Customs, Excise and Gold Tribunal - Delhi
Tata Unisys Ltd. vs Collector Of Central Excise on 30 June, 1994
Equivalent citations: 1994(73)ELT96(TRI-DEL)
ORDER Lajja Ram, Member (T)
1. M/s. Tata Unisys Ltd. have filed the present appeal being aggrieved with the Order-in-Appeal dated 11-3-1993, passed by the Collector of Central Excise (Appeals), Bombay.
2. The appellants were engaged in the manufacture of computer systems, falling under Heading No. 8471.00 of the schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the Tariff). They used to enter into contracts with their customers for supply of hardware, software and support requirements, making the computer configuration, as per requirements of their customers. For excise purposes they did not include the value of software to arrive at the assessable value of the computer system, and paid central excise duty only on that part of the value which they ascribed to the hardware. In the show-cause notice dt. 2-8-1991 it was alleged that the value of the software was includible for the purposes of arriving at the duty liability on the computer system. It was observed therein that their software was very much essential for the working of their computer; hardware without software will not make the computer workable, and that the total value of software plus hardware will form the assessable value of the computer system. The Asstt. Collector of Central Excise, Panaji, Goa, in his Order-in-Original dated 27-9-1991 observed that as their softwares were bought out items, were classifiable separately/independently, and enjoyed exemption from central excise duty, the value of the software could not be clubbed for arriving at the assessable value of computer system. On appeal the Collector of Central Excise (Appeals), Bombay under his Order-in-Appeal dated 11-3-1993 came to a finding that the software supplied by the assessee as per their contracts, was an essential component for the computer system to function, and the software and the hardware were cleared as one functional unit/system as per contracts. He held that the value of the computer system would include the value of software also.
3. The appellant filed a writ petition in the Bombay High Court, Goa Bench, and the Hon. High Court ordered as under :
"The Customs, Excise & Gold (Control) Appellate Tribunal to dispose of the appeal of the petitioners as early as possible and preferably before 31st December, 1993. In the meantime the petitioners to pay levy on the goods cleared by giving bank guarantee to the extent of 25 per cent and bond in respect of the remaining 75 per cent in the difference between the levy challenged and demanded by respondents, in so far as software is concerned. In the event the petitioners fails in their appeal the petitioners to make good the entire levy along with interest @ 12% within four weeks from the date of the order, subject to any statutory remedy."
4. The matter was posted for hearing on 3-12-1993, but had to be adjourned on the request of the learned Sr. Advocate appearing for the appellants. The learned Sr. Advocate had stated that for the disposal of the appeal certain documents which have not been filed by them, are essential, and that he needed time for filing of those documents. The matter was adjourned to 13th January, 1994 when again the matter had to be adjourned as it could not have been concluded within the time available. The matter was accordingly posted for hearing on 4-5-1994 when Shri A.M. Setalvad, Sr. Advocate with Shri F. Sarobjee, Advocate, and Ms. P. Bhandari, appeared for the appellants. Shri Prabhat Kumar, SDR represented the respondent.
