TaxTMI 
TaxTMI 
2006 (1) TMI 271
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....hapter 85 of the 1985 Tariff Act. 2. During the period October 1992 to March 1993 appellant was the manufacturer of STD-PCO unit. The said unit was a computer based equipment. The said unit was used to identify the time of the day and day of the week, the time when the telephone calls were made; to recognize whether the phone was on-hook or off-hook and to record the duration of a call. 3. The appellant filed classification list dated 29-5-1992 under which the appellant classified the above unit as an equipment under CH 85.17. In the said classification list, the appellant classified programmed memory chips, EPROM, under CH 85.24 and claimed exemption as a recorded medium under notification No. 84/89-C.E., dated 1-3-1989. 4. Vide show-cause notice (for short 'SCN') dated 2-4-1993 the Assistant Collector (AC) stated that the programmed memory chip was an integral part of STD-PCO unit; without which the unit was non-functional. According to the SCN, the programme recorded in the memory chip, EPROM, could be used with STD-PCO unit only in a particular telecom region and, therefore, the said chip was an essential component of the STD-PCO unit. According to the S....
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....o be an integral part of STD-PCO unit the recorded EPROM was required to be separately classified under sub-heading 8524.90 in view of note 6 to chapter 85. According to the appellant, even if a particular component or a part was most essential for a machine, it was not always classifiable with the machine, if otherwise, the said component came under a specific head for its classification. In this connection, reliance was placed on note 2 to section XVI of the Schedule to the 1985 Tariff under which chapter 85 falls. Therefore, according to the appellant, in the present case, the programmed EPROM was a recorded media which fell under a specific entry, viz., 8524.90 and, therefore, was not classifiable under heading 85.17. The appellant also contended that the programmed EPROM was a computer software under heading 85.24 and, therefore, the appellant was entitled to exemption under notification No. 84/89 dated 1-3-1989. 7. By order dated 24-3-1994 the Assistant Collector held that EPROMs were integrated circuits (chips); that, the recorded EPROMs were meant for certain functions to be performed by STD-PCO unit; that, the recorded EPROMs were integral parts of STD-PCO unit and....
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.... integrated circuit; that, the essential character of the recorded EPROM was that of computer software classifiable under CH 85.24 as a recorded media; and that, the only function of EPROM was that of a recorded media. In this connection, learned counsel placed reliance on the judgment of this court in the case of Sprint RPG India Ltd. v. Commissioner of Customs-I, Delhi reported in (2000) 2 SCC 486. Learned counsel further submitted that once the programmed EPROM stood classified under CH 85.24, then, even if it was cleared along with STD-PCO unit, classifiable under CH 85.17, the said EPROM remained classifiable under CH 85.24. In this connection, learned counsel placed reliance on note 6 to chapter 85. Reliance was also placed on the judgments of this court in the case of Commissioner of Central Excise v. Acer India Ltd. reported in (2004) 8 SCC 173 and in the case of PSI Data Systems Ltd. v. Collector of Central Excise reported in (1997) 2 SCC 78. 10. Shri T.M. Mohd. Yusuf, learned senior counsel appearing on behalf of the department, on the other hand, submitted that note 6 to chapter 85 was not applicable for the computer-based product, namely STD-PCO unit, as the pro....
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....pends on variations in resistivity on the application of an electric field; (b) "Electronic integrated circuits and microassemblies" are: (i) Monolithic integrated Circuits in which the circuit elements (diodes, transistors, resistors, capacitors, interconnections, etc.) are created in the mass (essentially) and on the surface of a semi-conductor material (doped silicon, for example) and are inseparably associated; (ii) Hybrid integrated circuits in which passive elements (resistors, capacitors, interconnections, etc.), obtained by thin-or thick-film technology, and active elements (diodes, transistors, monolithic integrated circuits, etc.), obtained by semi-conductor technology, are combined to all intents and purposes indivisibly, on a single insulating substrate (glass, ceramic, etc.). These circuits may also include discrete components; (iii) Microassemblies of the moulded module, micromodule or similar types, consisting of discrete, active or both active and passive, components which are combined and interconnected. For the classification of the articles defined in this Note, heading No....
