Cce, Aurangabad v. M/S Videocon Industries Ltd. Thr. Its Director
S. RAVINDRA BHAT, J.
1. These appeals, by the revenue, challenge two orders by the
Customs, Excise and Service Tax Appellate Tribunal (‘CESTAT’
hereafter).
2. In the first appeal1, the assessee is M/s Videocon International
(hereafter “Videocon”). CESTAT, by its impugned order 2 in the first
appeal, allowed Videocon’s appeal and held that the LCD panels imported
by it are classifiable Chapter Heading (“CH”) 9013.8010 [of t he First
Schedule to the Customs Tariff Act, 1975 (hereafter “CTA”)], as Liquid
Crystal Devices- as opposed to the revenue’s stand, th at they are
classifiable as 85.29 “parts of goods falling under heading 85.28”
[television sets falling in heading 85.28]. Videocon manufactur es TV
sets; the LCD panels are used by it, along with other it ems, such as
printed boards, decoders, etc.
3. In the second appeal,3 the revenue is aggrieved by order of the
CESTAT4 whereby import of LCD panels by the assessee i.e., M/S
1 CA 5622/2009
2 Dated 06.01.2009 in Order No. A/46/09/CSTB/C-II
3 CA 8026/2022
4 Dated 09.11.2021 in Order No. A/87132/2021 in Custo ms Appeal No. 85003/2019
263
Harman International (India) Pvt. Ltd., (hereafter “Harman”) was held
to be classifiable under CH 9013.8010, rejecting the revenue’s contention
that they were classifiable as “Car Audio or Video Players” under either
CTH 8519 or 8555. The LCD panels, in this case, were used as part of
audio systems in automobiles.
Brief facts
4. In both appeals, the assesses had imported LCD panels/display
boards. In Videocon appeal, Videocon claimed that the imported goods
fell in the relevant entry in CH 9013.8010. That entry reads as follows:
“9013.8010 Liquid crystal devices (LCD)”
The Chapter Heading read as follows:
“9013 Liquid crystal Devices not constituting articles provided
for more specifically in other headings; Lasers, ot her than
Laser Diodes; other optical appliances and instruments, not
specified or included elsewhere in this chapter”
Whereas, the revenue contended that the LCD panels were to
be classified as CH 8529, which reads as follows:
“Chapter 8529. “Parts suitable for use solely or principal ly
with the apparatus of heading 8525 to 8528”
CH 8528 reads as follows:
“8528 Monitors and projectors, not incorporating Televis ion
reception apparatus, reception apparatus for televi sion,
whether or not incorporating radio-broadcast receiv ers or
sound or video recording or reproducing apparatus”
5. The revenue claimed that the goods were improperly classified;
a show cause notice was issued. The Deputy Commissi oner, who
adjudicated them, ruled against the assessee and held that the goods
were classifiable under CH 8529. 9090. The assessee’s appeal succeeded,
and the Commissioner directed a remand. The Dy. Commissioner, after
remand, confirmed the show cause notice, and affirmed the classification
proposed by it; the assessee appealed against this order, unsuccessfully.
The Commissioner (Appeals) rejected its appeal. It, therefore, approached
the CESTAT, which by the impugned order, set aside the demand, and
upheld the assessee’s plea that the proper classificat ion of the goods
was in CH 9013.8010.
CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.
THR. ITS DIRECTOR [S. RA VINDRA BHAT, J.]
6. In the Harman appeal too, the assessee claimed that the imported
items i.e., LCD panels [declared before the customs authorities as
“Liquid Crystal Devices-TFT-LCD 4.8 in” ] for car audio assemblies,
were properly classifiable in CH 9013.8010. Its contention was rejected
by the revenue authorities, who classified it as “ Sound Recording or
Reproducing Apparatus” in CH 8519, and fell in CH 8522, item
8522.9000. CH 8522 reads as follows:
“8522 Parts and accessories suitable for use solely or
principally with the apparatus of headings 8519 or 8521 ”
The litigation history in Harman’s case followed a trajectory similar
to Videocon’s; ultimately, by the impugned order, CESTAT upheld its
contention that the goods, meant for use in car audio systems, w ere
classifiable in CH 9013.8010.
