ITC(HS) Classification- The Legal standpoint vis a vis Indian Customs


Dated: 06.09.2023

ITC(HS) Classification- The Legal standpoint

ITC(HS) Classification of goods is a major challenge for most of the Importers and Exporters in India.

Today we shall bring to the fore certain basic principles, court orders and legal standi that the Importers/Exporters have in India, which, when exercised with caution, can lead to avoidance of Litigations in accordance with The Indian Customs Act, 1962.

The Legal Provisions for Classification under the Indian Customs Act, 1962:

  1. Section 2 (2)- “assessment” means the determination of the dutiability of any goods and the amount of duty, tax, cess or any other sum so payable, if any, under this Act or under the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as the Customs Tariff Act) or under any other law for the time being in force, with reference to- (a) the tariff classification of such goods as determined in accordance with the provisions of the Customs Tariff Act; This section gives the powers to Customs officer to only assess the applicable taxes and not the classification.
  1. Section 11– Power to prohibit importation or exportation of goods.- subsection (h) the maintenance of standards for the classification, grading or marketing of goods in international trade;
  1. Section 17 (1)– The onus of correct classification has been put on the Importers/Exporters for assessment purposes
  1. Section 17(4)– Where it is found on verification, examination or testing of the goods or otherwise that the self- assessment is not done correctly, the proper officer may, without prejudice to any other action which may be taken under this Act, re-assess the duty leviable on such goods. This section expressly mentions about re-assessment and not classification in particular.
  1. Section 17(5)where any assessment done under sub-section 2 is contrary to the claim of the importer or exporter regarding valuation of goods, classification, exemption or concessions of duty availed consequent to any notification, therefore, under this Act, in cases other than those where the importer or the exporter, as the case maybe, confirms his acceptance of the said assessment in writing, the proper officer shall pass a speaking order within fifteen days from the date of assessment of the bill of entry or the shipping bill, as the case maybe. The underlining principle of this section is that if re-assessment is done by the Proper officer of the Customs (Refer Notfn no 24/2022, 26/2022, 105/2022-NT Customs) for classification, value, exemption/concessions/duty availed then the Proper officer has to issue a Speaking Order (SO) within 15 days. Importers/Exporters can reject or accept the re-assessment order with a protest in writing. In case a protest/rejection/appeal is not made against the re-assessment order then the scope of an appeal lies diminished going forward.
  1. Section 28(H)- Application for advance ruling Subsection 2(a): Classification of goods under the Customs Tariff Act, 1975 (51 of 1975)
  1. Section 127B– Application for settlement of cases subsection 1 also deals with issues of settling cases related to misclassification pending adjudication or already settled

The issues related to the classification of ITC(HS) codes can further be substantiated by references to relevant legal stand on the same as per below-

  1. Intended Use Clause: The classification of goods under the HS code often considers the intended use of the product, a principle affirmed by established court and CESTAT orders. A reference be drawn to Sl. No. 8.3 of Circular No 52/2018-GST dtd 09th August 2018 where it has been inferred that “Since the primary function of the article should be taken into consideration while deciding the classification”.
  1. General Rules of Interpretation (GRI): General Rules of Interpretation (GRI) serve as a fundamental guideline in HS classification.
  1. Principal Purpose Test: The Hon’ble Supreme Court delivered its verdict in M/s Thermax Ltd v. Commissioner of Central Excise. The Hon’ble Apex court had observed that as per the ‘Principal Purpose Test’ while rendering the verdict the product in question did not qualify as a ‘Heat Pump’. An unambiguous inference can be drawn from this particular Apex court ruling that without considering the “Principal Purpose Test” classification of goods cannot be finalized and that the same principle applies to revenue too.
  1. The Principle of Dominant Use: In M/s The Tyre Mark vs. Commissioner of Customs Bangalore, 2021, the Bangalore bench of CESTAT had allowed the import of “Off the Road” tyres based on the principle of “Dominant Use”. The CESTAT Bangalore bench had made its observations very clearly and relied upon the observations made by the Hon’ble Supreme Court in “Supreme Court 1997 (92) ELT-14”, where the Hon’ble Supreme Court also held that words “use upon road”; would denote the principle of dominant use and not where it may move incidentally; use on road being only ancillary or incidental to the main use, will not make it motor vehicles. Kindly refer to an observation made in Sl. No 5 of the CESTAT Bangalore bench for understanding the Principle of Dominant Use.

We also like to clarify here that the applicability of legal positions may change from case to case basis, hence a uniform formula does not apply in all the cases.


Source: Multiple Sources collated by SJ EXIM Services, New Delhi


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The views expressed in the update are strictly personal, based on our understanding of the underlying law. We are not responsible for any injury, loss, or cost arising to any person who refers to this update and acts or refrains from any act accordingly. We would suggest that detailed legal advice must be sought before relying on this update.

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