COMMISSIONER OF CUSTOMS, CHENNAI v. M-S. HEWLETT PACKARD INDIA SALES (P) LTD

Citation: [2007] 9 S.C.R. 641

Court: Supreme Court of India

Bench: ARIJIT PASAYAT, LOKESHWAR SINGH PANTA

Case summary

COMMISSIONER OF CUSTOMS, CHENNAI v. M-S. HEWLETT PACKARD INDIA SALES (P) LTD.pdf

Judgment text

,. ___ / COMMISSIONER OF CUSTOMS, CHENNAI v. M/S. HEWLETT PACKARD INDIA SALES (P) LTD. AUGUST 30, 2007 IDR. ARIJITPASAYAT ANDLOKESHWARSINGHPANTA,JJ. ) Customs Tariff Act, 1985; Headings 84. 71 and 85. 24 and Notification No. 2112002-Cus. Dated 1. 3. 2002 issued thereunder: Classification-Import of Laptops with Hard Disc Drives-CTH 84. 71 or 85. 24-Assessee claiming duty exemption-Exemption Notification- Applicability of-Held: Assessee imported Laptops containing preloaded Hard Disc Drives preloaded with t open without the operating system. The laptop without an operating system is like an empty building. At this stage, it may be clarified that the operating'system can also be imported as a packaged software which is like an accessory and which in the present case is classified by the department under CTH 85. 24. However, a preloaded operating system recorded on HDD is an integral part of the laptop (unit). Such preloaded operating system on the HDD forms an integral part ofthe laptop.

It is important to note that laptop as a stand alone unit is classifiable under CTH 84. 71. A laptop is a small portable Personal Computer (in short 'PC'). It runs either on battery or electricity. Laptop has a screen and a small key board. Most ofthe laptops run on the same software as their desk top counterparts. Most of the laptops accept floppy disks, CD ROM Drives, Extenial or Internal Modem etc. A notebook computer is a laptop. ·Jt is a machine. A CD or a floppy disk is a peripheral. I0. Applying the abo~e tests to the facts of the present case, we are of the view that preloaded operating system recorded in HDD in the laptop (which is the item of import) forms an integral part of the laptop. What was imported in the present case was a laptop as a stand alone item (unit). Present /' +- COMMR. OF CUSTOMS v. HE\\1. ETT PACKARD INDIA SALES (P) LTD. [PASAYAT, J. ) 649 dispute relates to the transaction value of the unit.

An importer who buys a laptop containing an operating system pays for the laptop as a unit. As stated above, without the operating system, like Windows, the laptop cannot work. The computer cannot open without operating system. In the present case, the respondent has not only imported laptops, it has also imported HDDs on which the operating system was recorded (packaged software) which has been classified by the Department under CTH 85. 24. However, when a laptop is imported with in-built preloaded operating system recorded on HOD the said item fonns an integral part of the laptop (computer system) and in which case the Department is right in treating the laptop as one single unit imported by the respondent. The Department has rightly classified the laptop as a unit under CTH 84. 71, quoted above. 11. Before concluding it may be pointed out that in none ofthe decisions cited on behalf of the respondent, the question raised in the present dispute was ever raised.

Although laptop is similar PC, the former is more compact. lt cannot be assembled as easily as PC. In the present case, the Department has rightly taken the value of the laptop as a unit and it has given the deduction for the value of the software. There is no error in the computation, particularly, when the respondent has refused to give the value ofthe software to the adjudicating authority despite being called upon to do so. 12. For the afore-stated reasons, we are of the view that the imported laptops were classifiable under CTH 84. 71 whereas operating software recorded on HOD imported as packaged software were classifiable under CTH 85. 24 and accordingly Civil Appeal filed by the Department deserves to be allowed, and the impugned judgment of the Tribunal is set aside. There will be no order as to costs. S. K. S. Appeals allowed.