Holding

A laptop or notebook computer, being an integrated item, does not constitute a "CPU with monitor, mouse and keyboard imported together as a set" under the Computers (Additional Duty) Rules, 2004, and the 7% additional duty is therefore inapplicable.

Summary

The Customs, Bangalore appealed against the CESTAT order that had allowed an additional duty of 7% on notebook (laptop) computers imported by M/s. Acer India Ltd. The central issue was whether a laptop qualifies as a "CPU with monitor, mouse and keyboard imported together as a set" under S.No.2 of Rule 2 of the Computers (Additional Duty) Rules, 2004. The Supreme Court held that a laptop is an integrated, inseparable item and does not constitute a set of separate components; therefore the 7% additional duty cannot be levied. The Court emphasized that taxing statutes must be construed strictly and that Section 19 of the Customs Act does not apply to such integrated goods. Consequently, the appeal was dismissed.

Issues considered

Whether notebook/laptop computers fall within the definition of "CPU with monitor, mouse and keyboard imported together as a set" under Rule 2 of the Computers (Additional Duty) Rules, 2004.
Whether the 7% additional duty can be imposed on such laptops.
Whether Section 19 of the Customs Act and Item No.19 of the Customs Tariff are applicable to laptops.

Legislation cited

Central Excise Tariff Act, 1986s. First Schedule
Customs Tariff Act, 1975s. 19

Subjects

Customs dutyAdditional dutyLaptopNotebook computerStatutory interpretationTax lawSection 19Computers (Additional Duty) RulesIntegrated itemSet of articles

Judgment

-(
A COMMR. OF CUSTOMS, BANGALORE
v.
MIS. ACER Il'IDIA PVT. LTD.

OCTOBER 12, 2007
B
[S.B. SINHA AND HARJIT SINGH BEDI, JJ.]

Computers (Additional Duty) Rules, 2004-r. 2-Levy of
Additional duty under-On Imported Notebook/Laptop Compute;s-
c Permissibility-Held: Not permissible-Notebook/Laptop Computers
is an integrated item and not a set of CPU with Monitor, Mouse and
Key-Board-The Rules being a taxing statute should be construed
strictly-Customs TariffAct, i975-TariffJtem 8471-Jnterpretation
of Taxing statutes.
D
The question for consideration is whether Notebook Computer
(Laptop Computers) are "CPU with Monitor, Mouse and Keyboard
imported together as a set" classified under SI. No. 2 of table in Rule 2
of the Computers (Additional Duty) Rules, 2004 and in terms whereof
E would the said goods be subjected to an additional duty of 7%.

Dismissing the appeal, the Court
HELD: 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. The
F 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
G 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 ofanother and retaining their individual identity
H 558
COMMR. OF CUSTOMS, BANGALORE v. MIS. ACER 559
INDIA PVT. LTD. [SINHA, J.]
all the time. Whereas a desktop computer comprising of a CPU with all A
the aforementioned accessories do not lose its individual identities and'
not only are marketable as separate items but are also used separately,,
a laptop computer cannot be said to be a set ofthe said parts. Computers
(Additional Duty) Rules, 2004 is a taxing statute. It is required to be,
construed strictly. B
[Paras 11, 20 and 21] [563-G, H; 564-A, B, C; 569-B-C]
1

