2025 (1) TMI 797 - HC - Customs

Interpretation of statute - the word and as appearing in Custom Tariff Item (CTI) 8517 (iv) is to be read in a disjunctive manner - exemption eligibility for Wireless Access Points (WAPs) operating solely on Multiple Input/Multiple Output (MIMO) technology under the amended Notification No. 24/2005-Cus. - whether the WAPs, which work on MIMO technology, imported by the respondent would qualify for an exemption from Basic Customs Duty? - HELD THAT - In the present case, there is no such ambiguity or absurdity. In our view, when all the four entries of Serial No. 13 are analysed, it would lead to only one conclusion that the word and is to be read in conjunctive manner only, and the phrase MIMO and LTE Products would refer to only those products which have both MIMO technology and LTE standard. The Notification No. 25/2005, and one Notification No. 57/2017-Customs were amended and the phrase MIMO and LTE Products were substituted with (i) MIMO products; (ii) LTE products , and that these amendments were clarificatory in nature, is concerned, notably, an amendment in the Notification No. 57/2017-Customs was brought vide Finance Act, 2021 which is clarificatory in nature, and, clarifies Serial No. 20 of the said notification. It states that the subject entry will now be read as (i) MIMO products; (ii) LTE products . Similar change was brought in Notification No. 25/2005 by virtue of Notification No. 05/2021-Customs. The clarification is brought about in the Statute when there is ambiguity and disputes arise due to such ambiguities. The fact that a clarification is needed to be brought about in the subject entry by the Finance Act, 2021 would point out towards the inherent ambiguity experienced in its interpretation and application which prompted and necessitated the subject amendment and clarification - exclusion clause (iv) of Serial No. 13 of the amended Notification No. 24/2005, which reads as MIMO and LTE products , would have to be read in its original form applying the law and rules of interpretation of statutes, especially as applicable in cases of taxation. Conclusion - The phrase MIMO and LTE Products in Serial No. 13 (iv) of the amended Notification No. 24/2005 applies solely to products combining MIMO technology and LTE standards. The exclusion clause cannot be stretched to encompass products featuring either one of the two technologies. Accordingly, the WAPs imported by the respondent, which employ MIMO technology but not the LTE standards, are entitled to the exemption from Basic Customs Duty. The Question of Law is accordingly answered in favour of the assessee, and against the Revenue - The appeal is accordingly dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal question presented in this case is:

Whether the word "and" as appearing in Custom Tariff Item (CTI) 8517 (iv) is to be read in a disjunctive manner and thus be viewed as referring to separate products, specifically in the context of exemption eligibility for Wireless Access Points (WAPs) operating solely on Multiple Input/Multiple Output (MIMO) technology under the amended Notification No. 24/2005-Cus.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The legal framework revolves around the interpretation of the exemption clause in the amended Notification No. 24/2005-Cus, which lists "MIMO and LTE Products" under Serial No. 13 (iv) as excluded from customs duty exemption. The interpretation of "and" in legal texts is crucial, as it determines whether products using either MIMO technology or LTE standard separately, or only those combining both, are excluded from the exemption.

Court's interpretation and reasoning:

The court analyzed the language of the notification, emphasizing the importance of the conjunction "and" in the phrase "MIMO and LTE Products." It concluded that "and" should be interpreted conjunctively, meaning the exclusion applies only to products that incorporate both MIMO technology and LTE standards. The court referenced linguistic principles and prior legal precedents to support this interpretation, emphasizing the need for plain and unambiguous reading of statutory language.

Key evidence and findings:

The court examined the structure of the notification, noting that wherever the government intended to specify products individually, terms like "products" or "equipment" followed the respective technology or feature. The absence of the word "products" after "MIMO" but its presence after "LTE" in the exclusion entry suggested a combined reference to products using both technologies. The court also considered the broader context of international agreements like the Information Technology Agreement (ITA), which India is a signatory to and which aims to eliminate customs duties on specified IT products.

Application of law to facts:

The court applied the principle of strict interpretation of tax exemptions, concluding that the phrase "MIMO and LTE Products" should be read to mean products that use both MIMO technology and LTE standards. As the WAPs imported by the respondent utilized only MIMO technology without LTE, they were deemed eligible for the exemption from customs duty.

Treatment of competing arguments:

The Revenue argued for a disjunctive interpretation of "and," suggesting that the phrase should cover products using either MIMO or LTE independently. The court rejected this argument, noting that if the intention was to exclude products using either technology independently, the phrase "MIMO or LTE Products" could have been used. The court also dismissed the Revenue's reliance on subsequent amendments to the notification as clarificatory, stating that such amendments apply prospectively and do not affect the interpretation of the notification during the relevant period.

Conclusions:

The court concluded that the phrase "MIMO and LTE Products" in the notification applies solely to products combining both technologies. Therefore, the WAPs imported by the respondent, which operated solely on MIMO technology, were entitled to the exemption from customs duty.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"The word 'and' is a conjunctive and is used to connect and join. The dictionary meaning of 'and' is as follows:... In the present case, there is no such ambiguity or absurdity. In our view, when all the four entries of Serial No. 13 are analyzed, it would lead to only one conclusion that the word 'and' is to be read in a conjunctive manner only, and the phrase 'MIMO and LTE Products' would refer to only those products which have both MIMO technology and LTE standard."

Core principles established:

The court reaffirmed the principle that statutory language, especially in tax exemptions, should be interpreted according to its plain and ordinary meaning. The use of "and" as a conjunctive term was emphasized, and the court highlighted the importance of considering the broader legislative and international context in interpreting exemption notifications.

Final determinations on each issue:

The court determined that the WAPs imported by the respondent, which utilized MIMO technology but not LTE standards, were entitled to the exemption from customs duty under the amended Notification No. 24/2005-Cus. The appeal filed by the Revenue was dismissed, and the order of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) was upheld.

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