2

CLASSIFICATION OF EXCISABLE GOODS

2.1 Introduction
The classification of goods consists of determining the headings or sub-headings of the
Central Excise Tariff under which the said goods would be covered.
Need for classification
(i)

The actual amount of excise duty payable on excisable goods is, inter alia, dependent upon
the rate of duty. The rate of duty is determinable on the basis of classification of goods.

(ii)

The classification of goods is also required to be decided for the purposes of determining
eligibility to exemptions, most of which are with reference to the Tariff headings or sub
headings.

2.2 Central Excise Tariff

2.2.1 Harmonised System of Nomenclature : Central Excise Tariff Act, 1985 is based on
the Harmonised System of Nomenclature (popularly known as HSN).
HSN is an internationally accepted product coding system formulated under the auspices of
the General Agreement on Tariffs & Trade (GATT). Excise Tariff Act is modelled along with
international practices. The international practice of adopting a uniform classification was done
to facilitate a common understanding of products across countries. In other words, the
classification of a product under this code would be the same across the countries.
2.2.2 Schedules to tariff
The Central Excise Tariff
Act, 1985
First Schedule

Second Schedule

Third Schedule

specifies the items on which basic

excise duty is leviable

specifies the items on which

special excise duty is leviable

Deemed manufacture in relation

to various specified goods.

(a) First Schedule

It consists of 96 chapters and twenty sections. This Schedule provides the rates of basic
excise duty (CENVAT) leviable on various products.

The Institute of Chartered Accountants of India

2.2

Central Excise
(i)

Sections: A group of Chapters representing a broad class of goods.

For example, Section I relates to Live animals and Animal products while Section V
relates to Mineral products.

(ii) Chapters: Each section is divided into various chapters and sub-chapters.

Each chapter contains goods of a particular class.

The chapters are arranged classifying all goods of a kind beginning with the
raw material and ending with the finished products, within the same Chapter.
It is also designed to group all goods relating to the same industry and all goods
obtained from the same raw material under one Chapter, in progressive manner.

(iii) Chapter notes: They are mentioned at the beginning of each chapter. These notes have
been given statutory backing and have been incorporated at the top of each Chapter.
(iv) Heading: Each chapter and sub-chapter is further divided into various heading
depending upon the different types of goods belonging to the same class of products.
(v) Sub-heading: Each heading is further divided into various sub-heading.
(vi) Rules of Interpretation and General explanatory notes
Along the lines of HSN, the Excise tariff has a set of Rules of Interpretation for the
interpretation of First schedule and General Explanatory notes.
(i)

Rules of interpretation:- Six

(ii) General explanatory notes: Two

(b) Second Schedule
Second Schedule specifies the items on which special excise duty is leviable.
However, with effect from 01.03.2006, all goods have been exempted from special
excise duty.
(c) Third Schedule
This schedule specifies goods in relation to which packing, repacking, labeling, relabelling, MRP declaration/alteration or treatment of goods to render them marketable
shall amount to manufacture under section 2(f)(iii) of the Central Excise Act, 1944.
2.2.3 Eight digit classification system : With effect from 28.02.2005, the excisable goods
are classified by using 8-digit system. Description with eight digits is termed as tariff
item. A tariff item under eight digit system would be interpreted as follows:First two digits: refer to the Chapter Number of the Tariff
Next two digits: refer to heading of the goods in that Chapter
Next two digits: indicate Chapter sub-heading
Last two digits: refer to the Chapter sub-sub-heading

The Institute of Chartered Accountants of India

Classification of Excisable Goods

2.3

2.3 Explanatory Notes to the HSN

(i)

Official notes issued by the Customs Co-operation Council

The Explanatory Notes to the HSN are the official notes issued by the Customs Co-operation
Council, Brussels.
(ii) Explain and clarify the scope of headings of HSN
They explain and clarify the scope and extent of each and every heading of the HSN, on the
basis of which the present Central Excise Tariff has been patterned.
(iii) Do not have a legal backing-are only of persuasive value
It is to be remembered that the Explanatory Notes do not have legal backing, unlike the
Chapter Notes and Section Notes contained in the Tariff. Consequently, these Explanatory
Notes are only of persuasive value and can be used as an aid to classification of goods when
there is ambiguity as to the scope of the entry.
(iv) Can be resorted to only in case of ambiguity in tariff items in Central Excise Tariff

HSN explanatory notes can be resorted to in case of ambiguity in classifying goods.

