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Hewlett Packard India Sales Pvt. Ltd. (now HP India Sales Pvt. Ltd.) vs Commissioner of Customs (Import), Nhava Sheva

Civil Appeal · 2023 INSC 50Decided 17 Jan 2023
Civil Appeal No. 5373 of 2019
Surya Kant · Vikram Nath · J.K. Maheshwari

Background

HP and Lenovo imported All-in-One desktop computers (the processor is built into the display unit, which is usually a touch screen at least 18.5 inches across, needs mains power, and is designed to sit on a stand or be wall-mounted). They self-classified them under Tariff Item 8471 50 00 ("processing units"). Customs reclassified them under 8471 30 10 ("portable digital automatic data processing machines, weighing not more than 10 kg.. personal computer"), which, although the duty rate is the same, triggers valuation on the basis of retail sale price and therefore a higher duty bill. The Commissioner (Appeals) and CESTAT upheld Customs' view, essentially because the machines weigh under 10 kg and can be lifted and carried; CESTAT relied on dictionary meanings and the Commissioner cited Wikipedia.

Decision Breakdown

The Supreme Court allowed both appeals. It rejected the importers' argument that "portable" requires a built-in battery: the Harmonised System notes only say such machines "may" work without external power. But it also held that weight under 10 kg cannot be the sole test: "portable" must be understood in the context of the trade in computers, not by generic dictionary definitions, and technical literature (IEEE, Oxford, Microsoft dictionaries) shows two essential ingredients: the machine must be easy to carry (considering weight, dimensions, and necessary accessories like stands and power adapters) and suitable for a consumer's daily transit (durable, with cases or bags designed for it). All-in-One desktops, with 18.5-inch-plus screens, mandatory stands and cables, no protective cases, and user guides warning against moving them out of their fixed orientation, fail both tests. The Court also cautioned adjudicating authorities against relying on crowd-sourced sites like Wikipedia in legal decision-making, and noted the burden of proving a different classification lies on Customs, which it failed to discharge. The goods were ordered to be valued under the importers' original classification, 8471 50 00.

Lesson Learnt

Technical words in a tax schedule are read as the relevant trade understands them, not by a bare dictionary meaning, and when Customs wants to reclassify what an importer declared, the burden is on Customs to prove it. The Court also flagged that Wikipedia and similar user-edited sources are not reliable authority for legal decisions.

Official source (sci.gov.in)View Judgment (PDF)

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