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TMI Blog2020 (2) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... uch are minicomputers of portable size which can be carried around with ease. They are meant to be substitutes for laptop computers. The tablet computers can process data, execute programs and connect to the internet via wireless network. Some such tablets have calling facility also. It is the case of the petitioner that such tablets are much larger in size than mobile phones and thus, cannot be used or categorised as mobile phones and that the primary use of the tablets is that of computers and that, in fact, the calling function cannot even be activated without running an operating system on the tablet computers. 2.1 It is further the case of the petitioner that the technical specifications and functions of tablet computers and desktop/laptop are the same except for the components used inside these two devices. The components of tablet computers are far smaller and compact than the traditional desktop/laptop computer owing only to the size and weight of the latter. The petitioner classified tablet computers with or without calling facility under sub-heading 8471 30 under the Customs/ Excise Tariff and, therefore, resultantly under Entry 4 of the notification dated 1.8.2009 issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ones and, hence, they were not eligible for being classified under Entry 4 of the notification issued under Entry 45 of Schedule II to the GVAT Act. The assessing authority, accordingly, classified the goods under residuary Entry 87 of Schedule II to the GVAT Act. Upon receipt of the assessment order, the petitioner noticed that while the assessing authority had sought to tax tablet computers with calling facility under residuary entry, he had imposed higher tax on the entire turnover of tablet computers which also included certain tablets without calling facility. Further no credit was given for certain taxes paid by the petitioner. The petitioner, therefore, filed rectification application before the assessing authority which came to be allowed and, therefore, the impugned rectified assessment order was passed. Being aggrieved, the petitioner has filed the present petition. 3. Mr. S. N. Soparkar, Senior Advocate, learned counsel with Mr. Uchit Sheth, learned advocate for the petitioner, submitted that the impugned order passed by the assessing authority refusing to classify tablet computers under Entry 4 of the notification issued under Entry 45 of Schedule ll to the GVAT Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s well established as held by the Supreme Court in Paper Products Ltd. v. Commissioner of Central Excise, (1999) 7 SCC 84, wherein it has been held that circulars issued by the Board were binding on the Excise department. It was submitted that when the excise tariff has been incorporated into the notification under the GVAT Act, then the interpretation of CBEC of such excise tariff is binding even on the authorities under the GVAT Act, inasmuch as, any other interpretation would defeat the very purpose of incorporation of the excise tariff in the notification issued under the GVAT Act. 3.2 Reliance was placed upon the decisions of this court in West Coast Waterbase Private Ltd. v. State of Gujarat, (2016) 95 VST 370 (Guj), and Godrej Consumer Product Ltd. v. State of Gujarat rendered on 12th October, 2018 in Special Civil Application No.12172 of 2018, wherein the court held that the determination order passed by the Deputy Commissioner under section 62 of the Sales Tax Act would continue to hold the field as sub-section (3) of section 80 of the GVAT Act refers to any order already passed under the Act or under the earlier law, it necessarily includes a reference to the order of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertain what the sections meant, though those other sections are not incorporated in the new Act". 12. Once we have ascertained the object behind the legislation and held that the provisions of Section 205 quoted hereinabove stand bodily lifted and incorporated into the body of Section 115J of the Income-tax Act, all that we have to do is to read the provisions plainly and apply rules of interpretation if any ambiguity survives. ... ..... " 3.4 It was submitted that the assessing authority was bound to follow the circular issued by the CBEC in the context of classification of tablet computers having additional facility of calling feature while assessing the petitioner under the GVAT Act. 3.5 Next, it was submitted that the excise tariff is based on the globally accepted Harmonized System of Nomenclature and it is well settled that where an HSN Code is mentioned then classification is required to be made as per such code. Reliance was placed upon the decision of the Supreme Court in the case of Collector of Central Excise v. Woodcraft Products Ltd. , (1995) 3 SCC 454, wherein the court held that any dispute of classification was required to be resolved on the basis of HSN C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was submitted that under the circumstances, the classification of the goods in question under residuary entry 87 of Schedule II to the GVAT Act is wholly arbitrary, mechanical and illegal. 