Customs, Excise and Gold Tribunal - Delhi
Sprint R.P.G. India Ltd. vs Commissioner Of Customs on 14 May, 1999
Equivalent citations: 2000ECR165(TRI.-DELHI), 2000(116)ELT268(TRI-DEL)
ORDER S.S. Kang, Member (J)
1. The appellants filed this appeal against the order-in-original dated the 25-3-1996 passed by the Commissioner of Customs, Delhi.
2. Brief facts of the case are that the appellants made import of the goods described in the Bill of Entry as Global Sprint Fax (GSF) software and claimed classification under sub-heading 8524 of the Customs Tariff Act, 1975 and also claimed the benefit of Notification No. 59 /95 as applicable to the software.
3. On examination of the goods, it was found that, in fact, the goods described as GSF software was hard disk drive, which is a storage unit of automatic data processing machine. Therefore, a show cause notice was issued to classify the goods under Heading 8471.93 of the Customs Tariff. In the impugned order, the Commissioner held that the goods were classifiable under sub-heading 8471 of the Customs Tariff and allowed the benefit of Notification No. 59/95 Cus as applicable to hard disk drive.
4. Ld. Counsel, appearing on behalf of the appellants, submitted that the hard disk drive is a storage unit of automatic data processing machine, on which data can be stored and in the present case software was loaded on the hard disk drive. He submitted that the price of hard disk drive is less than the price of the software loaded on the hard disk drive. If the goods, in question, are taken to be combination of two items, the value of software being more, the goods shall be classifiable under heading of software. He submits that Note 6 to Chapter 85 provides that records, tapes and other recorded media of Heading 85.23 or 85.24 are classifiable under this heading whether or not presented with the apparatus. Hence, the goods are classifiable under Chapter 85 of the Customs Tariff. He also submits that if the hard disk drive is classifiable under Heading 84.71 of the Customs Tariff then hard disk drive and software are two different goods as the hard disk drive, having magnetic media fitted inside the disk and for functioning of the machine, software programmes are loaded on the hard disk drive. He submits that in this case the magnetic media was fitted inside the drive on which software was loaded, therefore, software and the hard disk drive are to be classifiable under different heading. For this proposition, he relied upon the decision of the Hon'ble Supreme Court in the case of PSI Data Systems Ltd. v C.C.E. reported in 1997 (89) E.L.T. 3 (S.C.). He, therefore, prays that the appeal be allowed.
5. Ld. JDR, appearing on behalf of the Revenue, submits that the appellants are admitting the fact that they had imported hard disk drive on which the software was loaded. He submits that the classification is to be decided in terms of Rules of interpretation to the tariff and in terms of heading read with relevant chapter and not on the basis of the value of the goods. He submits that hard disk drive is a peripheral device of automatic data processing machine being storage unit, therefore, are classifiable under sub-heading 8471 of the Customs Tariff. He, further, submitted that the issue before the hon'ble Supreme Court in the case of PSI Data System Ltd. (supra), relied upon by the appellants, is different. He submits that in that case the assessee was manufacturing computers and the assessee was selling the software along with computer and the hon'ble Supreme Court held that the value of software, sold with the computer, is not to be included in the assessable value of the computer. He submits that in this case, the hard disk drive was imported and the same was assessed under the Customs Tariff for the purpose of customs duty. He, therefore, prays that the appeal be allowed.
6. Heard both sides. In this case, the appellants made import of hard disk drive on which the software was loaded. It is admitted by the appellants that the hard disk drive is a storage unit of data processing machine. Note 5A and B of Chapter 84 reads as under :
"5(A) For the purposes of Heading No. 84.71, the expression "automatic data processing machines" means :
(a) Digital machines, capable of (1) storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme; (2) being freely programmed in accordance with the requirements of the user; (3) performing arithmetical computations specified by the user: and (4) executing without human intervention, processing programme which requires them to modify their execution, by logical decision during the processing run:
(b) Analogue machines capable of simulating mathematical models and comprising at least: analogue elements, control elements and programming elements;
(c) Hybrid machines consisting of either a digital machine with analogue elements or an analogue machine with digital elements.
(B) Automatic data processing machines may be in the form of systems consisting of a variable number of separately-housed units. A unit is to be regarded as being a part of the complete system, if it meets all the following conditions :
(a) it is connectable to the central processing unit either directly or through one or more other units;
(b) it is specifically designed as part of such a system (it must, in particular, unless it is a power supply unit, be able to accept or deliver data in a form (code or signals) which can be used by the system) Such units presented separately are also to be classified in Heading No. 84.71.
7. Reading of the above note clearly shows that if the units presented separately; are also clalssifiable under Heading 84.71 of Customs Tariff.
8. Therefore, the hard disk drive, which is a storage unit of data processing system, as admitted by the appellants, is classifiable under Heading 84.71 of the Customs Tariff.
9. The contention of the appellants is that when the software is loaded on the hard disk drive, it becomes software and, therefore, is classifiable under Tariff Heading 85.24 which covers records, tapes and other recorded media, sound or other similarly recorded phenomena, including matrices and masters for the production of records. Further contention of the appellants is that Note 6 to Chapter 85 provides that the records tapes and other media of Heading 85.24 remains classifiable under this heading whether or not which presented with the apparatus. We find that the appellants imported hard disk drive loaded with the software. It is not the case of the appellants that the software was assembled with the disk drive. In fact, the software was installed on the hard disk drive from the recorded software media for the purpose of executing commands to the system. In these circumstances, the software becomes an integral part of the hard disk drive. Therefore, we do not find any force in the arguments of the appellants that the goods, in question, are, in fact, software.
10. The other argument of the appellants is that the hard disk drive and software are separately classifiable. As we have noted above, when the software was installed on the hard disk drive, it becomes the part of the hard disk drive. Hence the appellants now cannot plead that both should be classified separately. The appellants relied upon the decision of the hon'ble Supreme Court decision in the case of PSI Data Systems Ltd. (supra). In that case, the assessees were manufacturing computers and they were clearing software along with computers and the revenue wants to include the value of software in the assessable value of the computer. In these circumstances, the hon'ble Supreme Court held that for the purpose of excise duty, the value of software is not be included in the value of computer. Hence, the ratio of the decision of the hon'ble Supreme Court is not applicable on the facts of the present case.
11. In view of the above discussions, we do not find any merits in the appeal. The appeal is, therefore, rejected.