Classification of goods sometimes becomes so complicated that the provisions specified under classification Rules are found inadequate to classify a few products. Over the year some principles have been evolved by the Courts of law and the Tribunals, which help in classifying those commodities appropriately:
1. Trade Parlance: Descriptions of the goods as specified under tariff are normally not used in the same way by the trade. Those commodities are normally known with some other name in market. Long back in 1876 Justice Pollok in Grenfell v/s IRC had held that “As per the principle, a word in statute should be construed in its popular sense and not in the strict or technical sense. Popular sense means that which people conversant with the subject matter with which the statute is dealing, would attribute to it.” This findings has been confirmed by Supreme Court in several cases.
2. Nature and ordinary meaning: When a word is not defined in the Act, the ordinary and natural meaning must be kept in view. The headings and sub-headings of tariff should be understood not strictly with its technical sense but also in its popular sense too.
3. Basic Character, use and function should be given priority over the names used in trade parlance: Names in trade parlance may not be important and have no overriding impact unless it contains the basic character, use and function. The trade parlance is relevant only when statute does not define the words. If words are defined in the statute, the trade parlance is not relevant.
4. ISI or BIS classification are for quality control and are not relevant parameters to rely upon for classification of goods, which are to be classifiable according to the popular or commercial meaning.
5. Wikipedia free Encyclopedia and Google not an authentic source, but can be utilized for gathering information. These applications are used to reach into the nearest group of commodities from where taxpayer can choose the suitable sub-heading.
6. End use of goods is not relevant for classification: Particular use to which an article is put alone is not conclusive to determine the actual nature or character of the article for tax purposes. Accordingly, end use may not be base of classification. For example PVC cables are electrical goods, it can’t be classified as part or accessories of motor vehicle just because some of the cables were supplied to the dealers! manufacturers of automobile parts for use therein. However, end use may be considered as a parameter of classification if it is related to the prime function of the goods.
7. Exemption notification can’t determine classification: Classifications are to be decided by the relevant rules, parameters and the section and chapter notes. Classification can’t be decided on the basis of exemption notifications.
Classification Of The Intangible Assets under GST Where Titles And Right To Use Both Have Been Transferred.
Classification of Goods and Services as discussed above may bring major relief in maintaining uniform identification for levy and collection of tax in fair and equitable manner, enforcement of national law and international treaties, analysis of data for Policy decisions and planning etc. and almost all the goods and services may be codified under the classification scheme discussed above.
However, there are specific supplies under GST which may neither be classified under Goods nor under Services. For example - sale of Scripts issued by D GFT for duty free import. Sale/transfer of title as well as right to use of Trade Mark or Copy Right or IPR etc. Such supplies may not be treated as goods because these are intangible in nature. These may not be classified under NPCS because, these types of transactions are not even services since title and right to use both are getting transferred in these types of supplies. Hence, it is a possibility that such supplies of intangible assets may be classified somewhere, using logics of UNCPC so that these transactions may be assigned with certain uniform identification code. |