5. Shri A.M. Setalvad, the learned Sr. Advocate referred to the relevant tariff entries and the Chapter notes, and stated that under the new tariff, the value of computer hardware could not include the value of software. In the old Central Excise Tariff there was no definition of the computer, while there is such a definition in the new Central Excise Tariff. Under the new Central Excise Tariff the software is classifiable separately and independently. Their sales were on contract basis and they have filed their price lists in Part-II proforma. He referred to the various categories of their contracts with the buyers and stated that in some cases there was a composite contract with a composite price, covering both hardware and software, while in some cases there were two distinct contracts - one for hardware and the other for software. There were also single contracts showing separately the prices of software and hardware. In some cases they had only supplied hardware. Sometimes the list of software was annexed with the contract, while at other times no such list was annexed. Relying upon the Supreme Court decision in the Sales Tax case - State of Uttar Pradesh v. Kores (India) Ltd. - AIR 1977 SC 132, the learned Sr. Advocate pleaded that the software, as typewriter ribbon in that case, was an accessory and not a part of the computer system. In that case the Hon. Supreme Court had stated that just as aviation petrol is not a part of the aeroplane nor diesel is a part of a bus, in the same way ribbon is not a part of the typewriter, though it may not be possible to type out any matter without it. The learned Sr. Advocate- however, admitted that without the systems software the computer will not work, and that the computer was useless without the systems software. The learned Sr. Advocate summarised that (1) the software could not be taken as part of the computer, (2) earlier decisions of the Tribunal in the cases of Sunray Computers, Wipro and PSI Data Systems, were not applicable to the present case, (3) the exemption notification should be given effect to, and (4) the appellants do not make software. He invited attention to the Chapter Notes in the new Central Excise Tariff, and referred to the following decisions :
(1) Saurashtra Chemicals, Porbander v. Collector of Customs, Bombay -1986 (23) E.L.T. 283 (Trib.) - Section Notes and Chapter Notes were part of statutory tariff, and the heading to be interpreted and applied in the light of the Section Notes and Chapter Notes.
(2) Collector of Central Excise v. Metrowood Engineering 'Works -1989 (43) E.L.T. 660 (Trib.) - Chapter Notes were relevant for classification.
(3) Subhash Photographies v. UOI -1993 (66) E.L.T. 3 (SC) - Chapter Notes could be relied upon for interpretation of law.
(4) Bedi & Bedi (P) Ltd. v. Collector of Central Excise, Bangalore -1987 (32) E.L.T. 169 (Trib.) - if bought-out motor is not fitted on machine, cost of same is to be deleted from assessable value.
(5) Collector of Customs v. Premier Mills Stores -1992 (57) E.L.T. 197 (Trib.) - drilling tool to be classified as tool under specific heading and not as part of drilling machine.
(6) Kosan Metal Products Pvt. Ltd. v. UOI and Ors. - 1981 (8) E.L.T. 725 (Bom.) - price of bulbs and regulators is not includible in the assessable value of gas cylinders.
(7) Jay Engineering Works Ltd. v. UOI -1981 (8) E.L.T. 284 (Del.) - cost of speed regulator not includible in assessable value of ceiling fans.
(8) International Tractor Co. of India v. UOI -1977 (1) E.L.T. (J 133) (Bom.) - as a tractor can operate without wheel weights and hour meters, they are in the nature of unessential parts and accessories, and their price is not to be added to the value of the tractor.
(9) Indian Iron & Steel Co. Limited v. Collector of Central Excise -1990 (46) E.L.T. 409 (Trib.) - the interpretation of a notification calls for the clear intent of the makers of the law.
(10) Webel Telecommunications (I) Ltd. v. Collector of Central Excise, Calcutta -1987 (32) E.L.T. 453 (Trib.) - the value of Cable which is not an integral part of the Walkie-talkie sets/base stations but is an optional accessory should not be included in the value of the Walkie-talkie sets/base stations.
It was further stated that supply of software was their trading activity and they were making money on software. It was also informed that presently the assessments were provisional under High Court's orders and that they had furnished bank guarantee and executed bond.
