Delhi High Court: Wireless Access Points Using Only MIMO Technology Eligible for Duty Exemption— “‘MIMO and LTE Products’ Must Be Read Conjunctively, Not Disjunctively”

Court’s Decision:

The Delhi High Court dismissed the Revenue’s appeal, ruling in favor of the respondent (Ingram Micro). The court upheld the decision of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), interpreting the phrase “MIMO and LTE Products” in Serial No. 13(iv) of Notification No. 24/2005 as referring only to products that use both MIMO technology and LTE standards together. This means that Wireless Access Points (WAPs) imported by the respondent, which only utilized MIMO technology and did not support LTE, were entitled to the exemption from Basic Customs Duty (BCD) under the relevant notification.

The court rejected the Revenue’s argument that the word “and” in the notification should be read disjunctively as “or”, which would exclude any product using either MIMO technology or LTE from the exemption.

Facts:

1. Respondent’s Operations:
   • The respondent, Ingram Micro India Pvt. Ltd., is a distributor of Information Technology products. They imported Wireless Access Points (WAPs) between July 2014 and June 2017, which used MIMO (Multiple Input/Multiple Output) technology. These products were classified under Customs Tariff Heading (CTH) 8517, specifically under CTI 8517 62 90.
2. Notification No. 24/2005-Cus.:
   • Notification No. 24/2005 exempted certain goods, including products under CTH 8517, from the Basic Customs Duty (BCD). However, the notification was amended by Notification No. 11/2014-Cus., which excluded certain categories of products from this exemption, including products with “MIMO and LTE” technologies.
3. Claim for Exemption:
   • The respondent claimed the exemption for their imported WAPs, arguing that they utilized only MIMO technology and did not incorporate LTE standards. Therefore, they believed that they were entitled to the exemption under the amended notification.
4. Revenue’s Investigation:
   • The Directorate of Revenue Intelligence (DRI) initiated an investigation in 2017, alleging that the respondent’s WAPs were ineligible for the claimed exemption. The Revenue issued a Show Cause Notice (SCN) for the recovery of differential customs duties of approximately ₹9.10 crore, along with penalties and interest.
5. Adjudicating Authority’s Ruling:
   • The Adjudicating Authority ruled in favor of the respondent, holding that “MIMO and LTE Products” referred to products that used both MIMO technology and LTE standards together, and therefore, WAPs using only MIMO were entitled to the exemption.
6. CESTAT’s Decision:
   • The Revenue filed an appeal before CESTAT, which upheld the Adjudicating Authority’s order and dismissed the appeal, affirming that the phrase “MIMO and LTE Products” referred specifically to products incorporating both technologies together.

Issues:

1. Interpretation of “MIMO and LTE Products”:
   • Whether the phrase “MIMO and LTE Products” in Serial No. 13(iv) of Notification No. 24/2005 should be interpreted conjunctively (i.e., referring to products using both technologies) or disjunctively (i.e., referring to products using either technology).
2. Eligibility for Exemption:
   • Whether Wireless Access Points (WAPs) that use only MIMO technology but not LTE standards are eligible for the Basic Customs Duty exemption.

Petitioner’s (Revenue’s) Arguments:

1. Disjunctive Interpretation of “And”:
   • The Revenue argued that the word “and” in the phrase “MIMO and LTE Products” should be read disjunctively, meaning that the exclusion applies to products that use either MIMO technology or LTE standards, not necessarily both.
2. Grammatical Interpretation of “And”:
   • The Revenue contended that in certain contexts, the word “and” is interpreted disjunctively (e.g., “goods and passengers” or “medicinal and toiletry”). They argued that the phrase “MIMO and LTE Products” should include both types of products, not just those that use both MIMO and LTE together.
3. Consistency of the Revenue’s Stance:
   • The Revenue emphasized that the wording of Serial No. 13(iv) should be interpreted in its natural and ordinary sense, where MIMO and LTE are separate categories of products.

Respondent’s (Assessee’s) Arguments:

1. Conjunctive Reading of “And”:
   • The respondent argued that the word “and” in Serial No. 13(iv) must be interpreted conjunctively, meaning it refers only to products that use both MIMO technology and LTE standards together.
2. Legal Precedent:
   • The respondent pointed out that the Adjudicating Authority and CESTAT had ruled in favor of the same interpretation in previous cases involving similar Wireless Access Points.
3. Clarity of the Notification’s Wording:
   • The respondent emphasized that the wording of the notification is clear and unambiguous, and that attempting to read “and” as “or” would distort the legislative intent.
4. International Trade Commitments:
   • The respondent also argued that the Information Technology Agreement (ITA), under which India is a signatory, mandates exemption from customs duties for certain IT products, including WAPs. Denying the exemption would contravene India’s international obligations.

Analysis of the Law:

1. Interpretation of Exemption Notifications:
   • Exemption notifications must be interpreted strictly, and cannot be extended beyond their plain and unambiguous language.
2. Reading the Word “And”:
   • The court observed that if the intention was to exclude products with either MIMO or LTE, the phrase would have used “or” instead of “and”. The use of “and” implies conjunction, meaning both technologies should be present.
3. Principles of Statutory Interpretation:
   • The court applied the principle that when the words of a statute or notification are clear and unambiguous, they must be interpreted according to their plain meaning without adding or changing the language. The court noted that if the intention was to include MIMO or LTE products separately, the notification would have been worded differently.

Court’s Reasoning:

1. The word “and” in the phrase “MIMO and LTE Products” is clearly conjunctive, referring to products that use both MIMO technology and LTE standard together.
2. The Revenue’s interpretation of the word “and” as “or” was rejected because it would distort the plain meaning of the notification. The court held that reading “and” as “or” would create ambiguity and would go against the clear intent of the notification.
3. The court observed that previous notifications (including Serial No. 13 entries) clearly distinguished between products that used “or” to indicate alternatives, and those that used “and” to indicate a requirement for both characteristics.
4. The court also emphasized that the 2021 amendment to the notification, which changed the phrase to “MIMO products” and “LTE products”, was clarificatory and therefore does not affect the interpretation of the original notification for the period in question.

Conclusion:

• The Delhi High Court dismissed the Revenue’s appeal and upheld the decision of the CESTAT, confirming that Wireless Access Points (WAPs) using only MIMO technology, but not LTE, are entitled to the Basic Customs Duty exemption. The court ruled that “MIMO and LTE Products” must be read conjunctively, and thus only products incorporating both MIMO and LTE technologies are excluded from the exemption.

Implications:

• This judgment clarifies the interpretation of tax exemption notifications, reinforcing that such notifications should be interpreted based on their plain language.
• It also supports consistency with international trade commitments and provides certainty for businesses importing MIMO-based products that do not use LTE.

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