2003 (152) E.L.T. 3 (S.C.

IN THE SUPREME COURT OF INDIA

Syed Shah Mohammed Quadri and Ashok Bhan, JJ.

G.S. AUTO INTERNATIONAL LTD.

Versus

COLLECTOR OF C. EX., CHANDIGARH

Civil Appeal Nos. 4598-4612 of 1994 with C.A. Nos. 5711/99 and 5701-5705 of 2001, decided
on 15-1-2003

Classification of goods - Commercial parlance theory vis-a-vis function/use of goods -

Classification of goods to be determined by commercial identity test and not by functional test -
Goods to be classified as to how they are referred in the market by those who deal with them, be
it for the purpose of selling, purchasing or otherwise - Words used by the legislation must be
given their popular sense - Excise Collectorate Trade Notice No. 127/71, dated 5-7-1971. [1989
(40) E.L.T. 214 (S.C.) and 1996 (87) E.L.T. 321 (S.C.) followed]. [paras 10, 14, 15, 16, 21, 27]

Motor vehicle components - Automobile parts having fastening function viz. (1) Sprint Centre
Bolts with Nuts; (2) Spring U Bolt with Nuts; (3) Spring U Clamps with nuts and plates; (4)
Spring Shackle Pin (Shackel Bolt) with Nuts; (5) Spring Shackle Pin (Spring Pin); (6) Hub Bolts
& Nut Chevrolest; (7) Hub Bolt & Nut Chev Viking; (8) Hub Bolt & Nut Tata Diesel Vehicle;
(9) Hub Bolt & Nut Dodge B.I.F.; (10) Hub Bolt & Nut Dodge K.E.W.; (11) Hub Bolt & Nut
Dodge Timken; (12) Hub Bolt & Nut Dodge Rocket; (13) Hub Bolt & Nut Leyland; (14) Hub
Bolt & Nut Ford V.8.;(15) Hub Bolt & Nut Ford Kekra & Ford Thames; (16) Hub Bolt & Nut
Bedford J-4 & J-6; (17) Hub Bolt & Nut Shaktiman & Jeep; (18) Hub Bolt & Nut Benz 10 Ton;
(19) Hub Bolt & Nut Minibus; (20) Hub Bolt & Nut Square Type; (21) Hub Bolt & Nut Peyken;
(22) Genuine Nuts; (23) Azle Studs with Nuts; (24) Hub Bolt & Washers; (25) Checknuts; (26)
Shaft Bolts; (27) Misc. Bolts; (28) Sprint Shackle Assembly; (29) Gun Metal Bushes; (30) King
Pin & King Pin Unit; (31) Fan Blades; and (32) Spring Hanger & Brackets, classifiable under
Heading 87.08 of the Central Excise Tariff, 1985 and not under Heading 73.18 ibid - Notes 2(b)
and 3 of Section XVII and Note 2(a) of Section XV ibid. [paras 25, 26]

Motor vehicle components - Automobile parts viz. (1) Sprint Centre Bolts with Nuts; (2) Spring
U Bolt with Nuts; (3) Spring U Clamps with nuts and plates; (4) Spring Shackle Pin (Shackel
Bolt) with Nuts; (5) Spring Shackle Pin (Spring Pin); (6) Hub Bolts & Nut Chevrolest; (7) Hub
Bolt & Nut Chev Viking; (8) Hub Bolt & Nut Tata Diesel Vehicle; (9) Hub Bolt & Nut Dodge
B.I.F.; (10) Hub Bolt & Nut Dodge K.E.W.; (11) Hub Bolt & Nut Dodge Timken; (12) Hub Bolt
& Nut Dodge Rocket; (13) Hub Bolt & Nut Leyland; (14) Hub Bolt & Nut Ford V.8.; (15) Hub
Bolt & Nut Ford Kekra & Ford Thames; (16) Hub Bolt & Nut Bedford J-4 & J-6; (17) Hub Bolt
& Nut Shaktiman & Jeep; (18) Hub Bolt & Nut Benz 10 Ton; (19) Hub Bolt & Nut Minibus;
(20) Hub Bolt & Nut Square Type; (21) Hub Bolt & Nut Peyken; (22) Genuine Nuts; (23) Azle
Studs with Nuts; (24) Hub Bolt & Washers; (25) Checknuts; (26) Shaft Bolts; (27) Misc. Bolts;
(28) Sprint Shackle Assembly; (29) Gun Metal Bushes; (30) King Pin & King Pin Unit; (31) Fan
Blades; and (32) Spring Hanger & Brackets, are neither classifiable as Nut & Bolt under Tariff
Item 52 of the erstwhile Central Excise Tariff nor under Tariff Item 34A ibid being not specified
therein, hence classifiable under residuary Tariff Item 68 ibid. [para 10]

Parts, parts and accessories and parts of general use - Motor vehicle parts - Nut, bolt and screws -
Criteria for classification under Heading 73.18 of Central Excise Tariff Act, 1985 or under
Heading 87.08 ibid - Notes 2(b) and 3 of Section XVII and Note 2(a) of Section XV of Central
Excise Tariff Act, 1985. - A conjoint reading of the Notes, referred to above, would show that
the expression “parts of general use” throughout the Schedule, means, inter alia, articles of
Heading No. 73.18 and similar articles of other base metal; and the expression ‘part and
accessories’ in Chapter Heading 87.08 does not apply to parts or accessories which are not
suitable for use solely or primarily with articles of Chapter Heading 87.08 which pertains to
parts and accessories of motor vehicles of Chapter Heading Nos. 87.01 to 87.05. For the
purposes of classification under Chapter Heading 87.08, the test to be applied is: whether the
goods are suitable for use solely or primarily with articles of Chapter Heading Nos. 87.01 to
87.05; if the answer is in the affirmative, the goods will be classifiable under Chapter Heading
87.08, but if the answer is in the negative, they would have to be classified under Chapter
Heading No. 73.18. [para 26]