When there is no ambiguity about the scope of the entry, the classification has to be
done as per the tariff entry itself.

Relevant case law

The Larger Bench of Tribunal held that HSN notes can be brought into picture only when there
is doubt or ambiguity about scope of any tariff entry and if tariff entry itself is clear, no external
aid is necessary or permissible for determining its scope. Explanatory Notes in HSN are to be
invoked only if there is ambiguity in tariff items in Central Excise Tariff.

[G.M. Pens International Ltd. v. CC (Sea Port), Chennai, 2005 (187) E.L.T. 180 (Tri. - LB)]
Illustration
Product: Hot air generators
First Heading: 7322
Radiators for central heating, not electrically, heated, and parts thereof, or iron or steel; air heaters
and hot air distributors which can also distribute fresh or conditioned air, not electrically heated,
incorporating a motor-driven fan or blower, and parts thereof, of iron or steel.
Second Heading: 8419
Machinery, plant or laboratory equipment whether or not electrically heated, for the treatment
of materials by a process involving a change of temperature such as heating, cooking,
roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating,
vaporizing, condensing or cooling, other than machinery or plant of a kind used for domestic
purposes, instantaneous or storage water heaters, non-electric.
Classification of hot air generators: Heading no. 7322 expressly covers air heaters. Since
the said tariff entry is clear about the scope, the hot air generators are classifiable under the
heading 7322 and there is no need to refer to Explanatory notes to HSN.

The Institute of Chartered Accountants of India

2.4

Central Excise

2.4 Interpretative Rules to First Schedule of the Central Excise Tariff

The First Schedule to the Central Excise Tariff Act, 1985, contains a set of six general rules
for the interpretation of the Tariff items. By and large, these rules for interpretation are
identical to those contained in the HSN.
Before resorting to interpretative rules, nature, description, purpose and usage of the
goods must be considered
It was held that classification of goods under particular heading depends upon description,
purpose and use of the goods. Therefore, before resorting to interpretative rules, one has to
look at the nature, description, purpose and usage of the goods.
[CCE v. K.W.H. Heliplastics Ltd., 1998 (97) ELT 385 (S.C.)]
2.4.1 RULE 1: GENERAL RULE OF CLASSIFICATION : 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
subsequent rules [i.e. rule 2 to 6].
Example
Heading of Chapter 84 refers to nuclear reactors, machinery etc. but even a hand pump falls
under chapter 84.
Analysis
The above rule lays down the following propositions:(a) The titles of sections, chapters and sub-chapters do not have any legal force.
(b) Terms of headings read with relative section and chapter notes are legally relevant for
the purpose of classification.
(c) The rules of interpretation need not be resorted to when classification is possible on the
basis of description in heading, sub-heading, chapter notes and section notes.
(d) Notes of one chapter or section cannot be applied for interpreting entries in other
chapters or sections.
Relevant case laws:1.

Rajasthan Synthetic Industries Ltd. v. CCE 1989 (42) E.L.T. 24 (Tribunal)

Rules for interpretation are not invocable if the section and chapter notes clearly
determine the classification.

2.

Subhash Photographics v. U.O.I. 1992 (62) ELT 270 (Bom.)

Classification has to be determined according to the terms of the headings read with the
relevant Chapter Notes and Rules of Interpretation.