Contention of parties
7. Ms. Nisha Bagchi, learned counsel appearing for the revenue,
argued that the findings of the CESTAT are erroneous. She argued that
the literature and other documents reveal that the LCD pane ls have
specific model numbers. She pointed to the fact that the websites of the
manufacturers of the imported articles are meant for use i n LCD TVs.
It was undeniable that the imported items were used in the manufacture
of LCD TVs. Some, however, were used in manufacturing monitors,
though they were not sold in the market. Therefore, the goods wer e
LCD devices principally used in the manufacture of LCD TVs . LCD
TV is an apparatus covered specifically under heading 85.25 & 85.28.
8. Counsel argued that heading 90.13 covers only those articles
which are not provided for more specifically in other headings. In the
present case, LCDs are specifically mentioned as parts of LCD TVs in
heading 85.29. Therefore, they cannot be classified under heading 90.13.
Reliance was placed on G.S. Auto International Ltd v Collector of
Central Excise5. It was emphasized that in G.S. Auto (supra), this court
held that the true test for classification is the test of commercial identity
and not functional test. Therefore, the correct question is how the articles
are referred to in the market by those who deal with them, whether for
purchase, sale or otherwise. The commercial parlance test, therefore, is
determinative. Counsel submitted that the court in GS Auto (supra)
5 [2003] 1 S.C.R. 372: 2003 (152) ELT 3 (SC)
265
referred to Notes 2(b) and (3) of Section XVII and observed that a joint
reading of the notes would show that the expression “parts of general
use” throughout the schedule, meant, articles of Heading No. 7318 and
similar articles of other base metal, and the expre ssion ‘part and
accessories’ in Chapter Heading 87.08 did not apply to parts or
accessories unsuitable for use solely or primarily with art icles of CH
87.08 which related to parts and accessories of motor vehicles of CH
87.01 to 87.05. For the purposes of classification under CH 87.08, the
test to be applied is whether the goods are suitable f or use solely or
primarily with articles of CH Nos.87.01 to 87.05; if the answer is in the
affirmative, the goods will be classifiable under CH 87.08, bu t if the
answer is in the negative, they would have to be classified under CH
73.18.
9. It is urged that on an application of similar logic even if LCDs
are covered by CH 90.13, yet, they have to be classified under heading
85.29 since these are solely or principally used for manufacture of LCD
TVs and commercially known as parts of TVs.
10. Learned counsel referred to Chapter Note 2(b) (of Chapter
90) relating to classification of parts and accessories if suitable for use
solely or principally with a particular kind of machine, inst rument or
apparatus or with a number of machines, are to be classified w ith that
machine, instrument or apparatus of that kind. In view of this note, LCDs
for computer monitor are classifiable as part of computer monitor, and
the various general application and special application monitors will alone
be classifiable under Chapter Heading 90.13. The example g iven for
such LCD panels were panel for video games, medical monitoring and
industrial test and control, etc., which are not part of any particular
equipment or machine but can be used in an assortment of machines. It
was submitted that the assessee’s plea about classification of different
parts in various Chapter Headings other than Chapter 84 and 85 , is
irrelevant as the various notes/explanatory notes of all sections, chapters,
and headings are unique to the respective sections or chapters or headings
and cannot be generalized or interchanged or applied to with oth er
sections, chapters or headings, unless specified in the tariff/explanatory
notes or by any other legislation. The absence of explanatory note stating
the parts of LCD TVs will not be classifiable under Chapte r Heading
85.29 if it is specifically specified under any other chapter head ing (in
this case, Chapter Heading 90.13), the assessee cannot rely on notes
relating to other sections and chapters.
CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.
THR. ITS DIRECTOR [S. RA VINDRA BHAT, J.]
11. Lastly, Ms. Bagchi, anticipating reliance- by the assessee upon
the judgment of this court, in Secure Meters v Commissioner of
Customs6- submitted that the ratio of that case cannot be applied to the
facts of this case because, firstly, the competing entri es (in that case)
fell within the same chapter, and secondly, that the factual basis in the
present case, is stronger, because the websites of the manu facturers,
clearly reveal that the imported goods were meant principally to be used
in television sets. Section note 2 (b) applies in this case because the item
in question was not specifically classifiable under its headings, because
it is principally meant for use in television sets .
