Holding

A machine part such as the Granite Press Roll must be classified under the heading of the machine it serves, i.e., tariff item 84.31, pursuant to Note 2 of Section XVI of the Customs Tariff Act, 1975.

Summary

Mis Ballar Pur Industries Ltd imported a granite press roll, a component used to finish paper, and the Collector (Appeals) classified it under tariff heading 84.31 of the Customs Tariff Act, 1975, attracting a 40% duty. The Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) re‑classified the roll under heading 68.01/16(1), applying material‑based rules and arguing that the roll was principally a stone article. The company appealed, contending that the Tribunal mis‑applied the statutory notes and that the correct classification should follow Note 2 of Section XVI, which directs parts of machines to be classified with the machine they belong to. The Supreme Court held that the Tribunal relied on non‑existent rules in the statutory notes and that, under Note 2(a) and (b) of Section XVI, the roll must be classified with the machinery of Chapter 84, i.e., heading 84.31. Consequently, the Court set aside the Tribunal’s order, restored the Collector’s classification, and ordered a refund of the excess duty. The appeal was allowed.

Issues considered

Whether the Granite Press Roll should be classified under tariff heading 84.31 (machinery for making or finishing paper) or under heading 68.01/16(1) (articles of stone) of the Customs Tariff Act, 1975.
Whether the rules cited by CEGAT for classification were valid statutory provisions under the Customs Tariff Act.
Whether Note 2 of Section XVI of the First Schedule mandates that parts of machines be classified with the machine they belong to.

Legislation cited

Customs Act, 1962s. Section 130-E
Customs Tariff Act, 1975s. First Schedule, s. Section XIII, s. Section XVI

Subjects

customs classificationtariff interpretationmachine partsimport dutyCustoms Tariff ActSection XVINote 2Granite Press RollCEGATappeal

Judgment

MIS BALLAR PUR INDUSTRIES LTD. A
v.
THE COLLECTOR OF CUSTOMS (APPEAL), CUSTOMS HOUSE,
MADRAS

DECEMBER 14, 1994
B
[R.M. SAHAI AND N. VENKA TACHALA, JJ.]

Customs Tariff Act, 1975: First Schedule (as it stood prior to its
amendment on 28.2.1986)-Import tariff-Item No. 84.31and68.01116(1)
- Interpretation of-"Granite Press Ro/l"-Import of-Levy of duty-Held
classifiable under tariff item No. 84.31 and not under item No. 68.01116(1). C

The appellant-Company imported 'Granite Press Roll', whose
function was to give final finish or polish to paper, to be use~ as a part
of machinery in one of its paper manufacturing units. For levying duty
on it the Collector (Appeals) classified it under Import Tariff item D
No.84.31 of the First Schedule to the Customs Tariff Act, 1975.
However, the Customs, Excise and Gold (Control) Appellate Tribunal
classified it under Item No. 68.01/16(1). For coming to this conclusion,
the Tribunal relied on Rules 2(b) and 3(b) of the Rules for the
interpretation of Customs Tariff Schedule and held that item 84.31 was
specific for paper making/finishing machinery but not for parts of such E
machinery and there was no immutable rule in the Customs Tariff that
all parts of a machine must be assessed under the heading for that
machine. Further what made the Tribunal not to classify 'Granite
Press Roll' under heading No. 84.31 was its view that statutory Notes 1
and 2 in Section XVI, Note I in Chapter 84 and Note. I in Chapter 85 of
the First Schedule which have an overriding effect over the headings F
themselves lay down in general the order of priority or classification of
parts.

