Hewlett Packard India Sales Pvt. Ltd. (Now HP India Sales Pvt. Ltd.) VERSUS Commissioner of Customs (Import), Nhava Sheva

Hewlett Packard India Sales Pvt. Ltd.  (Now HP India Sales Pvt. Ltd.) VERSUS Commissioner of Customs (Import), Nhava Sheva

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

Hewlett Packard India Sales Pvt. Ltd. 
(Now HP India Sales Pvt. Ltd.)
… Appellant
Commissioner of Customs (Import), Nhava Sheva
… Respondent
Lenevo (India) Pvt. Ltd. … Appellant
Commissioner of Customs (Import), Nhava Sheva … Respondent
Surya Kant, J.
1. The question that arises for our consideration pertains to correct
classification   of   Automatic   Data   Processing   Machines  (hereinafter,
Page | 1
‘ADP’) which are popularly known as ‘All­in­One Integrated Desktop
Computer’ (hereinafter, ‘Concerned Goods’) under the First Schedule
to the Central Excise Tariff Act, 1985 (hereinafter, ‘First Schedule’). 
2. The Appellants imported certain units of the Concerned Goods
and classified them under ‘Tariff Item 8471 50 00’ as per the prevalent
self­assessment  procedure.   During  subsequent   examination   by  the
Custom Authorities, the Concerned Goods were classified under ‘Tariff
Item   8471   30   10’,   which   was   later   confirmed   by   the   Assistant
Commissioner of Customs and Commissioner of Customs (Appeal).
These   findings   were   further  affirmed   by  the   Customs,   Excise   and
Service   Tax   Appellate   Tribunal   (hereinafter,   ‘CESTAT’),   West   Zonal
Bench, Mumbai vide the impugned judgments dated 19.12.2018 and
3.   While the rate of duty is same under both the Tariff Items, the
method of computing them is different. Goods under ‘Tariff Item 8471
30 10’ attract the application of Section 4A of Central Excise Act,
1944, which valued the excisable goods on the basis of percentage of
retail sale price. In contrast, a classification under ‘Tariff Item 8471 50
00’ invites valuation based on price mechanism under Section 4 of
Central Excise Act, 1944 which would have effectively reduced the
overall liability to pay the requisite duty. This difference in liability is
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the precise reason behind the present dispute regarding classification
under the correct Tariff Item which calls for adjudication. 
4.  Before delving into the reasoning of the revenue authorities and
CESTAT, which is more or less identical, it would be appropriate to
reproduce the following relevant parts of the First Schedule :­
Heading/SubHeading/Tariff Item1
Description of goods2
8471  Automatic   data   processing   machines
and units thereof; magnetic or optical
readers,   machines   for   transcribing
data on to data media in coded form
and   machines   for   processing   such
data,   not   elsewhere   specified   or
8471 30 ­   Portable   digital   automatic   data
processing  machines,   weighing   not
more   than   10   kg,   consisting   of   at
least   a   central   processing   unit,   a
1 Additional Notes to The Customs Tariff Act 1975, sch 1 states that ­
1(a) “Heading”, in respect of goods, means a description in list of tariff provisions
accompanied by a four­digit number and includes all sub­headings of tariff items the
first four­digits of which correspond to that number.
  (b)“Sub­heading” ”, in respect of goods, means a description in list of tariff provisions
accompanied by a six­digit number and includes all tariff items the first six­digits of
which correspond to that number.
  (c)“Tariff Item” means a description in list of tariff provisions accompanied by a sixdigit   number   means   a   description   of   goods   in   the   list   of   tariff   provisions
accompanying either eight­digit number and the rate of the duty of excise or eightdigit number with blank in the column of the rate of duty.
2 General Explanatory Notes to The Customs Tariff Act 1975, sch 1 states that ­
1. Where in column (2) of this Schedule, the description of an article or group of
articles under a heading is preceded by “­”, the said article or group of articles shall
be taken to be a sub classification of the article or group of articles covered by the
said heading. Where, however, the description of an article or group of articles is
preceded by “­­”, the said article or group of articles shall be taken to be a subclassification  of  the  immediately  preceding  description  of  the  article  or  group  of
articles which has “­”. Where the description of an article or group of articles is
preceded by “­­­” or “­­­­”, the said article or group of articles shall be taken to be a
sub­classification of the immediately preceding description of the article or group of
articles which has “­” or “­­”.