The Institute of Chartered Accountants of India

Classification of Excisable Goods

2.5

2.4.2 RULE 2
RULE 2(a): CLASSIFICATION OF INCOMPLETE/UNFINISHED ARTICLES
(i) 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.
(ii) 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 dis-assembled.
Analysis
(i)

If any particular heading refers to a finished/complete article, the incomplete/unfinished

form of that article shall also be classified under the same heading provided the
incomplete/unfinished goods have the essential characteristics of the finished goods.

(ii) If any particular heading refers to a finished/complete article, the unassembled/dis-assembled

form of that article shall also be classified under the same heading provided the
unassembled/dis-assembled goods have the essential characteristics of the finished goods.
Examples:(a) Railway coaches removed without seats would still be railway coaches.
(b) A car without seats would still be classified as car.
Only goods requiring minor adjustments can be construed as having the essential
character
It was held that only goods requiring minor adjustments would be construed as having the
essential character. Those requiring major processes like turning, grinding, broaching, groove
cutting, heat treatment, surface treatment etc., cannot be construed as having the essential
character of complete and finished articles and cannot fall within the scope of rule 2(a) of the
General Interpretative Rules.
[Motor Industries Co. Ltd. v. Assistant Collector of Customs 1992 (62) E.L.T. 13 (Mad.)]
RULE 2(b): CLASSIFICATION OF MIXTURES/COMBINATIONS OF A MATERIAL/
SUBSTANCE WITH OTHER MATERIALS/SUBSTANCES
(i)

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.

(ii) 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.
(iii) The classification of goods consisting of more than one material or substance shall be
according to the principles of rule 3.
Analysis
The following propositions are laid out by the above rule:(a) Any reference to a material or substance would refer to mixture or combination of that

The Institute of Chartered Accountants of India

2.6

Central Excise
material or substance.

(b) Any reference to goods containing a particular material or substance would include a
reference to goods consisting wholly or partly of such specified material or substance.
Examples
(a) The term coffee will include coffee mixed with chicory.
(b) Natural rubber will cover a mixture of natural and synthetic rubber.
2.4.3 Rule 3: Classification in Case Goods are Classifiable under two or More Headings
The application of this rule arises when the goods consists of more than one material or substance.
When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable
under two or more headings, classification shall be effected as follows:
Rule 3(a) Specific over general
(i)

The heading which provides the most specific description shall be preferred to headings
providing a more general description.

(ii) 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 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.
Analysis
The heading that provides a more specific description should be preferred over the heading
that provides a general description.
Relevant case laws:(a) Speedway Rubber Co. v. CCE 2002 (143) E.L.T. 8 (S.C.)
Supreme Court held that heading which provides the most specific description shall be
preferred to headings providing a more general description.
(b) A. Nagaraju Bros v. State of Andhra Pradesh 1994 (72) E.L.T. 801 (S.C.)
Electric shaving machine was classifiable under following two headings:Heading No. 85.10: Shavers and hair clippers with self contained electric motors
Heading No. 85.09: Electro-mechanical domestic appliances with self-contained electric motor
It was held that the said product was classifiable under heading No. 85.10 as heading
No. 85.10 is more specific as compared to heading No. 85.09.
(c) Plasmac Machinery Mfg Co. Ltd. v. CCE 1991 (51) E.L.T. 161 (S.C.)
Specific heading should be preferred to general.
Rule 3(b) Essential character principle
Mixtures, composite goods consisting of different materials or made up of different

