Customs, Excise and Gold Tribunal - Bangalore
Commissioner Of C. Ex., Bangalore vs Wipro Ltd. (Infotech Group) on 1 February, 2002
Equivalent citations: 2002(80)ECC609, 2002(141)ELT527(TRI-BANG)
ORDER S.S. Sekhon, Member (T)
1. M/s. Wipro Ltd. (Infotech Group), formerly called M/s. Wipro Information Technology Ltd. No. 146, Belagola Industrial Area, Mysore-670 016. (hereinafter in this order referred to as "assessee") holders of Central Excise R.C. No. A-002/92 are manufacturers of excisable goods computer and computer system all sorts falling under Chapter 84 of the CETA, 1985. They filed 21 separate refund claims totally amounting to Rs. 22,24,853.57 for the period from 29-3-87 - 30-9-87 on the ground that they had paid the said duties 'under protest' and that they had paid the duty on bought out printers, drives in excess of one number and also on bought out (indigenous/imported) items and that those items were not integral part of the computer and that they were only accessories which had not been manufactured by them. The assessee had further contended that the price of the printers and the price of the drives in excess of one number has to be reduced from the gross sale price of the computer to arrive at the assessable value of the computers.
2. They were filling price lists both in part I and part II from time to time. Part II price lists were basically related to the purchase order/contracts entered into with customers for the supply of various items/computer systems. In the price lists the assessee were not showing the details regarding the peripheral items such as printers, drives, etc. The Assistant Commissioner order was that the price lists should include the value of all the additional peripheral items in the assessable value of the computer system supplied. The Collector (Appeals) vide his Order-in-Appeal No 327/885, dt. 30-11-88 set aside the order of the Assistant Commissioner and remanded the case for de novo consideration.
3. The Assistant Commissioner of Central Excise, Mysore-I in his de novo Order No. 51/89, dt. 28-4-89/16-6-89 held that -
(a) If there was a single contract for supply of computer including peripherals other hardware and software, the total value of the computer including that of hardware, software and peripherals have to be assessed to duty, irrespective of the fact whether the software, hardware or peripherals are supplied together or in a separate lot and irrespective of the fact whether single invoice was made for the hardware, software and peripherals or a separate invoice was made in respect of each of the said items.
(b) If there was separate contract having no nexus to sale of computer only but was for supply of software alone, the goods through the medium of which software were delivered had to be classified and assessed on their own merit under appropriate Tariff heading unless otherwise exempted from duty and assessee had to file a separate classification list.
(c) If brought out duty paid peripherals, hardware and additional units in which duty had been taken were sold as such without carrying on any manufacturing activity or alternation and no nexus to sale of computer, it would attract no further duty. For the purpose, the assessee had to submit full details and also declarations to the effect that it was purely a trading activity having no nexus to sale of computers.
(d) If the hardware, peripherals, cable assembly, software and parts was manufactured and cleared separately and not as a system in knocked down or semi knocked down condition, then they had to be classified separately under appropriate heading and duty shall be assessed accordingly. For this purpose separate classification list were to be filed and he ordered that all the price lists should be approved accordingly.
4. Based on the above said OIO No. 51/89, dt. 28-4-89 the Superintendent of Central Excise, Range "A" finalised pending RT 12 assessment for the period 1-3-87 to 31-3-88 and demanded a differential duty of Rs. 1,55,45,266.55 (BED) and Rs. 1,14,658.79 (SED) and issued a detailed assessment memorandum vide O.C. No 2359/89, dt. 22-6-89. The Commissioner (Appeals) vide in his OIA No. 78/94, dt. 18-3-94 upheld the order of the Assistant Commissioner. Aggrieved by said order the assessee filed an appeal before CEGAT, Chennai. They vide Order Nos. 1830-1832/97, dt. 17-7-97 observed that the inclusion of value of software in the cost of computers had to be examined in the light of Supreme Court decision in the case of M/s PSI Data Systems; Regarding the inclusion of value of peripherals, the Tribunal held that the position had to be examined taking into consideration Chapter Note 5(a) and 5(b) of the CETA, 1985 read with the description of Tariff item 8471. The Tribunal also observed that a view will have to be taken whether the goods cleared can be considered to be one entity for the purpose of levy in terms of Chapter Note 5(b) and 5(a); With respect to Modvat credit the Tribunal ruled that in case it is held by the Adjudicating Authority that the value of the peripherals etc., would be required to be included for arriving at the assessable value of the computer systems cleared as one entity then the assessees would be entitled to the Modvat credit in respect of the bought out items subject to the satisfaction of other requirements of law and remanded the case for de novo examination to the Original Authority.
