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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  4427  OF 2003

M/S Salora International Ltd. Appellant

Vs.

Commissioner of Central Excise, New Delhi Respondent

J U D G M E N T

ANIL R. DAVE, J

1. The challenge in this appeal is to an order dated 1st April,  

2003  passed  by  the  Customs,  Excise  and  Gold  (Control)  

Appellate  Tribunal at  New Delhi (in short  ‘The Tribunal’)  in  

E/APPEAL No. 1553/02-B whereby the Tribunal has dismissed

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the appeal filed by the appellant herein and upheld the Order-in-

Appeal passed by the Commissioner (Appeals).

2. The issue under consideration in this appeal is whether the  

goods manufactured by the appellant are liable to be taxed as  

‘Parts of Television Receivers’ falling under Tariff Entry 8529  

of the Central Excise Tariff contained in the First Schedule to  

the Central Excise Tariff Act, 1985 (in short ‘the Tariff’) or as  

‘Television Receivers’ under Tariff Entry 8528 of the Tariff, for  

the year 1989-90.  

3.     The appellant is a manufacturer of various components of  

television sets.  The components are manufactured at its factory  

at Delhi. Thereafter, the said components are assembled in the  

same factory for the purpose of testing of each component and  

for checking the working of each television set.  Thereafter the  

television  sets  so  assembled  are  disassembled  and  then  

transported  as  parts  to  various  satellite  units  of  the  appellant  

company at different places. In these satellite units, the separate

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components  are  re-assembled and,  as  per  the  appellant,  some  

further  processes  are  carried  out  in  order  to  make  those  sets  

marketable.  The issue is whether such components,  which are  

manufactured  at  and  transported  from  the  factory  of  the  

appellant  at  Delhi  are  liable  to  be  assessed  as  ‘Television  

Receivers’ or as ‘Parts of Television Receivers’.

4.     The  appellant  was  issued  a  show-cause  notice  dated  

21.3.1990 by the  Assistant  Collector,  New Delhi,  whereby  it  

was asked to show-cause as to why the goods manufactured by  

the appellant were not liable to be classified under sub-heading  

8528.00  of  the  Tariff  as  ‘Television  Receivers’,  rather  than  

under  Entry  8529.00,  as  ‘parts’  of  the  same.  The  appellant  

replied to the show-cause notice that the goods/components as  

transported  from  its  factory  did  not  possess  the  essential  

characteristics of finished Television Receivers as required by  

Rule 2(a) of the Rules for Interpretation of the Tariff (in short  

the  ‘Rules  for  Interpretation’),  and  also  detailed  the  various  

further processes required to be performed on those goods for

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them to be considered as complete Television Receivers. These  

contentions of the appellant appear to have been accepted as no  

further action was taken by the Revenue until the year 1993.  

5. Thereafter, the Collector of Central Excise, exercising his  

power under Section 35E(2) of the Central Excise and Salt Act,  

1944  vide  order  dated  18.02.1994  directed  the  Assistant-

Collector to file an appeal before the Collector, Central Excise  

(Appeals)  for  setting  aside  the  approval  granted  to  the  

classification  of  the  goods  of  the  appellant.  The  Collector  

(Appeals)  by order  dated  21/22.07.1994 dismissed  the  appeal  

filed by the Department.  

6.  Against the aforestated order, the Department preferred an  

appeal  before  the  Tribunal.   The  Tribunal  by its  order  dated  

18.02.2000 remanded the matter to the Collector (Appeals), on  

finding that the earlier order of the Collector (Appeals) was a  

non-speaking  order  and  violative  of  the  principles  of  natural  

justice.  Consequently,  the  Collector  (Appeals)  in  the  remand

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proceedings decided the issue in favour of the Department vide  

order  dated  26.06.2002.  Against  this,  the  appellant  filed  an  

appeal before the Tribunal, wherein the order impugned herein  

was passed.   By the impugned order, the Tribunal has accepted  

the  contentions  of  the  Department  and  held  the  goods  

manufactured by the appellant liable to be classified under Tariff  

Entry 8528 as ‘Television Receivers’ rather than under Tariff  

Entry 8529 as ‘parts’ thereof.  