. .- Godrej Soaps Private Limited v. A.K. Bandyopadhyay and Ors., .
(1981) ELT 555 (Born.)
ManishMaheshwariv.Asstt. Commissionerofincome TaxandAnr., C
(2007) 3 SCALE 627; Southern Pet!'"ochemical Industries Co. Ltd. v.,
Electricity Inspector and E. Tl 0. and Ors., (2007) 7 SCALE 392, referred
to
CIVIL APPELLATE nJRISDICTION: Civil Appeal No. 2321 of
2007. D
~ From the Final Order No. 1532/06 dated 13.09.2006 passed by
the Customs Excise and Service Tax Appellate Tribunal, South Zone Bench
at Bangalore in Appeal No. C/135/2005.
Mohan Parasaran, ASG., K. Swamy and B. Krishna Prasad for the E
Appellant.
M.P. Devanath and Monish Panda for the Respondent.
The Judgment of the Court was delivered by
S.B. SINHA, J. I. Revenue is in appeal before us aggrieved by F
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 of2005 dismissing an appeal upon
an order dated 28.12.2004 by the Commissioner of Customs (Appeals),
Bangalore. G
A. 2. The question which falls for our consideration herein is as to
whether notebook computers (laptop computers) are "CPU with monitor,
mouse and keyboard imported together as a set" classified under SL No.
2 of the Table in Rule 2 of the Computers (Additional Duty) Rules, 2004 H
-- )
COMMR. OF CUSTOMS, BANGALORE v. MIS. ACER
INDIA PVT. LTD. [SINHA, J.]
materials, components and ingredients of the same nature as; or A
561

similar to those, used in the production or manufacture of such
article, it may, by notification in the Official Gazette, direct that such
imported 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 B
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 C
ingredients used in the production or manufacture of such like
article."
8. The purpose oflevying 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 D
,.) to the said Act inter alia provides for 'automatic data processing machines
and units thereof. The relevant entries are as under:

Portable digital automatic data processing
"8471 30 - machines,weighing not more than 10 kg, E
consisting of at least a central processing unit,
a keyboard and a display:
8471 30 10 --- Personal computer
p
8471 30 90 --- Other
- Other digital automatic data processing
machines:
Comprising in the same housing at least a
G
8471 41 -- 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
H
562 SUPREME COURT REPORTS [2007] 11 S.C.R.

A 8471 41 90 --- Other
8471 49 00 -- Other, presented in the form of systems
- Digital processing units other than those of
sub-headings 8471 41 or 8471 49, whether
B 8471 50 00 - or not containing in the same housing one or
two ofthe following types of unit: storage units,
input units, output units
Input or output units, whether or not oontaining
c 8471 60 - storage units in the same housing:
8471 60 IO --- Combined input or out put units

*** ***
D 8471 60 30 Monitor
8471-60 40 --- Keyboard
8471 60 50 --- Scanners
8471 60 60 --- Mouse
E
8471 60 90 --- Other"

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
F Customs Tariff Act made rules known as Computers {Additional Duty)
Rules, 2004, Rule 2 whereof reads as .under:
"2. Levy of additional duty.- The Central Government, having
regard to the average quantum of duty of excise leviable under the
G
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
H
that the additional duty leviable under sub-section (3) of section·
)
COMMR. OF CUSTOMS, BANGALORE v. MIS. ACER 563
INDIA PVT. LTD. [SINHA, J.]
3 of the said Customs Tariff Act shall be equal to the rates specified A
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:-
B
Table
S.No. Description of goods Additional
- duty rate
(1) (2) (3)
1. Central processing unit (CPU) 6% ad c
valorem
2. CPU with monitor, mouse and key 7% ad
board, imported together as a set; valorem
but not including CPU imported separately D
and input or output devices or accessories
such as monitor, key board, mouse,
modem, uninterrupted power supply system
or web camera imported separately.
Explanation.- For the purpose of this notification, ••computer" shall E
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." F
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 G
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 H
564 SUPREME COURT REPORTS [2007] 11 S.C.R.

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~ rtotebook
computer, on the other hand, comes in an integrated and mseparable fonn.
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
B apparatus but it should consist of more than one item, each complementing
the work of another and retaining their individual identity all.the.J'
tlme.
all
~ .... __j 1 :

Whereas a desktop computer comprising of a CPU with the Y
aforementioned accessories do not lose its individual identifies and not
only are marketable as separate items but are also used separately, a
C 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:
D "Section 19 - Determination of duty where goods consi~ 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 :-
(a) articles liable to duty with reference to quantify. shall be
E
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 dutfaf that rate,
and if they are liable to duty at different rates, be chargeable to
F duty at the highest of such rates ; ·- - -n
''
(c) articles not liable to duty shall be chargeable to ~µty at the rate
at which articles liable to duty with reference to value,are liable
under clause (b) :
G Provided that,- • ., • t l "' ~