Appeals dismissed
CASES CITED

Hindustan Motors Limited v. Collector — Tribunal Final Order No. E/333/93-D, dated 6-10-
1993 — Referred [Para 2]

Jaishri Engineering Co. (P) Ltd. v. Collector — 1989 (40) E.L.T. 214 (S.C.) — Followed [Para
16]

Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector — 1991 (51) E.L.T. 161 (S.C.) — Referred
[Para 17]

Purewal Associates Limited v. Collector — 1996 (87) E.L.T. 321 (S.C.) — Followed [Paras
4, 6, 7, 9, 17, 20]

DEPARTMENTAL CLARIFICATION CITED

Excise Collector’s Trade Notice No. 127/71, dated 5-7-1971 [Para 19]

REPRESENTED BY : S/Shri S. Ganesh, Sr. Advocate, Rajesh Kumar, Ms. Nisha Bagchi,
Dileep Tandon, B. Krishna Prasad and D.S. Mahra, Advocates, for the Appellant.

[Judgment per : Syed Shah Mohammed Quadri, J.]. - This bunch of appeals raises a common
question of classification of certain goods (thirty two items), which will be referred to presently,
manufactured by the assessee-appellant in Civil Appeal Nos. 4598-4612 of 1994 (the first set of
appeals) which are directed against the final judgment and order of the Customs, Excise and
Gold (Control) Appellate Tribunal, New Delhi (for short, ‘the C.E.G.A.T.’) in Appeal Nos. E-
5455-5469/92-D, dated November 22, 1993 and the order in Rectification Application No.
E/41/93-D passed on March 3, 1994. The second set of appeals, Civil Appeal Nos. 5701-5705 of
2001, filed by the Revenue, is from final judgment and Order in Appeal Nos. E-289-293/1988-D,
dated January 9, 2001. All these twenty appeals relate to the Assessment Years 1979 to 1986,
albeit, for different periods. Civil Appeal No. 5711 of 1999 is filed by the Revenue, dissatisfied
by the final judgment and order of the C.E.G.A.T. in Final Order No. 351/99-B in Appeal No.
E/2483/1992-B passed on April 6, 1999 and it relates to the Assessment year 1986-87.

[Link] the order impugned in the first set of appeals, the Tribunal applied the functional test and
classified those thirty two items, manufactured by the assessee, under Tariff Item 52 of the First
Schedule to the Central Excise Act, 1944. The classification was based on the finding recorded
by the Tribunal, after referring to the findings in the identical case of M/s. Hindustan Motors
Limited v. Collector of Central Excise, Calcutta [Tribunal’s Order No. E/333/93-D, dated 6th
October, 1993 in Appeal No. E/882/85-D]. The finding reads as follows :

“... the Tribunal had clearly held that goods, even though used as component parts of motor
vehicles having a fastening function primarily, are to be classified under Item 52 C.E.T.”

(Emphasis supplied)

Two points may be noted in this finding. (1) the goods in question are component parts of motor
vehicles; and (2) the function of those goods is the fastening of parts.

[Link] the same assessment years but for a different period, the Tribunal, in its order dated
January 9, 2001 (subject-matter of Civil Appeal Nos. 5701-5705 of 2001), approved the
following findings recorded by the Collector (Appeals) with regard to the same goods :

“I observe that these are specially designed parts for use in automobile vehicles, sold in unit and
as per part numbers of the original vehicle manufacturers. They are not inter-changeable and can
be marketed only by auto-vehicle part dealers. Each and every part in question has code number,
vehicle in which they can be used, their nomenclature, description marking and part number. On
careful examination of these samples, I find that some of the items are not even threaded. They
are suitable for use only in different motor vehicles according to their specifications. As per the
sample and catalogue, by no stretch of imagination these items in question can be termed as
general type of fasteners.”

(Emphasis supplied)

[Link] to the test applied by this Court in Purewal Associates Limited v. Collector of
Central Excise [1996 (87) E.L.T. 321 (S.C.)], the Tribunal held :

“No one uses these parts as general parts of bolts and nuts. Some parts are such that they can, if
one wants, be used as a general purpose bolt or nut. This type of stray use of which they may be
put cannot take them out of the category of parts of Automobile. The materials now made
available namely the catalogue, affidavits given by dealers in automobile parts and the
communications received from M/s. Maruti Udyog Ltd., M/s. Mahindra & Mahindra, M/s.
Daewoo Motors show that these goods manufactured are specialised parts required for
automobiles. These parts are manufactured at the instance of automobile manufacturers and they
procure it as original equipment or replacement parts. No iota of evidence is forthcoming from
the Revenue to show that these parts are ever made available in the market as bolt and nuts or
that they are in common use as bolts and nuts as understood in ordinary or common parlance.”

[Link] those findings of fact, it was held that the goods in question did not fall under Tariff Item
52 and, being virtually parts of automobile, were classifiable under Tariff Item 68.

[Link] the basis of similar findings and following the principle laid down in Purewal Associates
Limited (supra), the Tribunal [in the order in question in Civil Appeal No. 5711 of 1999], having
regard to the change of scheme of classification of goods under the Central Excise Tariff Act,
1985 held, for the Assessment Year 1986-87, that the said goods were classifiable under Chapter
Heading 87.07 and not under Chapter Heading 73.18, as contended by the Revenue.

[Link]. S. Ganesh, learned senior Counsel appearing for the assessee, contends that inasmuch as
the test laid down in Purewal Associates Limited (supra), namely, the test of commercial
identity, was not available to the Tribunal when it passed the order, now subject-matter of the
first set of appeals, it erred in applying the functional test and holding that the goods in question
are classifiable under Tariff Item 52, as it existed prior to the commencement of the Central
Excise Tariff Act, 1985 and, therefore, the order of the Tribunal is liable to be set aside. He
submits that after having the benefit of the law laid down by this Court in Purewal Associates
Limited (supra), the Tribunal applied the correct test of commercial identity in its orders, which
are subject matter of the second set of appeals and the third appeal, which deserve to be upheld.