7.    At the outset, recourse may be had to the respective Tariff  

Entries during the relevant period:

“8528.00 – Television Receivers (including video  

monitors  and  video  projectors),  whether  or  not  

incorporating radio broadcast receivers or sound or  

video recording or reproducing apparatus.

8529.00 –  Parts  suitable  for  use  solely  or  

principally  with  the  apparatus  of  heading  Nos.  

85.25 to 85.28.”

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8. Rules 1 & 2 of the Rules for the Interpretation of Excise  

Tariff framed under Section 2 of the Act read as under:

“1. The titles of Sections and Chapters are provided  

for  ease  of  reference  only;  for  legal  purposes,  

classification shall be determined according to the  

terms of the headings and any relative Section or  

Chapter  Notes  and,  provided  such  headings  or  

Notes  do not  otherwise  require,  according to  the  

provisions hereinafter contained.

2. (a) Any reference in a heading to goods shall be  

taken  to  include  a  reference  to  those  goods  

incomplete  or  unfinished,  provided  that,  the  

incomplete or unfinished goods have the essential  

character of the complete or finished goods. It shall  

also be taken to include a reference to those goods  

complete  or finished (or falling to be classified as  

complete  or  finished  by  virtue  of  this  rule),  

removed unassembled or disassembled.”  

9. Mr. Dushyant Dave, learned senior counsel appearing for  

the appellant contended that the aforestated Rules of the Rules  

for  Interpretation may not  be taken recourse to  in  the instant

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case,  as  there  exists  a  clear  stipulation to  the contrary  in  the  

Section Notes to Section XVI of the Tariff, where the headings  

involved  herein  are  located.  Note  2  of  the  Section  Notes  to  

Section XVI is as follows:

“2.  Subject  to  Note  1  to  this  Section,  Note  1  to  

Chapter 84 and to Note 1 to Chapter 85, parts of  

machines (not being parts of the articles of heading  

No. 84.84, 85.44, 85.45, 85.46 or 85.47) are to be  

classified according to the following rules :

a. parts  which  are  goods  included  in  any  of  the  

headings of Chapter 84 or Chapter 85 (other than  

headings 84.85 and 85.48) are in all cases to be  

classified in their respective headings;”

10.  He further submitted that the classification of the goods  

manufactured by the appellant was not correct.  According to  

him,  as  per  the  sound  principle  of  classification  and  more  

particularly as per the provisions of interpretative Rule 1, the  

goods ought to have been classified under Tariff  Entry 8529  

because  the  appellant  had  manufactured  only  parts  of  

Television  Receivers.   He submitted  that  invocation  of  Rule

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2(a) of the Rules for Interpretation was not justified because  

looking to the facts of the case, the provisions of Rule 1 of the  

Rules  for  Interpretation  would  apply  because  of  the specific  

head  for  ‘parts  of  Television  Receiver’,  being  Tariff  Head  

8529.00.

11. The learned senior counsel cited the decision of this Court  

in Commissioner of Customs Vs. M/S Sony India Ltd. [(2008)  

13 SCC 145], wherein a case involving analogous headings as  

those in this case in the Schedule to the Customs Tariff Act, the  

goods imported by the assessee therein were held to be ‘parts of  

Television Receivers’, and further interpretative Rule 2(a) was  

held to be inapplicable to such goods. He further contended that  

as the goods transported by the appellant were substantially in  

the  same position  and  condition  as  those  transported  by  the  

assessee in the above case, the ratio in the said decision would  

be applicable to this case also.

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12. In  the  written  submissions  submitted  on  behalf  of  the  

appellant, it was stated that keeping in mind the law laid down  

by this Court in Union of India vs. Tara Chand Gupta [(1971)  

1 SCC 486], the goods manufactured by the appellant ought to  

have been classified under Tariff Entry 8529.00 and an effort  

was made to compare the facts of the said case with the present  

one by submitting that in the case referred to hereinabove, parts  

of scooter, in completely knocked down condition, were treated  

as parts of the scooter and not scooter itself.