3.7 It was, accordingly, urged that the petition deserves to be allowed by setting aside the impugned assessment order and holding that the IT product/goods, namely, tablet computers are classifiable under sub-heading No.8471 30 of the notification dated 1.8.2009 issued under Entry 45 of Schedule II to the GVAT Act. 4. Opposing the petition, Ms. Maithili Mehta, learned Assistant Government Pleader, at the outset, raised a preliminary contention as regards the maintainability of the petition on the ground that against the order of the assessing authority, there is a statutory alternative remedy available under the GVAT and hence, the petition under article 226 of the Constitution of India is not maintainable. 4.1 On the merits of the case, it was submitted that product in question viz. tablet computers, are not mere data processing machines but are tablet computers with calling feature and can also be used as mobile phones. It was submitted that earlier the description of goods falling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... integral part of the laptop under CTH 84.71 at the appropriate rate of duty. The court was of the view that preloaded operating system recorded in HDD in the laptop (which was the item of import) forms an integral part of the laptop. What was imported was a laptop as a standalone item (unit). The court observed that an importer who buys a laptop containing an operating system pays for the laptop as a unit and without the operating system, like Windows, the laptop cannot work. The computer cannot open without operating system. The court held that when a laptop is imported with in-built preloaded operating system recorded on HDD, the said item forms an integral part of the laptop (computer system) and should be treated as one single unit imported. The court, accordingly, upheld the classification of the laptop as a unit under CTH 84.71. 4.3 Reliance was also placed upon the decision of the Supreme Court in the case of Commissioner of Customs, Bangalore v. N.I. Systems (India) (P) Ltd., (2010) 1 taxmann.com 741 (SC), wherein the products were computer based instrumentation products. The Assessing Officer concluded that each item constitutes a part of the complete measurement system ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Court to consider that the petitioner herein in its product launching description has considered the product in question as a "smart phone" and has considered it as class of Mobile Device. The said products of different size are termed by the petitioner herein as an Android Smart Phone. Therefore, from the said product launching details, it is all the more evident that the product in question falls within the category of a phone (calling device) and not a computer as contended by the petitioner in this petition. The copy of the product launching details of the petitioner company herein describes the said product as Smart Phone is annexed hereto and marked as Annexure-R3. 13. I say and submit that the "common parlance" if applied in the present case would also bring the product in question within the term "Smart Phone" as envisaged in the product launching details provided by the petitioner company. I say and submit that the said product in question is now commonly also known as "phablet" having dual feature of a Smart Phone and a tablet computer. The said combination of both the features takes the said product outside the purview of IT product. The definition of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test is applied, the tablet computers are popularly known as mini computers and not mobile phones, as sought to be alleged. 5.3 Dealing with the contention regarding the maintainability of the present petition, the learned counsel placed reliance upon the decision of this court in the case of West Coast Waterbase Private Ltd. v. State of Gujarat and Godrej Consumer Product Ltd. v. State of Gujarat (supra), wherein the court had entertained the petitions against the assessment orders passed by the assessing authority. It was submitted that in the present case, the assessing authority has not followed the binding circular issued by the CBEC. Moreover, the impugned assessment order being a non-speaking order, this petition under article 226 of the Constitution of India is maintainable before this court. 6. The facts are not in dispute. One of the commodities manufactured, imported and sold by the petitioner are tablet computers. Some such tablet computers also have a calling facility. The petitioner had earlier classified the tablet computers under sub-heading 8471 30 which described the products thereunder as portable digital automatic data processing machines, not weighing more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule II to the GVAT Act, namely, the residuary entry and hence, amenable to tax at the rate of 15%. 