[Link]. Nisha Bagchi, learned Counsel appearing for the Revenue, vehemently contends that in
regard to pre-1986 period, both the findings recorded by the Tribunal as well as the function of
the goods would show that they are nothing but nuts and bolts classifiable under Tariff Item 52;
in regard to the classification under post-1986 period, she invited our attention to Notes 2(b) and
(3) of Section XVII read with Note 2(a) of Section XV to show that Chapter Heading 73.18 takes
in screws, bolts, nuts, etc. and that the expressions “parts” and “parts and accessories” have been
defined in Section XVII, Note 2(b). Inasmuch Note (2) to Section XV takes away the goods
classifiable under Chapter Heading 73.02, therefore, the goods in question have to be classified
only as nuts, bolts, screws even if they formed parts of automobile.

[Link]. Dileep Tandon, learned Counsel appearing for the Revenue in Civil Appeal Nos. 4598-
4612 of 1994, strenuously contends that nuts, bolts and screws, etc., are generic terms and
notwithstanding the fact that they are parts of automobile, they would nonetheless be species of
nuts and bolts and ought to be classified as such under Tariff Item 52. He relies upon the latter
part of the judgment in Purewal Associates Limited (supra) which deals with nuts and bolts, etc.,
in support of his contention.

[Link] controversy in these appeals pertains to the classification of the followings goods: (1)
Sprint Centre Bolts with Nuts; (2) Spring U Bolt with Nuts; (3) Spring U Clamps with nuts and
plates; (4) Spring Shackle Pin (Shackel Bolt) with Nuts; (5) Spring Shackle Pin (Spring Pin); (6)
Hub Bolts & Nut Chevrolest; (7) Hub Bolt & Nut Chev Viking; (8) Hub Bolt & Nut Tata Diesel
Vehicle; (9) Hub Bolt & Nut Dodge B.I.F.; (10) Hub Bolt & Nut Dodge K.E.W.; (11) Hub Bolt
& Nut Dodge Timken; (12) Hub Bolt & Nut Dodge Rocket; (13) Hub Bolt & Nut Leyland; (14)
Hub Bolt & Nut Ford V.8.;(15) Hub Bolt & Nut Ford Kekra & Ford Thames; (16) Hub Bolt &
Nut Bedford J-4 & J-6; (17) Hub Bolt & Nut Shaktiman & Jeep; (18) Hub Bolt & Nut Benz 10
Ton; (19) Hub Bolt & Nut Minibus; (20) Hub Bolt & Nut Square Type; (21) Hub Bolt & Nut
Peyken; (22) Genuine Nuts; (23) Azle Studs with Nuts; (24) Hub Bolt & Washers; (25)
Checknuts; (26) Shaft Bolts; (27) Misc. Bolts; (28) Sprint Shackle Assembly; (29) Gun Metal
Bushes; (30) King Pin & King Pin Unit; (31) Fan Blades; and (32) Spring Hanger & Brackets.

[Link] the controversy centres round Tariff Items 52 and 68 in the First Schedule of the Central
Excise Act, 1944, it will be apt to refer them here. They read as follows :

Item Description of goods Rate of duty

No.
(1) (2) (3)
52. Bolts and nuts, threaded or Fifteen per
tapped and screws, of base cent ad
metal or alloys thereof, in or in valorem
relation to the manufacture of
which any process is ordinarily
 carried on with the aid of power.
Explanation:- The expression
“Bolts and nuts, threaded or
tapped and screws” used in this
item shall include bolt ends,
screw studs, screw studding,
self-tapped screws, screw hooks
and screw rings.
Item Description of goods Rate of duty
No.
(1) (2) (3)
68. All other goods, not elsewhere Twelve per
specified, but excluding - cent ad
valorem
(a) alcohol, all sorts, including
alcoholic liquors for human
consumption;

(b) opium, Indian hemp and

other narcotic drugs and
narcotics; and

(c) dutiable goods as

defined in section 2(c) of the
Medicinal and Toilet
Preparations (Excise Duties)
Act, 1955 (16 of 1955).
Explanation: - For the purposes
of this item, goods which are
referred to in any preceding item
in this Schedule for the purpose
of excluding such goods from
the description of goods in that
item (whether such exclusion is
by means of an Explanation to
such item or by words of
exclusion in the description
itself or in any other manner)
shall be deemed to be goods not
specified in that item.

[Link] a perusal of the above excerpts of the Tariff Items, it is clear that bolts and nuts,
threaded or tapped and screws, base metal or alloys thereof, in or in relation to manufacture of
which any process is ordinarily carried on with the aid of power are classifiable under Tariff Item
52 and liable to duty at the rate of fifteen per cent ad valorem. Tariff Item 68 is a residuary entry.
All goods which are not specified elsewhere, except those which are excluded thereunder, are
grouped under this Item. We may note here that nuts and bolts do not fall in the category of
excluded goods under Tariff Item 68. The rate of duty payable on goods falling under this Item is
twelve per cent ad valorem.

[Link] may be useful to refer to Tariff Item 34A of the said First Schedule, on which reliance
was placed by the learned counsel appearing for the Revenue, which is in the following terms :

Item Description of goods Rate of

No. duty
(1) (2) (3)
34A. Parts and accessories of Motor Twenty per
Vehicles and Tractors, cent ad
including Trailers, the valorem
following namely :-
(i) Brake linings;
(ii) Clutch facings;
(iii) Engine valves;
 (iv) Gaskets;
(v) Nozzles and nozzle
holders;
(vi) Pistons;
(vii) Piston rings;
(viii) Gudgeon pins;
(ix) Circlips;
(x) Shock absorbers;
(xi) Sparking plugs;
(xii) Tin-walled bearings;
(xiii) Tie rod ends;
(xiv) Electric horns;
(xv) Filter elements, inserts
and cartridges.
Explanation I : - The
expression “Motor vehicles”
has the meaning assigned to it
in Item No. 34.

