http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

CASE NO.: Appeal (civil)  2321 of 2007

PETITIONER: Commr. Of Customs, Bangalore

RESPONDENT: M/s ACER India Pvt. Ltd

DATE OF JUDGMENT: 12/10/2007

BENCH: S.B. Sinha & Harjit Singh Bedi

JUDGMENT: J U D G M E N T  

S.B. SINHA, J :          1.      Revenue is in appeal before us aggrieved by and dissatisfied with a  judgment and order dated 13.09.2006 passed by the Customs Excise &  Service Tax Appellate Tribunal, South Zone Bench at Bangalore in Appeal  No. C/135 of 2005 dismissing an appeal upon an order dated 28.12.2004 by  the Commissioner of Customs (Appeals), Bangalore. 2.      The question which falls for our consideration herein is as to whether  notebook computers (laptop computers) are \023CPU with monitor, mouse and  keyboard imported together as a set\024 classified under Sl. No. 2 of the Table   in Rule 2 of the Computers (Additional Duty) Rules, 2004 and in terms  whereof the said goods would be subjected to an additional duty of 7%. 3.      Respondent herein imported some laptop computers.  Excise duty is  payable thereupon.  Relying on or on the basis of the purported Entry under  Tariff Item No. 8471 read with Section 33 of the Customs Tariff Act, the  Assessing Authority held that additional tax was imposable thereupon.   4.      An order of the Assessing Authority to the said extent has been set  aside by the Commissioner (Appeals).  The appeal filed by the Revenue  before the Tribunal, as noticed hereinbefore, has been dismissed. 5.      Mr. Mohan Parasaran, learned Additional Solicitor General appearing  on behalf of the appellant, in support of this appeal, inter alia would submit  that the Tribunal committed an error insofar as it failed to take into  consideration that the goods in question would not come within the purview  of the said Rules.  It was urged that Entry 8471 of the Tariff framed in terms  of the Customs Tariff Act encompasses within its fold desktops and laptops.   A laptop being a computer which has all the attributes of desktop is  amenable to excise duty. 6.      Mr. M.P. Devanath, learned counsel appearing on behalf of the  respondents, on the other hand, would submit that desktops and laptops are  known differently in the market.  In any event, having regard to the object  and purport of the levy of additional duty, a CPU with its accessories in a set  does not answer the description of a laptop or a notebook.  Our attention in  this behalf has been drawn to some literature. 7.      The Customs Tariff Act was enacted to consolidate and amend the  law relating to Customs Duties.  Section 3 of the Act provides for levy of  additional duty equal to excise duty; sub-sections (3) and (4) whereof read as  under: \023(3) If the Central Government is satisfied that it is  necessary in the public interest to levy on any  imported article [whether on such article duty is  leviable under sub-section (1) or not] such  additional duty as would counter-balance the  excise duty leviable on any raw materials,  components and ingredients of the same nature as,  or similar to those, used in the production or  manufacture of such article, it may, by notification  in the Official Gazette, direct that such imported

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

article shall, in addition, be liable to an additional  duty representing such portion of the excise duty  leviable on such raw materials, components and  ingredients as, in either case, may be determined  by rules made by the Central Government in this  behalf. (4) In making any rules for the purposes of sub- section (3), the Central Government shall have  regard to the average quantum of the excise duty  payable on the raw materials, components or  ingredients used in the production or manufacture  of such like article.\024

8.      The purpose of levying an additional duty is absolutely clear and  unambiguous.  It is to protect the domestic manufacturers.  It provides for a  level playing field.  Entry 8471 of Chapter 84 of the Schedule appended to  the said Act inter alia provides for \021automatic data processing machines and  units thereof.  The relevant entries are as under:

\0238471 30  -  Portable digital automatic data  processing machines, weighing not  more than 10 kg, consisting of at  least a central processing unit, a  keyboard and a display:  8471 30 10  ---  Personal computer  8471 30 90  ---  Other       -  Other digital automatic data  processing machines:  8471 41  --  Comprising in the same housing at  least a central processing unit and an  input and output unit, whether or not  combined :  8471 41 10  ---  Micro computer  8471 41 20  ---  Large or main frame computer  8471 41 90  ---  Other  8471 49 00  --  Other, presented in the form of  systems  8471 50 00  -  Digital 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  8471 60  -