13. He  further  submitted  that  the  Rule  1  of  the  Rules  for  

Interpretation  clearly  denotes  that  the  title  of  Sections  and  

Chapters are provided for ease of reference only but for legal  

purposes, the classification should be determined according to  

the  terms  of  the  headings,  and  as  the  appellant  had  

manufactured only parts of Television Receivers, the Revenue  

ought  not  to  have  classified  the  goods  manufactured  by  the  

appellant  as  ‘Television  Receivers’  under  a  different  head  

instead of as ‘parts’ of the same.

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14. In addition to these contentions, he also contended that if  

the  goods  manufactured  by  it  are  held  to  be  Television  

Receivers  covered by Tariff  Entry  8528 mentioned above,  it  

would lead to double-taxation as the satellite units, where such  

goods are finally assembled into Television Receivers, are in  

fact  paying  excise  duty  on  the  assembled  goods  under  the  

above Tariff Entry 8528.  

15. On the  other  hand,  on behalf  of  the  revenue,  Mr.  P.P.  

Malhotra,  learned  Additional  Solicitor  General  justified  the  

judgment  delivered by the Tribunal.   He tried  to  narrate  the  

facts  which  lead  the  Revenue  to  classify  the  goods  

manufactured by the appellant as complete  television for the  

reasons, some of which are as follows:

a. The appellant was assembling manufactured parts  

of TV sets and operating TV sets so as to check  

whether the entire set was complete and operative  

and then the TV sets were being disassembled;

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b.  The appellant was giving the same serial number  

on the chassis as well as the sub assemblies of the  

TV sets;

c. The  matching  of  the  said  chassis  and  sub-

assemblies  was  done  at  the  factory  of  the  

appellant itself;

d. The packing material and literature were supplied  

by  the  appellant  along  with  the  disassembled  

parts.

….etc.

16. He  further  contended  that  the  goods  produced  and  

temporarily  assembled  by  the  appellant,  being  

essentially/substantially  complete  Television  Receivers  in  a  

disassembled state,  would necessarily have to be classified as  

such, owing to Rule 2(a) of the Rules for Interpretation. It was a  

simple contention of the Revenue that the appellant had chosen  

to  disassemble  the  television  sets  as  parts  before  transporting  

them in order to avail the lower duty payable on such parts.

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17. We  have  heard  the  learned  counsel  and  considered  the  

facts of the case.  We have also gone through the judgments  

cited by the learned counsel and upon doing so, we are of the  

view that the Tribunal did not commit any error while passing  

the impugned order.

18. The  main  question  that  arises  for  consideration  in  this  

case is that of the applicability or otherwise of Rule 2(a) of the  

Rules for Interpretation to the goods of the Appellant, and the  

effect  of  Section  Note  2  to  Section  XVI  of  the  Tariff,  

reproduced above, on the applicability of such provision.  

19. On  the  question  of  the  applicability  of  the  Rules  for  

Interpretation vis-à-vis the Section Notes and Chapter Notes in  

the  Tariff  Schedule,  the  rule  laid  down  by  this  Court  in  

Commissioner of Central Excise, Nagpur Vs. Simplex Mills Co.   

Ltd. (2005) 3 SCC 51 may be seen to be applicable in this case.  

In that decision, a three judge bench had the following to say  

on the subject:

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“The rules for the interpretation of the Schedule to  

the  Central  Excise  Tariff  Act,  1985  have  been  

framed pursuant to the powers under Section 2 of  

that Act.  According to Rule 1 titles of Sections  

and  Chapters  in  the  Schedule  are  provided  for  

ease of reference  only.   But  for  legal  purposes,  

classification  "shall  be  determined  according  to  

the terms of the headings and any relevant section  

or Chapter Notes".  If neither the heading nor the  

notes  suffice  to  clarify  the  scope  of  a  heading,  

then it must be construed according to the other  

following provisions contained in the Rules. Rule-

I gives primacy to the Section and Chapter Notes  

along with terms of the headings. They should be  

first  applied.   If  no  clear  picture  emerges  then  

only can one resort to the subsequent rules.”   

