CCE, AURANGABADversusM/S VIDEOCON INDUSTRIES LTD. THR. ITS DIRECTOR

                        [2023] 6 S.C.R. 259                             259


                      CCE, AURANGABAD                                   A
                                 v.
  M/S VIDEOCON INDUSTRIES LTD. THR. ITS DIRECTOR
                  (Civil Appeal No. 5622 of 2009)
                         MARCH 29, 2023                                 B
    [S. RAVINDRA BHAT AND DIPANKAR DATTA, JJ.]
      Customs Tariff Act, 1975 – First Schedule – Chapter 90 –
LCD panels – Classification of – CESTAT held that the LCD panels
imported by assesses were classifiable in Chapter Heading
                                                                        C
9013.8010 of the First Schedule to the 1975 Act – Held: Reasoning
and conclusion of CESTAT that the LCD sets were classifiable under
Chapter 90, Entry 9013.8010, is sound and unexceptionable.
       Customs Tariff Act, 1975 – First Schedule – Section XVI, XVII
– Chapters 85 and 90 – General Interpretive Rules and Notes –
                                                                        D
Plea of revenue that by virtue of Note 2 (b) to Chapter 85, the
goods are to be classified based on their principal or sole use –
Held: Revenue’s argument jumps over interpretive instructions – In
the present case, Note 1 (m) along with the General Note 3 (a) [of
the General Rules of Interpretation] that headings that are
specifically provided should be preferred over the general ones, is     E
decisive – Thus, the aforesaid contention of revenue is insubstantial
because of the clear mandate of Note 1 (m) to Chapter 85 which
excludes Chapter 90 goods (which includes LCD panels) – When
goods are excluded from a particular chapter, the “pull in” through
a note has to be narrowly construed, as otherwise, the basis of
                                                                        F
exclusion would be defeated, and the earlier note (of exclusion)
rendered redundant – Secure Meters case 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 the said decision its use in meters was    G
in issue – Tax/Taxation.
      Dismissing the appeals, the Court
      HELD: 1.1 On a reading of the General Interpretive rules
and the notes to the concerned chapters (85 and 90, in the present
                                                                        H
                                259
260            SUPREME COURT REPORTS                       [2023] 6 S.C.R.


A     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
B
      2(a), an article is classifiable in more than one heading “the
      heading which provides the most specific description shall be
      preferred to headings providing a more general description.” [Note
      3 (a)] [Para 22][273-B-D]
             1.2 Note 1 (m) to Chapter 85 excludes “(m) Articles of
C     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
D     that Chapter 85 would cover the present case. The difficulty in
      accepting the revenue’s argument, in this case, is that it jumps
      over interpretive instructions. One, General 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
E     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) [of the General Rules of Interpretation] that headings that
      are specifically provided, should be preferred over the general
F     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
G     subject matter in Note 2; it is only where the article is a “part”
      which acts as an accessory, that the enumerated portions of
      Chapter 85 come into play. Such an interpretation is plainly
      untenable. [Paras 23, 25][273-D-E; 274-D-G]

H
 CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.                      261
               THR. ITS DIRECTOR

      Commissioner of Central Excise, Delhi-III v. UNI                A
      Products India Ltd. (2020) 19 SCC 742 : [2020] 13
      SCR 295 – relied on.

      1.3 When goods are excluded from a particular chapter,
the “pull in” through a note has to be narrowly construed, as
otherwise, the basis of exclusion would be defeated, and the          B
earlier note (of exclusion) rendered redundant. Finally, Secure
Meters 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,   C
in that decision, its use in meters was in issue. [Para 28][278-E-
F][278-E-F]

      Secure Meters v Commissioner of Customs (2015) 14
      SCC 239 : [2015] 6 SCR 219; Collector of Central
      Excise v Delton Cables Ltd. & Anr. (2005) 12 SCC 284;           D
      Commissioner of Central Excise, Delhi-III vs. UNI
      Products India Ltd. (2020) 19 SCC 742 : [2020] 13
      SCR 295; M/S Intel Design Systems (India) (P) Ltd. vs.
      Commissioner of Customs and Central Excise (2008) 3
      SCC 258 : [2008] 2 SCR 686 – relied on.                         E
      G. S. Auto International Ltd. v. Collector of Central
      Excise 2003 (152) ELT 3 (SC) : [2003] 1 SCR 372 –
      referred to.

