Tariff classification of tablet-based devices favoured Heading 8471 over a residual entry; manufacture was not fastened on the appellant.

Imported tablet-based devices assembled with accessories, firmware flashing, testing, packing and dispatch were treated as integrated data-processing units rather than residual electrical machines of individual function. Applying Chapter Note 5(E) and Chapter Note 7 of Chapter 84, the specific heading for automatic data processing machines prevailed, so the goods were classifiable under Heading 8471 and not under Heading 85437099. On the manufacturing issue, the same activity could not be fastened on the appellant as manufacture when it had already been treated and taxed as a service; if manufacture existed at all, liability would lie at the job-worker level.

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Issues: (i) whether the activity carried out by the appellant amounted to manufacture so as to sustain the duty demand against it, and whether any liability could instead arise, if at all, at the job-worker level; (ii) whether the goods were classifiable under Central Excise Tariff Heading 8471 or under the residual heading 85437099.

Issue (i): whether the activity carried out by the appellant amounted to manufacture so as to sustain the duty demand against it, and whether any liability could instead arise, if at all, at the job-worker level.

Analysis: The goods were imported as tablets and accessories and were then sent for further work including attachment of components, flashing of firmware, testing, packing and dispatch. The record also showed that the appellant had already discharged service tax on the activity treating it as a service. On those facts, the demand could not be sustained on the footing that the very same activity constituted manufacture at the appellant's end. Even otherwise, if the activity was treated as manufacture, the liability would arise, if at all, in relation to the job worker who carried out the manufacturing process.

Conclusion: The demand was not sustainable against the appellant on the alleged manufacturing activity.

Issue (ii): whether the goods were classifiable under Central Excise Tariff Heading 8471 or under the residual heading 85437099.

Analysis: The goods were described on import as tablet devices and were found to be designed for data collection, access control, computing, memory, time tracking, security and payroll management. Chapter Note 5(E) and Chapter Note 7 of Chapter 84 were applied to hold that goods having a specific function distinct from ordinary data processing do not fall outside classification under the computer heading merely because they are specialised. A residual heading is attracted only when no more specific heading applies. On that reasoning, the goods were treated as integrated computer/data processing units and not as electrical machines of individual function under the residual entry.

Conclusion: The goods were classifiable under Central Excise Tariff Heading 8471 and not under Central Excise Tariff Heading 85437099.

Final Conclusion: The duty demand and penalty could not be sustained, and the assessee obtained complete relief on the disputed classification and manufacture issues.

Ratio Decidendi: Where imported and assembled goods function as integrated data-processing units with specific computer-related operations, the specific tariff heading for automatic data processing machines prevails over a residual heading, and the same activity cannot be fastened as manufacture on the appellant when it has been treated and taxed as a service and carried out, if at all, through a job worker.

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