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keyboard and a display
8471 30 10 ­­­ Personal computer
8471 30 90 ­­­ Other 
­ Other   automatic   data   processing
8471 41 ­­ Comprising in the same housing at
least a central processing unit and an
input and output unit whether or not
8471 41 10 ­­­ Micro computer
8471 41 20 ­­­ Large or main frame computer
8471 41 90 ­­­ Other
8471 49 00 ­­  Other,   presented   in   the   form   of
8471 50 00 ­ Processing units other than those
of subheading 8471 41 or 8471 49,
whether   or   not   containing   in   the
same   housing   one   or   two   of   the
following   types   of   unit:   storage
units, input units, output units
(Emphasis Applied) 
5. Since, the reasoning confirming the classification under ‘Tariff
Item 8471 30 10’ by the adjudicating authorities including CESTAT is
identical, hence, it would be sufficient to discuss the key findings of
the impugned decisions in brevity. These observations are :­
a)  The Concerned Goods weighed less than 10 kilogram and were
easily carried from one place to another. In this respect the CESTAT
relied on dictionary meaning of the word ‘portable’ to hold that the
goods were rightly classified under ‘Tariff Item 8471 30 10”;
b) The   absence   of   in­built   power   source   does   not   render   the
Concerned Goods as non­portable;
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c)  The dimensions of the Concerned Goods as well as the fact that
it was not foldable did not impact the element of portability; 
d)  The Concerned goods had a display unit, a touch screen which
could function as a keyboard and thus it fulfilled  the description
mentioned under ‘Tariff Item 8471 30 10’.
6. We have heard learned counsel for the parties and perused the
documents produced on record. It must be noted that both sides have
not disputed the findings of the adjudicating authorities except in
respect of the aspect of portability of Concerned Goods. Hence, the
only limited question that falls for consideration before us in these
proceedings is whether the Concerned Goods are ‘portable’ or not
under ‘Tariff Item 8471 30 10’.
7. Mr. V Lakshmikumaran, learned counsel for the Appellants, has
made   four   key   contentions.  Firstly,   that   ‘Tariff   Item   8471   30   10’
pertains to class of ADPs which are popularly known as laptops or
notebooks. He has highlighted that the classification under ‘Tariff Item
8471   30   10’     involves   an   element   of   ‘functionality’   which   is   not
applicable in the present case as Concerned Goods are not capable of
functioning   without   an   external   source   of   power.  Secondly,  he
contended   that   Concerned   Goods   have   been   wrongly   held   to   be
‘portable’ by the CESTAT on the sole aspect that their weight was less
than 10 kilograms. He argued that mere weight cannot be the sole
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consideration for deciding whether any good is ‘portable’ or not, and it
is necessary to consider additional aspects such as functionality and
ease of transportability which is suitable for a mobile lifestyle of the
user.  Thirdly,  he urged that the CESTAT erroneously relied on the
general definition of ‘portable’ given in dictionaries and instead the
same should have been defined in relation to the class of goods, i.e.
ADPs. In this respect, he pointed out that the relevant ‘Sub­Heading
8471   30’   which   entails   the   condition   of   being   ‘portable’   in   the
description of goods was preceded by a single ‘­’ and consequently all
the  goods under the  said  sub­heading should be taken  as a sub
classification of the goods covered by the ‘Heading 8471’.  Finally,  to
buttress   the   aforementioned   arguments,   he   highlighted   that   the
Concerned Goods are not considered as ‘portable’ by the European
Commission’s classification and are also not covered by the ‘Tariff Item
8471 30 10’   as per the World Customs Organization’s Harmonized
System Explanatory Notes (hereinafter, ‘HSN’). We must also bring to
the   fore   and   appreciate   the   efforts   of   learned   counsel   for   the
Appellants   who   physically   demonstrated   by   setting   up   one   of   the
sample units of the Concerned Goods to showcase the aspects of
portability involved in present matter.