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....therefore, the issue which arises for consideration, in the first instance, is whether the recorded EPROM was an essential component of the said STD-PCO unit for making it operational. The authorities below have concurrently found that the programmed EPROM was an integral part of the unit; that, it served the purpose of transmitting electronic instructions for the performance of the unit; that, the recorded EPROM was a part of the unit and that the said EPROM was an essential component of the unit for making it operational after plugging in with telephone line and, therefore, the said EPROM constituted an integral part of the STD-PCO unit. Conceptually, one has to keep in mind the subject-matter of the levy. In the present case, the subject-matter of the levy is STD-PCO unit, as a final product. The subject-matter of the levy in the present case is not the recorded EPROM. The question before us is whether the appellant was entitled to claim deduction of the value of the programmed EPROM from the assessable value of STD-PCO unit. It was the case of the appellant before the department that the value of the recorded EPROM was not includible in the assessable value of STD-PCO unit on t....
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....edium" was not includible in the assessable value of the unit. 15. In the light of these arguments, the question which arises for determination is the meaning of the word" recorded medium" in tariff item 85.24. At this stage we may reiterate that the appellant has claimed exemption, therefore, the burden was on the appellant to show that the programmed EPROM constituted a "recorded media" under tariff item 85.24. It is in this context that the matter was examined by the department which came to the conclusion that EPROM was basically a chip or an IC classifiable under tariff item 85.42 and, therefore, on facts the authorities found that tariff item 85.24 had no application to the facts of this case. 16. The controversy on classification, therefore, is : whether the essential character of the programmed EPROM, in the present case, as an IC changed to become a "recorded media" or a software under CH 85.24. 17. The main components of a computer system are central processing unit, memory and disk store [See: Oxford Illustrated Encyclopaedia of Invention and Technology- 1992 Edition, page 183]. A floppy is a dumb storage box. It is different from a chip or an int....
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....ns for the computer's general housekeeping operations. A user can read and use the data stored in ROM, but cannot change them. When a computer is turned on, ROM supplies a series of instructions to CPU which in turn performs a series of tests. EPROM, on the other hand, according to the same dictionary, is an erasable programmable ROM. Initially, users had to supply ROM vendor with an inter-connected program so that the vendor could build the ROM. To avoid this high set-up charge, manufacturers developed a user-programmable ROM (PROM). A 'PROM' is just like a ROM. Similarly, as an alternative, with the development of technology, in the year 1973 Intel Corporation came out with EPROM. When the chip was exposed to ultra violet radiation the memory could be erased and replaced by a new memory. Therefore, EPROM is a re-writable memory chip. The only difference between ROM and EPROM is that EPROM holds its content without power. EPROM chips are written on an external programming device before being placed on the circuit board [See: www.answers.com]. The word "programmable" means that EPROM can be programmed with data, program or both whereas "ROM" means that the computer which is connect....
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....minant role whereas in the case of IC the programme is embodied in the IC which can perform various functions only when fixed to the mother board and is not removable like a floppy from VCR. According to Encyclopaedia of Technology Terms by Whatis.com, an IC can function as an amplifier, oscillator, timer, microprocessor etc. On the other hand, a floppy disk is only a storage. Moreover the essential character of IC does not change with the programme being embedded in the IC and hence the IC remains classifiable under CH 85.42. This distinction is also brought out by tariff items referred to above (See: Dictionary of Computing by Prentice Hall). 24. An embedded system is a programmed hardware device. Software written for embedded systems, especially those without a disk drive is called Firmware, the name for software embedded in hardware devices e.g. in ROM IC chips. Many embedded systems avoid mechanical moving parts, such as, disk drives, switches or buttons because they are unreliable as compared to ROM or Fast Memory IC chips. It is kept outside the reach of humans. In embedded systems, the software resides in ROM IC chips. Embedded systems are combination of hardware an....
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....d remains an IC. 27. In the case of PSI Data Systems Ltd. (supra) the department had conceded that the item in question was a software. Further, in that matter the subject-matter of the levy was a software, as a final product, sold with the computer. On the other hand, in the present case, the subject-matter of the levy is STD-PCO unit. The question before us in the present case is whether the programmed EPROM constituted an integral part of the STD-PCO unit classifiable under CH 85.17. As stated hereinabove, the programmed EPROM was a ROM with a circuit in which the programme was embedded. Therefore, the judgment of this Court in the case of PSI Data Systems Ltd. (supra) is not applicable to the facts of the present case. In fact, in para 2 of the judgment of this Court in PSI Data Systems, this Court has made a clear distinction between softwares, such as, disks, floppies, CD-ROMs etc. on the one hand vis-a-vis softwares which are etched into the computer. Therefore, the judgment in the case of PSI Data Systems has no application. On the contrary, it supports our interpretation in the present case. 28. In the case of Sprint RPG India Ltd. (supra) this Court observ....