The Institute of Chartered Accountants of India

Classification of Excisable Goods

2.7

components, and goods put up in sets for retail sale, which cannot be classified with reference
to (a), shall be classified as if they consisted of material which gives them their essential
character, in so far as this criterion is applicable.
Analysis
Sub-rule (b) would apply only if the goods cannot be classified under sub-rule (a). This subrule provides that composite goods should be classified on the basis of that material or
substance that gives it its essential character.
Relevant case law
It was held that in order to find out whether the incomplete article as imported has the
essential character of the completed article, the tests to be applied would be whether the
imported article has attained the approximate shape or outline of the finished article or part
and whether it can only be used for completion into the particular finished article [BHEL v.
CCus 1987 (28) E.L.T. 545 (Tribunal)].
Example
Product: Lead pencil with an eraser at the back.
Classification: Though the above product is composite goods, the essential character is that
it is a pencil and the attachment of eraser at the stub is only for the purpose of adding
convenience to the user. Therefore, it shall be classified as a pencil and not as an eraser.
Rule 3(c) Latter the better
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.
Analysis
If both sub-rules (a) and (b) fail to classify the goods in question, then resort may be had to
sub-rule (c), which provides that composite goods shall be classified on the basis of the
heading that occurs last in numerical order.
Relevant case laws
1.

Mahindra and Mahindra v. CCE 1999 (109) E.L.T. 739 (Tribunal)

When the goods cleared by assessee were equally classifiable under the following two
headings:Heading No. 87.03:-Motor cars and other vehicles principally designed for the transport
of persons.
Heading No. 87.04: Motor vehicles meant for transport of goods.
It was held that heading 87.04 occurs last and as both the headings equally merit
classification, goods shall be classified under 87.04 applying the interpretative rule 3(c).

2.

Artherton Engg. Pvt. Ltd. v. CCus 2001 (129) E.L.T. 502 (Tribunal)
Rule 3(c) of the Rules of Interpretation comes into operation only if goods cannot be

The Institute of Chartered Accountants of India

2.8

Central Excise
classified by following rule 3(a) & 3(b).

2.4.4 RULE 4: AKIN RULE : 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.
Analysis
This rule is popularly referred to as Akin rule. This rule specifies that where goods cannot be
classified according to any of the above principles, then the goods shall be classified under
the heading under which other goods, which are mostly similar to the goods in question (akin
goods), are classified.
Example
Product: Plastic films used to filter or remove the glare of the sun light, pasted on car glass
windows, window panes etc.
Classification: These goods do not find a specific entry in the tariff schedule. However,
heading 3925 30 00 covers Builders wares of plastic not elsewhere specified shutters,
blinds (including Venetian blinds). Even though the product in question is not a builders ware,
they are most akin to plastic blinds and hence it can be classified under 3925 30 00 heading.
2.4.5 RULE 5 : In addition to the foregoing provisions, the following rules shall apply in
respect of goods referred to therein:
(a) Classification of cases/containers used for packaging of goods
Camera cases, musical instrument cases, gun cases, drawing instrument cases,
necklace cases and similar containers shall be classified with a specific article or a set of
articles when of a kind normally sold therewith.
Conditions to be fulfilled:(i)

These cases/containers are specially shaped or fitted to contain a specific article or

a set of articles.

(ii) These cases/containers are suitable for long term use and presented with the
articles for which they are intended.
This rule does not, however, apply to containers which give the whole of its essential
character.
(b) Classification of packing materials and packing containers
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 material or packing
containers are clearly suitable of repetitive use.
Analysis
This rule lays down that:(i)

Cases which are specially designed or fitted to contain a specific article and given with

The Institute of Chartered Accountants of India

Classification of Excisable Goods

2.9

the articles for which they are intended shall follow the classification of the items which
are packed.
(ii) The packing materials and containers cleared along with the goods are classifiable with
the goods.
Example: Leather cases, which are normally supplied along with the goods, however
costly they may be, need not be treated separately for the purpose of classification.
Exceptions to rule 5
(a) Durable containers capable of repetitive use should be classified separately.
Example: Gas cylinders are meant for repetitive use and therefore cannot be classifiable
along with gas.
(b) When packing material itself gives the essential character as a whole.
2.4.6 RULE 6: ONLY SUB-HEADINGS AT THE SAME LEVEL ARE COMPARABLE
(i)

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 sub-heading
notes and, mutatis mutandis, to the above rules, on the understanding that only subheadings at the same level are comparable.