Explanation II : - The
expression “Tractors” shall
include agricultural tractors.

[Link] Tariff Item takes in its fold fifteen parts and accessories of Motor Vehicles and
Tractors. It may be noted here that the goods in question, which are claimed to be motor parts,
are not included within the specified goods mentioned in Tariff Item 34A.

[Link] question that needs to be adverted to is: whether the goods in question can
appropriately be classified under Tariff Item 52 or not having been specified elsewhere, they fall
under Tariff Item 68. In construing these items, what is the proper test to be applied? Is it the
functional test or is it commercial identity test which would determine the issue. It seems to us
that this question is no longer res integra. It fell for consideration of this Court earlier and it was
laid down that the true test for classification was the test of commercial identity and not the
functional test. It needs to be ascertained as to how the goods in question are referred to in the
market by those who deal with them, be it for the purposes of selling, purchasing or otherwise.

[Link] Jaishri Engineering Co. (P) Ltd. v. Collector of Central Excise [1989 (40) E.L.T. 214]
this Court considered the question whether High Pressure Connectors meant for lubricating
purposes were classifiable under Tariff Item 52 of the Central Excise Tariff as ‘nuts’ or under
Tariff Item 68 as ‘integral part of diesel engine pipes’. It was found that the said goods were not
manufactured according to any special specifications as integral parts of machinery, rather some
of these nuts were also purchased from the market while those being manufactured by the
assessee were also sold to outside buyers as nuts; further, those goods were commercially known
and bought and sold as nuts. On that finding, it was held that they were classifiable under Tariff
Item 52.

[Link] Purewal Associates Limited (supra), two appeals were dealt with by this Court. The
subject-matter of the first appeal was classification of screws, Lid screws, Barrel axle screw,
Bridge screw and the Dial Key screw which were used as parts in manufacturing watches. It was
contended that they would fall under Tariff Item 52 as they were nothing but screws. It was
observed that the Tribunal had rightly taken note of the test laid down by this Court in several
decisions but misdirected itself in applying it. The test is that while interpreting the entries in the
Schedule, they must be construed and understood as in common parlance and words used by the
Legislature must be given their popular sense, namely that sense people conversant with the
subject matter with which the statute was dealing would attribute to it. Applying the test of
commercial parlance for identity of the goods and referring to the observation of this Court in
Plasmac Machine Mfg. Co. Pvt. Ltd. v. Collector of Central Excise [1991 (51) E.L.T. 161
(S.C.)], it was held that the goods were classifiable under Tariff” Item 68. The other appeal dealt
with thirty two articles of different kinds of connecting rod bolts (bolt rear wheel, bolt front
wheel, etc). It is on this part of the judgment that Mr. Dileep Tandon has placed strong reliance
to show that nuts and bolts even if integral parts of machinery would be falling under Tariff Item
52. It would be useful to notice here the following observation in paragraph (16) :

“16. Before us the materials in question were produced and we could appreciate the conclusion
that they are nuts and bolts as commonly understood though they differ in shape and are
manufactured to order.”
[Link] Court approved the conclusion of the Tribunal. It is worth noticing that whereas in the
appeal relating to part of watches, the Tribunal misdirected itself in applying the correct test,
therefore, it warranted interference with the conclusion arrived at by the Tribunal but in the
appeal dealing with nuts and bolts as the Tribunal has noted the correct test and properly applied
it, there was no reason to interfere with the result which was arrived on the basis of the findings
of fact.

[Link] interpreting Tariff Item 52, we may usefully refer to Excise Collector’s Trade Notice
No. 127/71, dated 5th July, 1971. It would be apt to read it here :

“Mere existence of threads would not render an article as a bolt, nut or screw if it is recognisable
as component part of an instrument, apparatus, appliance or machine. The tariff definition of
Item 52 is intended to cover only those which are known as bolt, nuts and screws in the market.”

20. From a perusal of the Trade Notice, two aspects become apparent. The first is that mere
existence of threads would not render an article as a bolt, nut or screw so long as that is
recognisable as component part of an instrument, apparatus, appliance or machine and the
second is that the expression used in Tariff Item 52 is intended to cover only those which are
known as bolt, nuts and screws in the market. The Trade Notice re-affirms the commercial
identity of goods test. Keeping these two aspects in view, if one applies the afore-mentioned test,
one cannot identify, sell or purchase the goods in question as nuts, bolts, etc. The decision of this
Court in Purewal Associates Limited (supra) furnishes a good example of application of the test
on the findings of fact recorded by the Tribunal. With regard to the parts of the watches, various
types of screws were recognised as component parts of instruments and they were held not to fall
under Tariff Item 52; in regard to bolts and screws used in motors, as it was found that they were
not manufactured as component parts of automobile, so they were held as classifiable under
Tariff Item 52.

[Link] the light of the above discussion, if we read the findings of fact recorded by the Tribunal
in the appeals before us, referred to above, it cannot but be concluded that the goods in question,
which are found to be parts of automobile were wrongly classified under Tariff Item 52 by the
Tribunal in Civil Appeal Nos. 4598-4612 of 1994 and were rightly classified as falling under
Tariff Item 68 in Civil Appeal Nos. 5701-5705 of 2001.