                      Case Law Reference                              F

[2003] 1 SCR 372                 referred to        Para 8

[2015] 6 SCR 219                 relied on          Para 11

[2005] 2 SCR 441                 relied on          Para 24           G

[2020] 13 SCR 295                relied on          Para 25

[2008] 2 SCR 686                 relied on          Para 27

                                                                      H
262             SUPREME COURT REPORTS                             [2023] 6 S.C.R.


A           CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5622
      of 2009.
            From the Judgment and Order dated 23.02.2009 of the Customs,
      Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai
      in Appeal No.C/591/08-Mum in Order No.A/46/09/CSTB/C-II.
B            With
             Civil Appeal No. 8026 of 2022.
           N. Venkataraman, ASG, Mukesh Kumar Maroria, V. C. Bharathi,
      Ms. Nisha Bagchi, Mohd. Akhil, Udai Khanna, Bhuvan Kapoor,
C     Ms. Alka Agarwal, Advs. for the Appellant.
            Vivek Kohli, Sr. Adv., Rajat Bose, Ankit Sachdeva, S. S. Shroff,
      V. Lakshmikumaran, Ms. Apeksha Mehta, Ms. Falguni Gupta, Ms. Neha
      Choudhary, Pranav Mundra, Ms. Charanya Lakshmikumaran, Advs. for
      the Respondent.
D            The Judgment of the Court was delivered by
             S. RAVINDRA BHAT, J.
            1. These appeals, by the revenue, challenge two orders by the
      Customs, Excise and Service Tax Appellate Tribunal (‘CESTAT’
      hereafter).
E
             2. In the first appeal1, the assessee is M/s Videocon International
      (hereafter “Videocon”). CESTAT, by its impugned order2 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 the First
      Schedule to the Customs Tariff Act, 1975 (hereafter “CTA”)], as Liquid
F     Crystal Devices- as opposed to the revenue’s stand, that they are
      classifiable as 85.29 “parts of goods falling under heading 85.28”
      [television sets falling in heading 85.28]. Videocon manufactures TV
      sets; the LCD panels are used by it, along with other items, such as
      printed boards, decoders, etc.
G         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 Customs Appeal No. 85003/2019
H
 CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.                            263
       THR. ITS DIRECTOR [S. RAVINDRA BHAT, J.]

Harman International (India) Pvt. Ltd., (hereafter “Harman”) was held       A
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                                                           B
        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)”
                                                                            C
      The Chapter Heading read as follows:
      “9013 Liquid crystal Devices not constituting articles provided
      for more specifically in other headings; Lasers, other than
      Laser Diodes; other optical appliances and instruments, not
      specified or included elsewhere in this chapter”                      D
       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 principally
      with the apparatus of heading 8525 to 8528”
      CH 8528 reads as follows:                                             E

      “8528 Monitors and projectors, not incorporating Television
      reception apparatus, reception apparatus for television,
      whether or not incorporating radio-broadcast receivers or
      sound or video recording or reproducing apparatus”
                                                                            F
      5. The revenue claimed that the goods were improperly classified;
a show cause notice was issued. The Deputy Commissioner, who
adjudicated them, ruled against the assessee and held that the goods
were classifiable under CH 8529. 9090. The assessee’s appeal succeeded,
and the Commissioner directed a remand. The Dy. Commissioner, after
remand, confirmed the show cause notice, and affirmed the classification    G
proposed by it; the assessee appealed against this order, unsuccessfully.
The Commissioner (Appeals) rejected its appeal. It, therefore, approached
the CESTAT, which by the impugned order, set aside the demand, and
upheld the assessee’s plea that the proper classification of the goods
was in CH 9013.8010.                                                        H
264                SUPREME COURT REPORTS                         [2023] 6 S.C.R.


