LEGAL ISSUE: Classification of imported Liquid Crystal Display (LCD) panels under the Customs Tariff Act, 1975. CASE TYPE: Customs and Excise. Case Name: CCE, Aurangabad vs. M/S Videocon Industries Ltd. & CCE, Aurangabad vs. M/S Harman International (India) Pvt. Ltd. Judgment Date: 29 March 2023
Date of the Judgment: 29 March 2023
Citation: 2023 INSC 269
Judges: S. Ravindra Bhat, J. and Dipankar Datta, J. (authored by S. Ravindra Bhat, J.)
Can LCD panels imported for use in televisions and car audio systems be classified as “parts” of those systems, or should they be classified as “liquid crystal devices” under a separate category? The Supreme Court of India recently addressed this question in two appeals concerning the classification of imported LCD panels for customs purposes. The core issue revolved around whether these panels should be categorized as parts of specific electronic devices or as standalone liquid crystal devices. The bench comprised of Justice S. Ravindra Bhat and Justice Dipankar Datta, with the judgment authored by Justice S. Ravindra Bhat.
Case Background
The appeals before the Supreme Court involved two separate cases concerning the classification of imported LCD panels. In the first case, M/s Videocon Industries Ltd. (hereafter “Videocon”) imported LCD panels for use in manufacturing television sets. Videocon contended that these panels should be classified under Chapter Heading (CH) 9013.8010 of the Customs Tariff Act, 1975 (hereafter “CTA”) as liquid crystal devices. The revenue, however, argued that they should be classified under CH 8529 as parts of television sets.
In the second case, M/s Harman International (India) Pvt. Ltd. (hereafter “Harman”) imported LCD panels for use in car audio systems. Harman claimed that these panels should also be classified under CH 9013.8010 as liquid crystal devices. The revenue, on the other hand, argued that they should be classified under either CTH 8519 or 8555 as parts of car audio or video players.
Timeline
| Date | Event |
|---|---|
| N/A | Videocon imported LCD panels, claiming classification under CH 9013.8010. |
| N/A | Revenue contended Videocon’s LCD panels should be classified under CH 8529. |
| N/A | Deputy Commissioner ruled against Videocon, classifying goods under CH 8529.9090. |
| N/A | Commissioner directed a remand after Videocon’s appeal. |
| N/A | Dy. Commissioner, after remand, confirmed the original classification. |
| N/A | Commissioner (Appeals) rejected Videocon’s appeal. |
| N/A | CESTAT set aside the demand, upholding Videocon’s classification under CH 9013.8010. |
| N/A | Harman imported LCD panels, claiming classification under CH 9013.8010. |
| N/A | Revenue classified Harman’s LCD panels under CH 8519 or 8555. |
| N/A | CESTAT upheld Harman’s contention, classifying goods under CH 9013.8010. |
| 29 March 2023 | Supreme Court dismissed the appeals by the revenue, upholding CESTAT’s orders. |
Course of Proceedings
In the Videocon case, the Deputy Commissioner initially ruled against Videocon, classifying the LCD panels under CH 8529.9090. After a remand, the Deputy Commissioner reaffirmed this classification, and the Commissioner (Appeals) rejected Videocon’s appeal. Videocon then approached the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which set aside the demand and upheld Videocon’s claim that the correct classification was under CH 9013.8010.
Similarly, in the Harman case, the revenue authorities rejected Harman’s claim and classified the LCD panels under CH 8519 or 8555. CESTAT, however, upheld Harman’s contention that the goods were correctly classifiable under CH 9013.8010.
Legal Framework
The core legal issue revolved around the interpretation of the Customs Tariff Act, 1975, specifically the classification of goods under different Chapter Headings. The relevant chapter headings are:
- CH 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”
- CH 9013.8010: “Liquid crystal devices (LCD)”
- CH 8529: “Parts suitable for use solely or principally with the apparatus of heading 8525 to 8528”
- CH 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”
- CH 8519: “Sound recording or reproducing apparatus”
- CH 8522: “Parts and accessories suitable for use solely or principally with the apparatus of headings 8519 or 8521”
The Supreme Court also considered the General Rules for the Interpretation of the Schedule to the Customs Tariff Act, particularly Rules 1, 2, and 3, which provide the guidelines for classifying goods.
