The Supreme Court of India has held that imported “Aluminium Shelving for Mushroom Growing” is liable to be classified as “Aluminium Structures” under Customs Tariff Item (CTI) 76109010, attracting a 10% basic customs duty, and not as “Parts of Agricultural Machinery” under CTI 84369900, which carries a nil rate of duty.
The Division Bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan set aside the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observing that static, non-moving assemblies cannot be classified as “machinery” merely based on their end use or integration with other equipment.
The central legal issue before the Apex Court was the appropriate classification of imported aluminium shelving used in mushroom cultivation. The dispute was whether the subject goods should be classified as:
- CTI 76109010: Aluminium Structures (Chapter 76), attracting 10% Basic Customs Duty.
- CTI 84369900: Parts of Agricultural/Horticultural Machinery (Chapter 84), attracting Nil Duty.
The Court ruled in favor of the Revenue, holding that the goods are aluminium structures and do not qualify as “machinery” or “parts of machinery” under the Customs Tariff Act, 1975.
Background of the Case
M/s Welkin Foods (the Respondent) imported aluminium shelving along with a floor drain and an automatic watering system. The Respondent classified all items under CTI 84369900 as parts of agricultural machinery. While the Department accepted the classification for the floor drain and watering system, it disputed the classification of the aluminium shelving.
The Revenue contended that the shelving constituted “Aluminium Structures” under CTI 76109010. The misclassification allegedly resulted in a short levy of duty amounting to INR 21,01,983. The Adjudicating Authority and the Commissioner of Customs (Appeals) confirmed the demand, holding that the goods were structures of aluminium to be fixed at a location and did not possess the characteristics of a machine.
However, the CESTAT allowed the Respondent’s appeal, holding that the goods were “specifically designed” for mushroom growing and were known in “trade parlance” as mushroom growing racks. The Tribunal relied on General Rule of Interpretation (GRI) 3 to classify the goods under the more specific category of agricultural machinery. The Revenue challenged this decision before the Supreme Court.
Arguments of the Parties
Submissions on behalf of the Appellant (Revenue):
- End Use Irrelevant: The taxable event occurs at the time of import. The condition of the article at the time of import is crucial, and the end use does not determine classification unless the tariff entry specifically refers to it.
- Not Machinery: The shelves lack moving parts and do not transmit force or energy. They are static structures supporting other machines.
- Not ‘Parts’: Merely because machines are clamped onto the shelves does not make the shelves a “part” of the machine.
Submissions on behalf of the Respondent (Importer):
- Definition of Machine: Relying on Note 5 of Section XVI, the Respondent argued that the expression “machine” includes any “machinery, plant, equipment, apparatus or appliance”.
- Specific vs. Generic: Citing GRI 3, it was argued that Chapter 84 (specific to agricultural use) should prevail over Chapter 76 (generic aluminium structures).
- Essential Component: The shelves were essential for the functioning of the mushroom growing apparatus and thus should be treated as parts.
Court’s Analysis
The Supreme Court undertook a detailed analysis of the General Rules of Interpretation (GRI), the applicability of the common parlance test, and the consideration of “use” in classification disputes.
1. Applicability of Common Parlance Test The Court clarified that the common parlance test serves to ascertain the meaning of a term only in the absence of statutory guidance. It held that the test cannot be used to override the clear mandate of the statute or reclassify goods that are clearly identifiable under a particular heading.
2. Consideration of ‘Use’ The Bench observed that ‘use’ can be a relevant factor only if the tariff heading refers to ‘use’ or ‘adaptation’ explicitly or inherently.
- CTI 7610 (Aluminium Structures): This is an eo-nomine provision (describing goods by name) and makes no reference to use. It covers all aluminium structures.
- CTI 8436 (Agricultural Machinery): While this heading implies use, the goods must first qualify as “machinery”.
3. Nature of the Subject Goods The Court rejected the notion that the aluminium shelves could be termed “machinery”.
“We have no doubt that in common parlance, the subject goods are not understood as ‘machinery’. An iron or steel shelf, for example, is universally understood as a ‘structure’ or ‘furniture’, not a machine. By the same logic, these aluminium assemblies are mere structures. To classify these static, non-moving assemblies as ‘machinery’ is a classification that defies common sense and is patently absurd.”
4. Rejection of the ‘Functional Unit’ and ‘Parts’ Argument The Court noted that the mushroom growing apparatus was not a functional unit as the individual machines (watering, compost spreading, etc.) performed independent tasks. Regarding the argument that the shelves were “parts” of the machinery, the Court held:
“All of the individual machines are already complete and fully operational on their own, i.e, their mechanical and electrical functions do not rely on the aluminium shelves. These shelves do not contribute to their operation; they merely serve as a surface for the devices to perform their functions. A surface supports an object but does not become a part of it.”
5. Interpretation of Section Note 5 The Court dismissed the Respondent’s reliance on Section Note 5 of Section XVI to expand the definition of “machine” to include “plant”. The Court clarified that Note 5 limits the expansion of the term “machine” only for the purposes of the Section Notes and does not broaden the scope of the tariff headings themselves.
Decision
The Supreme Court concluded that the subject goods satisfy the criteria for “Aluminium Structures” under CTI 76109010 as they are made of aluminium and possess the characteristics of a structure (remaining in position once assembled).
Since the goods were found to be structures and not parts of agricultural machinery, the Court held they are legally barred from classification under Section XVI (Machinery) by virtue of Section Note 1(f) to Section XV.
The Court held:
“Looked at from any angle, we are of the firm view that the subject goods cannot be classified under Chapter Heading 8436. Consequently, the subject goods are liable to be classified under CTI 76109010 as ‘Aluminium Structures’.”
The appeal was allowed, and the impugned judgment of the CESTAT was set aside.
Case Details
Case Title: COMMISSIONER OF CUSTOMS (IMPORT) vs M/S WELKIN FOODS
Case Number: Civil Appeal No. 5531 of 2025
Coram: Justice J.B. Pardiwala and Justice R. Mahadevan
