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

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO 5373 OF 2019

Hewlett Packard India Sales Pvt. Ltd. 

(Now HP India Sales Pvt. Ltd.)

… Appellant

                                             VERSUS

Commissioner of Customs (Import), Nhava Sheva

… Respondent

WITH

CIVIL APPEAL NO 6715 OF 2019

Lenevo (India) Pvt. Ltd. … Appellant

                                             

                         VERSUS

Commissioner of Customs (Import), Nhava Sheva … Respondent

JUDGMENT

Surya Kant, J.

1. The question that arises for our consideration pertains to correct

classification   of   Automatic   Data   Processing   Machines  (hereinafter,

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‘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’). 

    FACTS

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

24.06.2019.

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

(1)

Description of goods2

(2)

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

included

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

machines

8471 41 ­­ Comprising in the same housing at

least a central processing unit and an

input and output unit whether or not

combined

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

systems

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’.

    B. CONTENTIONS

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

impermissible. 

9. We now examine these contentions of both parties.

    ANALYSIS

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

mouse;

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

nomenclature’5

, 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

‘portable’. 

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.

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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

weight

Power

source

Comments

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.

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Transportable 15–30 lb. House

current

Sometimes   called

luggable;   usually

has   floppy   and

hard   drives;

standard   CRT

screen.

Laptop 8–15 lb. House

current   or

batteries

Can   be   held   on

the   lap;   usually

has   a   floppy

drive;   uses   flat

LCD   or   plasma

screen.

Ultralight 2–8 lb. Batteries or

transformer

pack

Easy to carry in a

briefcase;

sometimes   uses

RAM   drive   or

EPROM instead of

floppy   or   hard

drive;   thinner

models are known

as   notebook

computers.

Handheld Less   than   2

lb.

Batteries or

transformer

pack

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

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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,

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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

wagon.

  

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. 

    CONCLUSION   

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.

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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.

(SURYA KANT)

………………………….. J.

(VIKRAM NATH)

NEW DELHI

DATED:17.01.2023

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