The Supreme Court, in Hewlett Packard India Sales Pvt. Ltd. and Lenovo (India) Pvt. Ltd. Vs Commissioner of Customs (Import), Nhava Sheva, Civil Appeal Numbers 5373 and 6715 of 2019 decided on 17.01.2023, held that the interpretation of word in a taxing statute shall be done pursuant to the relevant technical and commercial literature instead of common parlance or dictionary meaning.
FACTS
Hewlett Packard India Sales Pvt Ltd and Lenovo (India) Pvt. Ltd., (hereinafter referred to as the “Appellants”) imported some units of Automatic Data Processing Machines (ADP) popularly known as ‘All-in-One Integrated Desktop Computer’ (hereinafter referred to as the “Goods”) and classified them under ‘Tariff Item 8471 50 00’. After examination by the Custom Authorities, the classification of the Goods was changed to ‘Tariff Item 8471 30 10’.
The Classification by the Custom Authorities was further confirmed by the Assistant Commissioner of Customs and Commissioner of Customs (Appeals) and Customs Excise and Service Tax Appellate Tribunal (hereinafter referred to as the “CESTAT”), West Zone, Mumbai dated 19.12.2018 and 24.06.2019(hereinafter referred to as the “Impugned Judgments”).
The dispute about the two classifications is due to the difference in the method of computing under both the Tariff Items even though the rate of duty is same.
Goods under ‘Tariff Item 847130 10’ attract Section 4A of Central Excise Act, 1944 (hereinafter referred to as the “Act”, where the valuation of excisable goods is based on the percentage of retail sale price.
Whereas, goods under ‘Tariff Item 8471 50 00’ are evaluated based on price mechanism under Section 4 of the Act, which would effectively reduce the overall liability to pay the requisite duty. This creates a difference in liability on Appellants and hence the present Appeal.
ISSUE BEFORE THE SUPREME COURT
- Whether the Goods under consideration are portable or not under ‘Tariff Item 8471 30 10’?
CONTENTIONS OF THE PARTIES
The Appellants contended that the classification under ‘Tariff Item 8471 30 10’ involves an element of ‘functionality’ which is inapplicable to the present goods as they are not capable of functioning without an external source of power.
The Appellants submitted that the weight of goods cannot be the sole consideration for deciding the ‘portability’ of goods; other aspects such as functionality and ease of transport should also be considered.
The Appellant argued that the definition of ‘portable’ should have been relied in relation to the goods. Hence, the relevant ‘Sub-Heading 8471 30’ entails the condition of being ‘portable’ in the description of goods was preceded by a single ‘-’ and consequently all the goods under the said sub-heading should be taken as a sub classification of the goods covered by the ‘Heading 8471’.
The Appellant pleaded that the goods are not considered as ‘portable’ by 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 referred to as the “HSN”).
The Respondent submitted that dictionary meaning of the word ‘portable’ should be used for interpretation as it is not defined in the statute.
The Respondent further contended that the intention of the legislature was clear in qualifying the term ‘portable’ by stating the condition that the ADPs weighing less than 10 kg as automatically portable.
The Respondent relied on Mathuram Agrawal v. State of MP [(1999) 8 SCC 667] and asserted that the intention of legislature has to be discerned from the plain and unambiguous meaning of the language used in a taxation statute and other kinds of interpretation is not permissible.
DECISION AND FINDINGS
The Supreme Court (hereinafter referred to as the “Court”) considered the key characteristics of the Goods and proceeded in deciding the ‘portability’ of the Goods.
The Court observed that bare reading of the Explanatory Note of the HSN for ‘portability’ there is no mandatory condition of operating without any source of power and hence, ‘functionality’ is not required for classifying the Goods as ‘portable’.
The Court further relied on CCE v. Krishna Carbon Paper Co.[(1989) 1 SCC 150] and held that the word ‘portable’ should be interpreted in context of ADPs instead of dictionary meaning.
The Court further perused the relevant technical and commercial literature and concluded that weight cannot be a sole factum in determining the ‘portability’ of goods. Furthermore, the ADPs must fulfill two ingredients while determining ‘portability’; the ability to be carried around easily and suitability for daily transit and durability.
The Court opined that the ADPs are unviable for daily transit and also the Goods cannot be carried in absence of the power cables and are difficult for transportation and hence, the Goods are not ‘portable’. The Supreme Court set aside the Impugned Orders and allowed the Appeal and directed the valuation of the Goods for the levy of duty shall be done under ‘Tariff Item 8471 50 00’ and disposed the Appeal.
AMLEGALS REMARKS
The Supreme Court held that in a Taxing Statute, when a word is not defined, it has to be interpreted pursuant to relevant technical and commercial literature instead of common parlance.
The Court has placed the onus on that common parlance is not simply derived from the dictionary meaning but according to the acquired meaning of the word in accordance with other factors like viability for daily transit, impact of tech development on law.
This brings clarity to the existing principle of interpretation and the judgement lastly is bound together by the self-assessment procedure.
The onus is on the Authorities to set clear the classification of goods and in case of any definition or determination of meaning; one must refer trade meaning instead of dictionary meaning.
– Team AMLEGALS assisted by Ms. Samiha Yadav (Intern)
For any queries or feedback, please feel free to get in touch with aditi.tiwari@amlegals.com or himanshi.patwa@amlegals.com.
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