8. A perusal of the impugned order reveals that the assessing authority has referred to the contents of Heading 8471 and thereafter, observed that Tablet PC with Calling Feature (Tablet with Sim card Facility) has a facility of Sim card and can therefore, also be used as a mobile phone. Thus, a Tablet PC with Calling Feature can also be used as a calling device. In terms of serial No.4 of the notification only analogue or hybrid automatic data processing machines attract levy of tax at 4+1%. Tablet PC with Calling Feature (Tablet with Sim Card Facility) cannot get the benefit of the said notification. 8.1 It is further held that the dealer has considered sale of Tablets worth Rs. 440022534/- by considering such sales as sale of IT Products and paid tax at the rate of 4%. In this regard, detailed explanation was given to the dealer and after affording him reasonable opportunity of hearing and considering his submissions, at the end, it is found that as Tablet PC with Calling Feature (Tablet with Sim Card Facility) has a Sim card facility, it can be used as a mobile phone also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficial Gazette Four paise in the rupee. 14. In exercise of powers conferred by Entry 45 of Schedule II to the GVAT Act, the State Government has issued a notification dated 1st August, 2009 specifying the goods mentioned in the Table appended thereto as "IT Products" for the purpose of Entry 45. The notification dated 1.8.2009 insofar as the same is relevant for the present purpose reads thus: TABLE Information Technology products (IT Product) [The Headings, Sub-headings, or as the case may be, Tariff Items specifications of the IT Product/Goods mentioned in the table are as they are specified in the Central Excise Tariff Act, 1985 (5 of 1986)] Sr. No. Heading No. Sub Heading No. Tariff Item No. Description 4 8471 - - Automatic data processing machines and units thereof, magnetic or optical reader, machines for transcribing data onto data media in coded form and machines for processing such data - - Analogue or hybrid automatic data processing machines 8471 30 - Portable digital automatic data processing machines weighing not more than 10 kg. consisting of at least a central processing unit, keyboard and a display including p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nical appliances; parts thereof". Note 3 to Section XVI reads as under: "Unless the context otherwise requires, composite machines, consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complimentary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function." 20. Note 5.(A) to Chapter 84 defines the expression, "automatic data processing machine" and reads as under: "5.(A) For the purposes of heading 8471, the expression "automatic data processing machine" means machine capable of: (i) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme; (ii) being freely programmed in accordance with the requirements of the user; (iii) performing arithmetical computations specified by the user; and (iv) executing, without human intervention, a processing programme which requires them to modify their execution, by logical decision during the processing run." 21. On a conjoint reading of tariff item 8471 30 of the Central Excise Tarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly stated by LORD ESHER, M.R.: 'If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act as if they had been actually written in it with the pen, or printed in it.' (p. 233) Even though only particular sections of an earlier Act are incorporated into later, in construing the incorporated sections it may be at times necessary and permissible to refer to other parts of the earlier statute which are not incorporated. As was stated by LORD BLACKBURN: 'When a single section of an Act of Parliament is introduced into another Act, I think it must be read in the sense it bore in the original Act from which it was taken, and that consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the section meant, though those other sections are not incorporated in the new Act.' " 12. Once we have ascertained the object behind the legislation and held that the provisions of Section 205 quoted hereinabove stand bodily lifted and incorporated into the body of Section 115-J of the Income Tax Act, all that we have to do is to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvention on the Harmonised Commodity Description and Coding System (Harmonised System of Nomenclature called 'HSN') with the necessary modifications. The Revenue contends that the expression "similar laminated wood" in Heading No. 44.08 expressly includes block board, laminated wood and batten board, in which the core is thick and composed of blocks, laths or battens of wood glued or otherwise joined together and surfaced with the outer plies as clarified by the amendment in Chapter Note 5 which was always the meaning of the expression "similar laminated wood" according to HSN. The Revenue contends that this is how the expression was always understood in the HSN which is the pattern adopted while enacting Central Excise Tariff Act, 1985. According to the Revenue, the ISI Glossary of Terms being for a different purpose is not the appropriate aid to construction of these headings in the Central Excise Tariff Act. The Revenue contends that the amendments made in Chapter Note 5 were only with a view to clarify this position and end the controversy which was raised by the manufacturers relating to construction of these headings in the Act. 5. It is significant that Heading No. 44.