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

Input or output units, whether or not  containing storage units in the same  housing:  8471 60 10  ---  Combined input or out put units  ***      *** 8471 60 30

Monitor 8471 60 40  ---  Keyboard  8471 60 50  ---  Scanners  8471 60 60  ---  Mouse  8471 60 90  ---  Other\024

9.      The Central Government in exercise of the powers conferred upon it  by Sub-section (3) read with Sub-section (4) of Section 3 of the Customs  Tariff Act made rules known as Computers (Additional Duty) Rules, 2004,  Rule 2 whereof reads as under: \0232. Levy of additional duty.- The Central Government,  having regard to the average quantum of duty of excise  leviable under the First Schedule to the Central Excise  Tariff Act, 1985 (5 of 1986), on monitor, motherboard,  key board, mouse, and other parts and components used  in the manufacture of  the computers which are exempt  from whole of the duty of excise leviable thereon under  the First Schedule to the said Central Excise Tariff Act,  specifies that the additional duty leviable under sub- section (3) of  section 3 of the said Customs Tariff Act  shall be equal to the rates specified in column (3) of the  Table below in respect of the goods, when imported into  India, specified in corresponding entry in column (2) of  the said Table and falling within heading 8471 of the  First Schedule to the said Customs Tariff Act, namely:-  Table  S.No.  Description of goods  Additional  duty rate  (1)  (2)  (3)  1.  Central processing unit (CPU)  6%   ad  valorem  2.  CPU with monitor, mouse and key  board, imported together as a set;  but not including CPU imported  separately and  input or output  devices or accessories such as  monitor, key board, mouse,  modem, uninterrupted power  supply system or web camera

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

imported separately.  7%   ad  valorem   Explanation .- For the purpose of this notification,  \023computer\024 shall include central processing unit (CPU)  imported separately; or CPU with monitor, mouse and  key board, imported together as a set; but shall not  include input or output devices or accessories such as  monitor, key board, mouse, modem, uninterrupted power  supply system or web camera imported separately.\024

10.     A bare perusal of the aforementioned provision would clearly go to  show that levy of 7% ad valorem additional duty is provided having regard  to the average quantum of duty of excise leviable under the First Schedule to  the Central Excise Tariff Act on monitor, motherboard, key board, mouse  and other parts and components used in the manufacture of the computers.   11.     The traditional desktops, computers and monitors are known  differently in commercial parlance.  A desktop computer is a combination of  a CPU with monitor, mouse and key board imported together as a set.  What  is, thus, covered by the above is a set of items brought together and capable  of being put together to make a computer.  A notebook computer, on the  other hand, comes in an integrated and inseparable form.  It is, as such, not a  combination of CPU, Monitor, mouse and key board.  A set although in  view of the dictionary meaning may mean a complete apparatus but it should  consist of more than one item, each complementing the work of another and  retaining their individual identity all the time.  Whereas a desktop computer  comprising of a CPU with all the aforementioned accessories do not lose its  individual identifies and not only are marketable as separate items but are  also used separately, a laptop computer cannot be said to be a set of the said  parts. 12.     Furthermore, what would be the method of determination of duty  when the goods imported consisted of set of articles is contained in Section  19 of the Customs Act which reads, thus: \023Section 19 - Determination of duty where goods  consist of articles liable to different rates of duty  Except as otherwise provided in any law for the  time being in force, where goods consist of a set of  articles, duty shall be calculated as follows :\027 (a) articles liable to duty with reference to quantity  shall be chargeable to that duty ; (b) articles liable to duty with reference to value  shall, if they are liable to duty at the same rate, be  chargeable to duty at that rate, and if they are  liable to duty at different rates, be chargeable to  duty at the highest of such rates ; (c) articles not liable to duty shall be chargeable to  duty at the rate at which articles liable to duty with  reference to value are liable under clause (b) : Provided that,\027 (a) accessories of, and spare parts or maintenance  and repairing implements for, any article which  satisfy the conditions specified in the rules made in  this behalf shall be chargeable at the same rate of  duty as that article; (b) if the importer produces evidence to the  satisfaction of the proper officer regarding the  value of any of the articles liable to different rates  of duty, such article shall be chargeable to duty  separately at the rate applicable to it.\024