In assessee's appeal to this Court on the question whether the
change of classification of 'Granite Press Roll' made by the Tribunal
was uncalled for; G
Allowing the appeal and setting aside the order of the Tribunal,
this Court

HELD: 1. 'Granite Press Roll' is to be classified under Tariff I~m
84.31 of the 1st Schedule to the Customs Tariff Act, 1975 as it stood H
615
616 SUPREME COURT REPORTS [1994) SUPP. 6 S.C.R

A prior to its amendment on 28.2.1986. The import duty payable thereon
is only 40% as provided thereunder. [625 F]

2. The rules referred to by the CEGAT were rules which were non-
existent in statutory Notes 1 and 2 in Section XVI, Note I in Chapter 84
and Note I in Chapter 85 of the First Schedule to the Customs Tariff
B Act, although the same were assumed to exist. Consequently, the
Conclusion reached by the Tribunal in its order under appeal that the
imported article 'Granite Press Roll' falls under Tariff item in Chapter
68 is wholly wrong. [624 B to CJ

3.1 The rules which govern the classification of machine-part like
the 'Granite Press Roll' ought to be the rules contained in note 2 of
c Section XVI under Chapter 84 or Chapter 85 of the First Schedule to
the Customs Tariff Act. [624 D]

3.2 When Note 2 to Section XVI requires classification of parts of
machines to be made according to rules given thereunder and when
rule (a) thereunder requires goods (part of machine) of a kind
D described in any of the Headings of Chapters 84 and 85 (o.ther than
Nos. 84.65 and 85.28) under respective Headings, every machinery for
making or finishing cellulosic pulp, paper or paper-board, requires to
be classified under Heading 84.31. 'Granite Press Roll' being a part of
machine of goods 'Machinery for making or finishing cellulosic pulp,
paper or paper-board' which is suitable for use solely or principally as
E machinery for finishing paper, it requires to be classified with machine
described in the Heading 84.31, as required by rule (b) to Note 2 of
Section XVI. [625 B to CJ

3.3 CEGAT has gone wholly wrong in classifying that article under
import tariff item No. 68.01/16(1) of the First Schedule to the Customs
F Tariff Act, 1975, particularly when that article could not have been
regarded as an article of stone, as such, to become an excepted item
under Note 2 to Section XVI read with Note l(a) to Chapter 84,
· warranting its classification under Heading in Chapter 68 and
according to rules governing classification of materials or substances or
their parts. [625 E]
G
CIVIL APPELLATE WRISDICTION: Civil Appeal No. 2288(NM) of
1986.

From the Judgment and Order dated 10.4.86 of the Customs Excise and
Gold (Control) Appellate Tribunal, New Delhi in A.No.CD (SB) (T)
H No.1933of1983-B-2, Order No.234/86B-2.
BALLAR PUR INDS. LTD. v. COLL. OF CUSTOMS [VENKATACHALA, J.] 617

-
Ms. Indu Malhotra for the Appellant. A
Joseph Valla Palli and S.D. Shanna for the Respondent.

The Judgment of the Court was delivered by

VENKATACHALA, J. This appeal under Section 130-E of the
Customs Act, 1962 is directed against the order No. 234/1986-B.2 rendered B
on 10th April, 1986 by the Customs, Excise and Gold (Control) Appellate
Tribunal, New Delhi- "CEGAT', in CD(SB) (T) Appeal No.1933of1983
(B-2).

Whether there was justification for the CEGA T to classify the article
"Granite Press Roll" under Import Tariff Item No. 68.01/16(1) of the 1st C
Schedule to the Customs Tariff Act, 1975 as it stood prior to its amendment
on 28.2.1986, as against its classification made by the Collector (Appeals)
under Import Tariff Item No. 84.31 thereof, is the question which needs our
consideration and decision in this appeal.