A           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
B
      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
C     to Videocon’s; ultimately, by the impugned order, CESTAT upheld its
      contention that the goods, meant for use in car audio systems, were
      classifiable in CH 9013.8010.
                Contention of parties
             7. Ms. Nisha Bagchi, learned counsel appearing for the revenue,
D     argued that the findings of the CESTAT are erroneous. She argued that
      the literature and other documents reveal that the LCD panels have
      specific model numbers. She pointed to the fact that the websites of the
      manufacturers of the imported articles are meant for use in LCD TVs.
      It was undeniable that the imported items were used in the manufacture
E     of LCD TVs. Some, however, were used in manufacturing monitors,
      though they were not sold in the market. Therefore, the goods were
      LCD devices principally used in the manufacture of LCD TVs. LCD
      TV is an apparatus covered specifically under heading 85.25 & 85.28.
             8. Counsel argued that heading 90.13 covers only those articles
F     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
G     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)
H
 CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.                               265
       THR. ITS DIRECTOR [S. RAVINDRA BHAT, J.]

referred to Notes 2(b) and (3) of Section XVII and observed that a joint       A
reading of the notes would show that the expression “parts of general
use” throughout the schedule, meant, articles of Heading No. 7318 and
similar articles of other base metal, and the expression ‘part and
accessories’ in Chapter Heading 87.08 did not apply to parts or
accessories unsuitable for use solely or primarily with articles of CH
                                                                               B
87.08 which related to parts and accessories of motor vehicles of CH
87.01 to 87.05. For the purposes of classification under CH 87.08, the
test to be applied is whether the goods are suitable for use solely or
primarily with articles of CH Nos.87.01 to 87.05; if the answer is in the
affirmative, the goods will be classifiable under CH 87.08, but if the
answer is in the negative, they would have to be classified under CH           C
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.                                    D
       10. Learned counsel referred to Chapter Note 2(b) (of Chapter
90) relating to classification of parts and accessories if suitable for use
solely or principally with a particular kind of machine, instrument or
apparatus or with a number of machines, are to be classified with that
machine, instrument or apparatus of that kind. In view of this note, LCDs      E
for computer monitor are classifiable as part of computer monitor, and
the various general application and special application monitors will alone
be classifiable under Chapter Heading 90.13. The example given for
such LCD panels were panel for video games, medical monitoring and
industrial test and control, etc., which are not part of any particular
equipment or machine but can be used in an assortment of machines. It          F
was submitted that the assessee’s plea about classification of different
parts in various Chapter Headings other than Chapter 84 and 85, is
irrelevant as the various notes/explanatory notes of all sections, chapters,
and headings are unique to the respective sections or chapters or headings
and cannot be generalized or interchanged or applied to with other             G
sections, chapters or headings, unless specified in the tariff/explanatory
notes or by any other legislation. The absence of explanatory note stating
the parts of LCD TVs will not be classifiable under Chapter Heading
85.29 if it is specifically specified under any other chapter heading (in
this case, Chapter Heading 90.13), the assessee cannot rely on notes
relating to other sections and chapters.                                       H
266                SUPREME COURT REPORTS                        [2023] 6 S.C.R.


A            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 entries (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 manufacturers,
B
      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
C     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
D     used in its manufacturing process of car audio assembly. Further, it was
      stated that the items were assembled with the importer’s assembled
      PCBs to give different outputs on car audio screen and was designed
      specifically to suit end product requirements and could not be used
      separately as an accessory but was an essential part of its manufactured
      product. Thus, LCD panels were specifically designed in a particular
E     manner to be used only in car audio/infotainment systems. They were,
      consequently, specific parts of car audio/infotainment systems and cannot
      be used otherwise.
             13. Counsel urged that the goods were articles described
      specifically as parts of ‘Sound Recording and Reproducing
F     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’.
G          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
H
 CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.                                267
       THR. ITS DIRECTOR [S. RAVINDRA BHAT, J.]

by the entry heading 90.13 as it is not described more specifically in any      A
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          B
excludes articles of Chapter 90. Therefore, first, it has to be specifically
held that the LCD panels are not covered by Chapter 90. The revenue
does not deny that LCD panels are covered by Chapter Heading 90.13.
This heading, according to the revenue, covers only LCD panels meant
for general use and are interchangeable and not what are principally
meant for use in TVs. It is argued that tariff entry 90.13 refers to LCDs       C
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       D
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 covering the
LCDs more specifically.
       16. It is submitted that the description under heading 8529 is general   E
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:          F