12. In the second appeal 7 concerning import by Harman
International, the revenue argues that the items are LCD attached with
inseparable PCBs. Both were part of one equipment, though it was
declared as LCDs. Counsel pointed out that Harman, in its letter (dated
19.08.2016) stated that it manufactured Car Audio/infotainment items
and supplied them to auto manufacturers; the shipment contained LCDs
used in its manufacturing process of car audio assembly. Further, it was
stated that the items were assembled with the importer’ s assembled
PCBs to give different outputs on car audio screen and was de signed
specifically to suit end product requirements and could not b e used
separately as an accessory but was an essential part of its manufactured
product. Thus, LCD panels were specifically designed in a part icular
manner to be used only in car audio/infotainment systems. They were,
consequently, specific parts of car audio/infotainment systems and cannot
be used otherwise.
13. Counsel urged that the goods were articles desc ribed
specifically as parts of ‘Sound Recording and Reproducing
Apparatus’ covered under CTH 8522 and because they are constituting
articles described more specifically in other headings, there was no scope
of their being covered under CTH 9013 8010. It was urged, that like in
Videocon, the manufacturer’s literature described the goods specifically
as ‘LCD Module’.
14. Mr. Vivek Singh, learned Senior counsel (appearing in the
Videocon appeal), submitted that the view taken by CESTAT is correct.
Goods are admittedly liquid crystal device; they are specifically covered
6 [2015] 6 S.C.R. 219: 2015 (14) SCC 239
7 CA 8026/2022
267
by the entry heading 90.13 as it is not described more specifically in any
other heading. The entry referred to by the revenue i.e., Chapter Heading
8529 relates to parts suitable for use solely or principally with the
parts of heading nos.85.25 to 85.28, which inter alia includes LCD TV,
cannot be considered as a specific heading.
15. It was argued that Section Note 1(m) to Section XVI clearly
excludes articles of Chapter 90. Therefore, first, it has to be specifically
held that the LCD panels are not covered by Chapter 90. The revenue
does not deny that LCD panels are covered by Chapter Heading 90.13.
This heading, according to the revenue, covers only LCD panels meant
for general use and are interchangeable and not what are pri ncipally
meant for use in TVs. It is argued that tariff entry 90.13 refers to LCDs
which do not constitute articles provided for more specifically in
other headings . The entry relied on by the revenue is 8529, which
deals with parts suitable for use “solely or principally with the
apparatus” of Heading 8525 to 8528. This entry is not confined to LCD
panels meant for use in TVs only but to several other parts which go into
the making of LCD TV like TV tuners, PCB boards, switches, connectors,
speakers, etc., all of which will be classifiable under heading 8529. The
heading referring to parts cannot be treated as heading cover ing the
LCDs more specifically.
16. It is submitted that the description under heading 8529 is general
and not specific, whereas the description under heading 90.13 is more
specific. LCDs consist of items like LCD TV , (referred to under Chapter
Heading 8528.7218 and 8528.7510) and indicator panels incorporating
LCDs (referred to in entry 8531.2000) and other items which are
specifically provided for. The Supreme Court decision in G.S. Auto
(supra) is in the context of Section XVII where Note 2 and 3 provides:
“2 The expression parts’ and ‘parts and accessories’ do not
apply to the following articles, whether or not the y are
identifiable as for the goods this section:
(a) ********
(b) Parts of general use, as defined in Note 2 to Section X V,
of base metal (Section XV), or similar goods of pla stics
(Chapter 39)”
“3. References in Chapters 86 to 88 to parts or acces sories
do not apply to parts or accessories which are not suit able
CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.
THR. ITS DIRECTOR [S. RA VINDRA BHAT, J.]
for use solely or’ principally with the articles of those Chapters.
A part or accessory which answers to a description in two or
more of the headings of those Chapters is to be classified unde r
that heading which corresponds to the principal se of that
part of accessory.”
17. It was argued that the section notes clearly provide that the
word “parts and accessories” will not apply to parts of general use
as defined in Note 2 to Section XV of base metal, and it was in view of
this note that this Court held that parts which are suitable for use solely
or principally with articles of Chapters 86 to 88 are to be treated as parts
and accessories of articles falling under Chapter 86 to 88 in terms of
Note 3. These notes are missing from Section XVI and are, the refore,
irrelevant. Chapter notes/section notes and explanatory notes are unique
to the respective section, chapters and headings they deal with and cannot
be generalized or interchanged. Consequently, classification has reference
to section and chapter notes of the section to which the g oods belong,
i.e., Section XVI. Section Note 2(a) and 2(b) in Section XVI are different
from Section Notes of Section XVII. According to Section Note 2(a) of
Section XVI the parts which are goods included in any of the headings
of Chapter 84 or 85 are, in all cases, to be classified in their respective
headings, and it is only when the parts are not classifiable as per Section
Note 2(a) that Section Note 2(b) is attracted. Therefore, ev en though a
part is suitable for use or solely with a particular kind of machine finds
mention under any headings in Chapter 84 or 85, it will then get classified
under that heading and not as a part of apparatus or a machine.