The appellant, a Company incorporated under the Companies Act, D
1913, has two paper manufacturing Units in India. As 'Granite Press Roll',
which was required by the appellant to be used as a part of the machinery in
one of its paper manufacturing Units, was not indigenously made, the same
was imported from United Kingdom by the appellant for such use. The
Granite Press Roll, so imported, is goods or article which could be
described thus: E
Roll of 138 "length and 22" diameter with raised spigots,
fitted by mild steel shafts which are secured in position by
means of mild steel end-plates hand-fitted to the spigots with
mild steel nuts, the 3/8 cavity between the steel shaft and the
granite shell, having been filled with concrete and the granite F
shell being of7.l8/18 "thickness and the mild steel shaft 7"
thickness. Thus, it is a part of machine made of parts of arti-
cles like Granite, Steel and Concrete.

Whatever be the description of the goods or article, the Granite Press
Roll, it is found by the CEGA T to be "a component part ofpaper finishing G
machinery" its function bein_g to give final finish or polish to paper.

However, by its order under appeal, the CEGA T has classified the said
article, 'Granite Press Roll' under Import Tariff Item No. 68.01/16(1) as
against its classification made by the Collector (Appeals) under Import
Tariff Item No. 84.31. H
618 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R

A Was the said change of classification of the article- 'Granite Press
Roll' made by the CEGAT, uncalled for, as was argued on behalf of the
appellant by Ms. Indu Malhotra, is the question which, now requires, our .
consideration.

As a proper consideration of the said question becomes possible by
..
B reference to the relevant provisions in the 1st Schedule to the Customs
Tariff Act, 1975, it would be advantageous to excerpt them at the out-set:-

"SECTION XIII

ARTICLES OF STONE, OF PLASTER, OF CEMENT, OF
C ASBESTOS, OF MICA AND OF SIMILAR MATERIALS, CERAMIC
PRODUCTS: GLASS AND GLASSWARE.

CHAPTER68

ARTICLES OF STONE, OF PLASTER, OF CEMENT OF
D ASBESTOS, OF MICA AND OF SIMILAR MATERIALS.

NOTE

This Chapter does not cover:

(a) ................ .
E
(n) ................ .

Heading Sub heading No. and Rate of duty Central
No. description of (a) Standard Excise
article (b) Prefere- Tariff
F ntial areas Item.

22F.
....,
68.01/16 Articles of natural or
artificial stones of 23C.
agglomerated natural or 51.
artificial abrasives, of plastering material,
G of cement of concrete, of asbestos,
of asbestos-cement, or cellulose fiber
cement, or of mica:
articles of vegetable
materials agglomerated
with mineral binders
H
BALLARPURINDS. LTD. v: COLL. OF CUSTOMS [VENKATACHALA,J.] 619

mineral wools: expanded A
mineral materials:
articles of other
mineral substances not
elsewhere specified or
included:
B
(l) Not elsewhere (a) 100%
specified

(2) Grinding stones, (a)40%
grinding wheels and the
like of natural stone, c
of agglomerated natural
or artificial abrasives.
and segments or other
finished parts of such
stones and wheels but
excluding hand polish- D
ing stones, whetstones,
oil stones, and hones."

"SECTION XVI

MACHINERY AND MECHANICAL APPLIANCES; ELECTRICAL E
EQUIPMENT; PARTS THEREOF

NOTES

1. This Section does not cover:
F
(a) ..................... .

(0) ..................... .

.,_ 2. Subject to Note 1 to this Section, Note 1 to Chapter 84 and Note 1
to Chapter 85, parts of machines not being parts of the articles G
described in Heading No. 84. 64 or parts of the following articles
falling within Heading No. 85.18127, namely (i) insulators or
insulated electric wire and the like (ii) carbon articles used for
electrical purposes, or (iii) electrical conduit tubing and joints
therefore are to be classified according to the following rules: H
620 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R

A (a) goods of a kind described in any of the Headings of Chapters 84
and 85 (other than Heading Nos. 84.65. and 85.28) 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 falling
B within the same Heading (including a machine falling within
Heading No.84.59 or electrical goods and apparatus falling within
Heading No. 85.18/27) are to be classified with the machines of
that kind. However, goods Which are equally suitable for use
principally with the goods of Heading Nos. 85.13 and 85.15 are to
be classified in Heading No. 85.13;
c
(c) all other parts are to be classified in Heading No. 84.65 or 85.28."

