solely on that track. However, it is never disputed that
the road is not a ‘part’ of the car.

141. The respondent’s reliance on this Court’s ruling in Dharti
Dredging (supra) will not further its case. The reasons are two-
fold:
a. Firstly, in Dharti Dredging (supra), there was no question
regarding the nature of the good, i.e., whether or not it was
machinery, etc. In the present case, we have already
concluded that the ‘mushroom growing apparatus’ cannot
be considered to be ‘machinery’.
b. Secondly, in Dharti Dredging (supra), the issue was
whether the items were “essential for the purpose of
dredging” and the Court found, based on the facts, that the
dredger would fail to function as a dredger without them. As
we have stated above, that is not the situation in the present
case. None of the individual machines (watering systems,
compost spreaders) would operationally or mechanically fail
without the subject goods, which merely act as platforms.
142. For the reasons outlined above, we are satisfied that the subject
goods do not fall under Chapter Heading 8436. We have
established that the ‘mushroom growing apparatus’ is not
classified as ‘machinery’ and further, that the subject goods are
‘structures’ rather than ‘parts’ of machinery. Consequently, we
find it unnecessary to determine whether the intended use of the
subject goods was apparent through their objective
characteristics and properties.
143. We now wish to discuss certain other aspects of the impugned
judgment, which we believe rested on flawed and insufficient
Civil Appeal No. 5531 of 2025 Page 102 of 109


reasoning. The CESTAT in the impugned judgment based its
decision on two ancillary assertions: first, that the goods have “no
other purpose” other than being used for mushroom cultivation,
and second, that they are known in “trade parlance” as a
“mushroom growing apparatus” rather than mere racks. We
observe that the impugned judgment provides no reasoning or
evidence to substantiate either of these conclusions.
144. The standards of proof required to establish “trade parlance” and
"no other purpose" are stringent. The fact that these have been
custom-made for integration with other machinery used for
mushroom cultivation does not necessarily mean they serve no
other purpose. CESTAT should have assessed and identified
objective features of the subject goods that restricted their use as
any other aluminium structure. No such finding was recorded.
145. Similarly, relying solely on marketing materials, such as
brochures, or on the fact that the goods were sourced from a
person dealing in mushroom cultivating equipment, cannot be
sufficient grounds to establish that, in trade parlance, the subject
goods were known as mushroom growing racks. As we noted
above, to establish a separate commercial identity distinct from
that of general aluminium shelves, sufficient evidence needed to
be presented, especially indicating how the goods, owing to their
design, structure, and function, substantially transformed from
being merely aluminium shelves into mushroom growing racks.
No such evidence is discernible in this case. However, in the facts
of this case, even if the subject goods obtained a separate
commercial identity, it would not still warrant their classification
under CTI 84369900, as they cannot be regarded as ‘parts’ of an
agricultural machinery.
Civil Appeal No. 5531 of 2025 Page 103 of 109



146. Furthermore, the CESTAT also held that Chapter Heading 8436
is “more specific” than Chapter Heading 7610. However, CESTAT
should have never looked into which heading is more specific, as
that criterion is part of GRI 3(a). Since GRIs are to be applied
sequentially, GRI 3 can only be invoked after it is first determined,
under GRI 1, that the goods are prima facie classifiable under both
competing headings. In this case, such a scenario would never
arise. This is because if the goods were indeed classifiable under
Chapter Heading 8436 as held by the CESTAT, then the
classification dispute is solved by the section note, which excludes
goods from Section XVI from the ambit of Section XV. This non-
sequential application of the GRIs is an error that must be
avoided .

147. Looked at from any angle, we are satisfied that the subject goods
cannot be classified under Chapter Heading 8436. Consequently,
the subject goods are liable to be classified under CTI 76109010
as ‘Aluminium Structures’.








Civil Appeal No. 5531 of 2025 Page 104 of 109



F. Conclusion
148. A classification dispute in the context of imported goods arises
when the revenue and the importer disagree on the tariff heading
or sub-heading under which the imported goods ought to be
classified. In such scenarios, the tribunals and courts are tasked
with determining the most appropriate heading/sub-heading for
the purposes of customs law classification. When undertaking
this exercise of determining the most appropriate heading, the
tribunals and courts are bound by the GRIs, which are provided
for in the First Schedule to the Act, 1975 and ought to be applied
sequentially. The GRI 1 forms the basis for classifying goods
under the First Schedule of the Act, 1975, and establishes the
primacy of the notes and terms of headings in determining
classification. Thus, any customs law classification dispute at its
core would involve interpreting the tariff headings involved, along
with the section and chapter notes relevant to such headings.
149. When interpreting a tariff heading involved in a classification
dispute, the tribunal or court may need to invoke and rely on the
common or trade parlance test to understand the meaning and
scope of the terms used in that tariff heading. After a thorough
consideration of this Court’s various rulings on this issue, we
have succinctly summarised the broad factors that need to be
considered in invoking common or trade parlance when dealing
with classification disputes in paragraph 66 of this judgment. At
the core of all the factors mentioned therein is that the common
or trade parlance test can be invoked to determine the meaning
and scope of words, only in the absence of statutory guidance.

