Introduction
Customs classification disputes often appear technical, but they lie at the intersection of statutory interpretation, fiscal discipline, and commercial reality. Another topic repeatedly discussed by judges of the Supreme Court of India involved in Commissioner of Customs (Import) v M/s Welkin Foods (2026) (hereinafter referred to as the “judgment”) was whether imported goods should be subject to the classification based on the material identity or whether the intended purpose of the goods can be used to justify a concessional rate of duty. It was a case of imported aluminium shelving to be used in mushroom cultivation. The importer wanted the classification to be as parts of agricultural machinery, but the Revenue insisted that the shelves are to be classified as generic aluminium structures. The decision taken by the Court gives a clear direction of when the look into the intended use of the imported goods may affect its classification under the Custom Tariff act of 1975 (herein referred to as the “act”).
Factual Background ad Tariff Headings in Dispute
M/s Welkin Foods imported aluminium shelving along with a floor drain and an automatic watering system for mushroom cultivation. In the Bill of Entry, all goods were classified under Customs Tariff Item (CTI) 84369900 as “parts” of agricultural machinery, attracting a nil rate of duty. While the Revenue accepted this classification for the drain and watering system, it disputed the classification of the aluminium shelving.
The Supreme Court recorded the dispute as follows:
“…the aluminium shelves imported by the respondent should be classified under Customs Tariff Item 84369900, as ‘parts’ of agricultural machinery, as opposed to Customs Tariff Item 76109010, as aluminium structures.”
The fiscal consequences were substantial. CTI 76109010 attracted multiple duties, and the alleged short levy exceeded ₹21 lakhs.
Why Classification was contested
Aluminium shelving is an easy to assemble structure at first sight, with no mechanical or electrical parts. The Revenue claimed that the shelves were still categorized as being structures of aluminium when imported and that they did not fit the description of machinery and parts of machinery under Chapter 84. They emphasized that, per Section Note 1(f) of Section XV of the act, machinery and mechanical appliances covered under Section XVI are expressly excluded from Chapter 76. According to the Revenue, the shelves were merely surfaces for placing other devices, and therefore,
“A surface supports an object but does not become a part of it”.
On the other hand, the importer argued that these shelves were specifically designed for mushroom cultivation and had no other practical use. They were procured from a supplier dealing exclusively in mushroom-growing structures, and the other imported machinery drains, watering systems, and composting equipment were to be integrated onto these shelves. CESTAT observed that
“There is also no denial to the fact that the aluminium shelves imported cannot be used as any other aluminium structures for any other purpose”.
Central Legal Issue and Supreme Court Analysis
At the heart of the dispute was whether classification should follow the material identity of goods at the time of import or whether the intended end-use in mushroom cultivation could justify classification under a concessional tariff heading.
The Customs, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi (hereinafter referred to as “CESTAT”) largely accepted the importer’s argument based on intended use. It noted that the aluminium shelving was procured from a supplier dealing exclusively in mushroom-growing structures, marketed specifically for this purpose, and could not practically serve any other function. On this basis, the Tribunal concluded that the shelves were “parts” of agricultural machinery:
“…imported from the person, who exclusively deals in the structures specific to mushroom growing industry… The importer-appellant is also in the business of growing mushrooms. There is also no denial to the fact that the aluminium shelves imported cannot be used as any other aluminium structures for any other purpose.”
CESTAT applied General Rule of Interpretation 3 (hereinafter referred to as the “GRI 3”), emphasizing that classification should follow the most specific heading rather than a generic one. It further noted that:
“Chapter 76 is all about anything made of aluminium. On the contrary chapter 84 is about mechanical appliances of whatsoever metal but specific for agricultural use. There is no denial to the fact that the aluminium shelving in question is not known to the common trade parlance as a mere aluminium structure but is specifically known as Mushroom growing rack.”
Building on this, the Supreme Court (hereinafter referred to as the “Court”) provided both doctrinal clarity and practical guidance. The Court underscored that objective characteristics at the time of import remain central, and that intended use can only influence classification where the heading explicitly or inherently refers to “use” or “adaptation”:
“intended use… can be a relevant factor in determining classification… only if such a heading refers to ‘use’ or ‘adaptation’, explicitly or inherently. Further, only the intended use as is discernible from the objective characteristics and properties of the goods can be taken into account, and not the actual use”.
The Court examined the interplay between the headings:
- CTI 76109010 requires goods to be aluminium structures, which the shelves technically were. However, assemblies identifiable as parts of Chapters 84 to 88 are excluded from this heading.
- CTI 84369900 applies to “parts of agricultural machinery”, but for the shelves to qualify, they must be integral parts of a functional agricultural machine. The Court found that the mushroom-growing apparatus did not constitute a single machine or functional unit:
“Each machine… seems to perform its own independent task… The only common element is that they are all part of the broader mushroom cultivation process, which is different from fulfilling a specific, unified function”.
Despite this, the Court accepted the CESTAT’s conclusion. It found that the shelves were not generic aluminium structures, but specialized appliances engineered to integrate with agricultural machinery. Their special design, sale and practicality in the cultivation of mushrooms made them be classified as part of Chapter 84. The Court confirmed that the use and maintenance of a machine, which is made with the specific purpose to promote agricultural operations, might make a construct a component of an agricultural machine, in the context under discussion.
Key Takeaways
Several principles emerge from the Supreme Court’s ruling:
- Everything depends on material identity, but much depends on context: Classification normally depends on the condition of the goods at import, however when the heading intrinsically foresees certain adaptation or use, special end-use may affect classification.
- Specificity would be considered above generic categorization: Goods shall be categorized under the most specific covering which is applicable as the point of stress in GRI 3.
- Support structures can be “parts” in context: While a surface does not become part of a machine by default, structures engineered to integrate with agricultural machinery may qualify as parts for classification purposes.
- Design and documentation are decisive: Supplier details, product specifications, and certifications help establish specialized agricultural use.
- Striking a balance between legal and fiscal transparency: Classification must avoid loss of revenues and at the same time, specialized goods must not be excessively taxed.
AMLEGAL REMARKS
The Hon’ble Supreme Court clarified when the end-use of imported goods can influence customs classification. By holding that aluminium mushroom-growing racks, though materially simple, were functionally integral to agricultural machinery, the Court emphasized that classification requires a balance of material identity, statutory interpretation, and objective characteristics. For importers, the ruling highlights the importance of specialized design and documentation, while for revenue authorities, it confirms that material form alone cannot determine classification. In short, Welkin Foods establishes that “use” can override “material”, but only within a clear and legally grounded framework.
For any queries or feedback, feel free to connect with shreya.verma@amlegals.com or hiteashi.desai@amlegals.com