8. On the contrary, Mr. Arjit Prasad, learned senior counsel for the
Respondent   while   supporting   the   observations   in   the   impugned
decisions, put forth two counter arguments.  Firstly, that since the
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word   ‘portable’   is   nowhere   defined   in   the   statute,   it   should   be
interpreted on the principle of general parlance. In other words, he
submitted   that   the   dictionary   meaning   of   the   word   ‘portable’   is
sufficient to resolve the dispute regarding its interpretation. Secondly,
he maintained that the legislature’s intention  was  crystal   clear in
qualifying   the   term   ‘portable’   by   providing   the   condition   in   the
description that any ADP less than 10Kgs would automatically become
portable.   In   furtherance   of   this   argument,   he   relied   on   the
Constitution Bench decision of this Court in  Mathuram Agrawal v
State  of  MP3
  to urge that the intention of the legislature has to be
discerned from the plain and unambiguous meaning of the language
used   in   a   taxation   statute   and   any   other   interpretation   is
9. We now examine these contentions of both parties.
10. Before   we   ponder   over   the   question   whether   the   Concerned
Goods are ‘portable’ or not, it would be appropriate to highlight their
key characteristics which are as follows :­
a) The central processing unit is embedded within the display unit; 
b) The display unit is generally a touch screen which can be used
as an input unit also, such as in the capacity of a keyboard or a
3  Mathuram Agrawal v State of MP (1999) 8 SCC 667, para 12.
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c) The units generally come along with in­built speakers as well as
ports for further connectivity including a port for establishing links
with internet network;
d) The diagonal length of the display is at the minimum of 18.5
inches.   It   may   be   clarified   that   presently   certain   models   of   the
Concerned  Goods even  exceed  this aspect by having the display’s
diagonal length as wide as 25 inches while still being weighed under
10 kilograms;4
e) It needs a constant source of external power source to function;
f) It is non­foldable and cannot be carried around in the usual
laptop bags because of its dimensions;
g) The Concerned Goods for efficient functioning need to remain in
a vertical state and to be tethered to a stand which is provided along
with it or requires support of something else such as a wall. It must be
noted that the user guides brought on record in respect of one of the
models of the Concerned Goods indicate that any other method of
usage including horizontal use was harmful and could cause damage
to the Concerned Goods.
11. The first aspect which we will address is with respect to the
issue   of   constant   source   of   power   and   whether   the   same   is   a
necessary characteristic to treat goods as ‘portable’. In this respect,
the Appellants argued that ‘Tariff Item 8471 30 10’ is only applicable
4 It must be noted that in respect of current market trends, generally the largest display for
laptops/notebooks is around 17 inches. 
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to   laptops/notebooks   and   that   the   applicable   sub­heading   HSN
indicated this. The relevant part of the same reads as follows –
“Subheading 8471.30
This   subheading   covers   portable   automatic   data   processing
machines  weighing  not  more   than   10  kg.   These  machines,
which   are   equipped   with   a   flat   screen,  may   be   capable   of
operating  without  an  external   source  of   electric  power  and
often  have  a  modem  or  other  means   for  establishing  a   link
with a network.”
(Emphasis Applied)
12. While it appears well settled that the HSN is to be normally
taken as a safe guide for classifying goods under the First Schedule
because   it   is   based   on   an   internationally   recognized   ‘harmonized
, a bare reading of the explanatory note applicable to
the sub­heading clearly lays out the fact that there is no mandatory
condition for being operable without any external source of power. We
are thus unable to agree with the Appellants that only ADPs with a
built­in power source is necessarily required to be classified under
‘Tariff Item 8471 30 10’. In other words, no element of ‘functionality’ is
contemplated for the purpose of classifying the Concerned Goods as
13. The second aspect deals with the question as to whether mere
factum  of  weighing  less  than  10  kilograms  would   be  sufficient to
classify the Concerned Goods as ‘portable’ or not. In this respect, it
may be seen that the CESTAT vide its impugned order(s) has relied on
5 Collector of Central Excise, Shillong v Wood Craft Products Limited (1995) 3 SCC 454.
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the dictionary meaning which defined ‘portable’ as ­ “that can be easily
carried   and   not   permanently   fixed   in   a   place”. It then went on to
conclude that the dimensions of the Concerned Goods were not a
concern as long as it could be easily lifted and moved. As noted above,
a similar argument has been raised by learned senior counsel for the
Respondent before us also.