18. Learned senior counsel relied on the decision of this court in
Secure Meters (supra) and urged that the distinction sought to be made
by the revenue, with this case, is on untenable grounds. It wa s argued
that though the competing entries were in Heading 90, nevertheless, the
article was LC Displays, but used in meters. This clear ly undermined
the revenue’s argument that LCD sets were meant principally for TVs.
They have multiple uses; if the revenue is correct, each such use would
then be a “principal” use. In that event, the Chapter Heading would be
rendered redundant.
19. Mr. V. Lakshmikumaran, learned counsel appearing in Harman,
adopted the submissions made by Mr. Vivek Singh. He additionally relied
on Rule 1 of the General Rules of Interpretation, which provides that:
269
“Classification of goods in this Schedule shall be gov erned
by the following principles:
The titles of Sections, Chapters and Sub-Chapters are provide d
for ease of reference only; for legal purposes, classi fication
shall be determined according to the terms of the hea dings
and any relative Section or Chapter Notes and, provided such
headings or Notes do not otherwise require, according to the
following provisions.”
It was argued that in terms of Rule 1, since classificatio n of a
‘Liquid Crystal Device’ is specifically provided for by nomenclature
under tariff item 9013 8010, the LCDs imported by the asses see were
correctly classifiable under tariff item 9013 8010, i n terms of the
nomenclature of the item.
20. It was argued that Tariff Item 9013 8010 prescribes a mor e
specific description and is to be preferred over any other heading, whereas
tariff heading 8522 provides a general description, as parts and accessories
suitable for use, “solely or principally” with the apparatus of CH 8519 or
8521. The further submission of Mr. Laxmikumaran is that the expression
“parts and accessories” used in CH 8522 excludes articles covered under
Chapter 90 of the Tariff, whether or not they are identifiable as for the
goods falling under Section XVI of the Tariff and that even if any article
is identifiable as a “part or/and accessories for the goods o f Section
XVI, it shall be excluded from the term “parts and accessories”. Learned
counsel relied upon the judgment reported in Collector of Central Excise
v Delton Cables Ltd & Anr 8 where, the court dealt with section Notes
2 (a) and 2 (b) to Chapter 85 and held that Note 2 (b) applies only if the
item is not specifically classifiable under their respe ctive headings. It
was argued, therefore, in the present case, that Note 1 (m) to Chapter 85
specifically excluded from its operation, goods falling in Chapter 90. In
such circumstances, LCD panels were complete article s capable of
multiple uses, and not solely or principally in some artic les. It was
additionally urged that the facts found, clearly showed that the PCBs
attached to the LCD panels imported by the assessee were meant to act
as voltage stabilizers.
8 2005 (12) SCC 284
CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.
THR. ITS DIRECTOR [S. RA VINDRA BHAT, J.]
The provisions
21. First, it would be necessary to refer to the relevant norms of
interpretation under First Schedule of the CTA, i.e. “The General Rules
of Interpretation of this Schedule”. Rules 1, 2 and 3 are relevant and
are extracted below:
THE FIRST SCHEDULE—IMPORT TARIFF (See Section 2)
GENERAL RULES FOR “THE INTERPRETATION OF THIS
SCHEDULE
Classification of goods in this Schedule shall be governed by
the following principles:
1. The titles of Sections, Chapters and Sub-Chapter s are
provided for ease of reference only; for legal purp oses,
classification shall be determined according to the t erms of
the headings and any relative Section or Chapter Notes and,
provided such headings or Notes do not otherwise re quire,
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 unfinis hed,
provided that, as presented, the incomplete or unfi nished
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 clas sified as
complete or, finished by virtue of this rule), pres ented
unassembled or disassembled.
