Integrated Desktop Computer cannot be classified as ‘portable device’

[CA Bimal Jain]

The Hon’ble Supreme Court in HEWLETT PACKARD INDIA SALES PVT. LTD. (NOW HP INDIA SALES PVT. LTD.) VERSUS COMMISSIONER OF CUSTOMS (IMPORT) , NHAVA SHEVA AND LENEVO (INDIA) PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS (IMPORT) , NHAVA SHEVA - 2023 (1) TMI 700 - SUPREME COURT set aside the orders of CESTAT, Mumbai, which classified the Integrated Desktop Computer as a portable device. Held that, such goods cannot be classified as ‘portable’ for the reasons that their dimensions make it illogical and unviable for daily transit and the same needs to be transported along with the power cable as well as the applicable stand if it is to be mounted. Further, the consumer is unable to carry them around in the absence of any protective case or any covering bags.

Facts:

Hewlett Packard India Sales Pvt. Ltd. and Lenovo (India) Pvt. Ltd. (“the Appellants”) imported certain units of Automatic Data Processing Machines popularly known as ‘All in One Integrated Desktop Computer’ (“the Goods”) and classified them under ‘Tariff Item 8471 50 00’ of Schedule I to the Central Excise Tariff Act, 1985 (“the Central Excise Tariff Act”) i.e. ‘Processing units other than those of sub- headings 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‘, as per the prevalent self-assessment procedure.

During subsequent examination by the Custom Authorities (“the Respondent”) the Goods were classified under ‘Tariff Item 8471 30 10’ of Schedule I to the Central Excise Tariff Act, as ‘Personal computer’ under the ‘Sub-heading 8471 30’ which entails the condition of being ‘portable’, that was later affirmed by the CESTAT, Mumbai vide orders dated December 19, 2018 and June 24, 2019 (“the Impugned Orders”).

Being aggrieved, this appeal has been filed.

The Appellants contended that firstly, the classification under ‘Tariff Item 8471 30 10’ pertains to class of the Goods which are popularly known as laptops or notebooks and it involves an   element of ‘functionality’ which is not applicable in the case of their Goods, as they cannot function without an external source of power. Secondly, the Goods are wrongly held to be portable on the ground that they weigh less than 10 kilograms, and finally that the 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 (“the Explanatory Notes”).

Issue:

Whether the Goods are classifiable under ‘Tariff Item 8471 30 10’ as ‘Portable device’?

Held:

The Hon’ble Supreme Court in HEWLETT PACKARD INDIA SALES PVT. LTD. (NOW HP INDIA SALES PVT. LTD.) VERSUS COMMISSIONER OF CUSTOMS (IMPORT) , NHAVA SHEVA AND LENEVO (INDIA) PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS (IMPORT) , NHAVA SHEVA - 2023 (1) TMI 700 - SUPREME COURT held as under:

• Noted that, it is well settled that the HSN is to be normally taken as a safe guide for classifying goods under the First Schedule to the Central Excise Tariff Act, because it is based on an internationally recognized ‘harmonized nomenclature’ therefore, as per the bare reading of the Explanatory Notes, no element of ‘functionality’ is contemplated for the purpose of classifying the Goods as ‘portable’.
• Observed that, the adjudicating authorities while coming to their respective conclusions, have extensively referred to online sources such as Wikipedia to support their conclusion. Such sources, despite being a treasure trove of knowledge, are based on a crowdsourced and user generated editing model that is not completely dependable in terms of academic veracity and can promote misleading information.
• Further observed that, relying on the various definition of the term ‘portable’, it can be stated that weight cannot be the sole factor to determine the factum of portability.
• Set aside the Impugned Orders.
• Held that, the Goods cannot be classified as ‘portable’ for the reasons that their dimensions make it illogical and unviable for daily transit 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. Further, the consumer is unable to carry them around in the absence of any protective case or any covering bags.
• Further held that, since the Respondent wanted to classify the goods differently, the burden of proof to showcase the same was on them, which they failed to discharge. Hence under the prevalent self-assessment procedure, the classification submitted by the Appellants must be accepted and the valuation of the Goods for levy of the duty be determined under the ‘Tariff Item 8471 50 00’.

Relevant Provisions:

Tariff Item 8471’ of Schedule I to the Central Excise Tariff Act:

“Tariff Item	Description	Unit	Rate of duty
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
847130	Portable automatic data processing machines, weighing not more than 10 kg, consisting of at least a central processing unit, a keyboard and a display:
84713010	Personal computer	u	12.5%
84713090	Other	u	12.5%
…………………..
84715000	Processing units other than those of sub- headings 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	u	12.5%”

(Author can be reached at [email protected])