TMI Blog2018 (9) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... ds ‘translation’ and ‘dictionary’ functions qualifies the words ‘electrical machines’ with the mandate that translation or dictionary function should be the primary and relevant function of the said machine for which they are purchased and used. The exemption is restricted to machines which translate or perform dictionary functions and not to other machines that primarily perform some other function. The word “with” is equally capable of referring to the dominant or the main purpose and not the ancillary or the secondary function - the restrictive interpretation would be appropriate and inconsonance with principles of interpretation applicable to tariff items. Broad and wide ambit propounded by the respondent unintelligibly articulates a rather far-fetched interpretation. 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. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent Through: Mr. L. Badri Narayanan, Mr. Karan Sachdev Ms. Saumya Dubey, Advocates. SANJIV KHANNA, J. The Principal Commissioner of Customs, Air Cargo Complex (Import) and the Union of India, through Ministry of Finance, have filed the present writ petition for setting aside and quashing the Order No. AAR/CUS/01/2015 dated 15th May, 2015 passed by the Authority for Advance Rulings (the AAR, for short). 2. The impugned order holds that Kindle e-reading devices imported by M/s Amazon Seller Services Private Limited, the respondent before us and the applicant before the AAR, being electrical machines with translation or dictionary functions were exempt from basic customs duty vide serial No. 26 of the Exemption Notification No. 25/2005-CUS dated 1st March, 2005 as amended by notification No. 133/2006-CUSTOMS dated 30th December, 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. wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o sides are ad idem that Kindle ereading devices would be covered under the residuary tariff item CHA 8543 89/8543 7099, i.e., others , under the Chapter 85 heading electrical and electronic machinery and equipment . 8. In order to appreciate and understand the contention raised on interpretation of exemption notification, we would like to quote relevant portion from the notification dated 30th December, 2006 which reads :- G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts following the goods of the description specified in column (3) of the Table below and falling within the heading, sub-heading or tariff item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Kindle, Kindle Touch, etc. These various models of Kindle e-book reader are hereinafter referred to as Kindle Devices . Applicant proposes to import these e-book readers for reselling the same to distributors and other wholesale dealers who will ultimately sell these products to the end users or individual customers. 3. The Kindle Devices are electronic book readers which allows a (sic allows) user to (sic user to) read e-books. The Kindle devices simulate the experience of reading a physical book to a reader through a patented e-link technology and e-ink display screen. Readers can purchase/download e-books, newspapers and magazines onto (sic magazine) the Kindle Devices from the Amazon Kindle web store. The details of the product description and specification are provided as Annexure-IV. 4. The following are the features of the Kindle Devices: (a) Screen size of 6 - 10 (depending upon model) with e-ink display screen; (b) Weight: 5.98 18.9 Ounces (depending on model); (c) 5-Way Controller and/or Touch Capability; (d) Battery Life with wireless switched-off: 1 month or 2 months (depending on model) (e) Storage: 2 GB/4GB on device to store ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt dictionary displays the meaning of the word at the bottom of the page. The dictionary is stored on the device and there is no requirement to connect to the internet for accessing the dictionary. Therefore, the Kindle Devices contain an in-built dictionary. 12. The respondent had accepted in the application before the AAR that Kindle devices were primarily e-book readers, albeit also have inbuilt dictionary in the device, which the reader can use to understand meaning of the selected word. We would observe that no false or misleading representation regarding nature and use/function of the e book device was made. Nature and functions performed by a Kindle device are not under challenge and a matter of dispute before us. 13. Given the nature of dispute, we had called upon the petitioner to produce the original file under which the exemption notification was processed and issued. The respondent was also given liberty to file copy of the Information Technology Agreement as it was argued that the exemption Notification No. 25/2005-Cus dated 1st March, 2005 was issued pursuant to and in terms of the Information Technology Agreement to which India is a signatory. 14. Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as such and wishes of such readers. Subsequently, vide Budget of 2016-17 this exemption for e-readers was withdrawn and as a result e-readers were to attract basic customs duty of 7.5%. It is also the case of the petitioner that the products covered under the ITA-1 dated 13th December, 1996 to which India is signatory, would not cover modern information technology products. 16. We would note that for decision of the present case, we have to adjudicate and decide whether e-reading devices like Amazon kindle devices would fall within the ambit of electrical machines with translation or dictionary functions which were granted and allowed exemption. Suffice, for the present consideration and decision, is to notice the contention of the petitioner that it is the primary or the main function and not ancillary or secondary function, which would entitle a product to claim exemption under the exemption notification covering electrical machines with translation or dictionary function. The respondent contests the said submission, and rely on the word with with reference to dictionary function, to urge that no distinction could be drawn between primary and ancillary function. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponding to the principal function of the product, electronic book readers would be classifiable under the residuary sub-head, i.e., others and not under the CN code electrical machines with translation or dictionary functions . 