Customs, Excise and Gold Tribunal - Tamil Nadu
Apex Computers Pvt. Ltd. vs Cc (Airport) on 4 November, 2003
Equivalent citations: 2004(113)ECR919(TRI.-CHENNAI)
ORDER S.L. Peeran, Member (J)
1. The appellant is aggrieved with the Order-in-Original No. 7/99 dated 16.6.1999' passed by the Commissioner of Customs (Airport) Chennai holding that the hardware and software is required to be invoiced together as given in the revised invoice submitted by the importers and the goods should be assessed accordingly. The appellant-importer had imported computer parts and accessories and submitted separate Bills of Entry of clearance of these items along with software declared in the invoice only as Driver/Installation software of the hardware items like Mother boards, VGA Cards and CD Rewriter. The department took the view that as this software was supplied along with individual hardware, they were to be clubbed together for the purpose of assessment. The importer had availed the benefit of Customs Notification No. 20/99 as applicable to "Information Technology Software" with NIL rate of customs duty. However, the department proceeded on the ground that these software were not eligible for the benefit of exemption as they were required to work along with mother boards, VGA cards and CD Rewriter which was hardware and therefore the value of the hardware and software was required to be taken together and not in split format.
2. We have heard Shri S. Murugappan, Ld. Advocate for the appellant and Shri A. Jayachandran, Ld. DR for the respondent.
3. Ld. Advocate submitted that the issue pertaining to second classification and assessment of hardware and software was clarified by the Central Board of Excise & Customs by their Circular No. 51/2002-Cus dated 12.8.2002 clarifying that they are required to be separately classified under respective appropriate heading and assessed separately. He also relied on the Apex Court's judgement rendered in the case of PSI Data Systems Ltd. v. CCE wherein the Apex Court held that a computer and its software are distinct and separate, both as a matter of commercial parlance so also upon the material on record. The Apex Court further held that their value is to be separately assessed and cannot be assessed together. He submitted that in view of the Board's circular and the Apex Court judgement (supra) the appellant's prayer for classifying the software and assessing them separately and claiming exemption under Notification No. 20/99-Cus. Dated 28.2.1999 is required to be upheld and the impugned order deserves to be set aside.
4. Ld. DR submitted that the software was supplied along with hardware and as noted in the impugned order, they were essential for the purpose of operating the hardware and, therefore, their value cannot be split and assessed separately. He, therefore, submitted that the order passed by the Commissioner was after due consideration of all the facts and is required to be upheld by dismissing the appeal.
5. On a careful consideration of the submissions, it is seen that appellants had separately filed the Bills of Entry for assessment and for classification and valuation of computer parts and accessories and for the classification and valuation of computer parts and accessories and for the classification and assessment of software including the items like CD-ROM, Floppy Disk Drive, Hard Disk Drives, Mother boards, VGA Cards, Cooler fan, Sony CDU Store station and Sony CRX-100 EB and CD-Rewriter. They availed the benefit of Customs Notification No. 29/99 as applicable to "Information Technology Software" with NIL rate of customs duty. But, the department proceeded on the ground that CD-ROMs in question contained software for installation of Mother board, VGA Cards and CD maker software for CD-Rewriter and since they were part and parcel of the hardware, they were assessed together. It is seen that the issue is clarified by the Central Board of Excise and Customs vide circular No. 51/1002-Cus dated 12.8.2002 wherein it has been clearly held that where the software accompanying the imported article does not constitute a set put up for retail sale under GIR 3(b), they will have to be necessarily classified separately under their own appropriate heading, namely, heading 85.24. The Apex Court in the case of PSI Data Systems Pvt. Ltd. v. CCE (supra) have clearly held that a computer and its software are distinct and separate, both as a matter of commercial parlance as also upon the material on record. It has been held that a computer may not be capable of effective functioning unless loaded with software such as disks, floppies and C.D. rhoms, but that is not to say that these are part of the computer or to hold that, if they are sold along with the computer, their value must form part of the assessable value of the computer for the purposes of excise duty. The Apex Court noted an example of cassette recorder which will not function unless a cassette is inserted in it; but the two are well known and recognised to be different and distinct articles. It also noted that value of the cassette, if sold along with the cassette recorder, cannot be included in the assessable value of the cassette recorder. It further noted that just so, the value of software, if sold along with the computer for the purposes of excise duty, because what is subject to excise duty under the relevant Tariff Entry is the computer and not the computer system.
6. In view of this clear cut findings recorded by the Apex Court wherein it has been held computer parts and accessories cannot be included in the assessable value of the software and have to be assessed independently, therefore, the claim of the appellants for the purpose of availing benefit of customs notification in question with regard to software is required to be upheld. Respectfully following the Board's circular and the Apex Court judgement noted supra impugned order is set aside and the appeal is allowed with consequential relief, as per law.
(Pronounced in open Court on 4.11.2003)