The court also took into account the Chapter Notes of Chapter 85 and Chapter 90 of the Customs Tariff Act, 1975. Note 1(m) to Chapter 85 excludes articles of Chapter 90. Note 2 to Chapter 90 provides rules for classifying parts and accessories.
Arguments
Revenue’s Arguments:
- The revenue argued that the LCD panels, though classifiable under CH 9013, should be classified under CH 8529 because they are principally used in the manufacture of LCD TVs, which are covered under heading 85.28.
- They contended that the LCD panels are specifically designed for use in LCD TVs and car audio systems, and therefore, should be classified as parts of those systems.
- The revenue relied on Chapter Note 2(b) of Chapter 90, which states that parts suitable for use solely or principally with a particular kind of machine should be classified with that machine.
- The revenue also cited the commercial parlance test, arguing that the LCD panels are commercially known as parts of TVs and car audio systems.
- The revenue distinguished the judgment in Secure Meters v Commissioner of Customs [2015] 6 S.C.R. 219, arguing that the factual basis in the present case was stronger because the manufacturer’s websites indicated that the imported goods were meant principally for use in television sets.
Assessee’s Arguments (Videocon and Harman):
- The assessees argued that the LCD panels are specifically covered by the entry heading 90.13 as liquid crystal devices and are not described more specifically in any other heading.
- They contended that Chapter Heading 8529, which deals with parts suitable for use solely or principally with the apparatus of Heading 8525 to 8528, is a general heading and cannot be considered as a specific heading for LCD panels.
- The assessees relied on Section Note 1(m) to Section XVI, which excludes articles of Chapter 90 from Chapter 85, arguing that this exclusion should be given primacy.
- They argued that the description under heading 8529 is general, whereas the description under heading 90.13 is more specific.
- They contended that the LCD panels are complete articles capable of multiple uses and not solely or principally for use in specific articles.
- The assessees also relied on Rule 1 of the General Rules of Interpretation, which states that classification should be determined according to the terms of the headings and any relative Section or Chapter Notes.
- They argued that the judgment in Secure Meters (supra) was applicable to the facts of the present case, as it held that LCDs are not articles provided “more specifically in other headings” other than 90.13.
| Main Submission | Sub-Submissions | Party |
|---|---|---|
| Classification of LCD Panels | LCD panels are principally used in LCD TVs and car audio systems. | Revenue |
| LCD panels are specifically covered by heading 90.13 as liquid crystal devices. | Assessee | |
| Heading 8529 is a general heading and not specific to LCD panels. | Assessee | |
| Applicability of Chapter Notes | Chapter Note 2(b) of Chapter 90 applies, classifying parts with their principal use. | Revenue |
| Section Note 1(m) to Section XVI excludes articles of Chapter 90 from Chapter 85. | Assessee | |
| Interpretation of Rules | Classification should be based on commercial parlance test. | Revenue |
| Classification should be based on the specific terms of headings and chapter notes. | Assessee | |
| Precedents | The facts of the present case are different from Secure Meters (supra). | Revenue |
| The ratio of Secure Meters (supra) is applicable to the present case. | Assessee |
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues in a separate section. However, the core issue revolved around:
- Whether imported LCD panels should be classified under Chapter Heading 9013.8010 as liquid crystal devices or under Chapter Heading 8529 as parts of television sets, or under CH 8519 or 8522 as parts of car audio systems.
Treatment of the Issue by the Court
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Classification of LCD Panels | Classified under CH 9013.8010 | CH 9013.8010 specifically covers liquid crystal devices, and Note 1(m) to Chapter 85 excludes articles of Chapter 90. |
Authorities
Cases Relied Upon:
- G.S. Auto International Ltd v Collector of Central Excise [2003] 1 S.C.R. 372: 2003 (152) ELT 3 (SC): The revenue relied on this case to emphasize the commercial identity test for classification. The Supreme Court distinguished this case, noting it was in the context of Section XVII, which had different notes.
