2018 (3) TMI 1275 - AT - Central Excise

Computer upgrades classified as sub-assemblies under Chapter 8473.00 instead of complete machines under Chapter 8471.00

Atlaz Technology Pvt. Ltd. Versus Commissioner of C. Ex., Mumbai-II

The Tribunal upheld the decision to classify computer upgrades as sub-assemblies under Chapter sub-heading 8473.00 instead of complete machines under ... Classification of goods - Terminal and Computer upgrades/up-gradation - whether classified under CSH 8471.00 of Central Excise Tariff Act as parts and accessories of computer or otherwise? - Held that: - even after change of computer upgrades the other parts such as computer system, monitor, key board, mouse etc. are unchanged. In this fact, it is clear that upgrade units though helps in enhancing the capacity of the computer but unit itself is not complete machine therefore it cannot fall under Chapter 8471.00 since upgrades units being sub assembly - appeal dismissed - decided against appellant. Issues: Classification of computer upgrades as parts of a computer under Central Excise Tariff ActAnalysis:The case involves the classification of computer upgrades as parts and accessories of a computer under the Central Excise Tariff Act. The appellant, engaged in the manufacture of Terminal and Computer upgrades, classified the upgrades under CSH 8471.00. The demand raised in respect of computer upgrades was confirmed by the adjudicating authority, leading to the appellant's appeal before the Commissioner (Appeals) and subsequently before the Appellate Tribunal CESTAT Mumbai.The appellant argued that the computer upgrades manufactured by them are utilized to enhance the memory, speed, storage capacity, and connectivity of existing computer systems. They contended that the upgrades are assembled according to requirements and added to existing machines, functioning as complete machines rather than mere parts of a computer. On the contrary, the Revenue representative highlighted that the upgrades, although fitted in existing computers, do not constitute a new computer or complete system. The upgrades are considered a sub-assembly, aimed at reconditioning existing computers, and are correctly classifiable under Chapter sub-heading 8473.00.Upon careful consideration of the submissions and records, the Tribunal found that the computer upgrades, while enhancing the capacity of existing computers, do not qualify as complete systems in themselves. The upgrades, being a sub-assembly consisting of various parts to improve memory, speed, and other capacities, are placed within existing computers. Despite the upgrades, other components like the computer system, monitor, keyboard, and mouse remain unchanged. Consequently, the Tribunal concluded that the upgrades, as sub-assemblies, cannot be classified as complete machines under Chapter 8473.00. Therefore, the impugned order confirming the demand for computer upgrades under Chapter sub-heading 8473.00 was upheld, and the appeal was dismissed.In essence, the Tribunal's decision rested on the distinction between the upgrades as sub-assemblies enhancing specific aspects of existing computers and the absence of a transformation into complete systems, leading to the classification under Chapter sub-heading 8473.00 rather than 8471.00.