20. Therefore, as clearly specified by the above rule,  resort  

must first be had only to the particular tariff entries, along with  

the relevant Section and Chapter Notes, to see whether a clear  

picture  emerges.  It  is  only  in  the  absence  of  such  a  picture  

emerging,  that  recourse  can  be  made  to  the  Rules  for  

Interpretation.

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21. In the matter at hand, the entire case of the Revenue is  

based  on  an  application  of  Rule  2(a)  of  the  Rules  for  

Interpretation to the goods produced by the appellant, however,  

the applicability of this Rule cannot be established unless the  

classification  is  first  tested  against  the  relevant  Section  and  

Chapter Notes. In this case, the relevant Section Note is Section  

Note 2 to Section XVI of the Tariff, as reproduced above. The  

same may be reproduced again here for the purpose of a closer  

examination:

“2. Subject to Note 1 to this Section, Note 1 to  

Chapter 84 and to Note 1 to Chapter 85, parts of  

machines  (not  being  parts  of  the  articles  of  

heading 84.84, 85.44, 85.45, 85.46 or 85.47) are  

to be classified according to the following rules :

a. parts which are goods included in any of the    

headings  of  Chapter  84  or  85  (other  than  

headings 84.85 and 85.48) are in all cases to be  

classified in their respective headings;  

b. …” [Emphasis added]

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22. As  can  be  seen  from  the  above,  the  clear  stipulation  

contained in Section Note 2 is to the effect that ‘parts’ of goods  

mentioned in the Chapters specified therein, shall in all cases  

be  classified  in  their  respective  heading.  In  that  light,  the  

fundamental enquiry in this case must be that of whether the  

goods produced by the appellant may be said to be covered by  

the above Section Note.  

23.  In  view  of  the  above  mentioned  Section  Note,  the  

question that arises here is whether the goods produced by the  

appellant can be described as ‘parts’ under the goods included  

in any of the headings of Chapter 84 or 85.   In this respect, it is  

the contention of the appellant that the goods produced by them  

shall  inevitably have to be considered as ‘parts’,  as they are  

unable to receive a picture, which is said to be a fundamental  

requirement  for  a  good  to  be  considered  as  a  ‘Television  

Receiver’.  At  the  first  sight,  one  may  find  force  in  this  

contention.  As  the  test  in  Section  Note  2  is  simply  that  of  

whether  the  goods  in  question  are  ‘parts’,  it  may  be

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convincingly said that as the goods transported by the appellant  

are  incapable  of  functioning  as  ‘Television  Receivers’,  they  

shall have to be considered to be ‘parts’ thereof.  

24.   However,  on closer  scrutiny of the unique facts of this  

case, it is our view, the goods of the appellant may not be said  

to be ‘parts’ as per Section Note 2 to Section XVI of the Tariff.  

The  appellant  not  only  used  to  assemble  all  parts  of  the  

Television Receivers and make complete television sets, but the  

said  Television  Receivers  were  also  operated  in  the  

manufacturing  unit  of  the  appellant  and  thoroughly  checked  

and only upon it being confirmed that the Television Receivers  

were  complete  in  all  respects,  they  were  disassembled  and  

along with relevant material and individual serial numbers, sent  

to the various satellite units.  Once the Television Receivers are  

assembled  or  are  made  completely  finished  goods,  the  

manufacturing process is over and we are not concerned as to  

what  happens  subsequently.   Whether  they  are  sent  to  the

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satellite  units  of  the  appellant  in  its  complete  form or  in  a  

disassembled form is irrelevant.   

25. Looking to the facts of the case, it is not in dispute that  

complete  Television  was  manufactured  by  the  appellant  and  

therefore, in our opinion, the Revenue had rightly classified the  

goods- product as complete Television set even though it was  

subsequently disassembled.