(b) Any reference in a heading to a material or sub stance
shall be taken to include a reference to mixtures o r
combinations of that material or substance with other materials
or substances. Any reference to goods of a given mater ial or
substance shall be taken to include a reference to goods
consisting wholly or partly of such material or sub stance.
The classification of goods consisting of more than one
material or substance shall be according to the principles o f
rule 3.
3. When by application of rule 2(b) or for any other reason,
goods are, prima facie, classifiable under two or m ore
headings, classification shall be effected as follows:
271
(a) the heading which provides the most specific descrip tion
shall be preferred to headings providing a more gen eral
description. However, when two or more headings each refer
to part only of the materials or substances contained in mix ed
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 eq ually
specific in relation to those goods, even if one of them g ives a
more complete or precise description of the goods.
(b) mixtures, composite goods consisting of different mat erials
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 ma terial or
component which gives them their essential character, insof ar
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 m erit
consideration.”
Chapter 85 falls in Section XVI, the heading of which re ads as
follows:
“CHAPTER 85 Machinery and Mechanical Appliances;
Electrical Equipment; Parts thereof; Sound Recorder s and
Reproducers, Television Image and Sound Recorders a nd
Reproducers, and Parts and Accessories of Such Artic les
NOTE 1. This Chapter does not cover:
(a)xxxxxxxxxxx xxxxxx
(m) Articles of Chapter 90…
xxxxxx xxxxxx xxxxxx
1. Subject to Note 1 to this Section, Note 1 to Chapter 84
and to Note 1 to Chapter 85, parts of machines (not being
parts of the articles of heading 8484, 8544, 8545, 8546
or 8547) are to be classified according to the following
rules:
(a) Parts which are goods included in any of the headings of
Chapter 84 or 85 (other than headings 8409, 8431, 8448,
CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.
THR. ITS DIRECTOR [S. RA VINDRA BHAT, J.]
8466, 8473, 8485, 8503, 8522, 8529, 8538, and 8548)
are in all cases to be classified in their respective headings;
(b) other parts, if suitable for use solely or princip ally with
a particular kind of machine, or with a number of
machines of the same heading (including a machine o f
heading 8479 or 8543) are to be classified with the
machines of that kind or in heading 8409, 8448, 8466,
8473, 8503, 8522, 8529 or 8538 as appropriate.
However, parts which are equally suitable for use
principally with the goods of headings 8517 and 8525 to
8528 are to be classified in heading 8517
(c) all other parts are to be classified in heading 8409, 8431,
8448, 8466, 8473, 8503, 8522, 8529 or 8538 as
appropriate or, failing that in heading 8485 or 8548"
Chapter Heading 90, which falls in Section XVII, reads as follows:
“CHAPTER 90
“Optical, Photographic, Cinematographic, Measuring,
Checking, Precision, Medical or Surgical Instrument s and
Apparatus; Parts and Accessories Thereof”
Note 2 to Chapter 90 reads as follows:
2. Subject to Note 1 above, parts and accessories f or
machines, apparatus, instruments or articles of this Chapte r
are to be classified according to the following rules:
(a) Parts and accessories which are goods included in any of
the headings of this Chapter or of Chapter 84, 85 or 91 (ot her
than heading 4[8487], 8548 or 9033) are in all cases to be
classified in their respective headings;
(b) Other parts and accessories, if suitable for use s olely or
principally with a particular kind of machine, instrum ent or
apparatus, or with a number of machines, instrument s or
apparatus of the same heading (including a machine,
instrument or apparatus of heading 9010, 9013 or 9031) are
to be classified with the machines, instruments or app aratus
of that kind;
273
(c) All other parts and accessories are to be class ified in
heading 9033.”
Analysis and Conclusions
22. On a reading of the General Interpretive rules and the notes to
the concerned chapters (85 and 90, in the present case), it is evident that:
(a) classification has to be in accord with “the terms of the headings
and any relative Section or Chapter Notes” (Note 1)
(b) Reference in a heading to “an article” includes “that article
incomplete or unfinished” provided, such incomplete or
unfinished article has “the essential character of the complete
or finished article.” [Note 2(a)]
(c) If on an application of Rule 2(a), an article is classifi able in
more than one heading “the heading which provides the most
specific description shall be preferred to headings p roviding
a more general description.” [Note 3 (a)]
23. Note 1 (m) to Chapter 85 excludes “(m) Articles of Chapter
90…” The revenue relies on Note 2 (b) to Chapter 85, which says “other
parts and accessories, “if suitable for use solely or principally with a
particular kind of machine, instrument or apparatus , or with a
number of machines, instruments or apparatus of the same heading”
and then enumerates heading 9013, to say that Chapter 85 would cover
the present case.