- Secure Meters v Commissioner of Customs [2015] 6 S.C.R. 219: 2015 (14) SCC 239: The assessee relied on this case, where the Supreme Court held that LCDs are not articles provided “more specifically in other headings” other than 90.13. The court found this case to be directly applicable.
- Commissioner of Central Excise, Nagpur v Simplex Mills Co. Ltd. [2005] 2 S.C.R. 441: (2005) 3 SCC 51: The Supreme Court referred to this case to emphasize the primacy of section and chapter notes in classification.
- Commissioner of Central Excise, Delhi-III vs. UNI Products India Ltd. [2020] 13 S.C.R. 295: 2020 (19) SCC 742: The court relied on this case to highlight that when goods are excluded from a particular chapter, the “pull in” through a note has to be narrowly construed.
- Collector of Central Excise v Delton Cables Ltd & Anr 2005 (12) SCC 284: The court referred to this case to emphasize the rule of classification of goods in accordance with a specific description.
- M/S Intel Design Systems (India) (P) Ltd. vs. Commissioner of Customs and Central Excise [2008] 2 S.C.R. 686: 2008 (3) SCC 258: The court referred to this case to highlight that when goods are excluded from a particular chapter, the “pull in” through a note has to be narrowly construed.
Legal Provisions Considered:
- General Rules for the Interpretation of the Schedule to the Customs Tariff Act, 1975: Rules 1, 2, and 3 were considered for the classification of goods.
- Chapter 85 of the Customs Tariff Act, 1975: Specifically, Note 1(m) and Note 2 were considered.
- Chapter 90 of the Customs Tariff Act, 1975: Note 2 was considered.
| Authority | Court | How it was used |
|---|---|---|
| G.S. Auto International Ltd v Collector of Central Excise [2003] 1 S.C.R. 372 | Supreme Court of India | Distinguished; the court noted it was in the context of Section XVII which had different notes. |
| Secure Meters v Commissioner of Customs [2015] 6 S.C.R. 219 | Supreme Court of India | Followed; the court held that LCDs are not articles provided “more specifically in other headings” other than 90.13. |
| Commissioner of Central Excise, Nagpur v Simplex Mills Co. Ltd. [2005] 2 S.C.R. 441 | Supreme Court of India | Referred to; the court emphasized the primacy of section and chapter notes in classification. |
| Commissioner of Central Excise, Delhi-III vs. UNI Products India Ltd. [2020] 13 S.C.R. 295 | Supreme Court of India | Referred to; the court highlighted that when goods are excluded from a particular chapter, the “pull in” through a note has to be narrowly construed. |
| Collector of Central Excise v Delton Cables Ltd & Anr 2005 (12) SCC 284 | Supreme Court of India | Referred to; the court emphasized the rule of classification of goods in accordance with a specific description. |
| M/S Intel Design Systems (India) (P) Ltd. vs. Commissioner of Customs and Central Excise [2008] 2 S.C.R. 686 | Supreme Court of India | Referred to; the court highlighted that when goods are excluded from a particular chapter, the “pull in” through a note has to be narrowly construed. |
Judgment
| Submission | Court’s Treatment |
|---|---|
| LCD panels should be classified under CH 8529/8522 as parts of TVs/Car Audio Systems | Rejected. The court held that LCD panels are specifically covered under CH 9013.8010 as liquid crystal devices. |
| Chapter Note 2(b) of Chapter 90 applies, classifying parts with their principal use. | Rejected. The court held that Note 1(m) to Chapter 85 excludes articles of Chapter 90, which includes LCD panels. |
| The commercial parlance test should be applied. | Rejected. The court emphasized that the specific terms of headings and chapter notes should be given primacy. |
| The facts of the present case are different from Secure Meters (supra). | Rejected. The court found that the ratio of Secure Meters (supra) is applicable to the present case. |
How each authority was viewed by the Court:
- The court distinguished G.S. Auto International Ltd v Collector of Central Excise [2003] 1 S.C.R. 372, stating that it was in the context of Section XVII, which had different notes.
- The court followed Secure Meters v Commissioner of Customs [2015] 6 S.C.R. 219, stating that it was decisive on the question that LCDs are not articles provided “more specifically in other headings” other than 90.13.