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly accepted nomenclature found in the HSN and, therefore, any dispute relating to tariff classification must, as far as possible, be resolved with reference to the nomenclature indicated by the HSN unless there be an express different intention indicated by the Central Excise Tariff Act, 1985 itself. The definition of a term in the ISI Glossary, which has a different purpose, cannot, in case of a conflict, override the clear indication of the meaning of an identical expression in the same context in the HSN. In the HSN, block board is included within the meaning of the expression "similar laminated wood" in the same context of classification of block board. Since the Central Excise Tariff Act, 1985 is enacted on the basis and pattern of the HSN, the same expression used in the Act must, as far as practicable, be construed to have the meaning which is expressly given to it in the HSN when there is no indication in the Indian tariff of a different intention." 27. Thus, the Supreme Court has held that, as expressly stated in the Statement of Objects and Reasons, that the Central Excise tariffs are based on the HSN and the internationally accepted nomenclature was taken into account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia (P) Ltd. v. State of U.P., (2008) 5 SCC 680, on which reliance has been placed on behalf of the petitioner for the proposition that it is now a well-settled principle of law that in interpreting different entries, attempts shall be made to find out as to whether the same answers the description of the contents of the basic entry and only in the event it is not possible to do so, recourse to the residuary entry should be taken by way of last resort. Applying the above decision to the facts of the present case, as noted hereinabove, there is a specific entry viz. subheading 8471 30 which relates to portable digital automatic data processing machine. It is an admitted position that the product in question, namely, tablet computer is a portable digital automatic data processing machine. The only ground on which the respondents seek to classify the same in the residuary entry is that the same contains an additional calling feature and can be used as a mobile phone. 32. In the opinion of this court, merely because cellular phones have been deleted from sub-heading 8525 50 at serial No.20 of the notification dated 1st August, 2009 and are no longer classified as IT products, it does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principal function of the controllers was to execute control algorithm for real time monitoring and for controlling devices, processes or systems. In the present case, the principal function of the tablet computers is that of automatic data processing and it merely contains an additional feature which is in the nature of a calling facility. Insofar as the decision of the Supreme Court in Commissioner of Customs, Chennai v. Hewlett Packard India Sales (P) Ltd. (supra) is concerned, in that case, the respondent imported laptops containing preloaded HDD. The said drives were preloaded with operating systems (software) which controls the working of the computer. The value of the laptop depended on the operating system, which is preloaded. The laptop as a standalone unit was classifiable under CTH 84.71 whereas the operating system could also be imported as a packaged software which was classified by the Department under CTH 85.24. The respondent declared the value of laptop and value of software separately. The Supreme Court held that when a laptop is imported with an in-built preloaded operating system recorded on HDD, the said item forms an integral part of the laptop (computer sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as they are specified in the Central Excise Tariff. The CBEC being the highest authority under the Central Excise Act, the officers functioning under the said Act are bound by the said circular. While the CBEC circular may not be binding upon the authorities under the GVAT Act, in view of the fact that the provisions of the Central Excise Tariff Act have been bodily lifted and incorporated in the notification dated 1st August, 2009, the respondent assessing authority ought to have followed the CBEC circular dated 14.5.2013, as otherwise the same would result into contrary interpretations of the very same entry despite the fact that the State Government has adopted the provisions of the Central Excise Tariff Act for the purpose of maintaining uniformity in the classification of goods under the Central Excise Act and the GVAT Act. 38. This court, in West Coast Waterbase Private Ltd. v. State of Gujarat and Godrej Consumer Product Ltd. v. State of Gujarat (supra), in more or less similar circumstances wherein the determination order passed by the Deputy Commissioner of Sales Tax was not being followed by the authorities under the GVAT Act, has entertained the petition and has held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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