Customs Exemption: 'MIMO and LTE Products' in Notification No. 24/2005 Means Products with Both Technologies, Not Either, Rules Delhi High Court - 2025-01-13

Delhi High Court Clarifies " MIMO and LTE Products" in Customs Exemption Notification, Rules in Favour of Importer

New Delhi: The Delhi High Court, in a significant ruling on customs duty exemptions, has held that the phrase "Multiple Input/Multiple Output ( MIMO ) and Long Term Evolution (LTE) Products" in an exclusion clause of a customs notification must be read conjunctively. This means the exclusion from duty exemption applies only to products possessing both MIMO technology and LTE standards, not to products with only one of these features.

The judgment, delivered on January 13, 2025, by a bench comprising Hon’ble The Acting Chief Justice Vibhu Bakhru and Hon’ble Ms. Justice Swarana Kanta Sharma , dismissed an appeal filed by the Commissioner of Customs Air Chennai-VII Commissionerate against M/s. Ingram Micro India Pvt. Ltd. The court upheld the earlier order of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), which had favoured the importer.

Case Background: The Core of the Dispute

The case revolved around the import of Wireless Access Points (WAPs) by M/s. Ingram Micro India Pvt. Ltd., a distributor of Information Technology products, between July 2014 and June 2017. These WAPs utilized MIMO technology but did not incorporate the LTE standard. Ingram Micro claimed customs duty exemption under Notification No. 24/2005-Cus., as amended by Notification No. 11/2014-Cus.

The exemption was available for all goods under Customs Tariff Heading (CTH) 8517, except for certain specified categories. The contentious exclusion was entry (iv) of Serial No. 13: "Multiple Input/Multiple Output ( MIMO ) and Long Term Evolution (LTE) Products."

The Directorate of Revenue Intelligence (DRI) initiated an investigation, leading to a Show Cause Notice (SCN) demanding differential customs duty of ₹9,10,74,505. The Revenue's stance was that " MIMO and LTE products" should be interpreted disjunctively, meaning products with either MIMO technology or LTE standards were excluded from the exemption.

The Adjudicating Authority initially ruled in favour of Ingram Micro , holding that the WAPs using only MIMO technology were eligible for exemption. This decision was upheld by the CESTAT, prompting the Revenue to appeal to the High Court.

The central question of law framed by the High Court was: "Whether the word “and” as appearing in CTI 8517 (iv) is to be read in a disjunctive manner and thus be viewed as referring to separate products?"

Arguments Presented

Revenue's Contentions: * The word "and" in the exclusion clause should be interpreted disjunctively, meaning " MIMO products or LTE products." * The term "products" appearing after "LTE" should also apply to " MIMO ." * Examples like "goods and passengers" show "and" can be used disjunctively. * Subsequent amendments in 2021, which listed " MIMO products; LTE products" separately, were clarificatory of the original intent. * Ambiguity in an exemption notification should be resolved in favour of the Revenue, citing Sun Export Corporation, Bombay v. Collector of Customs, Bombay & Anr.

Respondent's ( Ingram Micro ) Contentions: * The word "and" must be read conjunctively, meaning the exclusion applies only to products incorporating both MIMO technology and LTE standards. * The WAPs imported used only MIMO technology. * A plain, grammatical interpretation of the clause supports a conjunctive reading. * Exclusionary clauses in exemption notifications must be interpreted strictly and narrowly. * The structure of other exclusion entries in the same notification (e.g., using "products" after each distinct item or using "or" explicitly) supported their interpretation. * The WAPs are IT products covered under the Information Technology Agreement (ITA), and denying exemption would contravene international commitments. * The 2021 amendments were not retrospective.

High Court's Analysis and Findings

The High Court meticulously analyzed the language of the notification, emphasizing the principles of statutory interpretation.

Interpreting " MIMO and LTE Products": The Court observed the structure of other exclusion entries within Serial No. 13 of the notification. It noted that where the government intended to specify products individually or offer alternatives, it used terms like "products" or "equipment" after each technology/feature, or explicitly used the word "or," and employed commas for demarcation.

> "In this background, when entry (iv) of Serial No. 13 – which refers to “ MIMO and LTE Products” – is examined, we note that there is a clear absence of word ‘products’ after ‘ MIMO ’, as the same has been put after the word ‘LTE’. To put it differently, the word ‘products’ has been put after the words ‘ MIMO and LTE’, thereby indicating that “ MIMO and LTE Products” includes those products which work on both MIMO technology and LTE standard." (Para 44)

The Court rejected the Revenue's argument that " MIMO and LTE Products" could mean three categories ( MIMO only, LTE only, or both). It stated that if the intent was to include products with either technology, "the phrase ‘ MIMO or LTE Products’ could have been used."

Plain Meaning and Taxing Statutes: The judgment reiterated the settled principle that taxing statutes must be interpreted based on what is clearly expressed, without importing provisions or supplying deficiencies.

> Citing Union of India & Ors. v. Ind-Swift Laboratories Limited , the Court affirmed: "A taxing statute must be interpreted in the light of what is clearly expressed... The court must look squarely at the words of the statute and interpret them." (Para 49) > > Further, referencing Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Co and Ors. : "The well settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the Courts are bound to give effect to the said meaning irrespective of consequences." (Para 50)

On Subsequent "Clarificatory" Amendments: The Court addressed the Revenue's reliance on 2021 amendments that changed " MIMO and LTE Products" to "(i) MIMO products; (ii) LTE products." It held that these amendments, though clarificatory, apply prospectively from their date of enactment (02.02.2021) and do not retroactively bind the interpretation of the pre-amendment entry.

> "The fact that a clarification is needed to be brought about in the subject entry by the Finance Act, 2021 would point out towards the inherent ambiguity experienced in its interpretation and application which prompted and necessitated the subject amendment and clarification." (Para 57) > > "The absence of word ‘and’ between the word ‘ MIMO ’ and ‘LTE’, as it existed prior to the amendment brought as clarification, rather speaks and explains by its absence, about the presence of intention to read ‘ MIMO ’ and ‘LTE’ as conjunctive and not disjunctive." (Para 60)

Final Decision and Implications

The High Court concluded that the word "and" in the specific exclusion clause must be read conjunctively.

> "In light of the above, we hold that the phrase “ MIMO and LTE Products” in Serial No. 13(iv) of the amended Notification No. 24/2005 applies solely to products combining MIMO technology and LTE standards. The exclusion clause cannot be stretched to encompass products featuring either one of the two technologies. Accordingly, the WAPs imported by the respondent, which employ MIMO technology but not the LTE standards, are entitled to the exemption from Basic Customs Duty." (Para 61)

The Court dismissed the Revenue's appeal, upholding the CESTAT's order and answering the question of law in favour of the assessee, M/s. Ingram Micro India Pvt. Ltd. This decision provides crucial clarity on the interpretation of conjunctions like "and" in exemption notifications and underscores the importance of precise drafting by legislative authorities. It reinforces the principle that in the absence of explicit disjunctive language or clear legislative intent to the contrary, "and" typically signifies a joint requirement.