24. The correct manner of interpreting the notes, chapters, and
the General rules of interpretation was explained by this court, in
Commissioner of Central Excise, Nagpur v Simplex Mills Co. Ltd., 9
where the Court held that the Rules for the Interpretation of the Schedule
to the CET Act are framed pursuant to the powers under S ection 2 of
that Act. The court observed:
“The Rules for the Interpretation of the Schedule t o the
Central Excise Tariff Act, 1985 have been framed pursuant to
the powers under Section 2 of that Act. According to Ru le 1
titles of sections and chapters in the Schedule are provided
for ease of reference only. But for legal purposes,
classification ‘shall be determined according to the t erms of
9 [2005] 2 S.C.R. 441: (2005) 3 SCC 51
CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.
THR. ITS DIRECTOR [S. RA VINDRA BHAT, J.]
the headings and any relevant section or chapter note s’. If
neither the heading nor the notes suffice to clarify the sco pe
of a heading, then it must be construed according to the other
following provisions contained in the Rules. Rule 1 gives
primacy to the section and chapter notes along with terms of
the headings. They should be first applied. If no clear picture
emerges then only can one resort to the subsequent rules. T he
appellants have relied upon Rule 3. Rule 3 must be understood
only in the context of sub-rule (b) of Rule 2 which says i nter
alia that the classification of goods consisting of mor e than
one material or substance shall be according to the principl es
contained in Rule 3. Therefore when goods are prima facie,
classifiable under two or more headings, classification sh all
be effected according to sub-rules (a), (b) and (c) of Rule 3
and in that order.”
25. The difficulty in accepting the revenue’s argument, in t his
case, is that it jumps over interpretive instructions. One, Ge neral Note
(1) states that classification has to be in consonance with terms and
headings in chapter notes. Two, Rule 3 (a) categorically enjoins that in
regard to classification, the heading providing for a “more” specific
description prevails over the general one. Three, Note 1 (m) – in Chapter
85 excludes the application of articles falling in Chapter 90. In this court’s
opinion, this note, along with the General Note 3 (a) [o f the General
Rules of Interpretation] that headings that are specifically provided, should
be preferred over the general ones, is decisive. Thus, the revenue’s
contention that by virtue of Note 2 (b) to Chapter 85, the goods are to be
classified based on their principal or sole use is insubstantial because of
the clear mandate of Note 1 (m), which excludes Chapter 90 goods
(which includes LCD panels). More importantly, Note 2 opens with the
expression “subject to Note 1”. This subordinates the entire subject matter
in Note 2; it is only where the article is a “part” whic h acts as an
accessory, that the enumerated portions of Chapter 85 come into play.
Such an interpretation is plainly untenable. In Commissioner of Central
Excise, Delhi-III vs. UNI Products India Ltd., 10 this court had to
consider whether “car matting” fell within Chapter 57 of the I Schedule
to the CET Act per heading “Carpets and Other Textile Floor Coverings”
or were to be classified under Chapter 87, as “vehicles other than railway
10 [2020] 13 S.C.R. 295: 2020 (19) SCC 742
275
or tramway rolling-stock and parts and accessories thereof”. The court
held that the item fell within the description “car matting”:
“25. We do not find any error in such reasoning. Chapter 87
of the Central Excise Tariff of India does not cont ain car
mats as an independent tariff entry. We have reprod uced
earlier the various parts and accessories listed against t ariff
entry 8708. All of them are mechanical components, and
revenue want car mats to be included under the resi duary
sub-head “other” in the same list. The HSN Explanatory Not es
dealing with interpretation of the Rules specificall y exclude
“tufted textile carpets, identifiable for use in motor cars ” from
87.08 and place them under heading 57.03. Revenue’s
argument is that the Explanatory Notes have persuasive value
only. But the level or quality of such persuasive value i s very
strong, as observed in the judgments of this Court t o which
we have already referred. Moreover, the Commissioner himself
has referred to the Explanatory Notes in the order- in-origin al
while dealing with the Respondent’s stand. Thus, we s ee no
reason as to why we should make a departure from the general
trend of taking assistance of these Explanatory Not es to
resolve entry related dispute. Now, on referring to these
Explanatory Notes, we find that one category of car pets
[Textile carpets (Chapter 57)] has been excluded specifical ly
from parts and accessories. In our opinion, the subject-ite m
does not satisfy the third condition specified in Section XVI I
of the Explanatory Notes in relation to “III-Parts and
Accessories”. A plain reading of Clause (C) thereof , which
we have quoted above, excludes “textile carpets” (Ch apter
57).
