The Madras High Court has set aside six appellate orders concerning the GST classification of automobile air and oil filters, holding that the appellate authority failed to examine the taxpayer’s principal argument based on the cumulative three-part HSN classification test.

The bench of Justice Senthilkumar Ramamoorthy found that the authority had relied heavily on the “sole or principal use” test without considering the judicial precedents cited by the taxpayer or CBIC Instruction No. 1/2022-Cus dated January 5, 2022.

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The bench emphasised the satisfaction of “triple test” laid down in HSN Explanatory notes, to classify any goods as Parts of automobiles. Takes note of the CBIC Instructions after Westinghouse Saxby Farmer case and various other judicial pronouncements. Since these issues, though raised, have not been dealt with by the first appellate authority, who went solely by Westinghouse case, the issue is remanded.

The petitioner/assessee manufactures air and oil filters for supply to automobile companies. The company classified these products under Chapter 84 of the Customs Tariff Act, 1975, specifically tariff items 8421 23 00 and 8421 31 00.

The tax department initiated proceedings on the ground that the filters were parts of automobiles and should therefore be classified under Chapter 87.

Those proceedings culminated in orders-in-original dated April 8, 2024. The taxpayer’s appeals were subsequently rejected through six orders dated May 11, 2026, covering the financial years 2017-18 to 2022-23.

The company challenged the appellate orders before the High Court, contending that its submissions based on the Section Notes, Chapter Notes and HSN Explanatory Notes had not been properly considered.

The company argued that classification as a part or accessory under Section XVII, which includes Chapter 87, requires satisfaction of all three conditions prescribed in the relevant HSN Explanatory Notes.

The goods must not be excluded by Note 2 to Section XVII; must be suitable for use solely or principally with articles covered by Chapters 86 to 88; and must not be more specifically included elsewhere in the tariff nomenclature.

The petitioner submitted that two of these conditions were not satisfied.

First, Note 2(e) to Section XVII excludes machines and apparatus falling under headings 8401 to 8479, subject to specified exceptions. Second, the HSN Explanatory Notes to heading 8421 specifically cover oil filters and intake air filters used in internal combustion engines.

Accordingly, the taxpayer argued that its filters could not be classified under heading 8708 merely because they were designed for use in automobiles.

The Court did not decide whether the filters were ultimately classifiable under Chapter 84 or Chapter 87 of the Customs Tariff. It confined its interference to the deficiency in the decision-making process and remanded the matter for fresh consideration.

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Read More: JURISHOUR | TAX LAW DAILY BULLETIN : 17 SEPTEMBER, 2026