[Link] far as Civil Appeal No. 5711 of 1999 is concerned, the classification of goods was done
under the Central Excise Tariff Act, 1985 (for the post-1986 period). The competing Heading
numbers are 73.18 and 87.08, which read as under :

Heading Sub- Description of goods Rate of

No. Heading duty
No.
(1) (2) (3) (4)
73.18 Screws, bolts, nuts, coach-
screws, screw-hooks,
rivets, cotters, cotter-pins,
washers (including spring
washers) and similar
articles, of iron or steel
7318.10 -Threaded articles 20%
Heading Sub- Description of goods Rate of
No. Heading duty
No.
(1) (2) (3) (4)
87.08 8708.00 Parts and accessories of 20%
the motor vehicles of
heading Nos. 87.01 to
87.05

[Link], we shall refer to the relevant notes under Sections XVII and XV respectively.

Notes 2(b) and (3) of Section XVII read as follows :

The “2. expressions ‘parts’ and ‘parts and accessories’ do not apply to the following articles,
whether or not they are identifiable as for the goods of this Section :

xxx xxx (a)

Parts (b) of general use, as defined in Note 2 to Section XV, of base metal (Section XV), or
similar goods of plastics (Chapter 39);”

References in “3. Chapters 86 to 88 to ‘parts’ or ‘accessories’ do not apply to parts or

accessories which are not suitable 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 use of that part
of accessory.”

[Link] XVII deals with Vehicles, Aircraft, Vessels and Associated Transport Equipment.
Note 2 says that the expression “parts” and “parts and accessories” do not apply to the articles
mentioned in clauses (a) to (l) thereunder. In clause (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), are
mentioned. This takes us to Note 2(a) to Chapter XV, which provides that throughout that
Schedule, the expression “parts of general use” means:

Articles of “(a) Heading No. 73.07, 73.12, 73.15, 73.17 or 73.18 and similar articles of other
base metal; ”

[Link] 3 says that references in Chapters 86 to 88 to ‘parts’ or ‘accessories’ do not apply to

parts or accessories which are not suitable for use solely or primarily with the articles of those
chapters and that a part or accessory which answers to a description in two or more headings of
those Chapters is to be classified under that heading which corresponds to the principal use of
that part of accessory.

26.A conjoint reading of the Notes, referred to above, would show that the expression “parts
of general use” throughout the Schedule, means, inter alia, articles of Heading No. 73.18 and
similar articles of other base metal; and the expression ‘part and accessories’ in Chapter Heading
87.08 does not apply to parts or accessories which are not suitable for use solely or primarily
with articles of Chapter Heading 87.08 which pertains to parts and accessories of motor vehicles
of Chapter Heading Nos. 87.01 to 87.05. For the purposes of classification under Chapter
Heading 87.08, the test to be applied is: whether the goods are suitable for use solely or primarily
with articles of Chapter Heading Nos. 87.01 to 87.05; if the answer is in the affirmative, the
goods will be classifiable under Chapter Heading 87.08, but if the answer is in the negative, they
would have to be classified under Chapter Heading No. 73.18. Having regard to the finding that
the goods in question cannot but be regarded as parts of automobiles, it has to be held that they
are suitable for use primarily with articles of Chapter Heading Nos. 87.01 to 87.05. It follows
that the goods in question cannot be treated as falling under Chapter Heading No. 73.18 and that
they can properly be classified under Chapter Heading No. 87.08 of the Central Excise Tariff
Act, 1985.

[Link] this view of the matter, the judgments and orders of the Tribunal under challenge in the
first set of appeals (Civil Appeal Nos. 4598-4612 of 1994) are set aside and the appeals filed by
the assessee are allowed. The judgment of the Tribunal under challenge in the second set of
appeals (Civil Appeal Nos. 5701-5705 of 2001) and the order impugned in the third appeal (Civil
Appeal No. 5711 of 1999) are confirmed and accordingly, the appeals filed by the Revenue are
dismissed with costs.

________
1994 (74) E.L.T. 12 (S.C.)

IN THE SUPREME COURT OF INDIA

B.P. Jeevan Reddy, Suhas C. Sen and K.S. Paripoornan, JJ.

INDIAN TOOL MANUFACTURERS

Versus

ASSISTANT COLLECTOR OF C. EX., NASIK

Civil Appeal Nos. 3579-81/84 and Civil Appeal No. 1357 of 1993, decided on 23-9-1994

Classification of goods - Tariff providing for a general heading - Fact that a particular veriety of
goods is known by a particular name in the market will not take it out of a general heading -
Every variety of goods falling under that general heading taxable under that general heading -
Section 3 of Central Excises & Salt Act, 1944 - Section 2 of Central Excise Tariff Act, 1985 -
Rule 173B of Central Excise Rules, 1944.

[paras 12, 13]

Tool Tips - Throw Away Inserts, unmounted, and being `sintered carbides of metals such as
tungsten, molybdenum and vanadium’, classifiable under Item 62 of erstwhile Central Excise
Tariff and not under Item 51A(iii) thereof.

- It is not the case of the appellant that its products (Throw Away Inserts) are mounted on tools.
The composition of its product is same as mentioned in Tariff Item 62. In shape or form it is not
different from a Tool Tip, except that it has multiple cutting edges. Its function is the same as
that of a Tool Tip. The fact that it is detachable and has to be thrown away after use, will not
change its basic character or function. In view of the aforesaid, [paras 10, 16, 21, 22] these
appeals fail and are dismissed.

CASES CITED

International Foods v. Collector — 1978 (2) E.L.T. (J 50) (A.P.) [Para 13]

Plasmac Machine Manufacturing Co. Pvt. Ltd. v. Collector — 1991 (51) E.L.T. 161 (SC) [Para
17]

REPRESENTED BY : Mr. Anil Nauriya and Ms. H. Wahi, Advocates, for the Appellants.

Mr. N.A. Dalvi and Mr. R.B. Hathikhanvala, Advocates, for the Appellant in C.A. No. 1357 of
1993.

Mr. A.K. Ganguli, Sr. Advocate, Mr. N.K. Bajpai and C.V.S. Rao, Advocates with him, for the
Respondents.

