Custom, Excise & Service Tax Tribunal
M/S. Manatec Electronics Pvt. Ltd vs Cce, Puduchery on 22 February, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal Nos. E/147 to 149/2011
(Arising out of Order-in-Appeal No. 187, 188 & 189/2010 (P) dated 22.12.2010 passed by the Commissioner of Central Excise (Appeals), Chennai)
M/s. Manatec Electronics Pvt. Ltd. Appellant
Vs.
CCE, Puduchery Respondent
Appearance Shri T.Ramesh, Advocate for the Appellant Shri R.Subramaniyam, AC (AR) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing / Decision: 22.02.2018 Final Order No. 40454-40456 / 2018 Per Bench All the three appeals arise out of a common impugned order and hence they are taken up together for hearing and disposal.
2. Brief facts are that the appellants are engaged in the manufactures of Computerized Wheel Aligner, Wheel Balancer, Computerized Petrol Exhaust Gas Analyzer and Computerized Diesel Smoke Meter etc. and are registered with the Central Excise Department. On scrutiny of ER1 returns, for the period 1.12.2007 to 30.4.2008, it was noticed that the appellants were manufacturing and clearing such goods along with Data Processing Machines which are located with basic software such as Windows XP etc. Apart from the basic software loaded into the Automatic Data Processing Machine supplied along with the equipment, the appellants have also supplied customized software for various applications to be performed by the above machines. The said software was essentially for making the equipments / machinery to perform the allotted functions. The department was of the view that such software either loaded or accompanied with the machine has to be levied to duty at the rates applicable to the equipment / machine for which the software is meant. The appellants did not include the value of the customized software which was supplied along with the machines / equipments. Show cause notices were issued demanding differential duty along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand, interest and penalties. In appeal, Commissioner (Appeals) upheld the same. Hence these appeals.
3. On behalf of the appellant, ld. counsel Shri T. Ramesh submitted that the issue with regard to the software supplied by the appellants which is customized for specific applications. The appellants have discharged duty on the software availing exemption @ 8% Adv. in terms of Sl. No. 27 of Notification 6/2006-CE dated 1.3.2006.. The customized software manufactured by the appellants cannot be classified along with the machinery / equipments / apparatus since the machine would function even without these customized software. He argued that the issue has been resolved by the Honble Supreme Court in the case of Commissioner of Central Excise, Puducherry Vs. Acer India Ltd. 2004 (172) ELT 289 (SC). The Tribunal following the said decision in the case of M/s. Siemens Ltd. Vs. Commissioner of Central Excise, Puducherry vide Final Order No. 40233/2018 dated 29.1.2018 has held that the software which is supplied separately for loading cannot be considered as part and parcel of the machines / equipments.
4. On behalf of the department, ld. AR Shri R. Subramaniam reiterated the findings in the impugned order.
5. Heard both sides.
6. The issue involved in these appeal is whether the software falling under Tariff Heading 85.24 has to be assessed to duty along with the computerized equipment / machinery or whether it has to be assessed under Tariff Heading 85.24 separately. It is brought out from the evidence that apart from the basic software loaded into computerized garage equipment / machinery. The appellant also supplies application software for various specific application which is essential for making the equipment to perform certain specific function as desired by the customer specific requirement. The said issue has been decided by the Tribunal in the case of Siemens Building Technologies Pvt. Ltd. (supra) wherein the Tribunal analyzed the issue as under:-
4.2 Revenue emphasized that Note 6 of Chapter 85 which reads as under:-
6. Records, tapes and other media of heading 8523 or 8524 remain classified in these headings, when they are presented with the apparatus for which they are intended The said Note was deleted w.e.f. 01.01.2007. View of the Revenue is that after such deletion the software now supplied in CD should form part of the tax liability of the apparatus itself. We note in the present case, the software in the CD was not supplied along with the device. Hence, on a plain reading of the Note, the same is not having any implication for determining the dispute on hand. It is also to be noted that the software which is called V SAMS and V TAMS supplied separately and loaded in the computer of the client, even if it is considered that the appellant intentionally supplied it separately, the question will arise what will be the tax liability of such software which is made afresh due to changed requirements or modified from the original version. In such situation the value collected for a fresh supply or updated supply of software cannot be attached to the value of the devise which was cleared much earlier and suffered duty of excise.
4.3 Revenue relied on the decision of the Anjaleem Enterprises Pvt. Ltd. Vs. Commissioner - 2006 (194) ELT 129 (S.C.). We note that the said case dealt with read only memory of a computer circuit which is not programmable later. In other words, they are embedded firmware. The decision in the said case has no application to the present dispute.
4.4 The appellant relied on the judgment of the Honble Apex Court in the case of CCE, Pondicherry Vs. Acer India Ltd. - 2004 (172) ELT 289 (S.C.). The Honble Apex Court held that even operational software does not form an essential part of the hardware. In the present case, the device cleared by the appellant containing embedded software and has suffered duty along with the device. We are dealing with a software to retrieve data from the said device for monitoring and follow-up 4.5 We note that the lower authorities have inter-mixed the embedded software with the customized software supplied latter for monitoring and data retrieval from the device. From the discussions above, it is clear that a devise should suffer Central Excise duty along with essential operating software which is part and parcel of the same. The same has been the case here. However, the software which is supplied separately for loading in the computer of the client linked to the devise for retrieval and monitoring of data cannot be considered as part and parcel of the said access control device.
5. In view of the above discussions and analysis, we set aside the impugned order and allow the appeal.
7. Following the said decision, we are of the view that the impugned order cannot sustain and requires to be set aside, which we hereby do. The appeals are allowed with consequential relief, if any as per law.
(Operative portion of the order was
pronounced in open court)
(Madhu Mohan Damodhar) (Sulekha Beevi C.S.)
Member (Technical) Member (Judicial)
Rex
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