- The court referred to Commissioner of Central Excise, Nagpur v Simplex Mills Co. Ltd. [2005] 2 S.C.R. 441 to emphasize the primacy of section and chapter notes in classification.
- The court referred to Commissioner of Central Excise, Delhi-III vs. UNI Products India Ltd. [2020] 13 S.C.R. 295 to highlight that when goods are excluded from a particular chapter, the “pull in” through a note has to be narrowly construed.
- The court referred to Collector of Central Excise v Delton Cables Ltd & Anr 2005 (12) SCC 284 to emphasize the rule of classification of goods in accordance with a specific description.
- The court referred to M/S Intel Design Systems (India) (P) Ltd. vs. Commissioner of Customs and Central Excise [2008] 2 S.C.R. 686 to highlight that when goods are excluded from a particular chapter, the “pull in” through a note has to be narrowly construed.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the specific language of the Customs Tariff Act and the General Rules of Interpretation. The court emphasized the following points:
- Specific vs. General Headings: The court prioritized the more specific heading (9013.8010 for LCDs) over the more general headings (8529 for parts of TVs and 8522 for parts of car audio systems).
- Exclusion Clause: The court gave significant weight to Note 1(m) of Chapter 85, which explicitly excludes articles of Chapter 90. This exclusion was crucial in determining that LCD panels should not be classified under Chapter 85, even if they are used in TVs or car audio systems.
- Interpretation of Notes: The court clarified that Note 2(b) of Chapter 85, which deals with parts suitable for use solely or principally with a particular machine, is subordinate to Note 1(m) and only applies when the article is a “part” which acts as an accessory.
- Precedents: The court found the ruling in Secure Meters (supra) to be directly applicable, as it established that LCDs are not articles provided “more specifically in other headings” other than 90.13.
| Sentiment | Percentage |
|---|---|
| Emphasis on Specific Headings | 35% |
| Importance of Exclusion Clause (Note 1(m)) | 30% |
| Interpretation of Chapter Notes | 20% |
| Reliance on Precedent (Secure Meters) | 15% |
| Ratio | Percentage |
|---|---|
| Fact | 20% |
| Law | 80% |
Logical Reasoning:
The court considered alternative interpretations, particularly the revenue’s argument that the LCD panels should be classified based on their principal use. However, the court rejected this interpretation, emphasizing that the specific exclusion of Chapter 90 articles from Chapter 85 takes precedence. The court also considered the argument that the commercial parlance test should be applied, but rejected this argument, emphasizing that the specific terms of headings and chapter notes should be given primacy.
The Supreme Court concluded that the LCD panels were correctly classified under Chapter 90, Entry 9013.8010. The court emphasized the importance of adhering to the General Rules of Interpretation and the specific chapter notes of the Customs Tariff Act. The court also highlighted that when goods are excluded from a particular chapter, the “pull in” through a note has to be narrowly construed.
The court’s decision was based on the following reasons:
- The LCD panels are specifically covered by the entry heading 90.13 as liquid crystal devices.
- Chapter Heading 8529, which deals with parts suitable for use solely or principally with the apparatus of Heading 8525 to 8528, is a general heading and cannot be considered as a specific heading for LCD panels.
- Section Note 1(m) to Section XVI excludes articles of Chapter 90 from Chapter 85, and this exclusion should be given primacy.
- The description under heading 8529 is general, whereas the description under heading 90.13 is more specific.
- The LCD panels are complete articles capable of multiple uses and not solely or principally for use in specific articles.
- The judgment in Secure Meters (supra) is applicable to the facts of the present case, as it held that LCDs are not articles provided “more specifically in other headings” other than 90.13.
The court quoted from the judgment:
- “classification has to be in accord with “the terms of the headings and any relative Section or Chapter Notes””
- “the heading which provides the most specific description shall be preferred to headings providing a more general description.”
- “when goods are excluded from a particular chapter, the “pull in” through a note has to be narrowly construed”
There were no dissenting opinions. The bench unanimously agreed on the classification of LCD panels under Chapter 90, Entry 9013.8010.
