In Commissioner of GST & Central Excise, Coimbatore v. Craftsman Automation Ltd. (Final Order No. 40276/2025, 24 February 2025), CESTAT Chennai held that fuel filter assemblies, water pump assemblies, cylinder head sub-assemblies and cylinder liner stud assemblies made for high horse power railway locomotives are parts of locomotives under heading 8607, not machinery of Chapter 84. The department relied on Note 2(e) to Section XVII, which excludes Chapter 84 machines and their parts from the vehicle chapters. The Tribunal applied the “solely or principally” test in Note 3 to Section XVII, followed the Supreme Court’s decision in Westinghouse Saxby Farmer, and dismissed the department’s appeal.
The goods and the dispute
Craftsman Automation Ltd. made these four sub-assemblies to the specifications of Banaras Locomotive Works for high horse power locomotives supplied to Indian Railways:
- fuel filter assembly;
- water pump assembly;
- cylinder head sub-assembly; and
- cylinder liner stud assembly.
The case arose under the Central Excise Tariff, which follows the HS. The company classified the goods as parts of railway locomotives under tariff item 8607 99 90 (HS subheading 8607.99) and paid duty at 6% under Notification No. 12/2016-CE. The department argued that they were engine and machinery parts of Chapter 84, which would attract a higher rate. The question was the legal identity of the goods under the HS, since their physical form was not in dispute.
CESTAT rejected the department’s appeal and upheld the classification under heading 8607.
Why the legal notes decide the case
Under GRI 1, classification is determined by the terms of the headings and the relevant Section and Chapter Notes. Section and Chapter Notes are binding rules. In this case two notes to Section XVII pulled in opposite directions:
- Note 2 lists articles that are not “parts” or “accessories” of vehicles even when identifiable as such. Note 2(e) excludes machines and apparatus of headings 84.01 to 84.79 and parts thereof. The department said fuel filters, water pumps and engine sub-assemblies fall within that exclusion.
- Note 3 provides that references in Chapters 86 to 88 to parts or accessories do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. The company’s case rested on this note: the goods were made only for locomotives.
The Tribunal resolved the conflict in the company’s favour. It applied the sole or principal use test as the Supreme Court had applied it in Westinghouse Saxby Farmer, held that the Note 2 exclusions reach parts with an independent market outside railways, not parts designed for railway use alone, and followed the Supreme Court’s decisions in G.S. Auto International and Cast Metal Industries. It distinguished Intel Design and Uni Products as cases on different products that did not engage with the Section Notes. It also observed that “when Section or Chapter Notes are clear and unambiguous, resorting to HSN Notes is not required.”
A note excluding a class of goods works differently from a note that defines what a “part” is. For the Note 2(b) exclusion of parts of general use, see the case study on parts of general use.
“Solely” vs “principally”: why the difference matters
Note 3 to Section XVII uses both words. On the facts, the Tribunal treated the goods as made for railway use alone, so the case did not turn on the difference; it matters for parts that have some use outside the named articles.
| Aspect | Solely | Principally |
| Meaning | Exclusive use only | Main or dominant use |
| Alternative use | None | Minor or theoretical use allowed |
| Design intent | 100% dedicated | Primarily dedicated |
| Market reality | Single industry | One dominant industry |
| Legal sufficiency | Sufficient | Equally sufficient under the HS |
| Common misconception | Treated as mandatory | Often wrongly ignored |
| Accepted by the Tribunal | Yes | Yes |
Why the distinction matters
Revenue authorities sometimes argue that a part cannot be classified as a part of a specific article unless it is used only with that article. The HS does not require this. Principal use is legally sufficient, because the note itself says “solely or principally”.
In this case, even if the goods resembled general engine components, the fact that they were made to Indian Railways’ drawings and specifications for locomotives, with no suggestion from the department that they had any independent market, satisfied the test. The same words appear elsewhere in the HS, for example in Note 6(C) to Chapter 84, applied in the face recognition access controller case.
Why the respondent won, and what it avoided
The company showed that the goods were designed and made to railway specifications, that they were supplied to Diesel Locomotive Works (now Banaras Locomotive Works) through Faiveley and Transloco, and that the department never claimed they had any independent marketability. With those facts established, Note 3 applied and the classification under heading 8607 followed.
As a result:
- the department’s appeal was rejected;
- classification under Chapter 86, with the 6% rate under Notification No. 12/2016-CE, was upheld; and
- the demand of ₹1,26,91,614 for 1 March 2016 to 30 June 2017, raised for the extended period under Section 11A(4) of the Central Excise Act, 1944, remained set aside on merits and on limitation.
On limitation, the Tribunal relied in part on the Board’s own instruction describing the classification of parts of Section XVII goods as “a complex issue”. A question the department itself calls complex is hard to treat as suppression by the assessee.
Lessons for manufacturers
- Start with the Section and Chapter Notes, not with what the product looks like.
- Document end use and principal use: drawings, customer specifications and supply records.
- Know which notes the other side will rely on. Here the department built its case on Note 2(e), and the answer lay in Note 3 and Supreme Court authority.
- Keep classification records that will stand up in an audit, made at the time of classification, not after a notice.
For how interpretive material fits around the legal notes, see the role of Explanatory Notes in classification disputes. For a Section XVII case where the Tribunal moved goods out of the residual parts subheading, see the automotive parts case study (ILJIN Automotive).