Inclusion of software value in assessable value for excise duty upheld by Tribunal

The Tribunal upheld the decision that the value of the systems software is includible in the assessable value of the computer system for central excise duty purposes. The software was considered essential for the operation of the computer system, and even though it enjoyed exemption from excise duty, its value had to be included in the assessable value of the final product. The Tribunal rejected the appeal and directed the appellants to comply with the levy and interest as per the High Court's order.

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Issues Involved:

1. Whether the value of software is includible in the assessable value of the computer system for central excise duty purposes.
2. Whether the classification and valuation of software and hardware should be treated independently or together.
3. The impact of exemption notifications on the assessable value of the computer system.

Summary:

Issue 1: Includibility of Software Value in Assessable Value of Computer System

M/s. Tata Unisys Ltd. filed an appeal against the Order-in-Appeal dated 11-3-1993, which included the value of software in the assessable value of the computer system. The appellants contended that the software should not be included as it was classifiable separately and enjoyed exemption from central excise duty. The Tribunal noted that the computer system was incomplete without the systems software and that the hardware without software would not make the system operational. The Tribunal upheld the Collector of Central Excise (Appeals) decision that the value of the computer system includes the value of the systems software.

Issue 2: Classification and Valuation of Software and Hardware

The appellants argued that under the new Central Excise Tariff, the value of computer hardware should not include the value of software, as they are classifiable separately. The Tribunal, however, emphasized that the classification and valuation are two separate aspects. It was held that the systems software, being essential for the operation of the computer system, should be included in the assessable value of the computer system, irrespective of their separate classification.

Issue 3: Impact of Exemption Notifications

The appellants claimed that the software was exempt from excise duty under Notification No. 84/89-C.E., dt. 1-3-1989, and thus its value should not be included in the assessable value of the computer system. The Tribunal clarified that the exemption of software does not affect the excisability of the computer system. The assessable value of the final product, the computer system, must include the value of all its essential components, including the systems software, regardless of their individual duty exemptions.

Conclusion:

The Tribunal upheld the impugned order, rejecting the appeal, and confirmed that the value of the systems software is includible in the assessable value of the computer system. The appellants were directed to comply with the levy and interest as per the High Court's order.

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