26. It is seen from the material on record, that at the time of  

the parts of the TV set being transported from the factory of the  

appellant, the parts manufactured by it are already identified as  

distinct  units.  As  it  can  be  seen  from  the  affidavit  of  the  

Revenue, which has not been controverted by the appellant, the  

parts manufactured by it are matched and numbered within the  

factory itself,  and also assembled together to receive pictures  

for the purpose of testing and quality control. The consequence  

of this is that the goods assembled at the satellite units would  

be  identifiably  the  same as  those  assembled  together  by the

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appellant in its factory for the purpose of testing, as all such  

parts  are  already  numbered  and  matched.  This  element  of  

identifiability shall  take  the  goods  manufactured  by  the  

appellant away from being classified as ‘parts’, and they will be  

classified as identifiable Television Receivers. The fact that the  

packing  material  for  the  products  is  also  manufactured  and  

transported  by  the  appellant  further  lends  credence  to  this  

conclusion.  

27. The facts in the case of  Sony India Ltd. (supra) may be  

distinguished  in  this  respect.  In  that  case,  the  assessee  had  

imported  different  parts  of  television  sets  in  94  different  

consignments. The said parts were imported separately in bulk,  

and  thereafter,  the  process  of  matching,  numbering  and  

assembling was carried out once they were in the possession of  

the assessee. Therefore, it may be seen that what the assessee  

had  imported  in  that  case  were  merely  various  parts  which  

could  not  yet  be  identified  and  distinguished  as  individual  

Television  Receivers  such  as  the  parts  transported  by  the

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appellant  in  this  case.  The  said  decision  is,  therefore,  

distinguishable on facts.  

28. For further clarification, it may also be stated that if the  

appellant had been in the practice of simply manufacturing and  

transporting  parts  of  Television  Receivers  in  bulk,  while  

leaving the matching and numbering functions to be done at the  

satellite units, then it could have availed the benefit of Section  

Note 2, because in such a case, there would not have been any  

production of identifiable television sets such as in the present  

case.  

29. Once the question of applicability of Section Note 2 to  

Section XVI of the Tariff is answered in the above manner, i.e.  

in  the  negative,  there  may  be  seen  to  be  no  bar  to  the  

application  of  Rule  2  of  the  Rules  for  Interpretation  to  the  

goods  transported  by  the  appellant.  Consequently,  the  only  

question that  remains  is  with respect  to  whether  such goods  

shall fall foul of the said Rule.

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30. In  this  regard,  despite  the  attempts  of  the  appellant  to  

establish  otherwise,  we  are  unable  to  see  how  the  goods  

transported  by  them  shall  not  be  covered  by  the  Rule,  

especially  as  a  complete  or  finished  article,  ‘presented  

unassembled or disassembled’. The terminology of the Rule is  

wide enough to cover the goods transported by the appellant,  

and  we  are  not  convinced  that  the  processes  required  to  be  

carried out at the satellite units are so vital to the manufacture  

of  the  Television  Receivers  so  as  to  render  the  goods  

transported by the appellant lacking the ‘essential character’ of  

Television Receivers. Rule 2(a) of the Rules for Interpretation  

has been couched in wide terms, and in terms of this Rule, it is  

our view that the goods produced by the appellant do in fact  

possess the essential character of Television Receivers.  

31. The appellant had also raised the plea of double-taxation;  

however, in our view once the question of classification of the  

goods transported by the appellant has been answered in the

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above manner, it is not open to us to grant the appellant any  

relief  on this ground alone.  Further,  it  is always open to the  

satellite units of the appellant to avail input tax credit on the  

duty paid by the appellant on the goods transported by them.  

32.   In view of the facts stated hereinabove,  we are of the  

view that the Tribunal did not commit any error while passing  

the impugned order and, therefore, the appeal is dismissed with  

no order as to costs.

…….………………………J (D.K. JAIN)

……….……………………J (ANIL R. DAVE)   

NEW DELHI SEPTEMBER 07,  2012

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