      “2 The expression parts’ and ‘parts and accessories’ do not
      apply to the following articles, whether or not they are
      identifiable as for the goods this section:
      (a) ********                                                              G
      (b) Parts of general use, as defined in Note 2 to Section XV,
      of base metal (Section XV), or similar goods of plastics
      (Chapter 39)”
      “3. References in Chapters 86 to 88 to parts or accessories
      do not apply to parts or accessories which are not suitable               H
268             SUPREME COURT REPORTS                           [2023] 6 S.C.R.


A           for use solely or’ principally with the articles of those Chapters.
            A part or accessory which answers to a description in two or
            more of the headings of those Chapters is to be classified under
            that heading which corresponds to the principal se of that
            part of accessory.”
B             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
C     Note 3. These notes are missing from Section XVI and are, therefore,
      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 goods belong,
D     i.e., Section XVI. Section Note 2(a) and 2(b) in Section XVI are different
      from Section Notes of Section XVII. According to Section Note 2(a) of
      Section XVI the parts which are goods included in any of the headings
      of Chapter 84 or 85 are, in all cases, to be classified in their respective
      headings, and it is only when the parts are not classifiable as per Section
      Note 2(a) that Section Note 2(b) is attracted. Therefore, even though a
E     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
F     by the revenue, with this case, is on untenable grounds. It was argued
      that though the competing entries were in Heading 90, nevertheless, the
      article was LC Displays, but used in meters. This clearly undermined
      the revenue’s argument that LCD sets were meant principally for TVs.
      They have multiple uses; if the revenue is correct, each such use would
G     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:
H
    CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.                            269
          THR. ITS DIRECTOR [S. RAVINDRA BHAT, J.]

         “Classification of goods in this Schedule shall be governed           A
         by the following principles:
         The titles of Sections, Chapters and Sub-Chapters are provided
         for ease of reference only; for legal purposes, classification
         shall be determined according to the terms of the headings
         and any relative Section or Chapter Notes and, provided such          B
         headings or Notes do not otherwise require, according to the
         following provisions.”
      It was argued that in terms of Rule 1, since classification of a
‘Liquid Crystal Device’ is specifically provided for by nomenclature
under tariff item 9013 8010, the LCDs imported by the assessee were            C
correctly classifiable under tariff item 9013 8010, in terms of the
nomenclature of the item.
        20. It was argued that Tariff Item 9013 8010 prescribes a more
specific description and is to be preferred over any other heading, whereas
tariff heading 8522 provides a general description, as parts and accessories   D
suitable for use, “solely or principally” with the apparatus of CH 8519 or
8521. The further submission of Mr. Laxmikumaran is that the expression
“parts and accessories” used in CH 8522 excludes articles covered under
Chapter 90 of the Tariff, whether or not they are identifiable as for the
goods falling under Section XVI of the Tariff and that even if any article
is identifiable as a “part or/and accessories for the goods of Section         E
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 & Anr8 where, the court dealt with section Notes
2 (a) and 2 (b) to Chapter 85 and held that Note 2 (b) applies only if the
item is not specifically classifiable under their respective headings. It      F
was argued, therefore, in the present case, that Note 1 (m) to Chapter 85
specifically excluded from its operation, goods falling in Chapter 90. In
such circumstances, LCD panels were complete articles capable of
multiple uses, and not solely or principally in some articles. It was
additionally urged that the facts found, clearly showed that the PCBs
attached to the LCD panels imported by the assessee were meant to act          G
as voltage stabilizers.



8
    2005 (12) SCC 284
                                                                               H
270            SUPREME COURT REPORTS                          [2023] 6 S.C.R.


