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HP NOT ENTITLED TO DUTY EXEMPTION ON HDDS IN LAPTOPS: SC



In a setback to Hewlett Packard India Sales (P) Ltd, the Supreme
Court has held that the company cannot claim customs duty exemption
on software-loaded hard disc drives fitted in laptops imported into
the country. The judgement was delivered by a bench headed by
Justice Arijit Pasayat on an appeal by Commissioner of Customs,
Chennai, against a decision of the Customs, Excise and Service Tax
Tribunal (CESTAT). The tribunal had allowed the Indian unit of the
world's largest maker of personal computers to categorise hard disc
drives pre-loaded with operating system (software) as separate from
the laptops. While the company was paying customs duty on laptops,
it had listed such hard discs in a separate category that attracts
nil rate of duty. Tax authorities had challenged the company's
contention that it can categorise such hard discs as separate from
the imported laptops in which they were fitted. According to the
government's customs tax rules, imported laptops are taxable but
software-loaded hard discs not part of a computer or laptop can be
imported at nil rate of duty. Upholding the tax authorities' view,
the apex court said operating system such as Windows XP, which is
loaded on a hard disc, forms an integral part of a laptop and the
company is liable to pay duty at an appropriate rate. "The
department has rightly taken the value of the laptop as a unit and
has given the deduction for the value of the software. There is no
error in the computation, particularly when Hewlett Packard has
refused to give the value of the software to the adjudicating
authority," the bench said. The apex court, however, said operating
system recorded on hard disc drives and imported as packaged
software without any other apparatus will be allowed at zero rate of
duty. More PTI IB UPD 09021422 DEL "We are of the view that the
imported laptops were classifiable under (customs tariff heading)
CTH 84.71, whereas operating software recorded on hard disk drives
imported as packaged software were classifiable under CTH 85.24,"
Justice Pasayat said in the judgement. As per customs rule, items
falling under heading 84.71 are to be taxed at an appropriate rate
of duty, while those falling under heading 85.24 attract nil duty.
On this basis, the customs authorities had demanded a tax of Rs 5.9
crore from the company, which was set aside by the tribunal. "...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," the
bench said. The court also said a person who buys a laptop pays for
the entire machine as a unit and without an operating system like
Windows, the laptop cannot work – www.economictimes.com

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