5. Duty assessments for the period April, 1988 to March, 1991 were finalised vide OIO No. 50/96, dt. 27-2-96/29-3-96. As a result of finalisation of provisional assessment an amount of Rs. 4,36,19,004/- was demanded. Against the above cited decision the assessee filed a writ petition before the Hon'ble High Court of Karnataka in Writ Petition No. 29909/96 Hon'ble High Court disposed of their writ petition granting stay of recovery of demand till appeal filed by the assessee was decided by the Commissioner (Appeals) subject to the assessee paid an amount of Rs. 1,00,00,000/- on 28-11-96. On an appeal filed by the assessee the Commissioner (Appeals) in OIA No. 374/98-C.E., dt. 29-6-98 observed that an identical issue in their own case for an earlier period has since been disposed of by the CEGAT vide its Order No. 1830 to 1832/97, dt. 17-7-97 by remanding the case for de novo adjudication. The Commissioner (Appeals) observed that the present appeal against OIO No. 50/96, dt. 27-2-96 involved identical issue of the same assessee and remanded the case for de novo examination in the light of CEGAT F.O. No. 1830 to 1832/97, dt. 17-7-97 and set aside the OIO No. 50/96, dt. 27-2-96/29-3-96.
6. Both the above de novo orders were taken up for common adjudication by Assistant Commissioner of Central Excise, Mysore-I vide OIO No. 219/98 BCEX. dt. 7/9-12-98, who after following necessary adjudication proceedings, demanded a total excise duty of Rs. 5,61,10,894.66 for a period March, 1986 to March, 1991, on determining the includibility of value of peripheral units, in the assessable value of the automatic data processing system falling under Chapter sub-heading 8471 under Section 11A while dropping the demand of Rs. 31,68,034.68 towards tangible software cleared for the period March, 1987 to March, 1988 based on the case of PSI Data Systems v. Collector of Central Excise, reported in 1997 (89) E.L.T. 3 (S.C.); he held -
(i) The peripheral units whether bought out or not cleared along with the computer under a common purchase order/contract constitute an integral part of the automatic data processing system in terms of Chapter Note 5(b) read with Chapter Note 5(a) and Heading 8471 and the price lists already approved for the relevant period after including the value of such peripherals units in the value of computer systems are in order.
(ii) The automatic data processing systems cleared by the assessee though having variable units, constitutes one entity and hence the value of all the constituent units should be included in the assessable value of such system irrespective of the fact whether such constituent units are bought out or not, whether they are inter-connected or not (as long as they are connectable) whether they are packed separately or not at the time of clearance, whether the prices are mentioned separately for each unit in the purchase order/contract and whether the invoices are raised separately or not and whether the assessee have failed to follow certain procedures in this regard or not.
(iii) No Modvat credit has been allowed to the assessee though it is admissible as they have not produced the duty paid documents with the details of credit admissible which is a precondition to allow Modvat credit based on the Tribunal order.
7. Aggrieved by this order, the assessee preferred an appeal before Commissioner (Appeals), who vide his OIA No. 1111/99, dt. 23-10-99 has set aside the OIO of Assistant Commissioner, Mysore-1 and allowed the as-sessee's appeal holding that the value of bought out peripherals is not includible in the assessable value of computers. Reliance was place by him on the decisions of Hon'ble Supreme Court in the case of (i) ORG Systems v. CCE, 1998 (102) E.L.T. 3 (S.C.) wherein the Supreme Court considered their earlier judgment in the case of M/s. PSI Data Systems [1987 (89) E.L.T. 3 (S.C.)]. (ii) Appellants own Order No. 3274 to 3282/97, dt. 10-12-97 [1998 (99) E.L.T. 343 (Tribunal)], (iii) West Regional Bench in the case of M/s. Rolta India Ltd., P.O. No. 3395 to 3398/97-WZB, dt. 18-8-97. (iv) Eureka Forbes Ltd. v. CCE, Meerut, [1996 (83) E.L.T. 334 (Tribunal)].
8. Aggrieved by the said OIA, the present appeal was filed before CEGAT SZB, Chennai on the following grounds, as Commissioner (Appeals) has -
(a) erred in relying upon the case of PSI Data Systems Ltd. v. CCE, 1997 (89) E.L.T. 3 that decision is applicable only to soft-
ware in the form of Discs, Floppies & CD Roms and does not relate to the extra hardware such as disc drives Printers, Digitisers, Plotters which are parts of the computers supplied by the assessee and to which the issue relates.
(b) failed to appreciate that the Delivery Challan/invoices were prepared separately for the CPU/Systems (without Printers/ Digitisers etc.) which were cleared on payment of duty and, items like Printers/Digitisers, Plotters, Disc drives etc., were cleared under the guise of bought out items with payment of duty with an intention to under value the Computer System.
(c) erred in referring to the decision of (i) ORG Systems v. CCE, Vadodara -1998 (102) E.L.T. 3 (S.C.) and M/s. Rolta India Ltd. v. CCE, Mjtmbai-II (Both the judgments have held that peripherals are accessories) inasmuch as computer peripherals like Disc drives etc. when supplied along with the computer system should be considered as parts of the computer as they are essential for the operation of the system, (ii) The bought out items such as hard disc drive etc. supplied with the Computer System are assembled at the customer's site. Therefore these items cannot be considered as accessories. These items have to be necessarily considered as parts. This clearly proves that the said items are essentially required parts of the Computer System, (iii) In the case of Koron Business Systems Ltd., 1992 (58) E.L.T. 48 (Bombay, the Hon'ble Divisional Bench of the High Court of Bombay held that the value of bought out items has to be included. In that case the petitioners were manufacturers of document copier.