A           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:
B           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:
C
            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,
D           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
E           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.
            (b) Any reference in a heading to a material or substance
F           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
G
            material or substance shall be according to the principles of
            rule 3.
            3. When by application of rule 2(b) or for any other reason,
            goods are, prima facie, classifiable under two or more
            headings, classification shall be effected as follows:
H
CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.                       271
      THR. ITS DIRECTOR [S. RAVINDRA BHAT, J.]

   (a) the heading which provides the most specific description       A
   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
                                                                      B
   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       C
   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            D
   consideration.”
   Chapter 85 falls in Section XVI, the heading of which reads as
   follows:
   “CHAPTER 85 Machinery and Mechanical Appliances;                   E
   Electrical Equipment; Parts thereof; Sound Recorders and
   Reproducers, Television Image and Sound Recorders and
   Reproducers, and Parts and Accessories of Such Articles
   NOTE 1. This Chapter does not cover:
   (a)xxxxxxxxxxx xxxxxx                                              F
   (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       G
      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,        H
272      SUPREME COURT REPORTS                         [2023] 6 S.C.R.


A         8466, 8473, 8485, 8503, 8522, 8529, 8538, and 8548)
          are in all cases to be classified in their respective headings;
      (b) other parts, if suitable for use solely or principally with
          a particular kind of machine, or with a number of
          machines of the same heading (including a machine of
B         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
      (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:
D     “CHAPTER 90
      “Optical, Photographic, Cinematographic, Measuring,
      Checking, Precision, Medical or Surgical Instruments and
      Apparatus; Parts and Accessories Thereof”
      Note 2 to Chapter 90 reads as follows:
E
      2. Subject to Note 1 above, parts and accessories for
      machines, apparatus, instruments or articles of this Chapter
      are to be classified according to the following rules:
      (a) Parts and accessories which are goods included in any of
F     the headings of this Chapter or of Chapter 84, 85 or 91 (other
      than heading 4[8487], 8548 or 9033) are in all cases to be
      classified in their respective headings;
      (b) Other parts and accessories, if suitable for use solely or
      principally with a particular kind of machine, instrument or
G     apparatus, or with a number of machines, instruments or
      apparatus of the same heading (including a machine,
      instrument or apparatus of heading 9010, 9013 or 9031) are
      to be classified with the machines, instruments or apparatus
      of that kind;

H
    CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.                                273
          THR. ITS DIRECTOR [S. RAVINDRA BHAT, J.]

          (c) All other parts and accessories are to be classified in              A
          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:
                                                                                   B
          (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          C
          or finished article.” [Note 2(a)]
          (c) If on an application of Rule 2(a), an article is classifiable in
          more than one heading “the heading which provides the most
          specific description shall be preferred to headings providing
          a more general description.” [Note 3 (a)]                                D
       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”
                                                                                   E
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
                                                                                   F
where the Court held that the Rules for the Interpretation of the Schedule
to the CET Act are framed pursuant to the powers under Section 2 of
that Act. The court observed:
          “The Rules for the Interpretation of the Schedule to the
          Central Excise Tariff Act, 1985 have been framed pursuant to
          the powers under Section 2 of that Act. According to Rule 1              G
          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 terms of

9
    [2005] 2 S.C.R. 441: (2005) 3 SCC 51                                           H
274                SUPREME COURT REPORTS                         [2023] 6 S.C.R.


A               the headings and any relevant section or chapter notes’. If
                neither the heading nor the notes suffice to clarify the scope
                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
B
                emerges then only can one resort to the subsequent rules. The
                appellants have relied upon Rule 3. Rule 3 must be understood
                only in the context of sub-rule (b) of Rule 2 which says inter
                alia that the classification of goods consisting of more than
                one material or substance shall be according to the principles
C               contained in Rule 3. Therefore when goods are prima facie,
                classifiable under two or more headings, classification shall
                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 this
D     case, is that it jumps over interpretive instructions. One, General 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
E     opinion, this note, along with the General Note 3 (a) [of 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
F     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” which acts as an
      accessory, that the enumerated portions of Chapter 85 come into play.
      Such an interpretation is plainly untenable. In Commissioner of Central
G     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
H          [2020] 13 S.C.R. 295: 2020 (19) SCC 742
 CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.                          275
       THR. ITS DIRECTOR [S. RAVINDRA BHAT, J.]