6. Shri Prabhat Kumar the learned SDR referred to the legal submissions made by the learned Senior Advocate and stated that the reliance placed on Chapter Notes in the Tariff for valuation purposes was not proper. The Chapter notes were only for classification, and the valuation was independent of it. He referred to the Tribunal decision in the case of Col-Tubes (P) Ltd. v. Collector of Central Excise, Indore - 1994 (2) RLT 129 (CEGAT-A), wherein it has been held by the majority decision that valuation has to be done in accordance with the valuation provisions, and that the valuation is independent of the classification aspect. The learned SDR referred to the Tribunal decision in the case of Andhra Pradesh Paper Mills Ltd. v. Collector of Central Excise - 1993 (65) E.L.T. 447 (Trib.), wherein it has been held that classification of goods and valuation are two different concepts covered by their respective rules. Relying upon Tribunal's decision in the case of Bata (I) Ltd., Calcutta v. Collector of Central Excise - 1986 (25) E.L.T. 559 (Trib.) - it was contended that the commercial parlance test for classification was not extendable for arriving at the assessable value. He also stated that while construing one statute no help could be taken of other statute. In respect of the contention that the classification and valuation were two different matters and were to be determined on the basis of separate enactments - classification under the Central Excise Tariff Act, and the valuation under the valuation provisions of the Central Excises and Salt Act, the learned SDR referred to the Supreme Court decisions in the cases of Hari Khemu Gawali v. Deputy Commissioner of Police, Bombay - AIR 1956 SC 559, and the Board of Muslim Wakfs, Rajasthan v. Radhe Kishan - AIR 1979 SC 289 - wherein it has been held that the expressions used in one Act cannot be interpreted with reference to the expressions in another Act, unless the two Acts are in pari materia. He added that while we are concerned with Section 4 of the Central Excises and Salt Act, 1944 (hereinafter referred to as the 'Act') the language under Heading 84.71 of the Tariff does in no way provide for the exclusion of the value of systems software while arriving at the assessable value of the computer system. The systems software are a set of instructions as how the machine should approach the given problem. The computer machine is incomplete without systems software. In the case of Name Tulaman Manufacturers Pvt. Ltd. v. Collector of Central Excise -1988 (38) E.L.T. 566 (SC) - the Hon. Supreme Court had held that assembling of duty paid components of the weigh-bridge amounts to manufacture when both parts and final product are separately and specifically dutiable. It was mentioned that only when software has been supplied alongwith hardware, the value of the software has been included in the value of the computer system for calculating the duty liability. If the software has not been supplied, the value of software has not been included. He referred to the Bombay High Court's decision in the case of Telco v. UOI -1991 (52) E.L.T. 500 (Bom.) - to say that the assessable value was to be the value of the goods which are cleared from the factory, and added that we have to go by their purchase orders in each and every case. Reliance was placed on the Tribunal's decision in the case of Orient General Industries Limited v. Collector of Central Excise, New Delhi, 1994 (70) E.L.T. 764 (Trib.) - wherein it has been held that the regulators when sold alongwith the electric fan were an integral part thereof and were assessable at the same rate as electric fan. In the Jay Engineering Works Limited v. Govt. of India -1982 (10) E.L.T. 378 (AP) - it has been held that the cost of regulator was includible in assessable value of fan. In the case of Paharpur Cooling Towers v. Collector of Central Excise, 1986 (24) E.L.T. 611 (Tri.) - it has been held that assessable value of industrial fans has to include the value of gears which are important components. In the case of Bajaj Auto Limited v. Collector of Central Excise, 1989 (44) E.L.T. 763 (Trib.)- it has been held that the value of footrest was includible in the assessable value of scooters. This decision of the Tribunal has been confirmed by the Hon. Supreme Court as reported at 1993 (44) ECR page 23J. In the case of Auto Control (P) Ltd. v. Collector of Central Excise -1993 (63) E.L.T. 156 (Trib.) - it has been held that daizy wheel being an essential part of electric typewriter, and not an accessory, the value thereof was includible in the assessable value of electric typewriter. The learned SDR referred to the Supreme Court decision in the case of State of Uttar Pradesh v. Kores (India) Ltd. - AIR 1977 (SC) 132 -wherein it was held that typewriter ribbon was an accessory and not a part of the typewriter (unlike spool), he referred to para 18 of the Supreme Court decision wherein the criteria of essentiality has been referred to, and stated that the appellants' reliance on this Supreme Court decision goes against their case as in the present matter the system software was an essential part of the computer system. Reference was also made to the Tribunal decision in the case of Collector of Central Excise, Bombay v. Lawkin Pvt. Ltd., Thane, 1987 (31) E.L.T. 700 (Trib.) - wherein it has been observed that the value of parts and accessories of an article marketed was not excludible from assessable value of article on grounds of parts not being integral or essential part thereof, but merely accessories. The learned SDR submitted that the matter was entirely covered by the Tribunal's earlier decisions in the three cases of (1) Collector of Central Excise, Bangalore v. Sunray Computers (P) Ltd. - 1988 (33) E.L.T. 787, (2) Collector of Central Excise, Bangalore v. Wipro Information Technology - 1989 (39) E.L.T. 113 and (3) Collector of Central Excise v. PSI Data Systems - 1989 (39) E.L.T. 692. He added that there was no contrary judgment to these decisions. It was also added that the various judgments referred to by the appellant related to "accessory" only. As regards the effect of exemption on software he submitted that such scheme was normal in the Central Excise Tariff, and the matter has been discussed by the Collector of Central Excise (Appeals) in his order.