14. At the outset, we must note that the adjudicating authorities
while   coming   to   their   respective   conclusions,   especially   the
Commissioner of Customs (Appeal) have extensively referred to online
sources   such   as   Wikipedia   to   support   their   conclusion.   While   we
expressly acknowledge the utility of these platforms which provide free
access to knowledge across the globe, but we must also sound a note
of caution against using such sources for legal dispute resolution. We
say so for the reason that these sources, despite being a treasure trove
of   knowledge,   are   based   on   a   crowd­sourced   and   user­generated
editing model that is not completely dependable in terms of academic
veracity and can promote misleading information as has been noted by
this court on previous occasions also.6
  The courts and adjudicating
authorities should rather make an endeavor to persuade the counsels
to place reliance on more reliable and authentic sources.
15. Moving   forward,   we   must   now   address   the   issue   at   hand,
namely, the interpretation of the word ‘portable’ and more so when the
6 Commissioner of Customs, Bangalore v Acer India (P) Ltd. (2008) 1 SCC 382, para 17.
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reasoning of the CESTAT solely hinges on the aspect of weight. Such
an approach is apparently erroneous because despite the fact that the
‘portable’ was not defined under the statute, it was incorporated in
‘Sub­Heading 8471 30’ and was preceded by a single ‘­’, which meant
that classification of goods under the same would be taken as a subclassification of the ‘Heading 8471’. 
16. In other words, ‘portable’ should have been defined in reference
to the ADPs instead of relying on dictionary meaning which contains
all kinds of hues of associated meanings as held by this Court in CCE
v Krishna Carbon Paper Co.7
.  The cited decision also explains the
correct approach to be taken in case when a word is to be defined in
context of any entry under the First Schedule. It thus holds that :–
“10.   The   trade  meaning   is   one   which   is   prevalent   in   that
particular trade where the goods is known or traded. If special
type   of   goods   is   subject­matter   of   a   fiscal   entry   then   that
entry  must  be  understood   in  the  context  of  that  particular
trade, bearing in mind that particular word.  Where, however,
there is no evidence either way then the definition given and
the meaning following (sic flowing) from particular statute at
particular time would be the decisive test.”8
(Emphasis Applied)
17. In our considered opinion, the word ‘portable’ should have been
interpreted in the context of ADPs. In this regard, relevant technical
and   commercial   literature   has   been   perused   by  us.   On   a  minute
7 CCE v Krishna Carbon Paper Co. (1989) 1 SCC 150, para 6.
8 ibid, para 10.
Page | 11
analysis   thereof,   we   deem   it   appropriate   to   extract   the   following
relevant material:­
The Institute of Electrical and Electronics Engineers defines ‘portable
computer’ as ­
“A   personal   computer   that   is   designed   and   configured   to
permit transportation as a piece of handheld luggage”9
The Dictionary of Computer and Internet Terms defines it as ­
“able to be carried around. A portable computer is larger than
a laptop computer, but is still easily movable”10
The   Oxford   Dictionary   of   Computer   Science  defines   ‘portable’   in
respect of computers as ­
“A   computer   that   can   be   simply   carried   from  one  place   to
another  by  one  person.  They  cannot  necessarily  be  used   in
transit. Examples include laptop computers.”11
The Microsoft Computer Dictionary  also provides a definition along
with   an   illustrative   chart   depicting   various   types   of   ‘portable
computers’ –
“Any   computer   designed   to   be   moved   easily.   Portable
computers can be characterized by size and weight.”12
Type Approximate
9 The Institute of Electrical and Electronics Engineers, IEEE Standard Computer Dictionary
(1990) 155.
10 Douglas A. Downing and others, Dictionary of Computer and Internet Terms (10th edn,
Barron’s Educational Series 2009) 374.
11  Andrew Butterfield and Gerard Ekembe Ngondi (eds),  Oxford Dictionary of Computer
Science (7th edn, OUP 2016).
12 Alex Blanton (ed), Microsoft Computer Dictionary (5th edn, 2002) 412­413.
Page | 12
Transportable 15–30 lb. House
Sometimes   called
luggable;   usually
has   floppy   and
hard   drives;
standard   CRT
Laptop 8–15 lb. House
current   or
Can   be   held   on
the   lap;   usually
has   a   floppy
drive;   uses   flat
LCD   or   plasma
Ultralight 2–8 lb. Batteries or
Easy to carry in a
sometimes   uses
RAM   drive   or
EPROM instead of
floppy   or   hard
drive;   thinner
models are known
as   notebook
Handheld Less   than   2
Batteries or
Also   called
palmtop   or   palmsized; can be held
in one hand.
