Introduction
In a globalised economy, standardization and regulation play a pivotal role in ensuring product safety, fair trade, and compliance with trade practices. To ensure compliance, Harmonised System (‘HS’) Codes and Quality Control Orders (‘QCO’) are of importance, amongst others. Each has implications on the other, as HS Codes are often used to enforce QCOs on imported and domestically manufactured goods.
What are QCOs?
Every country has product specification and safety standards to ensure the quality of their products and make them more competitive in the international market. In line with the same, the Bureau of Indian Standards (‘BIS’) has issued over 12,000 Indian Standards. However, as per the Bureau of Indian Standards Act, 2016 (‘BIS Act’), only products which are notified in the Official Gazette by an Order are required to compulsorily comply with the Indian Standard, and the rest of the Indian Standards are voluntary in nature.
These compulsory certification orders are known as Quality Control Orders, and they are issued in exercise of the powers conferred under Section 16 of the BIS Act in consultation with the relevant line ministry. QCOs list the Indian Standards to which the specified products need to conform.
What are HS Codes?
HS Codes are derived from the Harmonised System of Nomenclature (‘HSN’), which is a globally agreed system for categorising and coding product types. HS Codes provide commodity/ product codes along with product description, which can be used by governments around the world to levy the correct import taxes.
In India, ITC-HS Codes are used. ITC stands for Indian Trade Classification. ITC-HS codes contain the 6 digits of the HS Code, plus 2 additional digits. This results in an 8-digit HS Code which gives more detailed information about the product. Classification under the Customs Tariff Act, 1975 (‘CTA’), is used to identify the duty applicable on imported goods.
Interaction of HS Codes and QCOs
Recently, it has been observed that certain QCOs mention the product, its corresponding Indian Standard, as well as the HS Code. Thus, it becomes important to understand the relationship between QCOs and HS Codes.
During trade, when a product is imported or exported, customs authorities refer to its HS Code to determine applicable duties, documents required, and whether any QCO applies. In case there is a QCO for that product, then customs clearance can be denied unless the BIS certificate is provided. Thus, at the border, HS Codes assist in the enforcement of QCOs.
With the recent increase in digitization of trade processes, linking of QCOs with HS Codes helps make it easier to check for compliances within the customs import/ export management systems, not just for the customs department, but also for importers/ exporters to understand whether any compliance is required for their products.
Reliance on Indian Standards and QCOs to determine HS Code
In the case of Re: Steelage Industries Ltd. [1990 (47) ELT 84 (Collr. App.)], while determining whether to classify a product under the heading of ‘safes’ or ‘fire cabinets’, Indian Standard 550-1979 was relied upon, which lays down specifications of safes, such as the minimum thickness of steel plates, thickness of the body plate, the materials used, etc. By placing reliance upon the Indian Standard, it was concluded that the product does not meet the specifications of a ‘safe’ laid down by the Indian Standard, and thus, cannot be classified as a ‘safe’, and instead ought to be classified as a fire cabinet.
Further, in the case of Kalyani Breweries Limited v Assistant Collector of Customs [1992 (57) E.L.T. 373 (Cal.)], the question was whether ‘beer’ is considered as a food article or not, for the purpose of availing the benefit of exemption notification. To understand this, reliance was placed on BIS standards, wherein standards for food have been laid down, and beer has been included in the list of foods.
In the case of Gastrade International v Commissioner of Customs, Kandla [2025 (392) ELT 529 (SC)] as well, the classification of petroleum and bituminous oils were decided based on Indian Standard 1460 : 2005.
The above judicial precedents show that Indian Standards and QCOs have been relied upon to understand the classification of products for the purpose of application of tariff on the products.
Reliance on HS Codes to determine QCO applicability
Generally, from BIS perspective, quality control or technical regulation orders are enforced based on the descriptions, functions, features, technical specifications, or safety specifications of the products. However, in a few orders, certain products are mapped with corresponding HS Codes.
The Hon’ble Bombay High Court in the case of Global Tradex Ltd. v. Union of India [2016 332 ELT 657 (Bom.)] has held that the HS Codes mentioned in QCOs are merely indicative and are not to be used to understand the applicability of the QCO itself. The relevant portion of the same is extracted herewith:
‘43. A bare perusal thereof would denote that foreign trade ought to be developed and regulated. The act contains both facilitating and regulatory measures. It is in terms of such an act that import is facilitated. For facilitation of import and export and regulation of foreign trade, that the products, articles and goods are identified. Beyond that, the ITC (HS) codes will not serve any purpose.
- Rather, the standard devised for high strength deformed steel bars and wires for concrete reinforcement specification will have to be complied with. Mr. Nankani could not dispute that the schedule and which is styled as the Steel and Steel Products (Quality Control) Second (Amendment) Order, 2014 made by the Central Government under Section 14 of the BIS Act, 1986 sets out the Indian Standard number, the title of the goods and date of coming into force of the product standard to the extent set out therein. The ITC (HS) Code is for reference purposes. It also indicates as to how the title listing the steel products has to be construed and with reference to the ITC (HS) Code. The standards have to be complied with and from the dates mentioned therein.’
In the case of Bubbly Balloons v. Commissioner of Customs, Chennai [2024 (3) TMI 87 – CESTAT Chennai], the appellant was engaged in the import of balloons for decoration purposes under HS Code 9503. Since balloons are included under the Toys (Quality Order), 2020, and HS Code 9503 covers toy balloons as well as decorative balloons, the Department was of the view that the imported balloons are required to be BIS certified. However, the Hon’ble CESTAT held that the imported balloons are meant for decorative purposes only and are not meant to be used as toys, and the Toys QCO, therefore, will not apply to the imported balloons.
Similarly, in the case of Pelf Power Electronics Pvt. Ltd. v. Commissioner of Customs (Import), JNCH [2024 (1) TMI 96 – CESTAT Mumbai], the dispute regarding requirement of BIS certification was triggered due to HS Code 8532, which covers Electrical Capacitors, being adopted by the appellant. It was held that the relevant Indian Standard 13340 is only applicable to ‘power factor correction and power factor capacitor’ whereas the goods imported by the appellant are ‘dry type capacitor’ and thus, the imported goods are not covered under the QCO.
On the other hand, in the context of the Steel and Steel Products QCO, 2024, CBIC has issued a clarification stating that the mandatory clarification regarding applicability of BIS on import of steel must be sought from the Ministry of Steel in respect of the Tariff Items listed in the QCO only. This leads to the inference that the Steel QCO is only applicable to the HS Codes mentioned therein.
Further, there are cases where the QCO is silent on this aspect, for instance, the Machinery and Electrical Equipment Safety (Omnibus Technical Regulation) Order, 2024 (‘OTR Order’). Here, the HS Codes have been provided against the product description, but there is ambiguity as to whether the HS Codes mentioned therein are the only ones to which the OTR Order applies, or whether the HS Codes are merely indicative in nature.
Conclusion
While the HS Code of the product might assist in understanding the product better and thereby help in understanding the applicability of the QCO, the HS Code cannot be relied upon for determining the applicability of QCOs. It is the product description and specifications mentioned in the Indian Standard that are the main indicators while determining the QCO applicability for a given product.
Therefore, although there is a relationship between HS Codes and QCOs, it would not be prudent to rely on the HS Codes alone. In our view, the HS Codes must be used cautiously while examining the applicability of QCO for a given product.