18. However, there is contra ruling by the United States International Trade Commission in the case of Thomson Multimedia, Inc. regarding the e-book reader RCA REB 1100 and 1200 Amazon, HQ 9647 79 dated 27th February, 2002, wherein the electronic e-book readers were classified under the sub-heading 8543.89.92 electrical machines with translation or dictionary functions . Referring to comparison with sub-heading 8543 89 96, i.e., others , which was described as the basket provision, it was observed that use of the word with in the sub-heading, 8543 89 92 indicates combination, accomplishment, presence or addition or omissions inclusive of all and, therefore, this sub-heading did not require that the dictionary should serve as the principal function of the electronic machines. Rather, the word with indicates mere presence of dictionary function, that was all that was required. 19. To grapple with with and explain the expression electrical m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rical/electronic machines preloaded with translation or dictionary software with the exclusive or primary function of translator or dictionary. 21. We now turn to the connecting word with and interpret the same. Dictionary meaning of the word with in Webster s Comprehensive Dictionary is in the company of; as a member or associate of . The word with is also used, by means of or aid of, as is apparent when we use the word with in the sentence; to write with a pencil. Therefore, the word with can in the context mean, adding or having a material or quality or endowed with the particular character. In Oxford Advanced Learners Dictionary the word with has been defined as having or carrying, which in the present context would mean an electrical machine which carries, i.e., works and functions as a translator or has a dictionary function. The Dictionary also states that the word with may have reference to having possessing or showing a particular thing or quality or a feeling. The word with as per Words and Phrases, Permanent Edition, Volume 46 published by West Publishing Company, denotes or expresses some situation or relation of nearness, proximity, contiguity or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals [Mangalore Chemicals and Fertilisers Ltd. v. CCT, 1992 Supp (1) SCC 21] and other decisions viz. each such exception/exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision is found applicable to him, full effect must be given to it. As observed by a Constitution Bench of this Court in Hansraj Gordhandas v. CCE and Customs [Hansraj Gordhandas v. CCE and Customs, AIR 1970 SC 755 : (1969) 2 SCR 253] , that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. 30. In Novopan India Ltd. [1994 Supp (3) SCC 606] this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. CCE and Customs [AIR 1970 SC 755 : (1969) 2 SCR 253] held that (Novopan India Ltd. case [1994 Supp (3) SCC 606] , SCC p. 614, para 16) 16. such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification i.e. by the plain terms of the exemption. 31. Of course, some o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, this distinction cannot be ignored. To sum up, the Supreme Court in M/s Dilip Kumar and Company (supra) had observed:- 60. To sum up, we answer the reference holding as under- Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands over-ruled. 27. In the present case, the exemption notification was to allow import of electrical machines with translation or dictionary functions at nil rate of duty. In whatever manner we interpret the said words the interpretation should not be irrational and arbitrary. Chapter 85 deals with the electrical machinery and equipment and parts thereof. The electrical machine apparatus are classified under tari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption was granted to devices with primary and relevant function to act as translator or dictionary. The electronic dictionary provided is pre-installed in the Kindle device. Downloading of additional dictionaries though not stated in the application before the AAR could be optional, as in case of several electronic devices. E-reading devices are designed, purchased and used for reading text and not as a dictionary or translator. 29. Considerable emphasis was laid by the respondent on the difference between the language and the use of the word with in the exemption Notification No. 25/2005-Cus at Serial No. 26 electrical machines with translation or dictionary functions and with reference to other items wherein the word for and not with has been used. According to us, this would not make any difference when we apply the principles of law as expounded by the Constitution Bench of the Supreme Court in the case of M/s Dilip Kumar and Company (supra). As noticed above, the word with is equally capable of referring to the dominant or the main purpose and not the ancillary or the secondary function. For reasons stated in paragraphs 27 and 28 above, the restrictive int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be allowed holding that Kindle devices are not covered under the exemption notification as they were/are not electrical machines with translation or dictionary functions . 32. The last issue, which arises for consideration, is whether our judgment should be made applicable with effect from the date on which the writ petition was filed or should have retrospective effect i.e. from the date of filing of the application by the Respondent before the AAR. Judgment and decisions by the Courts interpret and declare the law as it exists and they do not create and enact any new law. In this sense, judgments of the Courts would be always retrospective, unless for special reasons, the judgment is given prospective effect [see Assistant Commissioner, Income Tax, Rajkot Vs. Saurashtra Kutch Stock Exchange Limited, (2008) 14 SCC 171]. In the context of the present case, we would notice that there has been considerable delay and laches on the part of the Union of India in challenging the order of the AAR dated 15th May, 2015, as the present writ petition was filed only on 11th May, 2017. The order dated 15th May, 2015 had its consequences. The respondent could have verily believed th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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