18. On a conjoint reading of the relevant material and inputs, it is
explicitly clear that weight cannot be the sole factor to determine the
factum of portability. Instead, the essential ingredients to logically
establish whether an ADP is ‘portable’ are twofold. The first ingredient
is their ability to be carried around easily which includes all aspects
Page | 13
such as weight and their dimensions. We must hasten to add that in
appropriate cases, this assessment would also take into consideration
the necessary accessories which are required for safe and efficient
usage such as mounted stands or any power adapters. The second
ingredient is that the ADP must be suitable for daily transit of a
consumer and would include aspects such as durability to withstand
frequent commute and damage protection. An example of the same
would be the availability of protection cases which allows users to
carry the ADPs in hand or possibility of carrying the same in normal
briefcases or shoulder bags.
19. On   applying   these   core   ingredients   to   the   characteristics   of
Concerned   Goods,   there   is   no   room   to   doubt   that   they   are   not
‘portable’.  Firstly,  the dimensions of the Concerned Goods make it
illogical   and   unviable   for   daily   transit.   While   it   is   true   that
classification   of   the   goods   must   not   be   usually   made   on   the
advertisement material of the manufacturer, the user guides produced
before   us   showcase   that   placing   the   product   in   other   than   the
specified orientation could lead to damage to the Concerned Goods.
The user guides also emphatically highlight that the Concerned Goods
were meant to be used at a fixed place and contained specifications
that made them ideal for being mounted on a wall.
20. Secondly, the inability of the consumer to carry these goods
around in the absence of any protective case or any covering bags,
Page | 14
which   makes   the   Concerned   Goods   vulnerable   to   damage   during
transit. As noted in the literature relied upon before us, the weight
was not the sole consideration for being considered as ‘portable’. For
example, there used to be computers which are now no longer in
common use which were popularly known as ‘luggable’. They used to
weigh more than 10 kilograms. These old predecessors of laptops were
designed at the relevant time to be portable and used to fold up neatly
in one box with a handle. Despite their weight and the size comparable
to small suitcase, they could still be transported, albeit without a
21. Furthermore, we must also use this opportunity to highlight the
impact of technological advancement on law. It’s a matter of fact that
at the time when the relevant entries of the First Schedule came into
effect,   weight   was   definitely   an   important   criterion   for   deciding
whether   any   ADPs   was   ‘portable’.   Scientific   progress   has   greatly
reduced the weight associated with high performance in the context of
ADPs. It is not surprising that the advent of LED technology, faster
microchips,   etc.   has   made   it   possible   for   mobile   phones   to   have
performance specifications which merely a decade ago was possible
only on high end laptops. We must therefore be cognizant of such an
impact on the consumer’s understanding of any good or trade. 
Page | 15
22. Keeping in view the applicable understanding of the element of
‘portable’ as understood in common parlance used in the trade of
ADPs, we must hold that the Concerned Goods are not portable for the
reasons that­ Firstly, the diagonal dimension of the Concerned Goods
being minimum of the length of 18.5 inches and the same needs to be
transported along with the power cable as well as the applicable stand
in most cases if it is to be mounted and;  secondly  there being no
protective case designed by the markets for daily transport for these
Concerned   Goods.   Such   requirements   make   the   Concerned   Goods
unable to be carried around easily during daily transit. We, thus, hold
that the Concerned Goods are not ‘portable’.
23. It goes without saying that since the customs authorities wanted
to classify the goods differently, the burden of proof to showcase the
same was on them, which they failed to discharge.13 Hence under the
prevalent self­assessment procedure, the classification submitted by
the Appellants must be accepted. 
24. In light of the abovementioned discussion, we allow the appeals
and set aside the impugned orders which classified the Concerned
Goods under ‘Tariff Item 8471 30 10’. It is directed that valuation of
the Concerned Goods for levy of the duty be determined under the
13 Dabur India Ltd. v CCE, Jamshedpur (2005) 4 SCC 9.
Page | 16
initially declared ‘Tariff Item 8471 50 00’. All necessary consequences
shall follow.
25. The appeals are disposed of along with any pending applications
in the above terms. 
………..………………… J.
………………………….. J.
Page | 17


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