Assessable value of computers includes warranty-linked services and software charges; suppression supported extended limitation and cum-duty recomputation.

Technical service charges linked to marketability and software charges forming part of the computer system were includible in assessable value, while unrelated service elements were excludible; the duty computation was therefore to be redetermined on that basis. Suppression was found until proper disclosure to the competent assessing officer on 14-5-1984, so the extended limitation period applied up to that date and the normal period thereafter. The token penalty was sustained because the penalty clause had already been invoked and suppression was established. The includible portion of service charges was to be treated on a cum-duty basis for recomputation.

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Issues: (i) whether technical service charges and software charges recovered separately from customers were includible in the assessable value of computers; (ii) whether suppression of facts justified invocation of the extended period of limitation up to 14-5-1984; (iii) whether the penalty of Rs. 250 was sustainable; and (iv) whether the includible portion of service charges was to be treated as cum-duty price.

Issue (i): whether technical service charges and software charges recovered separately from customers were includible in the assessable value of computers.

Analysis: Cost of services having nexus with manufacturing or marketability was includible in the assessable value, while services without such nexus were not. Warranty services were treated as necessary to market the computers and their full cost for the period actually offered had to be included. Software was held to be an essential part and parcel of the computer system and not an accessory. The matter required re-determination of the includible components in the light of the earlier valuation principles.

Conclusion: The charges relatable to warranty and software were includible in the assessable value, and the duty demand had to be recalculated accordingly.

Issue (ii): whether suppression of facts justified invocation of the extended period of limitation up to 14-5-1984.

Analysis: Disclosure to a junior officer was not treated as disclosure to the proper assessing officer. The full price structure, including technical services separately billed, was not properly disclosed to the competent authority until 14-5-1984. Therefore, suppression existed up to that date, but not thereafter.

Conclusion: The extended period of limitation was justified up to 14-5-1984, and the normal period applied from that date onwards.

Issue (iii): whether the penalty of Rs. 250 was sustainable.

Analysis: The earlier show cause notices already invoked the penalty clause, and the later notices were only addenda. Since suppression was found up to 14-5-1984, the token penalty was justified.

Conclusion: The penalty was sustained.

Issue (iv): whether the includible portion of service charges was to be treated as cum-duty price.

Analysis: The request that the includible amount be treated as gross receipts or cum-duty price was found to be reasonable and was not opposed.

Conclusion: The duty computation was to proceed on a cum-duty basis.

Final Conclusion: The duty demand was set aside for fresh re-determination by the Assistant Collector on the valuation principles stated, while the penalty was confirmed and the valuation dispute was remanded for recomputation of differential duty.

Ratio Decidendi: In valuation of computer systems, service charges connected with marketability or making the system functional are includible in assessable value, whereas purely excludible services are not, and suppression of the full price structure before the proper assessing authority permits invocation of the extended limitation period up to the date of proper disclosure.

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