13.     The learned counsel for the parties have placed before us  specifications of the types of computers imported by the respondent in order  to show that they are known differently.  Laptop is defined in Wikipedia as  under: \023A laptop computer, or simply laptop (also

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

notebook computer or notebook), is a small mobile  computer, which usually weighs 2.2-18 pounds (1- 6 kilograms), depending on size, materials, and  other factors. Laptops usually run on a single main battery or  from an external AC/DC adapter which can charge  the battery while also supplying power to the  computer itself. Many computers also have a 3volt  cell to run the clock and other processes in the  event of a power failure. As personal computers, laptops are capable of the  same tasks as a desktop computer, although they  are typically less powerful for the same price.  They contain components that are similar to their  desktop counterparts and perform the same  functions, but are miniaturized and optimized for  mobile use and efficient power consumption.  Laptops usually have liquid crystal displays and  most of them use different memory modules for  their random access memory (RAM), for instance,  SO-DIMM in lieu of the larger DIMMs. In  addition to a built-in keyboard, they may utilize a  touchpad (also known as a trackpad) or a pointing  stick for input, though an external keyboard or  mouse can usually be attached.\024

14.     The learned Additional Solicitor General would submit that the said  description of a laptop would clearly go to show that for the purpose of  classification there is not much difference between a laptop and a desktop.   From Wikipedia itself, it appears that a desktop computer is described as  under:

\023A desktop computer is a computer made for use  on a desk in an office or home and is distinguished  from portable computers such as laptops or PDAs.  Desktop computers are also known as  microcomputers. There are four types of desktop  computers: home computers, or personal  computers; workstations, Internet servers, and  special communications computers. Desktops are currently the most affordable  computers and ubiquitous in businesses, schools,  and households; they are used for performing  office tasks, organizing digital photos, video  editing, and Internet access. Nearly all desktop  computers are modular, with components that can  easily be replaced or upgraded. Desktop computers come in a variety of case styles  ranging from large vertical towers to small form  factor models that can be tucked behind an LCD  monitor. Desktop computers are commonly connected to a  power strip.\024

15.     From what has been noticed hereinbefore, it would appear that a  micro computer is also known as a desktop computer.  Micro computer is  specifically mentioned in Entry 8471 41 10 as an item separate to the other  items.  Entry 8471 30 0, however, speaks of personal computer.  We have  noticed hereinbefore, that monitor, key boards, scanners, mouse, etc. have  been classified separately.   16.     It is, thus, evident that in common parlance a desktop or a micro  computer is different from a laptop or PDA.  The distinction between a  laptop and a desktop computer would further be evident from the history of  Wikipedia wherein inter alia it is stated:

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

\023Laptops’ upgradeability is severely limited, both  for technical and economic reasons. As of 2006,  there is no industry-wide standard form factor for  laptops. Each major laptop vendor pursues its own  proprietary design and construction, with the result  that laptops are difficult to upgrade and exhibit  high repair costs. With few exceptions, laptop  components can rarely be swapped between  laptops of competing manufacturers, or even  between laptops from the different product-lines of  the same manufacturer. Standard feature  peripherals (such as audio, video, USB, 1394,  WiFi, Bluetooth) are generally integrated on the  main PCB (motherboard), and thus upgrades often  require using external ports, card slots, or wireless  peripherals. Other components, such as RAM  modules, hard drives, and batteries are typically  user-upgradeable. Many laptops have removable CPUs, although  support for other CPUs is restricted to the specific  models supported by the laptop motherboard. The  socketed CPUs are perhaps for the manufacturer’s  convenience, rather than the end-user, as few  manufacturers try new CPUs in last year’s laptop  model with an eye toward selling upgrades rather  than new laptops. In many other laptops, the CPU  is soldered and non-replaceable. [7] Many laptops also include an internal MiniPCI  slot, often occupied by a WiFi or Bluetooth card,  but as with the CPU, the internal slot is often  restricted in the range of cards that can be  installed. The widespread adoption of USB  mitigates I/O connectivity to a great degree,  although the user must carry the USB peripheral as  a separate item. NVidia and ATI have proposed a standardized  interface for laptop GPU upgrades (such as an  MXM), but again, choices are limited compared to  the desktop PCIe/AGP after-market.\024