7. In rejoinder the learned Sr. Advocate referred to the provisions of Section 4 of the Act and stated that duty could only be imposed on the goods specified in the tariff and accordingly classification and valuation were interlinked. He again invited attention to the Tribunal's decision in the case of Bedi & Bedi (P) Ltd. v. Collector of Central Excise, Bangalore -1987 (32) E.L.T. 169 (Trib.) - wherein it has been held that if bought-out motor is not fitted on machine, then the cost of the same was to be deleted from the assessable value.
8. We have carefully gone through the facts and circumstances of the case and have given our due thought and consideration to the submissions made by both the sides.
9. At the outset we may mention that in the present case we are concerned only with that type of software which is known as systems software. In the grounds of appeal before the Collector of Central Excise (Appeals), Bombay, it had been stated as under :-
"It is contended that the party had contracted for supply of softwares which are essential for imparting the capability to the data processing machines (the hardware), for performing the functions for which they are designed. In fact a perusal of the supply contracts shows that the party has supplied software packages which do not solve any specific problems but which are designed to control the operation of the computer system. This type of software known as systems software is distinct from application software which is developed by the users for specified application only. Without the system software the application software cannot be run on the computer system."
The Collector of Central Excise (Appeals) in his order-in-appeal has also observed as under:
"The department argues that the software supplied by the respondents is indispensable to the computer system and is known as system software. This system software controls the function of the computer system. Then the user of this computer system develops his own software known as application software for specified applications only. Without the system software the application software cannot be run on the computer system. This explanation is not disputed by the respondents. So, it can be safely taken that the software supplied by the respondents as per the contract is an essential component for the computer system to function."
10. Computer is a marvel of technology. It is one of the most interesting and important machines ever invented. It is even capable to create new knowledge for the use of mankind and has great potentiality for the future. The computer is in two parts - hardware and software. The term 'software' in computer technology is used in contraposition to hardware. Hardware in itself cannot think about problems and figure out how to solve them. The hardware has to be told as what to do with the data and other input it receives. The material, in the form of instructions, for a computer to follow is called a program. This instructional material necessary to run the computer is the software. With the help of this material called software the computer is able to perform the desired tasks. Without programs a computer could not solve any problem or deliver any desired result. The software is also of two types -systems software and application software. In addition there is also a type of software known as 'firmware' for basic instructions which is generally burnt into the hardware itself. In this case we are not concerned with this type of software, known as 'firmware'. Systems software is designed to use a computer for its basic functions. This system software is further comprised of operating system and utilities. Operating system is a type of software that controls the operation of a computer system. It controls the input and output devices, and it reads and responds to user commands. It also places programs and data into the memory and makes sure that the processor executes the right program. According to the appellants themselves (refer page 66 of the paper book), it was the operating system which was necessary for the hardware. During the course of the hearing before us the learned Sr. Advocate appearing for the appellants admitted that without the systems software, the computer will not work, and that the computer was useless without the systems software. At page 61 of their paper book they have stated - "The software was loaded on the machine only at the customer site post delivery to make the machine operational." Thus it has been admitted that their computer system will not be operational without their software - the system software, with which we are concerned in this appeal. The software supplied by them was the system software, and without this systems software, the other wares supplied were of no use.
11. From the scrutiny of the various documents filed by the appellants, the following facts emerge :
(1) The software was manufactured by them with United States technology on the condition that they may not be re-exported without prior approval from the United States Authorities (refer pages 30, 40,80 and 98 of the compilation of documents).
