Assessable value of software in excise duty: CEGAT remands for fresh adjudication

The Appellate Tribunal CEGAT, Madras considered whether the value of software should be included in the assessable value of Batch Readers for excise duty assessment. The Tribunal, noting a discrepancy with a Supreme Court ruling, remanded the matter to the Original Authority for fresh adjudication. The appellants and Revenue were granted opportunities to present additional evidence for a comprehensive re-evaluation of the issue in line with the Supreme Court's principles. The appeal was allowed, subject to the remand for further examination.

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Issues: Inclusion of software value in assessable value of Batch Readers for excise duty assessment.

Analysis:
The appeal before the Appellate Tribunal CEGAT, Madras revolves around the question of whether the value of the software should be included in the assessable value of Batch Readers for excise duty assessment. The Lower Appellate Authority had previously held that the software supplied with the Batch Readers is essential for the functioning of the computer system and thus should be included in the assessable value. However, the Tribunal notes that the Supreme Court, in the case of PSI Data System v. CCE, held a contrary view. This discrepancy necessitates a re-consideration of the issue based on the Supreme Court's ruling. The Tribunal highlights the need to examine whether the software supplied is specifically for the computer system and if it is supplied along with the computer, as per the Supreme Court's decision. The facts of the case reveal that the Batch Readers manufactured by the appellants incorporate a Central Processing Unit and have their own built-in software. The software is designed for the specific needs of customers and is sometimes sold with the Batch Reader and sometimes without, along with or without the Host Computer.

The Tribunal further delves into the arguments presented by both parties. The appellants argue that the Batch Reader should be considered a computer due to the presence of the Central Processing Unit, and therefore, the demand for including the software value does not hold ground based on the Supreme Court's judgment. On the other hand, the Departmental Representative contests this view, stating that if the software is only meant for the Batch Reader and not the computer, then it should not be considered part of the computer system. The Tribunal notes the absence of discussion on this crucial aspect in the orders of the lower authorities, emphasizing the need for a detailed examination in light of whether the software is indeed meant for the computer system.

Consequently, the Tribunal sets aside the order of the Lower Authority and remands the matter to the Original Authority for fresh adjudication. The appellants are granted an opportunity to present further evidence, and the Revenue is also permitted to introduce additional evidence. The appeal is allowed, subject to the remand to the Original Authority for a comprehensive re-evaluation of the issue in accordance with the principles laid down by the Supreme Court.

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