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2023 (1) TMI 700 - SC - CustomsClassification of imported Automatic Data Processing Machines (ADP) popularly known as All in One Integrated Desktop Computer - to be classified under Tariff Item 8471 50 00 or under Tariff Item 8471 30 10? - whether the Concerned Goods are portable or not under Tariff Item 8471 30 10? - HELD THAT - 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 COLLECTOR OF CENTRAL EXCISE, SHILLONG VERSUS WOOD CRAFT PRODUCTS LTD. 1995 (3) TMI 93 - SUPREME COURT , 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 - the Appellants contention that only ADPs with a built-in power source is necessarily required to be classified under Tariff Item 8471 30 10 , cannot be agreed upon. Whether mere factum of weighing less than 10 kilograms would be sufficient to classify the Concerned Goods as portable or not? - HELD THAT - The word 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 COLLECTOR OF CENTRAL EXCISE, KANPUR VERSUS KRISHNA CARBON PAPER CO. 1988 (9) TMI 50 - SUPREME COURT . 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. 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 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. 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 . The impugned orders which classified the Concerned Goods under Tariff Item 8471 30 10 is set aside - It is directed that valuation of the Concerned Goods for levy of the duty be determined under the initially declared Tariff Item 8471 50 00 - appeal allowed.
Issues Involved:
1. Classification of Automatic Data Processing Machines (ADP) under the correct Tariff Item. 2. Determination of whether the Concerned Goods are "portable" under Tariff Item 8471 30 10. Detailed Analysis: Issue 1: Classification of Automatic Data Processing Machines (ADP) The primary issue pertains to the correct classification of ADPs, specifically 'All in One Integrated Desktop Computers' (hereinafter, 'Concerned Goods') under the First Schedule to the Central Excise Tariff Act, 1985. The Appellants classified the Concerned Goods under 'Tariff Item 8471 50 00', but the Custom Authorities reclassified them under 'Tariff Item 8471 30 10'. This reclassification was confirmed by the Assistant Commissioner of Customs, Commissioner of Customs (Appeal), and the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The classification under 'Tariff Item 8471 30 10' involves valuation based on the retail sale price percentage under Section 4A of the Central Excise Act, 1944, unlike 'Tariff Item 8471 50 00', which uses a price mechanism under Section 4 of the same Act. This difference in valuation methods impacts the overall duty liability, prompting the dispute. Issue 2: Determination of Portability The core question is whether the Concerned Goods qualify as 'portable' under 'Tariff Item 8471 30 10'. The CESTAT and revenue authorities classified the goods as portable based on their weight (less than 10 kilograms) and other features such as the presence of a display unit and touch screen. The Appellants contended that 'Tariff Item 8471 30 10' pertains to laptops or notebooks, emphasizing that portability should consider functionality, ease of transport, and suitability for a mobile lifestyle, not merely weight. They argued that the goods require an external power source, are non-foldable, and lack protective cases for daily transit, making them unsuitable for classification as portable. The Respondents argued that the term 'portable' should be interpreted based on its general dictionary meaning, asserting that any ADP weighing less than 10 kilograms qualifies as portable. Analysis: Characteristics of Concerned Goods The key characteristics of the Concerned Goods include: 1. Central processing unit embedded within the display unit. 2. Touch screen functioning as an input unit. 3. Inbuilt speakers and connectivity ports. 4. Display size ranging from 18.5 inches to 25 inches. 5. Requirement of an external power source. 6. Non-foldable and needing support for vertical positioning. 7. Lack of protective cases for transit. Interpretation of Portability The Court examined whether the goods' need for an external power source disqualifies them from being portable. It was found that the Harmonized System Explanatory Notes (HSN) do not mandate an internal power source for classification under 'Tariff Item 8471 30 10'. Thus, the absence of an inbuilt power source does not affect portability. However, the Court disagreed with the CESTAT's reliance solely on weight for determining portability. It emphasized that 'portable' should be defined in the context of ADPs, considering both the ease of carrying and suitability for daily transit. Relevant technical and commercial literature, including definitions from the Institute of Electrical and Electronics Engineers and various dictionaries, were considered. The Court concluded that weight alone is insufficient to determine portability. Essential factors include the ability to be carried easily, suitable dimensions, and necessary accessories for safe usage. The Concerned Goods, due to their large dimensions, requirement of a power cable and stand, and lack of protective cases, do not meet these criteria. Conclusion The Court held that the Concerned Goods are not portable and should not be classified under 'Tariff Item 8471 30 10'. The burden of proof was on the customs authorities to justify the reclassification, which they failed to do. Consequently, the classification submitted by the Appellants under 'Tariff Item 8471 50 00' was accepted. The appeals were allowed, and the impugned orders were set aside. The Concerned Goods were directed to be valued under 'Tariff Item 8471 50 00', with all necessary consequences to follow.
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