or tramway rolling-stock and parts and accessories thereof”. The court    A
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 contain car
      mats as an independent tariff entry. We have reproduced
      earlier the various parts and accessories listed against tariff     B
      entry 8708. All of them are mechanical components, and
      revenue want car mats to be included under the residuary
      sub-head “other” in the same list. The HSN Explanatory Notes
      dealing with interpretation of the Rules specifically exclude
      “tufted textile carpets, identifiable for use in motor cars” from
      87.08 and place them under heading 57.03. Revenue’s                 C
      argument is that the Explanatory Notes have persuasive value
      only. But the level or quality of such persuasive value is very
      strong, as observed in the judgments of this Court to which
      we have already referred. Moreover, the Commissioner himself
      has referred to the Explanatory Notes in the order- in-original     D
      while dealing with the Respondent’s stand. Thus, we see no
      reason as to why we should make a departure from the general
      trend of taking assistance of these Explanatory Notes to
      resolve entry related dispute. Now, on referring to these
      Explanatory Notes, we find that one category of carpets
      [Textile carpets (Chapter 57)] has been excluded specifically       E
      from parts and accessories. In our opinion, the subject-item
      does not satisfy the third condition specified in Section XVII
      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” (Chapter           F
      57).
      26. The main argument of the Appellant is that because 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 have been         G
      excluded from Parts and Accessories. We have referred to such
      exclusion in the preceding paragraph. It has also been urged
      on behalf of the revenue that these items are not commonly
      identified as carpets but are different products. The Tribunal
      on detailed analysis on various entries, Rules and Notes have
                                                                          H
276            SUPREME COURT REPORTS                        [2023] 6 S.C.R.


A           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 made
            for cars and not for “home use” (in broad terms), those goods
            cannot be transplanted to the residual entry against the
B
            heading 8708. As we find the subject-goods come under the
            chapter-heading 570390.90, and the other entry under the
            same Chapter forming the subject of dispute in the second
            order of the Commissioner, in our opinion, there is no necessity
            to import the “common parlance” test or any other similar
C           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:
D
            “3. There appears to be no dispute that were it not for Section
            Note 2(b), the item in question would be classified under Tariff
            Heading 85.44 as contended by the appellant. Sections Notes
            2(a) and (b) respectively provide as follows:
E
            “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 respective
            headings.

F           (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
G
            85.28 are to be classified in Heading 85.17.”

            4. It is clear from a reading of the two clauses to the section
            note that clause
H
     CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.                          277
           THR. ITS DIRECTOR [S. RAVINDRA BHAT, J.]

          (b) would only apply once it was found that the items in            A
          question were not specifically classifiable under their
          respective headings. As has been clearly said by the Collector
          (Appeals)

          “from the sequence of the paragraphs given under Section
          Note 2 it is clear that the question of switching over to Section   B
          Note 2(b) can arise only after ensuring that the parts are not
          covered by Section Note 2(b) [sic Section Note 2(a).] which
          begins with the expression “other parts” meaning thereby that
          the parts which are not covered by Section Note 2(a) would
          be considered for coverage by Section Note 2(b). One cannot         C
          therefore directly jump over to Section Note 2(b) without
          exhausting the possibility of Section Note 2(a).”

      27. M/S Intel Design Systems (India) (P) Ltd. vs. Commissioner
of Customs and Central Excise11 is a decision, where the goods were
described as parts of tanks and other armoured and motorized fighting         D
vehicles, under Heading 8710 was held to fall within Chapter 85. The
reasoning of this court, in that case, was as below:

          “4. As per Rule 1 on Interpretive Rules, classification of
          excisable goods is to be determined according to the terms of
                                                                              E
          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, control box
          etc. are the goods used for switching, protecting electrical
          circuits or for making connections to or in electric circuit.       F
          These parts/components are specifically covered under CSH
          8536.90. The CBEC Circular relied upon by the assessee is
          not relevant.

