AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 272
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....er, 2006 (hereinafter collectively referred to as 'the exemption notification'). 3. Counsel for petitioner-Revenue has confined and restricted his challenge to the interpretation given to the expression "electrical machines with translation or dictionary functions" in Serial No. 26 of the exemption notification i.e. whether Kindle e-reading devices were "electrical machines with translation and dictionary function". Revenue does not dispute the finding that Kindle devices are electrical machines under the residuary clause, i.e., "others" under the residuary Custom Tariff Heading (CTH, for short) 8543 89/8543 7099. 4. Revenue submits that the primary function of Kindle e-reading devices was not to translate or perform dictionary functions and hence, they would not be covered under the expression "electrical machine with translation or dictionary function". Reliance is placed on the Constitution Bench decision of the Supreme Court in Commissioner of Central Excise, New Delhi versus Hari Chand Shri Gopal And Others, (2011) 1 SCC 236 and Commissioner of Customs (Import), Mumbai versus Dilip Kumar, in Civil Appeal No. 3327/2007 decided on 30th July, 2018, to urge that exemptio....
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.... specified in the corresponding entry in column (2) of the said Table, when imported into India, form the whole of the duty of customs leviable thereon under the said First Schedule, namely:- S.No. Heading, Sub-heading or Tariff item Description of goods 26. 8543 7099 Electrical machines with translation or dictionary functions" 9. The AAR had dealt with and interpreted exemption granted under Serial No. 26 with reference to the Kindle e-reading devices in the following words:- "2. The application is opposed by the Revenue, Customs Department on the ground that the Kindle Device which is imported does not have the translation or as the case may be dictionary functions as it is the main feature. The contention of the Revenue is that the Notification would be applicable only to such Kindle devices which have the translation or as the case may be dictionary functions as its main function. 3. The interpretation of the Revenue is completely incorrect if the Tariff entry 8543 7099 is accepted, then it is clear that all such electrical machines which have the translation or its dictionary functions will be entitled to be benefitted by the Notification as stated above. When the en....
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....lity; (d) Battery Life with wireless switched-off: 1 month or 2 months (depending on model) (e) Storage: 2 GB/4GB on device to store about 1,400/3,000 books (depending on model) (f) Text-to-Speech capability; (g) In-Built Dictionary Function; (h) Proprietary software specifically designed for e-books: Bookmarks and Annotation on the e-books; Personal documents service; Highlighting of passages; Sharing of meaningful passages via social networking sites such as Facebook, Twitter, etc.; Lending books between users; (i) Content Formats: Kindle (AZW), TXT, PDF, unprotected MOBI, PRC natively; HTML, DOC, DOCX, JPEG, GIF, PNG, BMP through conversion; (j) Network connectivity is via Wi-Fi, WAN, 3G and network via USB 2.0; (k) No voice or other data communication function is available. For example readers cannot make voice calls, or send messages over the wireless network. No other form of transmission of data is available other than downloading of e-books and those mentioned at S. No. (h) above; (I) Experimental Web Browser via Wi-Fi connection only. 5. The main feature/function of the Kindle Devices is to allow reading of books/newspapers/magazines in electronic forma....
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....and in terms of the Information Technology Agreement to which India is a signatory. 14. Petitioners have not been able to produce the relevant file and stated that in-spite of efforts made the file is untraceable. However, the petitioner state that all signatory countries including India to the Ministerial declaration on Trade and Information Technology Products, Singapore dated 13th December, 1996 (ITA-1) were to eliminate customs duties and other duties and charges of any kind, within the meaning of Article II: I(b) of the General Agreement of Tariff and Trade, 1994 with respect to the products annexed to the declaration. India being a signatory to the ITA-I was bound to classify and grant exemption to 217 items, including "Electrical machines with translation or dictionary functions", covered by the agreement on which nil basic customs duty was prescribed. The Notification No. 25/2005-Cus dated 1st March, 2005 was accordingly issued, exempting certain products from customs duty. The petitioner state that the subheading 8543 89 "others" would cover electrical machines and apparatus having individual functions not specified or included elsewhere in Chapter 85. The said entry was ....
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....ion, to urge that no distinction could be drawn between primary and ancillary function. 17. Our research has shown that the issue of classification and exemption of "e-reading devices for electronic books" under the Combined Nomenclature (CN, for short) Code 8543 70 10 "electrical machines with translation and dictionary functions" on which no conventional rate of duty was payable was raised before the Court of Justice of European Union in the case of Amazon EU Sarl on reference made in terms of request made by Principal Customs Office, Hanover, Germany. Contention of the Customs Office, Germany was that the CN Code 8543 70 90 applicable to "others" on which conventional duty @ 3.7% was payable, would apply to "e-reading devices for electronic books". Decision of the Court of Justice of European Union dated 11th June, 2015 opines that "e-reading devices for electronic books" in addition to hardware and software for reading e-books have a speech output option and a programme for reproduction of audio formats. E-reading devices also have a dictionary function, which can be pre-installed with option to download and install additional dictionaries. European Court referred to Rule 3 of....
