Indirect Tax

Classification of Goods Classification of goods means the determination of headings and sub-headings under which the particular product will be covered so that relevant rate of duty should be charged on goods manufacture in India. Classification of goods plays a vital role in excise law because a correct assessment of duty payable is possible only if proper and correct classification is done. It means wrong classification would either cause loss of revenue to central govt. or it will unjustify for the assessee. Principles regarding classification:1. Scientific or technical meaning vs commercial or trade parlance:- Two major characteristics for determining the classification of excisable goods are:(a) The scientific and technical meaning (b) The trade or commercial parlance. The scientific or technical meaning is the name attach to the goods by expert in particular field. The Supreme Court has held that goods should be classified according to technical and commercial meaning. For e.g.:- Lal Dant Maujau shall not be classified as medicine because according to trade parlauce theory, the court held that medicine is generally prescribed by medical practioner or doctor and it is used for limited time and not on daily basis. Common man use lal dant maujau to clean his teeth on daily basis. Therefore lal dant maujau is considered as consumable goods and not as medicine. 2. Classification of goods according to function or use:- The basic character or use of goods is comparatively more imp. Than the trade parlauce of the product for the purpose of classification. When goods are classified then their classification is done as per the tariff headings. The goods are classified under tariff headings according to their names. But when a substance is capable of being called by more than one name its classification has to be done with reference to more appropriate name. 3. Classification as per the constituents of material:- Nature of material used in manufacturing of excisable goods is one of the parameter for determining the classification of excisable goods. The test for this is known as pre dominance of material test. It is but natural that excisable goods should be classified in the chapters relevant for the constituents of material. If the goods consisting of different materials than these goods should be classified according to that input of material which gives them on essential characteristic.

4. Classification of accessories, parts and components:- components or parts which provide essential features of the main product are to be classified along with main product. Infact, CET deals differently with the classification of parts in different situation and circumstances. The parts which are of general use are deal differently than the parts which are meant for specific purpose. Similarly the parts supply with the main product are deal differently than similar parts supplied for replacement use. According to CET, accessories cannot be featured as separate part of an article. So they cannot be classified as separate article. 5. Classification according to ISI specification:- An article specified by ISI and BIS (Bureau of Indian statudards) is certainly evidence of the fact that the article is known as per its commercial parlance. ISI specification are with regard to quality of goods. If the goods are not defined in the excise tariff then such goods should be classified according to ISI specification. ISI specification can only be used as an expert opinion. The other tangible factors should be taken into consideration while classifying the excisable goods. Therefore ISI Specification have limited validity for classifying the goods. 6. Classification according to expert opinion:- It is the responsibility of central excise officer to classify the goods under appropriate heading. The classification is done on the basis of evidence available from records and after making proper enquiry. In case of dispute regarding nature of goods, the excise officer can take a opinion of experts for the purpose of classification of goods. However, expert opinion has to be given due respect but it cannot decides the classification of goods, that means the expert opinion is just only a guiding factor for classifying the goods and final responsibility for classification should be on central excise officer. 7. Classification according to residual entries:- Goods which cannot be classified under various specific heads of central excise tariff, are to be classified under residual entries. 8. Relevant point of time for classification: - The supreme court has decided that according to rule 5 of central excise rules 2002, the event for classifying the goods is the actual removal of goods from the place where the goods are manufactured i.e. factory, godown. 9. Burden to prove:- Normally is the responsibility of dept to establish correct tariff heading under which product falls. The burden to prove particular classification is initially on dept and it is discharge by classifying goods on the basis of prima facia evidence. After the classification done by excise officer, the burden to prove classification is shifted to assessee.