Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-005531 – 2025 |
| Diary Number | 53645/2024 |
| Judge Name | HON’BLE MR. JUSTICE J.B. PARDIWALA |
| Bench | HON’BLE MR. JUSTICE J.B. PARDIWALA & HON’BLE MR. JUSTICE K.V. VISWANATHAN |
| Precedent Value | Binding authority |
| Overrules / Affirms | Overrules CESTAT order; affirms SC precedents on GRI and use |
| Type of Law | Customs tariff classification (HSN) |
| Questions of Law | Whether the imported aluminium shelving should be classified as parts of agricultural machinery under CTI 84369900 or as aluminium structures under CTI 76109010? |
| Ratio Decidendi |
The Court applied the General Rules of Interpretation sequentially:
|
| Judgments Relied Upon |
|
| Logic / Jurisprudence / Authorities Relied Upon by the Court |
|
| Facts as Summarised by the Court | M/s Welkin Foods imported aluminium shelving, floor drains and an automatic watering system for mushroom cultivation, classified all under CTI 84369900. An audit reclassified the shelves as CTI 76109010, leading to a duty demand. CESTAT reversed the lower authorities by treating the racks as machine parts; the Supreme Court restored the “aluminium structures” classification. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All Customs authorities and appellate tribunals |
| Persuasive For | Other High Courts, Customs, Excise & Service Tax Appellate Tribunal |
| Overrules | CESTAT decision in Customs Appeal No. 50542/2021 |
| Follows | Dunlop India Ltd., Indian Aluminium Cables Ltd., Collector v. Kumudam |
What’s New / What Lawyers Should Note
- End-use is disregarded unless the tariff heading explicitly refers to adaptation or principal use.
- Chapter 76’s eo-nomine entry for aluminium structures demands classification by material and structure, irrespective of later integration.
- Section XVI and Chapter 76 exclusions bar dual classification of machinery parts and aluminium structures.
- Common parlance test is available only when no statutory definition or technical term defines the heading.
- “Parts” classification requires the article to be inherently indispensable to the machine’s operation.
Summary of Legal Reasoning
- Classification framework: Section 12 of CA 1962 and Section 2 of CTA 1975; HSN structure and GRIs.
- GRI 1–4 sequentially govern classification; Chapter and Section Notes override later rules.
- Common parlance applies narrowly when headings lack definitions or technical terms, and does not override statutory scope.
- “Use” or “adaptation” is relevant only if the tariff entry refers to principal or sole use; must be discernible from objective design and function.
- CTI 76109010 (Aluminium structures) is an eo-nomine entry that covers all structures made of aluminium; Explanatory Notes confirm criteria of permanence and assembly.
- CTI 84369900 (Parts of agri-machinery) requires goods to be machinery parts inherently essential to operation; subject shelving lacks moving parts, not machinery or indispensable parts.
- Section XVI Note 2 and Section XV Note 1(f) jointly exclude overlap between machinery parts and aluminium structures.
Arguments by the Parties
Petitioner (Commissioner of Customs)
- Classification depends on condition at import; end use irrelevant absent explicit use provision.
- Aluminium shelving lacks moving parts and mechanical function; cannot be agricultural machinery or parts.
- Explanatory Notes confirm these are permanent aluminium structures.
- Incomplete or unassembled status does not convert them into machinery parts lacking essential character.
Respondent (M/s Welkin Foods)
- Section XVI’s Note 5 defines “machine” broadly to include plant, equipment, apparatus or appliance.
- Chapter 84 is a specific heading for agricultural machinery; trade parlance recognises “mushroom racks” as machine parts.
- Material from ICAR certificate and supplier exclusivity establish principal use in mushroom cultivation.
- CTI 84369900 is more specific under GRI 3(a); “parts” classification favoured over generic Chapter 76.
Factual Background
M/s Welkin Foods imported aluminium shelving, floor drains and an automatic watering system for mushroom cultivation under Bill of Entry No. 7399702 dated 09.11.2016. The importer declared all items under CTI 84369900. Audit reclassified the shelving as aluminium structures under CTI 76109010, raising a duty shortfall of ₹21,01,983. The Joint Commissioner and appellate authority upheld this reclassification, but CESTAT reversed both decisions, treating the racks as parts of agricultural machinery. The State appealed to the Supreme Court.
Statutory Analysis
- Section 12(1), Customs Act 1962: charging section for customs duty based on CTA 1975 schedules.
- Section 2, Customs Tariff Act 1975: specifies rates in First Schedule; CTA aligned with HSN.
- General Rules of Interpretation (GRI 1–6): sequential rules binding for classification under HSN.
- Section XV Note 1(f): excludes Section XVI articles from Section XV.
- Section XVI Notes 2–5: define parts classification, composite/functional units, and define “machine” for notes.
- HSN Explanatory Notes: chapter 76 and 84 notes give authoritative definitions and scope, subject to alignment test under Madhan Agro.
Alert Indicators
- ✔ Precedent Followed – reaffirmed sequence of GRIs and limited use/common parlance tests.