"CHAPTER84

BOILERS, MACHINERY AND MECHANICAL APPLIANCES:
D PARTS THEREOF

NOTES

1. This Chapter does not cover:

E (a) millstones, grindstones and other articles falling within Chapter 68;

(b) ................. .

(e) ................. .

F 2. ··················

5 .................. .. -
Heading Sub-heading No. and Rate of duty Central
No. description of (a) Standard Excise
G article · (b) Prefere-
ntial areas
Tariff
item.
-·
84.01/02

84.31 machinery for making or finishing (a) 40%
cellulosic pulp. paper or paper-board .................... "
H
BALLAR PUR INDS. LTD. v. COLL. OF CUSTOMS [VENKATACHALA, J.] 621

"CHAPTER86 A
ELECTRICAL MACHINERY AND EQUIPMENT: PARTS
THEREOF"

NOTES

1. This Chapter does not cover:
B

(a) ....................... "

(underlining is ours)

No doubt, CEGAT has reached the conclusion that the article- C
"Granite Press Roll", falls for classification under Chapter 68. The
discussion found in CEGAT's order under appeal, that refers to the
statutory rules of classification of articles or goods under Tariff items of
Customs Act which formed the basis for its conclusion that 'Granite Press
Roll' has to be classified as an article under Chapter 68, runs thus:-
D
"4. We have carefully considered the rival submissions. We
observe that heading 84.31 is specific for paper
making/finishing machinery but not for parts of such
machinery. The respondents have not imported paper
making/finishing machinery but only a part of such
machinery. There is no suitable rule in the Customs Tariff E
that all parts of a machine must be assessed under the
heading for that machine. On the contrary, statutory Notes 1
and 2 in section XVI, Note I in Chapter 84 and Note 1 in
Chapter 85, which have an overriding effect over the
headings themselves, lay down in general the order of
priority or classification of parts in the following sequence:- F

(1) Parts made of- certain materials like mineral products, glass,
ceramics, plastics etc, and parts of general use made of base metals
are to be classified in the respective material composition heading.

(2) Subject to (1) above, parts having a specific heading for G
themselves in Chapters 84 and 85 are to be classified under that
heading.

(3) Other parts, if suitable for use solely or principally with a
particular kind of machine are to be classified within the heading
of that machine. H
622 SUPREME COURT REPORTS [1994] SUPP. 6S.C.R

A (4) All other parts are to be classified in heading No. 84.65 or 85.28."

5. The respondents are canvassing for the course at (3) above. But
that is permissible only ifthe prior options at (1) and (2) above are
not available. No heading which is specific for Granite Press Rolls,
or for that matter for parts of paper making/finishing machinery,
B has been shown to exist in the Tariff. The course at (2) above is,
therefore, not available. The respondents argue that the course at
(1) is also not available because the goods are not made of stone
alone but are a composite product of stone and steel. We find that
the Rules for the interpretation of the Customs Tariff Schedule,
which are statutory, do not permit exclusion of the course at (1)
c above merely on that ground. We reproduce below the relevant
Rules:-

"2 (a) .....................

(b) Any reference in a heading to a material or substance shall be
D
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
E more than one material or substance shall be according to the
principles contained in rule 3.

3. When for any reason, goods are, prima facie, classifiable under
two or more Headings, classification shall be affected as follows :

F (a) The Heading which provides that most specific description shall be
;
preferred to Headings providing a more general description.