26. The main argument of the Appellant is that becau se the
car mats are made specifically for cars and are used also in
cars, they should be identified as parts and accessories. But
if we go by that logic, textile carpets could not h ave been
excluded from Parts and Accessories. We have referred to suc h
exclusion in the preceding paragraph. It has also been urged
on behalf of the revenue that these items are not common ly
identified as carpets but are different products. The Tri bunal
on detailed analysis on various entries, Rules and Notes have
CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.
THR. ITS DIRECTOR [S. RA VINDRA BHAT, J.]
found they fit the description of goods under chapter heading
570390.90. We accept this finding of the Tribunal. Once the
subject goods are found to come within the ambit of that
sub-heading, for the sole reason that they are exclusively m ade
for cars and not for “home use” (in broad terms), those goods
cannot be transplanted to the residual entry agains t the
heading 8708. As we find the subject-goods come under the
chapter-heading 570390.90, and the other entry unde r the
same Chapter forming the subject of dispute in the s econd
order of the Commissioner, in our opinion, there is no necessity
to import the “common parlance” test or any other s imilar
device of construction for identifying the position of these
goods against the relevant tariff entries.”
26. In the decision reported as Delton Cables Ltd (supra) too,
this court had emphasized on the rule of classification of the goods in
accordance with a specific description and observed that:
“3. There appears to be no dispute that were it not for Sect ion
Note 2(b), the item in question would be classified under T ariff
Heading 85.44 as contended by the appellant. Sections Notes
2(a) and (b) respectively provide as follows:
“2. (a) Parts which are goods included in any of the headings
of Chapter 84 or Chapter 85 (other than Headings 84 .85
and 85.48) are in all cases to be classified in their respect ive
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 84.79 or
Heading 85.43) are to be classified with the machines of that
kind. However, parts which are equally suitable for use
principally with the goods of Headings 85.17 and 85.25 to
85.28 are to be classified in Heading 85.17.”
4. It is clear from a reading of the two clauses to the sectio n
note that clause
277
(b) would only apply once it was found that the ite ms in
question were not specifically classifiable under t heir
respective headings. As has been clearly said by the Collec tor
(Appeals)
“from the sequence of the paragraphs given under Se ction
Note 2 it is clear that the question of switching over to Section
Note 2(b) can arise only after ensuring that the parts are n ot
covered by Section Note 2(b) [sic Section Note 2(a).] which
begins with the expression “other parts” meaning thereb y that
the parts which are not covered by Section Note 2(a) would
be considered for coverage by Section Note 2(b). One cannot
therefore directly jump over to Section Note 2(b) w ithout
exhausting the possibility of Section Note 2(a).”
27. M/S Intel Design Systems (India) (P) Ltd. vs. Commissioner
of Customs and Central Excise 11 is a decision, where the goods were
described as parts of tanks and other armoured and motorized fighti ng
vehicles, under Heading 8710 was held to fall within Chapter 8 5. The
reasoning of this court, in that case, was as below:
“4. As per Rule 1 on Interpretive Rules, classifica tion of
excisable goods is to be determined according to the terms of
the Heading and in terms of Section/Chapter notes. Note 2(f )
to Section XVII (which governs Chapter 87) excludes the
goods viz. electrical machinery and equipment (Chapter 85).
The goods in question i.e. contractors, switches, cont rol box
etc. are the goods used for switching, protecting el ectrical
circuits or for making connections to or in electri c circuit.
These parts/components are specifically covered under CSH
8536.90. The CBEC Circular relied upon by the assessee i s
not relevant.
5. As per the Explanatory Notes to HSN the parts falling und er
Chapter Heading 8710 would be covered under the sai d
chapter, provided they fulfill both the conditions i.e. they must
be identifiable as being suitable for use solely or prin cipally
11 [2008] 2 S.C.R. 686: 2008 (3) SCC 258
CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.