The decision has potential implications for future cases involving the classification of similar goods. The court’s emphasis on the specific language of the tariff act and the priority of specific headings over general headings will guide future decisions. The court’s emphasis on the exclusion clause in Note 1(m) of Chapter 85 will also be important in future cases.
The court did not introduce any new doctrines or legal principles. The court’s decision was primarily based on the existing legal framework and the interpretation of the provisions of the Customs Tariff Act, 1975.
Key Takeaways
- LCD panels are classified under Chapter Heading 9013.8010 as liquid crystal devices, not as parts of televisions or car audio systems.
- Specific headings in the Customs Tariff Act take precedence over general headings.
- Exclusion clauses in the Customs Tariff Act must be given significant weight.
- The principle of Secure Meters (supra) is upheld, that LCDs are not articles provided “more specifically in other headings” other than 90.13.
- The judgment clarifies the interpretation of Chapter Notes and General Rules of Interpretation of the Customs Tariff Act, 1975.
Directions
No specific directions were given by the Supreme Court.
Development of Law
The ratio decidendi of the case is that LCD panels are to be classified under Chapter Heading 9013.8010 as liquid crystal devices and not as parts of televisions or car audio systems. This decision upholds the previous position of law as established in Secure Meters (supra), and clarifies the interpretation of Chapter Notes and General Rules of Interpretation of the Customs Tariff Act, 1975.
Conclusion
The Supreme Court dismissed the revenue’s appeals, affirming that LCD panels should be classified under Chapter Heading 9013.8010 as liquid crystal devices. The court emphasized the importance of specific headings, exclusion clauses, and the interpretation of chapter notes in the Customs Tariff Act, 1975. This ruling provides clarity on the classification of LCD panels for customs purposes and upholds the previous position of law as established in Secure Meters (supra).
Category
Parent Category: Customs Law
Child Category: Classification of Goods
Child Category: Chapter 90, Customs Tariff Act, 1975
Child Category: Chapter 85, Customs Tariff Act, 1975
Child Category: Section XVI, Customs Tariff Act, 1975
Child Category: Section XVII, Customs Tariff Act, 1975
Parent Category: Customs Tariff Act, 1975
Child Category: Section 2, Customs Tariff Act, 1975
Child Category: Chapter Heading 9013, Customs Tariff Act, 1975
Child Category: Chapter Heading 8529, Customs Tariff Act, 1975
Child Category: Chapter Heading 8528, Customs Tariff Act, 1975
Child Category: Chapter Heading 8519, Customs Tariff Act, 1975
Child Category: Chapter Heading 8522, Customs Tariff Act, 1975
FAQ
Q: What was the main issue in this Supreme Court case?
A: The main issue was how to classify imported LCD panels under the Customs Tariff Act, 1975. Should they be classified as “liquid crystal devices” or as “parts” of televisions or car audio systems?
Q: What did the Supreme Court decide?
A: The Supreme Court decided that LCD panels should be classified as “liquid crystal devices” under Chapter Heading 9013.8010 of the Customs Tariff Act, 1975, and not as parts of televisions or car audio systems.
Q: Why did the court classify LCD panels this way?
A: The court prioritized the specific heading for LCDs (9013.8010) over the general headings for parts of TVs or car audio systems. The court also emphasized that Note 1(m) of Chapter 85 excludes articles of Chapter 90, which includes LCD panels.
Q: What does this mean for businesses importing LCD panels?
A: Businesses importing LCD panels should classify them under Chapter Heading 9013.8010. This classification may have implications for the customs duties and taxes they pay.
Q: What is the significance of this judgment?
A: This judgment clarifies the interpretation of the Customs Tariff Act, 1975 and provides guidance on classifying LCD panels. It also reinforces the importance of specific headings and exclusion clauses in tariff classifications.
Q: What is the commercial parlance test?
A: The commercial parlance test is a method of classifying goods based on how they are referred to in the market by those who deal with them, whether for purchase, sale, or otherwise. The Supreme Court rejected this test in favor of specific terms of headings and chapter notes in the present case.
Source: Customs Dispute Resolved