(b) Mixtures and composite goods which consist of different materials
or are made up &:1f different components and which cannot be
classified by reference to (a) shall be classified as if they consisted ..
G of the material or component which gives the goods their essential
character, in so far 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 latest among
those which equally merit consideration."
H
BALLARPURINDS. LTD. v. COLL. OF CUSTOMS [VENKATACHALA, J.] 623

6. As already stated in the preceding paragraph, there is no specific A
description heading for Granite Press Rolls or even for parts of
paper making/finishing machinery in general. Rule 3(a), therefore,
does not apply. The next course is to determine classification in
terms of Rule 3(b) read with Rule 2(b). Now, in the Granite Press
Roll, the functional part is the roll made out of granite stone. It is
this part which imparts final finish to paper, The centre shaft and B
end plates only provide support to the roll and enable its fitment in
the paper finishing machinery. The very name of the article
"Granite Press Roll" is also suggestive of the fact that it is the
stone part which is the major and the important component. We
have, therefore, no hesitation in saying that it is the stone
component which gives the goods their essential character. As C
such, applying Rules 2(b) and 3(b), the goods fall for classification
in Chapter 68 and by virtue of Note l(a) to Chapter 84 they stand
excluded from that Chapter."

As is seen from Preamble to the above discussion in para 4 of the order
ofCEGAT, what has made .it (CEGAT) not to classify 'Granite Press Roll', D
machinery part of paper making or finishing, the imported article or goods
under Heading No. 84/31 in Chapter 84, is its view that there were contrary
rules in statutory Notes I and 2 in Section XVI. Note 1 in Chapter 84 and
Note 1 in Chapter 85 which had the over-riding effect on the Headings
themselves. Such contrary rules which according to it had the over-riding E
effect over the Headings themselves are those specified in sequence by it in
para 4 __of the discussion itself as rules 1 to 4. Again, as seen from the
discussion in para 5 of the order, CEGAT has found rules for the
interpretation of Customs Tariff Schedule being statutory, did not permit
exclusion of course at ( 1) above, that is, rule ( 1) referred to in para 4 of the
order because that rule (1 ), to wit, "parts made of certain materials like F
mineral products, glass, ceramics, plastics etc, and parts of the general use
made of these metals", required classification under the respective material
composition heading. It is this assumed situation, which has made it
(CEGAT) reproduce the rules 2(b) and 3(a), (b) and (c) requiring
classification of materials or substances, or parts of materials like mineral G
products, glass, plastics etc, and paits of general use made of base metals
and apply the same to the classification of machine part- 'Granite Press
Roll' under consideration, as could be seen from the said discussion itself.
Once again, as becomes obvious from its aforesaid discussion at para 5, it is
its (CEGAT's) assumption that rule (1) in para 4 relating to materials and
substances, given by it is applicable to machine part (part of machinery) in H
624 SUPREME COURT REPORTS [1994] SUPP. 6 S.C.R

A Section XVI, which has made it proceed to hold that 'Granite Press Roll' ...v'
falls in Chapter 68 by reason ofnote l(a) to Chapter 84. i

As rightly pointed out on behalf of the appellant ·here (respondent, '}-~

before the CEGAT) which was not, rightly denied on behalf of the
respondent here (appellant before the CEGAT) that the rules referred to in
B the discussion above by the CEGAT at para 4 of its order were rules which
were non-existent in statutory Notes l and 2 in Section XVI, Note l in
Chapter 84 and Note 1 in Chapter 85, although the same were assumed to
exist. When the basic rules which formed the foundation for CEGAT to
reach the conclusion that 'Granite Press Roll' which was admittedly an
imported machine-part, was that which fell under Heading No. 68.01/18(1)
c and not under Heading No. 84.31, are found not to exist, the reasoning
adopted by it in reaching that conclusion also cannot stand. Consequently,
we have to hold that CEGAT's conclusion reached in its order under appeal
that the imported article 'Granite Press Roll' falls under Tariff item in
Chapter 68 is wholly wrong.
D But, as rightly pointed out by CEGAT itself, the rules which govern the
classification of machine-part like the 'Granite Press Roll' with which we
are concerned, ought to be the rules contained in Note 2 of Section XVI
under Chapter 84 or Chapter 85, which are already excepted by us.