THR. ITS DIRECTOR [S. RA VINDRA BHAT, J.]
for such vehicles and that they must not be exclude d by the
provisions of Notes to Section XVII. The identifiab le parts
under the said heading bodies of armoured vehicles and parts
thereof, cover special road wheels for armoured car s,
propulsion wheels for tanks, tracts etc. As per thi s
requirement, the goods should not only be identifiable to be
armoured vehicles, but it should so not have been exclud ed
by Notes to Section XVII. The Chapter note 2(f) exc ludes
electrical machinery and equipment falling under Ch apter
85. Explanatory Notes to HSN relating to the parts and
accessories excluded by Note 2 specify items with refer ence
to specific Chapter Heading as per (7) (a), (k) which excludes
photographs and other current collectors for electric tract ion
vehicles, fuses, switches and other electric appara tus of
Heading No.85.35 or 85.36. The items, therefore,
manufactured by the appellants are identifiable or are in the
nature of goods falling under Chapter Heading 85.36. Since
these fall under the category of excluded goods under Chapter
Notes, even though they are used specifically solel y or
principally with the armoured vehicles of Chapter H eading
8710, they are classifiable under Chapter Heading 8536 .90
only as held by the adjudicating authority.”
28. It is, therefore, clear that when goods are excluded from a
particular chapter, the “pull in” through a note has to b e narrowly
construed, as otherwise, the basis of exclusion would be defeated, and
the earlier note (of exclusion) rendered redundant. Finally, Secure Meters
(supra) is decisive on the question that LCDs are not articles provided
“more specifically in other headings”, i.e., other than 90.13. Furthermore,
the fact that LCDs could be used for purposes other than television sets
or audio sets is also concluded because, in that decision, its use in meters
was in issue. This court held, pertinently, as follows:
“17. Keeping in mind the aforesaid nature of produc t in
question, we revert to the tariff entries. It cannot be di sputed
that LCDs are specifically provided in Tariff Item 9013. T he
only condition is that such LCDs should not constit ute
“articles” provided more specifically in other head ings. In
279
the present case, it is also not in dispute that LCDs imported
by the appellant did not constitute any such “article” which
is more specifically provided in other headings. On the
contrary, the Revenue wants to include in the same cha pter
i.e. Chapter 90, though under Entry 9028.90.10 as “ parts
and accessories”. The only reason for including the goods
under Chapter Heading 9028 is that the LCDs were to be
used in the electricity supply meters. However, Ent ry 9028
does not pertain to LCDs but gas, liquid, etc. and i ncludes
electricity supply meters as well. Merely because thes e LCDs
are to be used as parts in the said electricity supply meters,
can it be said that they are to be included in Entr y 9028?
Here, Note 2 of this Chapter Notes becomes important s ince
LCDs are used in the electricity supply meters only a s parts
thereof. Note 2(a) stipulates that parts and accessories w hich
are goods included in the heading of the said chapt er i.e.
Chapter 90, are to be classified in their respective headings.
Going by the plain reading of Note 2(a) it is clear that LC Ds,
which are goods and are used as parts in the final produ ct
mentioned in Chapter 90, namely, electricity supply m eters,
are to be classified in its respective heading. Res pective
heading, which is specifically provided is 9013.
18. It was sought to be argued by Ms Kiran Suri that as per
Note 2(b), when these LCDs are used solely for part icular
instrument, namely, electricity supply meter, it ha s to be
classified with the said meter and, therefore, Chapt er Entry
9028 would get attracted. However, this argument loses sight
of the fact that Note 2(b) relates to “other parts and
accessories”, namely, it would apply to those parts and
accessories for which Note 2(a) is inapplicable. Once we find
that in the present case Note 2(a) squarely applies , the
irresistible conclusion is that the goods will be cl assified in
Tariff Item 9013, which is the specific heading for these
goods.”
29. In view of the above decisions and the foregoing reasoning,
the CESTAT’s reasoning and conclusions, in both cases, that the LCD
CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.
THR. ITS DIRECTOR [S. RA VINDRA BHAT, J.]
sets were under Chapter 90, Entry 9013.8010, is sou nd and
unexceptionable. Consequently, the appeals have to fail and are dismissed,
without order on costs.
Divya Pandey Appeals dismissed.
(Assisted by : Kritika Singh and Shevali Monga, LCR As)