(2) There was a single contract for hardware/software/support requirements (refer pages 45, 67, 80, 90, 92,116,134,150, 246 and 254 of the compilation of documents).
(3) The prices were for the configuration (refer page 18 of the compilation of documents).
(4) The software carried the same code as the hardware (refer page 12 and page 115 of the compilation of documents).
(5) The software was supplied with the hardware (refer pages 72 and 74 of the compilation of documents).
(6) The warranty included the warranty for the software (refer page 118 of the compilation of documents).
12. It is seen that when the appellant's Computer system first enter the stream of trade, it so enters with their systems software. The customers wanted the whole system to be operational, and for this purpose they placed orders both for the hardware and the systems software. The systems software so. supplied was designed to control the operation of the hardware, and make the configuration a system, the computer system. This software known as Systems software was different from the software which is used by the users for taking care of their specific requirements and which software is known as application software. Their computer system was incomplete without their systems software as the mere hardware without systems software will not make the system workable. In the circumstances the systems software was a part of the computer system and was essential for the working of the system. It formed an integral part of the system and activated and controlled the functioning of the system.
13. We find that the matter is entirely covered by the Tribunal's earlier decisions in the cases of Sunray Computers, Wipro and PSI Data Systems. Although the appellants have contended that after the introduction of the new Central Excise Tariff, the rationale of these decisions has lost their basis, as we will presently see, the law laid down by these decisions is very much valid law, in so far as the valuation of the systems software, as part of the computer system is concerned.
14. In the case of Collector of Central Excise, Bangalore v. Sunray Computers (P) Ltd. - 1988 (33) E.L.T. 787 (Trib.), the Tribunal has quoted with approval the following extracts from the book titled "Computer for Everybody" IIIrd edition by Jerry Willis and Merl Miller : "Hardware, the actual computer and its accessories is only half a computer system. To get it to do anything useful the computer must be given a set of instructions that will tell it exactly what to do. These instructions are called programs or software and they are at least as important as the nuts and bolts of a system." "A computer is only a dumb box with a bunch of electronics in it. All the talk about the marvellous things computer can do is really only talk about all the marvellous things software can do. The Tribunal observed that "without software the hardware is incomplete, a mere dumb box and of no use at all to the customer." They held that "if there is a single contract for the supply of computer including software the total value of the computer including that of the software would have to be assessed to duty irrespective of the fact whether the software part is supplied along with the hardware or in a separate lot and irrespective of the fact whether a single invoice is made for both hardware and software or a separate invoice is made for the software."
15. In the case of Collector of Central Excise, Bangalore v. Wipro Information Technology Ltd., 1989 (39) E.L.T. 113 (Trib.) - the Tribunal had relied upon their earlier decision in the case of Sunray Computers, and have held further that "inasmuch as the software actually makes the computer work, the software cannot be treated as an accessory. It is an essential part and parcel of the computer system."
16. In the case of Collector of Central Excise v. PSI Data Systems -1989 (39) E.L.T. 692 (Trib.) also the Tribunal followed their earlier decisions in the cases of Sunray Computers and Wipro. With regard to the basic software also called firmware they held that "No customer would like to invest lakhs of rupees on a computer just for the luxury of doing simple jobs of addition, subtraction, multiplication etc."