[Judgment per : Suhas C. Sen, J.]. - The appellants manufacture and sell what they call as
`THROW-AWAY INSERTS’ (hereinafter referred to as `the Inserts’). During the period upto
17-6-1977, these Inserts were classified under T.I. No. 68. In view of the amendment in T.I. No.
51A, these Inserts were classified under that Tariff Item Number from 18-6-1977. Until 28-2-
1979, the appellants paid duty accordingly. On 1-3-1979, they filed a revised classification list in
which Inserts were listed at Serial Nos. 1716 to 1741. Since the Department intended to make
certain inquiries likely to take some time, classification of the inserts was provisionally approved
under Item No. 51A(iii). On 25-2-1980, the Assistant Collector, Central Excise, issued a Show
Cause Notice asking the appellants as to why the classification in respect of the Inserts approved
earlier provisionally under T.I. No. 51A(iii) should not be changed to T.I. No. 62. A similar
Show Cause Notice was issued in respect of the Classification List No. 5 effective from 20-6-
1979, No. 6 effective from 2-7-1979, No. 7 effective from 6-7-1979, No. 8 effective from 12-7-
1979 and No. 14 effective from 28-11-1979, in so far as these pertained to the `Inserts’. Under an
order dated 28-4-1980/2-5-1980, reclassification proposed under the Show Cause Notices was
confirmed. That is to say, the `Inserts’ were classified under T.I. No. 62 as `Tools Tips’.

[Link] aggrieved, the appellants filed an appeal registered as Appeal No. 1982/80 (F. No. V.
2 (62) 1982/80). Besides this appeal, there were two other appeals, one registered as Appeal No.
2218/80 (F. No. V2 (51A) 2218/80), against the Order No. V-51A(17) 131/VC/80, dated 10-7-
1980, passed by the Assistant Collector of Central Excise, Nasik, by which he confirmed the
demand for differential duty (as a result of reclassification) in respect of the `Inserts’ cleared
from April, 1976 to December, 1978. The other appeal was registered as Appeal No. 35/81 (F.
No. V. 2 (62) 988/81), against the Assessment Order No. 35/81, dated 7-1-1981, made by the
Superintendent of Central Excise, Range `C’, Nasik, by which he indicated that short levy in
respect of the `Inserts’ cleared from January, 1979 to April, 1980, differential duty demanded
was on account of the reclassification made as aforesaid.

[Link] Collector of Central Excise (Appeals) held :-

“As I understand, the basic difference between the `Tool Tips’ and the so-called `Inserts’ is that
the former are mounted on Tool by brazing (soldering), whereas the latter are clamped on the
tools and are separable. Having regard to these facts and to the scope of the expression `in any
form or size’ appearing in T.I. No. 62, I find difficult to persuade myself to agree with the
appellants’ contention. Now let us see what the IS : 4022-1967 for `Cemented Carbide Indexable
Throw - Away Inserts’ states. It says ”Indexable inserts are being increasingly used for
machining of metal by turning and milling. They derive their name from the fact that the insert is
held mechanically in a tool holder for turning or in a milling cutter for milling". From this, it is
seen that these are known as `Inserts’ because of the manner in which they are inserted in a Tool
Holder. In fact at Para 0.6 of the standard, it is stated that this standard is based on Draft ISO
Recommendation No. 997 `Throw Away Carbide Tips’ of the International Organisation for
Standardisation (ISO). From this also, one can infer that these are not two different things,
specially in view of the scope of the Item 62. The mere fact that the mode of fixation of Tips and
Inserts is different, should not in any way blur the correct classification and for the reasons stated
earlier, the inserts are classifiable under T.I. No. 62 as held correctly in the impugned order."

[Link] Collector further held that the demand for short levy for the period January, 1979 to
February, 1979 was barred by limitation. But the demand for the period March, 1979 to April,
1980 was sustainable.

[Link] assessee applied for revision to the Central Government against the aforesaid order
passed by the Collector. These cases were transferred to the Customs, Excise and Gold (Control)
Appellate Tribunal (CEGAT). The Tribunal held that :-

“The undisputed facts about the nature of the products are that both Tool Tips as well as Throw
Away Inserts are made from carbide powder of the metals such as tungsten, molybdenum and
vanadium. Both are pressed into the required shapes and then sintered (heat treated). Both are
affixed on the tool handle and perform the function of machining of metals (turning and milling
etc.). Thus, both are tools. So far as the differences between Tool Tips and Throw Away Inserts
are concerned, the appellants gave an imposing list of 10 points of difference. The Bench asked
them to show the authorities and technical literature etc. on which these points of difference were
based. The appellants were not able to produce any. The points of difference between Tool Tips
and Throw Away Inserts, as understood by us on the basis of the samples, catalogues and Indian
Standard Specifications etc. shown to us are as under :-

The Inserts are clamped on the tool handle and are (i) detachable. The Tool Tips are brazed
(welded or soldered) on the tool handle.

The Inserts are pre-ground (sharpened) before clearance (ii) from the factory. Tool Tips are
ground after they are welded on the tool handle.

Inserts have multiple edges. When one edge is blunted, the (iii) other edge can be put in place
by manipulation of the angle. Tool Tips have only one edge.
When all the edges of the Inserts are blunted after use, (iv) the Inserts have to be thrown away.
They cannot be sharpened again. The edge of the Tool Tip can, however, be sharpened and used
again."