(ii) For the purposes of this rule, the relative section and chapter notes also apply unless the
context otherwise requires.
The main proposition laid down by this rule is that sub-heading at the same level are
comparable. This implies that a sub-heading can be compared only with another sub-heading
within the same heading.

2.5 General Explanatory Notes

There are two general explanatory notes included in the First Schedule. They are(a) Relevance of one dash [-], two dash [--] and three dash [---].

Where in column (2) of this Schedule, the description of an article or group of articles
under a heading is preceded by -, the said article or group of articles shall be taken to
be a sub-classification of the article or group of articles covered by the said heading.

Where, however, the description of an article/group of articles is preceded by - -,

the said article or group of articles shall be taken to be a sub-classification of the
immediately preceding description of the article or group of articles which has -.

Where the description of an article or group of articles is preceded by - - or - - -, the

said article or group of articles shall be taken to be a sub-classification of the
immediately preceding description of the article/group of articles which has - or - -.

(b) Meaning of abbreviation % in relation to the rate of duty

The abbreviation % in column (4) of this Schedule in relation to the rate of duty

The Institute of Chartered Accountants of India

2.10

Central Excise
indicates that duty on the goods shall be charged on the value of the goods* on the basis
of the percentage specified.
*The value of goods (referred to above) is the value fixed, defined or deemed to be, as
the case may be, under or in:(i)

Sub-section (2) read with section 3(3) -Tariff value

(ii) Section 4-Transaction value

(iii) Section 4A of the Central Excise Act, 1944-Maximum Retail Price

2.6 Additional Notes

In First Schedule,-1.

(a) Heading: in respect of goods, means a description in list of tariff provisions

accompanied by a four-digit number and includes all sub-headings of tariff items the
first four-digits of which correspond to that number.
(b) Sub-heading:- in respect of goods, means a description in the list of tariff
provisions accompanied by a six-digit number and includes all tariff items the first
six-digits of which correspond to that number.
(c) Tariff item :-means a description of goods in the list of tariff provisions
accompanying either eight-digit number and the rate of the duty of excise or eightdigit number with blank in the column of the rate of duty.

2.

The list of tariff provisions is divided into Sections, Chapters and Sub-Chapters

3.

In column (3), the standard unit of quantity is specified for each tariff item to facilitate the
collection, comparison and analysis of trade statistics.

2.7 Rules for Interpretation Non-Statutory Principles

Apart from the above statutory principles of classification, the Courts have evolved certain
non-statutory principles. However, it must be understood that statutory principles will have
precedence over non-statutory principles.
2.7.1 Trade parlance test
Meaning of trade parlance test
According to the Trade Parlance test, if a product is not defined in the Schedules and Section
Notes and Chapter Notes of the Central Excise Tariff Act, 1985, then it should be classified
according to its popular meaning or meaning attached to it by those dealing with it i.e., in its
commercial sense.
However, where the Tariff headings itself uses highly scientific or technical terms, goods
should be classified in scientific or technical sense.

The Institute of Chartered Accountants of India

Classification of Excisable Goods

2.11

Relevant case laws

1.

Akbar Badruddin Jiwani v. CC [1990] 47 ELT 161 (SC)

The express wordings of the Tariff Headings and relevant Section and Chapter Notes
would take precedence over the commercial or trade parlance test for classifying
excisable goods. However, if the specific headings and notes do not cover the excisable
goods, then resort must be had to the commercial or trade understanding of the goods.

2.

Bakelite Hylam Ltd. v. CCE 1998, (101) ELT 561 (SC)

When legislature has adopted technical term in a particular entry, classification will have
to be done in the technical sense and resort to common parlance cannot be done.

3.

Chemical and Fibres of India Ltd. v. U.O.I. 1997 (89) E.L.T. 633 (SC)
Tariff Entry using commercial words to be interpreted as understood in the trade. A
different approach may be required where strictly technical or scientific words are used.

4.

CCE v. Fenoplast P. Ltd. 1994 (72) E.L.T. 513 (SC)

Trade understanding to be resorted to if words not defined in the Act.