17. The appellants have stated that the software supplied by them was a bought-out item and was not manufactured by them. On that account they have pleaded that the value of such software could not be included in the assessable value as per Section 4 of the Act. The statement that the software was not manufactured by them is contradicted by the following endorsement in their invoices. "These commodities are manufactured in India with United States Technology on the condition that they may not be re-exported without prior approval from United States Authorities." It is also endorsed with regard to software as "Only licenced to use these program products as per the terms and conditions in our standard program products licence agreement." They have shown software in their classification/price lists and claimed exemption from central excise duty available in favour of software as such. Further it may be mentioned that under Section 3 of the Act there shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in or imported by land into any part of India as and at the rates set forth in the Schedule to the Central Excise Tariff Act, 1985. In this case the excise liability of the computer system has to be determined with reference to the computer system itself. For the assessment of the computer system it is immaterial whether the software or any other part of it, is a bought out item. In the assessment of computer system any part loses its independent identity and becomes a part of the computer system. It is also immaterial that its packing is separate. In the case of Texmaco Ltd. v. Collector of Central Excise, 1992 AIR SCW 2020 the Hon. Supreme Court have observed that the value of the article was the full intrinsic value of the article inclusive of the cost of the materials and components supplied free by the customer, and irrespective of the fact that no expenditure was incurred by the manufacturer on such components. The Hon. Supreme Court added that the assessable value would take into account the full commercial value. The nexus with the manufacturing activity of the asses-see while assessing the final product in which bought-out items are used is not a relevant criteria in a case where the bought-out items are an essential part of the final product. In fact there are so many cases wherein the manufacturers are engaged only in the assembly of various bought-out items to bring into existence a new excisable commodity. In the case of Kirloskar Brothers v. UOI - 1992 AIR SCW 1324 the appellant carried on business of manufacturing power-driven pumps and mono block pumps. For manufacturing mono block type power driven pump sets and power driven pumps, they were purchasing electric motors from another company. Although that matter related to old Section 4 of the Act the observations of the Hon. Supreme Court that "the value of the excise duty paid on the electric motor is not deductible while arriving at the assessable value under Section 4(a) of the Act", are of general application, and relevant to the issue before us. In the case of Koran Business Systems Ltd. v. Supdt. of Central Excise, 1992 (58) E.L.T. 48 (Bom.), the Bombay High Court have observed that the assessable value of finished goods was to include the value of duty paid components purchased from the market. They held that the bought-out parts were includible as Camera in photocopying machine could not function without timer and lens. They held that the Camera when assembled includes the timer and lens, and without these, camera cannot function. Without Camera, the photocopying machine could not be sold in the market. Thus the Bombay High Court held that the value of timer and lens is required to be included in the assessable value.
18. In the case of Rallis India Ltd. v. Collector of Central Excise, 1993 (67) E.L.T. 144 (Trib.), it has been held that the fan unit, throttle lever and bowden cable, being essential parts of engines, the value thereof was includible in the assessable value of the engines. In the case of Bedi & Bedi (Pvt.) Ltd. v. Collector of Central Excise, Bangalore -1987 (32) E.L.T. 69 (Trib.) - (The case relied upon by the appellants) it has been held that value of bought-out duty paid items is to be included since value of machine as a whole has to be reckoned for excise purposes. In the case of Dayaram Metal Works Pvt. Ltd. v. Collector of Central Excise, Baroda, 1985 (20) E.L.T. 392 (Trib.), it has been held that the value of bought-out parts alongwith the manufactured equipment/machinery was to be included in the value of clearances.