[Link] Tribunal further held that the proposition enunciated by the appellants that in the
absence of a statutory definition, reliance has to be placed on the trade parlance and
understanding for classification of goods under the Central Excise Tariff, was correct. The only
evidence the appellants produced was Tool Tips and Throw Away Inserts, which were
internationally known by two different names and that there were two separate ISI Specifications
for them. The Tribunal observed that the more important test would be to find out the basic
character, function and use of the articles. The Tribunal recorded that the appellants themselves
admitted that so far as the names were concerned, the Inserts were also called as `Tips’. Item 62
was introduced in the Tariff in 1973. At that time I.S. Specification 4022-1967 was in vogue. In
the Chapter `Foreword’ in paragraph 0.3, Inserts were described as `Tips’. Paragraph 0.6 further
stated that the said Standard was based on Draft ISO Recommendation No. 997 `Throw Away
Carbide Tips’ of the International Organisation for Standardisation. This, according to the
Tribunal, went to show that the trade and industry the world over did not consider Inserts and
Tips as two different things. In that view of the matter, the Tribunal held that the entry `Tool
Tips, in any form or size...’ encompassed Throw Away Tips as well as Inserts.

[Link] Tribunal further explained the position in the following manner :-

“Both Tips and Inserts are made from the same raw material, undergo practically the same
process of manufacture and perform basically the same function of machining the metal.
Difference in the method of fixing them on the tool handle and the shorter life span of the Inserts
do not make them basically different goods. It only means that Inserts are a separate variety of
Tool Tips. From their disposable character or the shorter life span, the Inserts have acquired the
adjective `Throw Away’ and from their method of fixing by insertion or clamping the name
`Throw Away Inserts’ has come to be more commonly used. But in their basic character and use,
the Inserts are nothing more than a separate species of the generic item `Tool Tips’.”

[Link] Tribunal concluded that Throw Away Inserts, being a variety of the generic item Tool
Tips, had to be classified as specific Item 62 and could not fall under the more generic Item
51A(iii) -`Tools’.

[Link] by the decision of the Tribunal, the appellants have now come up to this Court
and contend that Carbide Throw Away Inserts, manufactured by the appellants, fell under Item
51A(iii) of the Central Excise Tariff and not under Item 62, as held by the Tribunal. The relevant
Tariff Items, as they stood at the relevant time, were as under :-

Tools designed to be fitted into hand tools, machine “51A(iii) tools or tools falling under sub-
item (ii), including dies for wire drawing, extrusion dies for metals and rock drilling bits;”

Tool Tips, in any form or size, unmounted, of sintered “62. carbides of metals such as tungsten,
molybdenum and vanadium.”

10.A distinction has been drawn between `Tools, designed to be fitted in hand tools, machine
tools and tools of other specified categories’ under one heading, `Tool Tips in any form or size’
under the other heading. In order to find out whether `Throw Away Inserts’ manufactured by the
appellants fall in the category of Tool Tips or Tools, the essential characteristics of the Inserts
will have to be examined. There is no dispute that the Throw Away Inserts are unmounted and
are of `sintered carbides of metals such as tungsten, molybdenum and vanadium’. Therefore, the
only question that remains to be considered is whether a `Throw Away Insert’ is a variety of
Tool Tip. This controversy is basically one of fact. The Tribunal has pointed out that an Insert is
multi-edged, detachable and has a shorter life span. It has to be thrown away when its edges get
blunted. The edge of an ordinary Tool Tip can, however, be sharpened and used again.

[Link] facts are not disputed. In fact, the Assistant Collector, who personally visited the
factory of the appellant, has recorded :-

“...none of the blanks as such can be used as finished product. Blanks for tool tips are first brazed
(welded) to the tool or to be more precise tool holder and after welding the same the tips are
ground and only one edge of the tip is available for cutting. In case of blanks for inserts all the
edges are available for cutting.

.... .......

Thus there being no difference in the process of manufacture and in the end-use except the
difference that the so-called inserts which are nothing but tool tips are affixed to the tip of the
tool through clamping device and they are replaceable easily while the other tips are permanently
welded and not easily detachable. But in case of the latter if the customer has the facilities for
brazing the tips to the tools, the customer purchases these tool tips (unground blanks for tips)
from the manufacturer and to that extent one can say that even the so-called tool tips are also
replaceable."

[Link] behalf of the appellants, it has been contended that to decide this controversy, regard
must be had to the market parlance. A customer wanting to buy Throw Away Inserts will not ask
for Tool Tips. Similarly, a person wanting to buy Tool Tips will not look for Inserts in the
market.

[Link] may be the position. But that will not solve the controversy in this case. If there is a
general heading for the purpose of levy of Excise Duty, then every variety of goods falling under
that general heading will have to be taxed under that heading. The fact that a particular variety is
known by a particular name in the market will not take it out of the general heading. For
example, when duty is leviable on biscuits, then every variety of biscuits will be taxed under that
heading. A particular type of thin crisp biscuits is known in the market as `wafer’, but basically it
is a biscuit. It was held by the Andhra Pradesh High Court in the case of International Foods v.
Collector of Central Excise, Hyderabad, 1978 (2) E.L.T. (J 50), that `wafer’ was a kind of
biscuit, although it may be different in size and shape from an ordinary biscuit. A pear-shaped
drinking glass with a small opening is known as `snifter’. Because of that, `snifter’ will not cease
to be a drinking glass. To decide the question, whether Throw Away Inserts are Tool Tips, nature
and function of Inserts will have to be examined. The form or size of the Inserts are quite
immaterial for this purpose. From the finding of fact recorded by the departmental authorities
and the Tribunal, it appears that the basic character, function and use of an Insert is not different
in any way from a Tool Tip.

[Link] finding of the Department which has been upheld by the Tribunal is that both Tool
Tips as well as Throw Away Inserts were Carbide Tips for machining of metal. The Inserts had
shorter functional life and were replaceable. The Tool Tip had one cutting edge while the Insert
had multiple cutting edges. These facts did not alter in any way the basic character and function
of the two articles. Both were tips meant for machining of metal. Both were manufactured by the
same process and had been made out of same metals. The Inserts were clamped on the holders.
The ordinary Tool Tips were brazed on the holders. This will not take the Inserts out of the
amplitude of the description in Tariff Item 62 `Tool Tips in any form or size ....’. This wide
description will encompass every type of Tool Tips detachable or otherwise. Whether a Tool Tip
is brazed on a tool handle or clamped on a tool handle will not alter its basic character, function
or use. The form of the Tool Tip is also immaterial . The detachable Tool Tip is only a variety of
Tool Tips and the fact that it is identified by the name `Throw Away Insert’ will not take it out of
the ambit of the heading `Tool Tips in any form or size.....’.

