2007 (9) TMI 141 - AT - Central Excise

Tribunal includes co-processor in computer system value, deeming it essential for efficiency.

The Tribunal set aside the Commissioner's order excluding the co-processor from the computer system's value, emphasizing its essential role. Referring to ... Includibility of the value of a co-processor in the value of a computer system - co-processor as an integral and essential part of a computer system - exclusion of peripherals from the value of a computer system - precedential conclusion in Sunray Computers that numerical coprocessor is an essential part of the computerIncludibility of the value of a co-processor in the value of a computer system - co-processor as an integral and essential part of a computer system - precedential conclusion in Sunray Computers that numerical coprocessor is an essential part of the computer - The co-processor is part of the computer system and its value is includible in the value of the computer system; the Commissioner's direction to exclude the co-processor was erroneous. - HELD THAT: - The Tribunal examined the Commissioner's finding that, because a co-processor (commonly a numeric or math co-processor) performs additional or assisting functions, its value was not liable to be included in the value of the computer system. The Tribunal observed that where a co-processor is synchronized with and assists the main processor, it ordinarily constitutes an integral and indeed essential part of the computer system, particularly for numeric/math functions without which efficient functioning is impaired. The Tribunal relied on its prior view in Sunray Computers that the numerical co-processor must be regarded as an essential part of the computer. The Commissioner's conclusion to exclude the co-processor and direct the Assistant Commissioner to omit it from the list of items constituting the computer system was held to be without warrant; that portion of the Commissioner's order was set aside and the order modified accordingly. [Paras 3, 4]Portion of the Commissioner's order directing exclusion of the co-processor from the computer system value is set aside; the co-processor is to be treated as part of the computer system and its value includible.Final Conclusion: The appeal is allowed to the extent that the Commissioner's direction to exclude the co-processor from the value of the computer system is quashed; the co-processor is to be treated as an integral and essential part of the computer system, and its value includible in the computer system value. Issues:Challenge to the order of the Commissioner regarding the inclusion of co-processor in the value of the computer system.Analysis:The Revenue challenged the Commissioner's order, specifically regarding the inclusion of the co-processor in the value of the computer system. The Commissioner had directed the Asstt. Commissioner to re-examine and exclude peripherals, including the co-processor, from the list of items constituting the computer system. The Commissioner's order was based on the belief that the co-processor, by its nature and use, was not liable to be included in the computer system's value. However, the Authorized Representative for the department argued that the co-processor is an integral part of the computer system, as concluded in previous Tribunal orders and judgments.The Tribunal had previously remanded the matter due to the lack of a speaking order from the Commissioner. In the earlier order, it was explicitly stated that the co-processor is an integral part of a computer system, assisting the main processor in performing additional functions. The Commissioner's conclusion that the co-processor's value should not be included in the computer system's value was deemed unfounded. The Tribunal emphasized that a co-processor, especially a numeric or math co-processor, is essential for the efficient functioning of a computer system. Referring to the decision in the case of Sunray Computers (P) Ltd., the Tribunal reiterated that the co-processor must be regarded as an essential part of the computer system.In light of the arguments presented, the Tribunal set aside the portion of the Commissioner's order directing the exclusion of the co-processor from the list of items constituting the computer system. The Tribunal modified the Commissioner's order accordingly, allowing the Revenue's appeal on this specific aspect of the matter. The decision was dictated and pronounced in open court on 6-9-2007.