What, .then, cannot be ignored is the requirement of the provision in
E Note 2 to Section XVI, that subject to Note 1 to Section XVI, Note l to
Chapter 84 and Note 1 to Chapter 85 parts of machine (not being excepted
items) are to be classified according to the rules given thereunder as (a), (b)
and (c). What Note 2 to Section XVI says, in other words, is that machine
parts in Section XVI, which are not covered by articles specified in Note 1
to Section XVI, Note 1 to Chapter 84 and Note 1 to Chapter 85, are to be
F
classified according to rules given under Note 2 to Section XVI itself, that
is, rules (a), (b) and (c) thereof.

•
Coming to Rule (a) of Note 2 to Section XVI which is also excerpted
by us, already, goods of a kind described in any of the Headings of
G
Chapters 84 and 85 (other than Heading Nos. 84.65 and 85.28) are in all ·.
cases to be classified in their respective Headings. Then, coming to Rule (b)
of Note 2 to Section XVI, which is also excerpted by us, already, other part
of goods of a kind described in any of the Headings of Chapter 84, if
suitable for use solely or principally with a particular kind of machine
(described in Chapter 84) is required to be classified with machine of that
H kind mentioned in Chapter 84. Therefore, what has now to be examined is,
BALLAR PUR INDS. LTD. v. COLL. OF CUSTOMS [VENKATACHALA, J.] 625

when Heading No. 84.31 describes the goods (article) classified thereunder A
as "machinery for making or finishing cellulosic pulp, paper or paper-
board" whether the goods or article "Granite Press Roll", which is held by
CEGA T itself, to be a part or component of paper making machinery, does
warrant its classification thereunder. In our view, when Note 2 to Section
XVI requires classification of parts of machines to be made according to
rules given thereunder and when rule (a) thereunder requires goods (part of B
machine) of a kind described in any of the Headings of Chapters 8,4 and 85
(other than Nos. 84.65 and 85.28) under respective Headings, every
machinery for making or finishing cellulosic pulp, paper or paper-board,
requires to be classified under Heading 84.31. Then, coming to 'Granite
Press Roll' the imported article under consideration, being a part of
machine of goods 'Machinery for making or finishing cellulosic pulp, paper C
or paper-board' which is suitable for use solely or principally as machinery
for finishing paper, it requires to be classified with the machine described in
the Heading 84.31, as required by rule (b) to Note 2 of Section XVI,
inasmuch as, Granite Press Roll is described by CEGAT itself as part of
machine of paper making machinery. Therefore, 'Granite Press Roll', the D
imported article, in our view, warrants its classification under Chapter
Heading 84.31, as held by the Collector (Appeals). Thus, when classifi-
cation of imported article - the Granite Press Roll-ought to have been made
under tariff item No. 84.31 of Chapter 84, as is held by us, CEGAT has
gone wholly wrong in classifying that article under import tariff item No.
68.01/16(1) of the 1st Schedule to the Customs Tariff Act, 1975, E
particularly when that article could not have been regarded as an article of
stone, as such, to become an excepted item under Note 2 to Section XVI
read with Note l(a) to Chapter 84, warranting its classification under
Heading in Chapter 68 and according to rules governing classification of
materials or substances or their parts.
F
Since 'Granite Press Roll' is an imported article, which is classified by
us as Tariff item 84.31 of the 1st Schedule to the Customs Tariff Act, 1975
as it stood prior to its amendment on 28.2.1986, the import duty payable
thereon is only 40% as provided thereunder.

In the result, we allow this appeal, set aside the order of CEGA T under G
appeal, restore the order of the Collector (Appeals), and direct the
respondents to refund the excess import duty collected on 'Granite Press
Roll' to the appellant within one month form today. However, in the facts
of this appeal, no order as to costs, is made.

T.N.A. Appeal allowed. H