Commissioner of Customs (Import) v. Welkin Foods; 2026 INSC 19 -Common Or Trade Parlance Test

Taxation Laws -The application of the common or trade parlance test while dealing with classification disputes a. The common or trade parlance test must be applied restrictively. Its function is limited to ascertaining the common or commercial meaning of a term found within a tariff heading or its defining criterion. b. The trade or common parlance test can be invoked when dealing with a classification dispute only when the following conditions are satisfied. i. The governing statute, including the relevant tariff heading, Section Notes, Chapter Notes, or HSN Explanatory Notes, does not provide any explicit definition or clear criteria for determining the meaning and scope of the tariff item in question. ii. The tariff heading does not include scientific or technical terms, or the words used in the heading are not employed in a specialised, technical context. iii. The application of the common parlance test must not contradict or run counter to the overall statutory framework and the contextual manner in which the term was used by the legislature. Thus, broadly speaking, the common or trade parlance test cannot be invoked where the statute, either explicitly or implicitly, provides definitive guidance. Explicit statutory guidance exists where the legislature provides a specific definition or a clear criterion for a term within the Act itself. Conversely, implicit guidance is found where the terms employed are scientific or technical in nature, or where the statutory context indicates that the words must be construed in a technical sense. It is only in a state of statutory silence, where the legislative intent remains unexpressed, that the tribunals or courts may resort to the common or trade parlance test. c. In the contemporary HSN-based classification regime, the common or trade parlance test cannot serve as a measure of first resort. It should only be employed after a thorough review of all relevant material confirms the absence of statutory guidance. d. When interpreting terms in a tariff item by relying on the basis of common or trade parlance, an overly simplified approach should be avoided, and the words should be understood within their legal context. Further, when a party asserts a meaning of a term based on common or trade parlance, it must present satisfactory evidence to support that claim. e. When a tariff item is general in nature and does not indicate a particular industry or trade circle, the common parlance understanding of that term is appropriate. However, when a tariff item is specific to a particular industry, the term must be understood as it is used within that specific trade circle. f. The common or trade parlance test cannot be used to override the clear mandate of the statute. Specifically: i. The test cannot be applied in a way that results in the reclassification of a good that is clearly identifiable under a particular heading according to the statute, simply because that good is marketed or called by a different name in trade or common parlance. ii. Conversely, the test cannot be used to challenge the classification of goods under a statutory heading if those goods retain the essential characteristics defined by that heading, even if they have a unique or specialised trade name. In other words, the character and nature of the product cannot be veiled behind a charade of terminology which is used to market the product or refer to it in common or commercial circles. g. To establish a separate commercial identity, it is essential to demonstrate that the good has undergone such a substantial transformation that it can no longer be characterised as a mere sub-type or category of a broader class and thus falls outside the ambit of the common or commercial understanding associated with such a class of goods.(Para 66) [SC held that the ‘mushroom growing apparatus’ is not classified as ‘machinery’ and further, that the subject goods are ‘structures’ rather than ‘parts’ of machinery.]