150. Furthermore, in some cases, such as the one at hand, one
another related issue relevant for the purpose of determining
Civil Appeal No. 5531 of 2025 Page 105 of 109


whether goods are classifiable under a particular tariff heading is
whether the ‘use’ or ‘adaptation’ of the goods can be considered a
relevant factor. A close examination of various decisions of this
Court on this issue indicates that ‘use’ or ‘adaptation’ can be a
relevant factor in determining classification under a heading, only
if such a heading refers to ‘use’ or ‘adaptation’, explicitly or
inherently. Further, only the intended use as is discernible from
the objective characteristics and properties of the goods can be
taken into account, and not the actual use, as the same ensures
conformity with the ‘as imported’ principle. After a thorough and
detailed examination of all decisions on the subject, we have
summarised the legal position in India regarding the
consideration of use or adaptation when dealing with
classification disputes under the First Schedule of the Act,1975,
in paragraph 96 of this judgment.
151. In the present case, the question before us is whether the subject
goods should be classified under CTI 76109010 as ‘Aluminium
Structures’ or under CTI 84369900 as ‘Parts of Agricultural
Machinery’.
152. To be classified under CTI 76109010, the subject goods need to
fulfil a two-part criterion: first, they must be made of aluminium,
and secondly, they must be a structure or part of such a
structure. On the basis of examining the objective characteristics
and properties of the subject goods, it is evident that the subject
goods fulfil both the characteristics and thus can be classified
under CTI 76109010 as aluminium structures. However, both
Section Note 1(f) to Section XV and the Explanatory Note to
Chapter Heading 7610, respectively, are clear: (1) goods
classifiable under Section XVI are excluded from being classified
Civil Appeal No. 5531 of 2025 Page 106 of 109


under Section XV, and (2) assemblies identifiable as parts of
articles of Chapters 84 to 88 respectively, are excluded from being
classified under the heading 7610. Therefore, if the respondent’s
classification of the goods as “parts of agricultural machinery” is
accepted, the goods would be legally barred from classification
under Chapter Heading CTI 7610901.
153. Chapter Heading 8436 is an eo nomine provision as it refers to
goods by their name: ‘agricultural machinery’. However, it is
undeniable that the term ‘agricultural machinery’ inherently
refers to ‘use’, i.e, machinery whose principal use is in
agricultural processes.

154. For the subject goods to be classified under the CTI 84369900,
once again, a two-fold criterion needs to be fulfilled: (i) there
needs to be agricultural machinery, i.e., a machinery whose
principal use is in the agricultural process, and (ii) the subject
goods ought to be considered as ‘parts’ of such agricultural
machinery.
155. The respondent has contended, on the basis of Section Note 5 of
Section XVI, that the term “machine” encompasses any
machinery, plant, equipment, apparatus, or appliance. It was
further contended that the subject goods are part of a mushroom
growing plant and should therefore be classified as ‘parts’ under
CTI 84369900. On a close reading of Section Note 5 of Section
XVI, it is clear that Note 5 of Section XVI limited the expansion of
the term “machine” to include plants only for the purposes of the
section notes of Section XVI. Consequently, if a specific heading,
such as Chapter Heading 8436 in this case, refers solely to
‘machinery’, its scope is limited to ‘machinery’, and it cannot be
argued on the basis of Section Note 5 that the same would
Civil Appeal No. 5531 of 2025 Page 107 of 109


encompass other types of goods like ‘plant’ also. Thus, the
corollary question that arises now is whether the mushroom
growing apparatus can be termed as ‘machinery’?
156. The “mushroom growing apparatus” seems to be a combination
of various separate machines. However, on applying the relevant
section notes and Explanatory Notes, it appears to us that
mushroom growing apparatus does not qualify as: (i) a composite
machine, as different machines are not meant to be fitted together
permanently, or (ii) a functional unit, because all the machines
do not appear to work together towards a single, clearly defined
function. Rather, each machine, i.e., the head filling machine, the
automatic watering system, and the compost spreading
equipment, seems to perform its own independent task. The only
common element is that they are all part of the broader
mushroom cultivation process, which is different from fulfilling a
specific, unified function. Thus, mushroom growing apparatus
cannot be classified as ‘agricultural machinery’ under Chapter
Heading 8436.
157. Lastly, the subject goods also fail to qualify as parts of the
machines with which they are integrated post-importation. All of
the individual machines are already complete and fully
operational on their own, i.e, their mechanical and electrical
functions do not rely on the aluminium shelves. These shelves do
not contribute to their operation; they merely serve as a surface
for the devices to perform their functions. A surface supports an
object but does not become a part of it.
158. Looked at from any angle, we are of the firm view that the subject
goods cannot be classified under Chapter Heading 8436.
Consequently, the subject goods are liable to be classified under
Civil Appeal No. 5531 of 2025 Page 108 of 109


CTI 76109010 as ‘Aluminium Structures’.
159. For all the foregoing reasons, the appeal succeeds and is hereby
allowed. The impugned Judgment and Final Order No.
55604/2024 dated 19.04.2024 passed by the CESTAT in
Customs Appeal No. 50542 of 2021 is hereby set aside.


….………………………….…. J.
(J.B. PARDIWALA)




….………………………….…. J.
(R. MAHADEVAN)

New Delhi.
January 06, 2026.
Civil Appeal No. 5531 of 2025 Page 109 of 109