19. A point has been made that the software was exempt from the whole of the excise duty leviable thereon under Notification No. 84/89-C.E., dt. 1-3-1989. By including the value of the software while arriving at the assessable value of the computer system, it is not the software which is being charged to duty but the computer system of which the software is an essential part. It will make no difference to the levy on the final product as to whether its part is entitled to exemption or not. The parts or components have to bear their own duty burden or enjoy duty exemption, or favourable treatment, as the case may be. Once they form part of the finished product then the excisability and the duty liability have to be determined with reference to the final product. In fact there are many exemption notifications in the Tariff which provide exemption to various parts, components, auxiliaries, accessories etc; but the products in which/with which they are used, are dutiable. Similarly exemption has been provided in favour of various inputs, parts or other goods subject to the condition that they are used in the manufacture of specified goods - exemption to component parts of diesel oil operated internal combustion engines, parts of weigh-bridges, gas compressors, internal combustion engines, electric motors or parts of electric motors etc. etc. In the case of Hico Products Ltd. v. Collector of Central Excise, 1994 (71) E.L.T. 339 (SC), the Hon. Supreme Court have held that exemption by means of notification does not take away the levy or have the effect of erasing levy of duty (para 3). In para 15 of their judgment it has been held that: "those goods are exempt from payment of excise duty because of the language of the notification binding it to a particular item and not universally." In the case of Hind Plastics v. Collector of Central Excise, Bombay, 1994 (71) E.L.T. 325 (SC), the Hon. Supreme Court have held that double taxation was not illegal (para 16). In the case of Tamil Nadu (Madras side) Handloom Weavers Cooperative Society Ltd. v. Asstt. Collector of Central Excise, Erode -1978 (2) E.L.T. (J 57) the Madras High Court had held that the character of product as excisable goods does not depend on the actual levy of duty but depends on the description as excisable goods in the Tariff. Reference may also be made to the Tribunal decision in the case of Kerala State Electronics Development Corporation Ltd. v. Collector of Central Excise, Cochin - 1994 (71) E.L.T. 508 (Trib.) wherein it has been held that the value of the battery was includible in assessable value of uninterrupted power supply (UPS) system and that it was immaterial that the battery was a bought out item, was exempt from duty and was being invoiced to the customers separately. Thus exemption in favour of software will not take away the excisability or dutiability of the computer system or any part of it, unless an exemption is provided in favour of the computer system as such.
20. A distinction has been sought to be made by the appellant as to the applicability of the Tribunal's earlier decisions in the cases of Sunray Computers, Wipro and PSI Data Systems, to the facts in the present case on the ground that the above decisions were rendered under the old Central Excise Tariff as in force prior to the enactment of the Central Excise Tariff Act, 1985. The Tribunal's earlier decisions were not on classification but on valuation. There is no change in so far as the valuation provisions are concerned as between the time when the Tribunal's earlier decisions in the cases of Sunray Computers, Wipro and PSI Data Systems were rendered, and the period for which the present proceedings relate. The learned SDR has stated that the reliance on Chapter notes in the Tariff for valuation purposes was not proper. According to the learned SDR the Chapter notes etc. were only for classification, and that valuation was independent of it. In this connection he has placed reliance on the Tribunal's decision in the case of Col-Tubes (P) Ltd. v. Collector of Central Excise, Indore, 1994 (2) RLT 129 (CEGAT-A). By the majority decision the Tribunal in that case, has held as under :
"Classification or valuation are two separate aspects of the matter. The classification is to be done keeping in view the tariff, read with the rules of interpretation Section notes and Chapter notes, whereas the value has to be determined in terms of Section 4 of the Central Excises and Salt Act, 1944, read with Central Excise Valuation Rules."
In the case of Collector of Central Excise v. Metrowood Engg. Works - 1989 (43) E.L.T. 660 (Trib.) (Relied upon by the appellants with regard to the relevancy of chapter notes for classification), the Tribunal has observed in para 11 that : "Change in Tariff does not change the nature of the goods." In the case of Andhra Pradesh Paper Mills Ltd. v. Collector of Central Excise, 1993 (65) E.L.T. 447 (Trib.), the Tribunal in para 8 of their decision have held as under :
"It has to be observed that Section 4 exclusively deals on principles of valuation and the factors governing valuation need not necessarily govern the aspect of classification, as classification of items are done on the basis of a separate legislation, namely Central Excise Tariff Act, which lays down interpretative rules and chapter notes for the purpose of classification of goods."
21. In the light of the above discussion the view taken by the Asstt. Collector of Central Excise, Panaji that as the softwares were classifiable separately, their value could not be clubbed for arriving at the assessable value of computer system, is not well founded. We agree with the Collector of Central Excise (Appeals) who has observed that the software supplied by the appellants was the systems software, which was indispensable to the computer system and that this systems software controlled the functions of the computer system, and has held that in this case the value of the computer system would include the value of the systems software also.
22. Taking all the relevant considerations into account, we uphold the impugned order, reject the appeal and order accordingly. (In terms of the orders of the Hon. Bombay High Court the appellants are required to make good the entire levy along with interest at the rate of 12 per cent within four weeks from the date of this order subject to any statutory remedy).