          5. As per the Explanatory Notes to HSN the parts falling under
          Chapter Heading 8710 would be covered under the said                G
          chapter, provided they fulfill both the conditions i.e. they must
          be identifiable as being suitable for use solely or principally


11
     [2008] 2 S.C.R. 686: 2008 (3) SCC 258
                                                                              H
278             SUPREME COURT REPORTS                           [2023] 6 S.C.R.


A           for such vehicles and that they must not be excluded by the
            provisions of Notes to Section XVII. The identifiable parts
            under the said heading bodies of armoured vehicles and parts
            thereof, cover special road wheels for armoured cars,
            propulsion wheels for tanks, tracts etc. As per this
            requirement, the goods should not only be identifiable to be
B
            armoured vehicles, but it should so not have been excluded
            by Notes to Section XVII. The Chapter note 2(f) excludes
            electrical machinery and equipment falling under Chapter
            85. Explanatory Notes to HSN relating to the parts and
            accessories excluded by Note 2 specify items with reference
C           to specific Chapter Heading as per (7) (a), (k) which excludes
            photographs and other current collectors for electric traction
            vehicles, fuses, switches and other electric apparatus of
            Heading No.85.35 or 85.36. The items, therefore,
            manufactured by the appellants are identifiable or are in the
            nature of goods falling under Chapter Heading 85.36. Since
D
            these fall under the category of excluded goods under Chapter
            Notes, even though they are used specifically solely or
            principally with the armoured vehicles of Chapter Heading
            8710, they are classifiable under Chapter Heading 8536.90
            only as held by the adjudicating authority.”
E
             28. It is, therefore, clear that when goods are excluded from a
      particular chapter, the “pull in” through a note has to be 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
F     “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:

G           “17. Keeping in mind the aforesaid nature of product in
            question, we revert to the tariff entries. It cannot be disputed
            that LCDs are specifically provided in Tariff Item 9013. The
            only condition is that such LCDs should not constitute
            “articles” provided more specifically in other headings. In

H
 CCE, AURANGABAD v. M/S VIDEOCON INDUSTRIES LTD.                        279
       THR. ITS DIRECTOR [S. RAVINDRA BHAT, J.]

      the present case, it is also not in dispute that LCDs imported    A
      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 chapter
      i.e. Chapter 90, though under Entry 9028.90.10 as “parts
      and accessories”. The only reason for including the goods
                                                                        B
      under Chapter Heading 9028 is that the LCDs were to be
      used in the electricity supply meters. However, Entry 9028
      does not pertain to LCDs but gas, liquid, etc. and includes
      electricity supply meters as well. Merely because these LCDs
      are to be used as parts in the said electricity supply meters,
      can it be said that they are to be included in Entry 9028?        C
      Here, Note 2 of this Chapter Notes becomes important since
      LCDs are used in the electricity supply meters only as parts
      thereof. Note 2(a) stipulates that parts and accessories which
      are goods included in the heading of the said chapter i.e.
      Chapter 90, are to be classified in their respective headings.
                                                                        D
      Going by the plain reading of Note 2(a) it is clear that LCDs,
      which are goods and are used as parts in the final product
      mentioned in Chapter 90, namely, electricity supply meters,
      are to be classified in its respective heading. Respective
      heading, which is specifically provided is 9013.
                                                                        E
      18. It was sought to be argued by Ms Kiran Suri that as per
      Note 2(b), when these LCDs are used solely for particular
      instrument, namely, electricity supply meter, it has to be
      classified with the said meter and, therefore, Chapter Entry
      9028 would get attracted. However, this argument loses sight
      of the fact that Note 2(b) relates to “other parts and            F
      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 classified in
      Tariff Item 9013, which is the specific heading for these         G
      goods.”

      29. In view of the above decisions and the foregoing reasoning,
the CESTAT’s reasoning and conclusions, in both cases, that the LCD

                                                                        H
280              SUPREME COURT REPORTS                         [2023] 6 S.C.R.


A     sets were under Chapter 90, Entry 9013.8010, is sound and
      unexceptionable. Consequently, the appeals have to fail and are dismissed,
      without order on costs.


      Divya Pandey                                              Appeals dismissed.
B     (Assisted by : Kritika Singh and Shevali Monga, LCRAs)




C




D




E




F




G




H