(a) accessories of, and spare parts or maintenance and,repairing
implements for, any article which satisfy the conditiolli? specified in
the rules made in this behalf shall be chargeable at the same rate
H of duty as that article;
)
COMMR. OF CUSTOMS, BANGALORE v. M/S. ACER 565
INDIA PVT. LTD. [SINHA, J.]
(b) if the importer produces evidence to the satisfaction of the A
. 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."
13. The learned counsel for the parties have placed before us B
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 wider:
"A laptop computer, or simply laptop (also notebook computer
or notebook), is a small mobile computer, which usually weighs C
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 battel)' while also supplying D
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 E
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 F
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."
G
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: tI
566 SUPREME COURT REPORTS (2007] 11. S.C.R.

A "A 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· krtown as
microcomputers. There are four types of desktop coniptlte_rs:"_home
computers, or personal computers; workstations, Internet servers,
B 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,
c and Internet access .. Nearly all desktop computers are r!iodular,
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.
D
Desktop computers are commonly connected to a power strip."
15. From what has _been noticed hereinbefore, it would appear that
a micro computer is also known as a desktop computer. Micro computer
E is specifically mentioned in Entry 8471 41 IO as an item separate to the
other items. Entry 8471300, 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
F 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:
"Laptops' upgradeability is severely limited, both for technical and
economic reasons. As of 2006, there is no induStry-wide standard
G
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
H
)
COMMR. OF CUSTOMS, BANGALORE v. MIS. ACER 567
INDIA PVT. LTD. [SINHA, J.]
the different product-lines of the same manufacturer. Standard A
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- B
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 c
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-replaceabie. [7]
Many laptops also include an internal MiniPCI slot, often occupied D
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. E

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."
17. We have referred to wikipedia, as the learne~ counsel for the F
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. G
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
H
\
568 SUPREME COURT REPORTS , [2007] ·11 S.C.R.
~

A said to have committed any error in opining: ' .1 it
" ... Hence the two items are totally different though capable of
performing same or similar functions, but one canilot be mistaken
for the other ... " /
~ · •r ~ ,
B 19. We may notice that a learned Single Judge o(the;Bombay High
Court in Godrej Soaps Private Limited v. A.K BandY,opadhyay and
Ors., (1981) ELT 555 (Born.) in a case involving import of animal ..,..
compound feed consisting of several ingredients held as wider:
I l'T '-,,.t~
"12. Now Section 19 of the Customs Act speaks ofa case where
c • •

goods consist of "set of articles". In the present case, the goods
~.,II •of. ~ I f

viz. the animal compound feed does not consi~ 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 collection of articles or otherwise there must be a
D
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 in~ketable
E
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.
F 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 i
Excise Tariff, the Respondents_ pressed into seryice the two
notifications referred to in the impugned orders and it was
strenuously contended by the Respondents that on construing these
G notifications, it must be held that the goods in question were
covered under Section 19 of the Customs Act and came within
the scope ofltem No. 19 of the Indian Customs and Central Excise k

Tariff. Ordinarily, I would have dealt with this argument of the
Respondents in detail, but Mr. Taraporwala, the learned Counsel
H
)
COMMR. OF CUSTOMS, BANGALORE v. MIS. ACER 569
INDIA PVT. LTD. [SINHA, J.]

for the Petitioners pointed out that the said notifications applied to A
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 B
necessary for me to deal with the said argument."

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. c
21. Furthermore, the Computers (Additional Duty) Rules, 2004 is
a taxing statute. It required to be construed strictly. [See Manish
Maheshwari v. Asstt. Commissioner ofIncome Tax and Anr., (2007)
3 SCALE 627 and Southern Petrochemical Industries Co. Ltd v.
Electricity Inspector and E.Tl.O. and Ors., (2007) 7 SCALE 39l. D
> 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. E
K.K.T. Appeal dismissed.