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....uired. 19. To grapple with "with" and explain the expression "electrical machines with translation or dictionary functions", we will strictly go by the words used in the exemption notification and give natural and normal meaning to the said words for there is no indication as to the object and purpose behind providing such exemption or concessions, except the obligation in terms of ITA-I. The first aspect to be noticed is that exemption has been granted to a limited category of items/products covered by the residuary entry "others" enlisted as CHA 8543 89/8543 7099 under Chapter V under the heading "electrical and electronic machinery and equipment". The products covered under the residuary clause CHA 8543 89/8543 7099 are products not specified and included elsewhere in the chapter 8543 89 10 to 8543 89 95. In other words, what would be covered by the exemption notification are items or goods, which fall under the residuary clause and not any item which falls under a specific clause of the tariff items. The issue of classification of Kindle Devices under Tariff Item 8543 89/8543 7099 was raised before the AAR, but the said position has not been argued and contested before us. The....
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....esses some situation or relation of nearness, proximity, contiguity or association, connection or the like. It can be used to denote the accompaniment of a cause, means or instruments, etc.; sometimes equivalent to "by". It is stated that the word "with" is frequently used in the same sense of "in addition to" i.e., word "with" has a dual meaning and may be defined to mean either inclusive of or by way of addition or supplement. 22. Referring and interpreting the word "with" with reference to the eligibility criteria in the recruitment rules on years of service, the Supreme Court in A.K. Raghumani Singh and Others versus Gopal Chandra Nath and Others, (2000) 4 SCC 30 had observed and held:- "7. The word "with" has been defined in the New Shorter Oxford Dictionary (1993), diversely the meaning depending on the context in which it is used. But when it is used to connect two nouns it means: "Accompanied by; having as an addition or accompaniment. Frequently used to connect two nouns, in the sense 'and' - 'as well'." 8. Applying the definition to the eligibility criteria it is clear that it requires the prescribed educational qualification and 6 years' experience as well. Give....
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.... governed wholly by the language of the notification i.e. by the plain terms of the exemption." 24. In IVRCL Infrastructure and Projects Limited versus Commissioner of Customs, (2015) 13 SCC 198, it was observed that eligibility clause in relation to exemption notification is to be given strict meaning, thereby meaning that the notification is to be interpreted in terms of the language and once the assessee satisfies the eligibility clause, exemption clause therein has to be construed liberally. Thus, eligibility condition deserves strict construction although construction of a condition may be given a liberal meaning. G.P. Ceramics (P) Limited versus CTT, (2009) 2 SCC 90, which refers to several earlier decisions, elucidating on interpretation of tax exemptions had observed that exemption given with a beneficent objective would be in public interest and for public purpose. Sometimes, the Courts take into consideration the object and purpose to clear an ambiguity and doubt and make exemption clause effective. Courts have taken a pragmatic and a practical view so as to avoid any anomaly or absurdity as was held in Union of India versus Ranbaxy Laboratories Limited and Others, (2008....
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.... the provisions of an exemption notification may be directory in nature and some are mandatory in nature. A distinction between the provisions of a statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in their nature, on the other, must be kept clearly distinguished. In TISCO Ltd. [(2005) 4 SCC 272] this Court held that the principles as regard construction of an exemption notification are no longer res integra; whereas the eligibility clause in relation to an exemption notification is given strict meaning where for the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed literally. An eligibility criteria, therefore, deserves a strict construction, although construction of a condition thereof may be given a liberal meaning if the same is directory in nature." 26. Recent decision of the Supreme Court in Commissioner of Customs (Import), Mumbai versus M/s Dilip Kumar and Company and Others, Civil Appeal No. 3327/2007 dated 30th July, 2018 overrules the ratio i....
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....lectronic equipments like video special effect equipment, video typewriter, audio-visual stereo encoders, radio frequency power transformers, etc. It is undisputed and unchallenged, as stated above, that Kindle devices would fall under the basket or residuary heading 8543 89/8543 7099. Thus, the only issue is whether the said device is "with translation or dictionary functions". The words "with translation or dictionary functions" have been used to restrict and keep the benefit of the exemption notification within bounds and not expand scope of exemption. Kindle device is an electronic device designed for use as an electronic book reader. As an electronic book reader, it has several e-books pre-installed in the device and other e-books can be downloaded. The product is developed and designed to function as an e-book reader and is sold and bought as a e-book reader and not as a translator or as a dictionary. The e-book reader has an inbuilt dictionary feature, which is a secondary or additional feature, useful for the reader. This secondary or additional feature would not make it and qualify the e-reading machine as an "electrical machine with translation or dictionary function". Th....
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....ance with principles of interpretation applicable to tariff items. Broad and wide ambit propounded by the respondent unintelligibly articulates a rather far-fetched interpretation. 30. In other words, our conclusion is that the exemption notification would apply where the device is an electrical machine covered under tariff item No.8543 89/8543 7099, and its primary and basic function should be to translate or perform dictionary function. Primary function of kindle device is to enable the user to read e-books. It is an e-book reading device and not a translator, and is not procured or purchased to perform dictionary function. No one purchases a kindle device because it is a translator or device "with" a dictionary function. E-book readers are purchased because a person wants to read e-books which are pre-loaded or can be downloaded from internet. Dictionary in a Kindle device enables the reader to make use of the dictionary while reading the e-book. E-book reader as such is not a dictionary or translator device. E-book readers would be appropriately classified in "others" as distinct from "electrical machines with translation and dictionary function". 31. We are conscious and awa....