17.     We have referred to wikipedia, as the learned counsel for the parties  relied thereupon.  It is an online encyclopaedia and information can be  entered therein by any person and as such it may not be authentic.         However, it is not disputed that a laptop and a desktop is differently  known in commercial parlance.         Furthermore, we are required to determine this issue on interpretation  of the relevant entries contained in the schedule of Customs Tariff Act.  18.     We, therefore, are of the opinion that the Tribunal cannot be said to  have committed any error in opining: \023\005Hence the two items are totally different  though capable of performing same or similar  functions, but one cannot be mistaken for the  other\005\024

19.     We may notice that a learned Single Judge of the Bombay High Court  in Godrej Soaps Private Limited v. A.K. Bandyopadhyay and others [1981  ELT 555 (Bom.)] in a case involving import of animal compound feed  consisting of several ingredients held as under: \02312. Now Section 19 of the Customs Act speaks of  a case where goods consist of "set of articles". In  the present case, the goods viz. the animal  compound feed does not consist of a set of articles  for, as stated above, there is only one identifiable  article viz. animal compound feed. In order to  attract the provisions of Section 19 there must be a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

collection of articles or otherwise there must be a  collection or aggregation of two or more individual  and severally indentifiable articles, which is not  the case here. In the present case, the goods are  made up of several ingredients, which have all lost  their indentities and have become inseparable even  by common processes, and have in fact emerged as  a single marketable product. Section 19 of the  Customs Act has, therefore, no application  whatsoever, and if this is the position, then there is  no question of holding that it comes within the  compass of Item No. 19 of the Indian Customs and  Central Excise Tariff. 13. I may here add that in interpreting Section 19  of the Customs Act along with Item No. 19 of the  Indian Customs and Central Excise Tariff, the  Respondents pressed into service the two  notifications referred to in the impugned orders  and it was strenuously contended by the  Respondents that on construing these notifications,  it must be held that the goods in question were  covered under Section 19 of the Customs Act and  came within the scope of Item No. 19 of the Indian  Customs and Central Excise Tariff. Ordinarily, I  would have dealt with this argument of the  Respondents in detail, but Mr. Taraporwala, the  learned Counsel for the Petitioners pointed out that  the said notifications applied to Item No. 21 of the  Indian Customs and Central Excise Tariff and the  language thereof could not be stretched to interpret  either Section 19 of the Customs Act or Item No.  19 of the Indian Customs and Central Excise  Tariff. Mr. Taraporwala’s contention was and is in  order and I accept the same. In view of this, it is  not necessary for me to deal with the said  argument.\024

20.     We, therefore, are of the opinion that a laptop or a notebook being an  integrated item cannot be said to be a set of a CPU with monitor, mouse and  key board. 21.     Furthermore, the Computers (Additional Duty) Rules, 2004 is a taxing  statute.  It required to be construed strictly.  [See Manish Maheshwari v.  Asstt. Commissioner of Income Tax and Anr. 2007 (3) SCALE 627 and  Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector and  E.T.I.O. and Ors., 2007 (7) SCALE 392].  So construed, we are of the  opinion, that the interpretation by the Tribunal is in consonance with the  aforementioned rules of interpretation. 22.     For the reasons aforementioned, there is no merit in this appeal which  is dismissed accordingly.  No costs.