2005 (4) TMI 169 - AT - Central Excise

Appeal granted for software unit claiming capital goods benefit under Notification No. 1/95-C.E.

The Tribunal allowed the appeal of a Software Export Unit, holding that computer workstations and storage racks were essential for software development ... Computer workstation/storage racks Issues:1. Eligibility of computer workstation and storage racks as Capital Goods for software development.2. Claim of benefit under Notification No. 1/95-C.E.3. Rejection of pleas by Commissioner (Appeals).4. Comparison with previous judgments regarding office equipment classification.5. Interpretation of Notification at Sl. No. 3 for office equipment exemption.6. Essentiality of equipment for software development.7. Application of Apex Court judgment on Capital Goods.Analysis:The appellant, a Software Export Unit, claimed the benefit of Notification No. 1/95-C.E. for computer workstation and storage racks, essential for software development for export. The Commissioner (Appeals) rejected the claim, considering the items as office equipment, not eligible for Capital Goods benefit. The appellant argued that without these equipments, software development could not proceed, citing precedents where similar items were granted exemption. The SDR contended that the items were not Capital Goods as they were not directly used in software development. Reference was made to an Apex Court judgment on the definition of Capital Goods. However, the Tribunal, in previous cases, had classified such items as office equipment falling under the Notification's scope, crucial for software development, unlike the items in the Apex Court judgment not directly used in manufacturing. Therefore, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the essentiality of the equipment for software development and distinguishing the Apex Court judgment.This judgment clarifies the interpretation of the Notification regarding office equipment exemption and the essentiality of specific equipment for software development. It also highlights the distinction between items directly used in a manufacturing process and those necessary for a specific purpose like software development. The Tribunal's reliance on previous judgments to support the classification of the equipment as office equipment under the Notification further strengthens the appellant's claim. The judgment underscores the importance of considering the specific context and purpose of equipment in determining their classification for benefit eligibility, as demonstrated by the detailed examination of the equipment's role in software development.