[Link], the Tribunal dealt with the argument based on trade parlance :

“... we find that all that they have to show by way of evidence of trade parlance is that (1) Tool
Tips and Throw Away Inserts are known by different names and that (2) there are two separate
Indian Standard Specifications for them. We find that these two factors by themselves can hardly
constitute adequate evidence of trade parlance. ... We find further that the appellants themselves
admit that even so far as the name is concerned, until recently the Inserts were also called as
Tips. Item 62 was introduced in the Tariff in 1973. At that time, the relevant I.S. Specification IS
: 4022-1967 was in vogue. In the Chapter `Foreword’, in paragraph 0.3, this Specification
describes the Inserts as `Tips’. Paragraph 0.6 thereof states further that the said Standard was
based on Draft ISO Recommendation No. 997 `Throw Away Carbide Tips’ of the International
Organisation for Standardisation (ISO). This shows that the trade and industry the world over did
not consider Inserts and Tips as basically two different things, so much so that Inserts were
commonly referred to as Tips. Therefore, in the context of such trade understanding, when the
entry `Tool Tips, in any form or size...’ appeared in the Central Excise Tariff, the only
reasonable conclusion can be that it encompassed Throw Away Tips or Inserts as well. IS : 4022-
1967 has remained current till about three months ago. The appellants state that the revised
Specification has dropped the name `Tips’ for Inserts. We have not been shown the revised
Specification, but even if it is so, it can only mean that a different name has been given to Throw
Away type of Tips. There has, however, been no change in the character or use of the article.”

[Link] assessee has been unable to bring to the notice of the Court anything to show that the
nature and function or composition of a Throw Away Insert is in any way different from an
ordinary Tool Tip. The highest that can be said for the appellants is that a Throw Away Insert is
a detachable Tool Tip with multiple edges.

[Link] were also referred to the judgment of this Court in the case of Plasmac Machine
Manufacturing Co. Pvt. Ltd. v. Collector of Central Excise, Bombay, 1991 (51) E.L.T. 161 (SC)
= (1991) Supp. 1 SCC 57. In that case, the question was whether `Tie Bar Nuts’ of base metal or
alloys manufactured with the aid of power and having `acme threads’, could be classified under
Tariff Item 52, which at the material time was as under :-

Bolts and nuts, threaded or tapped and screws, of base “52. metal or alloys thereof, in or in
relation to the manufacture of which any process is ordinarily carried on with the aid of power.

Explanation. - The expression “Bolts and nuts, threaded or tapped and screws” used in this item
shall include bolt ends, screw studs, screw studding, self-tapped screws, screw hooks and screw
rings."

[Link] that case, it was pointed that there was no dispute that Tie Bar Nuts conform to the
popular idea of nuts. It was observed :-

“Applying the foregoing principles and considering the fact that the Tie Bar Nuts’ function of
fixing the platens as stated by the appellants and that of fastening, as argued by them, are not
basically different, and the appellants themselves having called the goods as `nuts’, we are of the
view that We, the Tribunal is correct in classifying Tie Bar Nuts under Tariff Item 52.
therefore, do not find any reason to interfere with the department’s prospective modification of
the classification. We find no justification for classifying those in the residuary Item 68. As was
held in Dunlop India Ltd. v. Union of India, 1983 (13) E.L.T. 1566 (SC) = 1976 (2) SCC 241, if
an article is classifiable under a specific item, it would be against the very principle of
classification to deny it the proper parentage and consign it to the residuary item.”

[Link] attention was also drawn to Brussels Tariff Nomenclature relating to `Tool Tips’,
which is as under :-

“82.07 -

TOOL-TIPS AND PLATES, STICKS AND THE LIKE FOR TOOL-TIPS, UNMOUNTED, OF
SINTERED METAL CARBIDES (FOR EXAMPLE, CARBIDES OF TUNGSTEN,
MOLYBDENUM OR VANADIUM).

This heading covers products made by sintering metal carbides (e.g., of tungsten, molybdenum,
titanium, tantalum, vanadium or niobium) usually with a binder such as cobalt or nickel.

They are usually in the form of tool-tips, plates, sticks, rods, pellets, rings, etc., and are
characterised by great hardness, even when hot, and great rigidity.

In view of their special properties these tips, plates, etc., are welded or brased on to lathe tools,
milling tools, drills, dies or other high-speed cutting tools used for working metals or other hard
materials. They fall within this heading whether sharpened or not, or otherwise prepared, but not
if already mounted on tools : in the latter case, they fall within the headings for tools, particularly
heading 82.05."

[Link] heading and the explanation thereunder do not support the case of the appellants in
any way. On the contrary, it makes it clear that the products made by sintering metal carbides of,
inter alia, tungsten, molybdenum, vanadium, will fall under this heading. It has been clarified
that these products are usually in the form of Tool Tips, plates, etc. These products will fall
within this heading whether sharpened or not or otherwise prepared, but not if already mounted
on tools.

[Link] is not the case of the appellant that its products are mounted on tools. The composition of
its product is same as mentioned in Tariff Item 62. In shape or form it is not different from a
Tool Tip, except that it has multiple cutting edges. Its function is the same as that of a Tool Tip.
The fact that it is detachable and has to be thrown away after use, will not change its basic
character or function.

[Link] view of the aforesaid, these appeals fail and are dismissed. The parties will bear their
own costs.

CIVIL APPEAL NO. 1357 of 1993

[Link] view of our decision in Civil Appeals Nos. 3579-81/84, this appeal is also dismissed.
There will be no order as to costs.
4