5.

Shree Baidyanath Ayurved Bhavan Ltd v. CCE 1996 (83) E.L.T. 492 (SC)
Scientific and technical meaning of the terms and expressions used in the tax laws like
Excise Act should not be resorted to. Goods should be classified according to the popular
meaning attached to them by those using the product.

6.

CCE v. Fusebase Eltoro Ltd 1993 (67) ELT 30 (SC)

In the absence of statutory definition of the goods, the classification to be done based on
the common parlance, primary function and the utility.

2.7.2 Burden to prove classification is on Department

(i)

Under normal circumstances, it is the responsibility of the Department to establish the

correct Tariff Heading under which the product falls. The onus is on the Department to
establish the alternate classification, when the Department turns down the one claimed
by the assessee.

(ii) When certain goods are prima facie covered by the generic description, the burden to
prove that they are not so covered would be on the person claiming so.
(iii) To sum up, the burden to prove a particular classification is initially on the Department
and once it is discharged, the onus shifts to the assessee, because it is he who has
exclusive and special knowledge about the product produced by him.
Relevant case laws
1.

Kirloskar Oil Engines Ltd. v. Union of India (1991) (51) ELT 334
It is well settled that the burden to establish that certain goods can be classified and
excise duty can be levied under a particular tariff item is entirely on the Department.

The Institute of Chartered Accountants of India

2.12
2.

Central Excise
Union of India v. Sahney Steel And Press Works Ltd. (1992) (58) ELT 38
It was held by the Tribunal that the burden was on the authorities to establish that
particular goods fell within a particular item of the Tariff.

3.

H.P.L. Chemicals v. CCE, Chandigarh, 2006, (197) ELT 324 (SC)

If the Department intends to classify the goods under a particular heading or sub-heading
different from that claimed by assessee, the Department has to adduce proper evidence
and discharge burden of proof.

4.

Hindustan Ferodo Ltd. v. CCE 1997 (89) E.L.T. 16 (SC)

The burden of proving that a particular goods fall in a particular entry will be on the
Department.

2.7.3 Treatment of goods for the purpose of classification and exemption

The meaning of for the purpose of classification as well as for exemption should be
the same in view of the provisions of section 20 of the General Clauses Act.
The onus of proving dutiability is on the Department. However, in the case of exemption, the
burden is on the tax payer claiming the exemption.
Relevant case laws
1.

Eskayef Ltd. v. CCE 1990 (49) ELT 649 (SC)

The Supreme Court held that the exemption from payment of a excise duty which has
been granted under a Notification is confined to goods falling under a particular Tariff
Heading. Merely because a product can be used for the purposes as specified in the
exemption notification does not qualify it for exemption, unless it also falls under the
Tariff Heading specified in the Notification because the exemption cannot transfer
product from one Tariff entry to another.

2.

Naffar Chandra Jute Mills Ltd. v. Asst. CCE 1993 (66) E.L.T. 574 (Cal.)
The Calcutta High Court has held that the Rules for Interpretation of the Central Excise
Tariff are applicable for interpreting exemption notifications as well.

3.

Maestro Motors Ltd. 2004 (174) E.L.T. 289 (SC)

If a tariff heading is specifically mentioned in exemption notification, the Rules for
Interpretation will apply to such exemption notification. However, if an item is specifically
mentioned without any tariff heading, then exemption would be available even though for
purpose of classification, it may be something else.

4.

Pravinchandra D. Bros. v .CC 1996 (88) E.L.T. 151 (Tribunal)

Chapter Note and Section Note relevant for the classification purposes only and not to be
applied for interpreting the exemption notification so long as the description in the tariff
and the notification is different.

The Institute of Chartered Accountants of India

Classification of Excisable Goods

2.13

2.7.4 Other principles

1.

Rule of interpretation to be preferred over common parlance test

The Supreme Court held that Rules of interpretation will be preferred to the common
parlance test.
[CCE v. Wood Polymers Ltd. 1998 (97) E.L.T. 193 (SC)]

2.

