Trade parlance test:

According to the Trade Parlance test, if a product is not defined in the Schedules and Section Notes and Chapter Notes of the Central Excise Tariff Act, 1985, then it should be classified according to its popular meaning or meaning attached to it by those dealing with it i.e., in its commercial sense.

However, where the Tariff headings itself uses highly scientific or technical terms, goods should be classified in scientific or technical sense.

Relevant case laws

1. Akbar Badruddin Jiwani v. CC [1990] 47 ELT 161 (SC)

The express wordings of the Tariff Headings and relevant Section and Chapter Notes would take precedence over the commercial or trade parlance test for classifying excisable goods. However, if the specific headings and notes do not cover the excisable goods, then resort must be had to the commercial or trade understanding of the goods.

2. Bakelite Hylam Ltd. v. CCE 1998 (101) ELT 561 (SC)

When legislature has adopted technical term in a particular entry, classification will have to be done in the technical sense and resort to common parlance cannot be done.

3. Chemical and Fibres of India Ltd. v. U.O.I. 1997 (89) E.L.T. 633 (SC)

Tariff Entry using commercial words to be interpreted as understood in the trade. A different approach may be required where strictly technical or scientific words are used.

4. CCE v. Fenoplast P. Ltd. 1994 (72) E.L.T. 513 (SC)

Trade understanding to be resorted to if words not defined in the Act .

5. Shree Baidyanath Ayurved Bhavan Ltd v. CCE 1996 (83) E.L.T. 492 (SC)

Scientific and technical meaning of the terms and expressions used in the tax laws like Excise Act should not be resorted to. Goods should be classified according to the popular meaning attached to them by those using the product.

6. CCE v. Fusebase Eltoro Ltd 1993 (67) ELT 30 (SC)

In the absence of statutory definition of the goods, the classification to be done based on the common parlance, primary function and the utility.