(d) CEGAT in another decision in the case of the same assessee bearing Final Order No. 1830 to 1832/97 has held that Chapter Notes 5(a) and 5(b) read with description of Heading 8472 have to be taken into consideration before it can be concluded that what was cleared was one whole system. Verification of the sample contracts/purchase order reveals that the order is placed for one Computer System consisting of various hardware including more than one item. The entire system has been referred to as one unit and in terms of Chapter Notes 5(a) & 5(b) of Chapter 84 they are classifiable as one system only.
(e) CEGAT, Mumbai in the case of CMS Computers (P) Ltd. v. CCE, Mumbai reported in 1999 (108) E.L.T. 525 (Tribunal) = 1998 (29) R.L.T. 915 (T) has held that printers and monitors are not parts of computer but only accessories. However the department has not accepted the said decision and a Civil Appeal has been filed before the Supreme Court [2000 (118) E.L.T. A156.] against the said CEGAT Order No. C-II/2727/98 WZB dt. 24-11-98 (Ministry's F. No. 390/15/99-JC dt. 8-4-99).
(f) In the assessee's own case the department has filed a Civil Appeal before Hon'ble Supreme Court against CEGAT, Chennai's P.O. No. 3274 to 3282/97, dt. 10-12-97 [1998 (99) E.L.T. 343 (Tribunal)] (Misc. Order No. 416 to 424/99, dt. 9-4-99 vide C. No. IV/3/344/89 (Appeals), dt 11-6-99).
9. We have heard both sides, considered the matter and find -
(a) that civil appeal has been filed against the decision in the case of CMS Computers (P) Ltd. v. CCE, Mumbai reported in 1999 (108) E.L.T. 525 (Tribunal) = 1998 (29) RLT 915 (Tribunal) and against CEGAT decision in the appellants' own case (P.O. No. 3274 to 3282/97, dt. 10-12-97) [1998 (99) E.L.T. 343 (Tribunal)] and the said order had not been accepted, cannot be grounds for Revenue's appeal. The Commissioner is as much bound by the CEGAT decisions, as any other authority subordinate to CEGAT. If appeals have been filed in the Supreme Court, the same cannot be a ground till a stay order of the said decision of the CEGAT is obtained. No such stay orders have been produced before us. The appellants, on the other hand, have produced a copy of report from Excise Law Times - 1999 (114) E.L.T. A231 which confirms that the Departmental Appeal before the Hon'ble Supreme Court against the Order of the CEGAT vide Order No. 3274 to 3282/97-SZB, dated 8-10-99 (reported in 1998 (99) E.L.T, 343 (T) in Appeal No. D. No. 10728/99 stands dismissed both on merits and on grounds of delay. In this view, grounds (e) & (f) in this appeal do not survive. The confirmation of the Chennai Bench decision of Tribunal would bind the Department, to the findings of the Tribunal arrived at in their Order No. 3274 to 3282/97 [1998 (99) E.L.T. 343 (Tribunal)] which is as follows -
"The hard disc drive it is seen, from the order of the lower appellate authority, was supplied as a spare. The plea of the Revenue is that the value of disc drive should be taken into consideration for the purpose of duty in respect of the computer inasmuch as the same was being supplied as a part of the single contract We observe that it is not the manner in which the product is contracted for which would be always relevant for the purpose of assessment. What has to be seen is whether the item being assessed is an identifiable item as understood in the trade for assessment purpose and whether that item in terms of the contract can be taken to be forming part of the main item. In the present case, it is not the plea of the Revenue that the disc drive supplied formed part of the computer. But the pleas is that it will be used as part of the computer subsequently. Disc drive is already installed in the computer. We, therefore, hold that the lower appellate authority was right in allowing the exclusion of the cost of disc drive for the purpose of arriving at the assessable value of the computer. The ratio of the decision of the Hon'ble Supreme Court in the case of PSI Data Systems Ltd. supports the view taken by the lower appellate authority."
and in that view of the matter, the present items will also have to be viewed and understood not as parts but accessories.
(b) The Commissioner (Appeals), in this case has correctly relied upon the decision as mentioned in his order, to come a conclusion that the impugned items herein were peripherals and accessories and not essential parts. The findings on Chapter Note 5 of Chapter 84 of CETA, 1985, cannot be assailed by any interpretation, since this note was not applicable during the disputed period. We find, therfore, no infirmity in the findings arrived at the learned Commissioner (Appeals) on peripherals, bought out and supplied along with computers on common purchase order/contracts to constituent an integral part of the computer system under Excise Law to merit duty under CETA, 1985.
(c) We find that the present appeal is, therefore, devoid of any grounds on merits as regards constituent an integral part of computer peripherals (accessories thereon). Thus the appeal therefore cannot survive.
10. In view of our findings, the Revenue's appeal is hereby dismissed.