Composition important in classification

Generally in classification matters, composition is important. The End User test would be
applicable only if the relevant entry says so.
[CCE v. Mannampalakkal Rubber Latex Works, 2007 (217) ELT 161 (SC)]

3.

Classification of waste of any article

Waste of any particular article will be classified as waste of that article only if the article
retains its original character after the process yielding the waste is being carried on it.
[CCEx., Cochin v Apollo Tyres Ltd. 2005 (184) ELT 115 (SC)]

4.

Applicability of Composition and end-user test

In matters of classification, composition test was an important test and end-user test
applied only if the entry said so.
[CCEx. v. Mannampalakkal Rubber Latex Works 2007 (217) ELT 161 (SC)]

5.

Reliability on Wikipedia for the purposes of classification

Wikipedia, like all other external aids to construction, like dictionaries etc., was not an
authentic source, although the same might be looked at for the purpose of gathering
information. Where an express statutory definition of a word existed, a Wiki definition
could not be preferred. It could not normally be used for the purpose of interpreting a
taxing statute or classification of a product vis--vis an entry in statute.
[Ponds India Ltd. v. Comr. of Trade Tax, Lucknow 2008 (227) ELT 497 (S.C.)]

6.

Non-alignment of entries in the Harmonised System of Nomenclature (HSN) and the

Excise Tariff
When the entries in the Harmonised System of Nomenclature (HSN) and the Excise
Tariff are not aligned, reliance cannot be placed upon HSN for the purpose of
classification of goods under the said Tariff.
[Camlin Ltd. v. CCEx., Mumbai 2008 (230) E.L.T. 193 (SC)]

2.8 Power of Central Government to amend First and Second

Schedules to the Tariff
The Central Government has the power to amend the Schedules by notification under section
5 of the Central Excise Tariff Act. This is subject to the condition that such amendment shall
not alter or affect in any manner, the rates of duty. The provisions of this section are:

The Institute of Chartered Accountants of India

2.14

Central Excise

(1) Where the Central Government is satisfied that it is necessary so to do in the public
interest, it may, by notification in the Official Gazette, amend the First Schedule and the
Second Schedule. However, such amendment shall not alter or affect in any manner the rates
specified in the First Schedule and the Second Schedule in respect of goods at which duties of
excise shall be leviable on the goods under the Central Excise Act, 1944.
(2) Such notifications shall be laid before each House of Parliament, while it is in session, for
a total period of thirty days as soon as it is issued. These thirty days may be comprised in one
session or in two or more successive sessions. If before the expiry of the session, immediately
following the session or the successive sessions aforesaid, both Houses agree in making any
modification in the notification or both Houses agree that the notification should not be issued,
the notification shall thereafter have effect only in such modified form or be of no effect, as the
case may be. However, any such modification or annulment shall be without prejudice to the
validity of anything previously done under that notification.

2.9 Clarifications
2.9.1 Classification of coconut oil packed in small containers
Issue
Under which of the following two chapters, the coconut oil sold in small packs (upto 200
ml), should be classified:

Chapter 15 covering various types of vegetable oil including coconut oil.

Chapter 33 covering cosmetics including hair oil?

Clarification
Classification of coconut oil
packed in small containers

When hair oil is printed on

the container/label
As hair oil under Chapter 33

When edible oil and pure

coconut oil/ coconut oil is
printed on the container/label
As per Annexure A* below

*Annexure A
In this case, the classification of coconut oil would depend upon the fact as to how the
majority of the customers use it. Therefore, it would be classified as follows:S.No.
1.

Use by the consumer

It would be classified as
Coconut oil packed in packages Hair oil under heading 3305 (refer Note
which are generally meant for below)

The Institute of Chartered Accountants of India

Classification of Excisable Goods

sale in retail as hair oil (packed in
containers upto 200 ml)
Coconut oil packed in say 1 liter
or 2 liter packages, which are
generally used by consumers for
edible purposes

2.

2.15

(even though few consumers may use it as

edible oil)
Vegetable oil under Chapter 15
(even though some customers may use it as
hair oil)

Note: Reasons for the classification under heading 3305:1.

Chapter Note 2 of Chapter 33 prescribes a condition that heading No. 3305 (which
covers hair oil also) applies to products put up in packing of a kind sold by retail
for such use.

2.

Section Note 2 to Section VI also provides that goods classifiable in heading 3305
by reason of being put up for retail sales are to be classified in the said heading and
in no other heading of the schedule. This Section Note further supports the
aforesaid interpretation.
[Circular No. 890/10/2009 CX dated 03.06.2009]

2.9.2 Classification of textile quilted products like quilts, quilted bed spreads, etc.
Issue
Clarification
Under which of the following two headings It is clarified that these products will be
the textile quilted products like quilts, classified under heading 9404.
quilted bed spreads, etc. would be
classified:(i) Heading 9404
(ii) Heading 5811
Reason for such classification:1.

Heading 5811 covers quilted textile products which are further used in the manufacture
of quilts, quilted bedspreads, etc. The term used in the manufacture in heading 5811
implies that heading 5811 covers only materials which are further used in making of
quilted final products like bedding or bedspreads.
While it is heading 9404 which covers the final finished products like quilts and
other articles of bedding and furnishing.

2.

Explanatory Notes to Harmonized System of Nomenclature to Chapter Heading 5811

also states that the heading does not cover made up goods of this Section (Section
Note 7) and articles of bedding or similar furnishing of Chapter 94 which are padded or
internally fitted. Thus, the articles of bedding and furnishing fall in Chapter 94.
Note:
1.

The Explanatory Notes to Harmonized System of Nomenclature to

Chapter Heading 5811 reads as follows:

The Institute of Chartered Accountants of India

2.16

Central Excise
These materials are commonly used in the manufacture of quilted garments,
bedding or bedspreads, mattress pads , clothing, curtains, place-mats,
underpads (silencers) for table linen etc.
The heading does not cover:
a.

Plastic sheets quilted, whether by stitching or heat sealing to a padded

core (generally Chapter 39);

b.

Stitches or quilted textile products in which the stitches constitute designs

giving them the character of embroidering;

c.

Made up goods of this Section;

d.

Articles of bedding or similar furnishing of Chapter 94 padded or internally

fitted.(emphasis supplied).

The made up goods are defined by Section Note 7 of Section XI.

2.

The Explanatory Notes to Harmonized System of Nomenclature to

Chapter 9404 clarify that the heading covers:
A. Mattresses supports,
B.

Articles of bedding and similar furnishing which are sprung or stuffed or

internally fitted with any material (cotton, wool, horsehair, down, synthetic
fibers etc or are of cellular rubber or plastics (whether or not covered with
woven fabrics, plastics. etc). For example:
1.

Mattresses, including mattresses with a metal frame:

2.

Quilts and bedspread (including counterpanes and also quilts for

baby - carriages) eiderdowns and duvets (whether of down or any
other filling/mattress protectors, bolsters, Pillows/cushions, pouffes,
etc.

Quilts, quilted bedspread etc. are articles of bedding and are covered under
the Explanation (B)(2) as mentioned above.
[Circular No. 903/23/2009-CX dated 20.10.2009]
2.9.3 Classification of Polyester Staple Fibre manufactured out of PET scrap and waste
bottles
It has been clarified that polyester staple fibre manufactured out of PET scrap and waste
bottles is nothing but a textile material and hence will be classified as textile material
under heading 55032000 under Section XI and not as article of plastic in Chapter 39.
[Circular No. 929/19/2010-CX dated 29.06.2010]
Note - The headings cited in some of the case laws mentioned in this chapter may not
co-relate with the headings of the present Excise Tariff as these cases relate to an
earlier point of time.

The Institute of Chartered Accountants of India