AI Drafter 
TaxTMI 
TaxTMI 
2006 (3) TMI 366
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....85 of the table to notification 17/2001-Cus. The invoice under which both the items were imported did not indicate the value of the items separately and a composite price of US $ 150.27 was indicated therein. Hence the importers indicated the following value in the bill of entry filed for assessment of the imported goods :- (1) Value of printer - US $ 147.57 (2) Value of software - US $ 2.70 The department was of the view that both software and printer are classifiable under Chapter Heading 84.71 of the Customs Tariff and after due process of adjudication, the Assistant Commissioner passed order dated 20th October, 2001 classifying the printer and the software under CTH 84.71. However, the value declared for the software was not questioned by the department. On appeal filed by HP India, the Commissioner of Customs vide order dated 6-2-2002, set aside the adjudication order accepting the importers' contention that printer and software are classifiable separately under CTH 84.71 and 85.24 respectively and accepting the value of the software declared by the importers. The Revenue challenged this order before the Tribunal which vide its order dated 11-6-2003 ....
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....vidence in this regard. The department's appeal was allowed by the Commissioner (Appeals) in view of the Tribunal's decision dated 11-6-2003; the importers have thus filed Appeal No. C/110/2005 against the Commissioner (Appeals)'s order dated 25-11-2004. 4. We have heard both sides. 5. We find that the software is imported in the form of CD which contained driver software and other utility/application software such as optical character recognition software in order to enable the scanned text to be converted to word file, photo-print software so as to enable the printer to take colour print out of photographs. The printer is an output device for the computer and the tuning/configuration of the computer is done by installing the software imported in the present case, on to the hard disk inside the computer. From the user manual/operation manual of the printer, it is seen that software loaded/installed on the computer in its hard disk is easily erasable. The software imported is specific to the model of the printer and not to its specific serial number. If the computer crashes or is infected with a virus and therefore requires to be re-formatted, the printer software is also req....
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....ce J Magid, driver is defined as under : "A small program that runs peripheral hardware. Drivers are usually loaded into the memory via the Config.sys file.'" (e) In the same book, Config.sys is defined as under : "A file stored in the root directory of your hard disk that DOS reads each time you start up your computer. It includes instructions for DOS about how to set up memory and other system configurations." 7. The plea of the importers is that the printer software is not the firmware of the printer while the case of the department is that it is a firmware. We note that this contention has been made for the first time by the learned DR. In order to appreciate the correctness of the above submissions, it is necessary to consider what is firmware. In the Dictionary of Modem Electronics Technology by Andrew Singmin, firmware is defined as "a computer system software resident in read only memory (ROM)". ROM is defined in the same book as "a semiconductor device for storing data in permanent non-erasable form usually accomplished through the configuration of the metal mask pattern during the fabrication process." In the book titled Computing Terminology....
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.... customs on goods imported into India at the rates specified under the Customs Tariff Act, 1975, Section 2 of which provides that the rates at which duties of customs shall be levied under the Customs Act are specified in the first and second schedules thereto. The Schedule to the Customs Tariff consists of - (a) General Rules for Interpretation of the Customs Schedule (b) Section Notes (c) Chapter Notes. Rule 1 of the General Rules for Interpretation stipulates that "Classification of goods in this Schedule shall be governed by the following principles : 1. The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings, and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions:" By virtue of Note 6 to Chapter 85 which provides that "Records, tapes and other media of heading No.85.23 and 85.24 remain classified in those headings, whether or not they are presented with the apparatus for which they are intended", the software recorde....
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....f both. Excise duty, in other words, would be leviable only on the goods which answer the definition of "excisable goods" and satisfy the requirement of Section 3. A machinery provision contained in Section 4 and that too the explanation contained therein by way of definition of 'transaction value' can neither override the charging provision nor by reason thereof a 'goods' which is not excisable would become an excisable one only because one is fitted into the other, unless the context otherwise requires. 56. ..... In the invoice, the composite price of the computer and software is being shown, as noticed hereinbefore and therefrom, the price of the software is only being deducted. The invoice price, thus, also shows the actual price of the computer as also the price of the software together with the licence to use the same. ...... 64. The softwares, thus, whether they are cleared with the apparatus for which they are intended, viz., with the computer or not they remain classified under the same heading. By reason of the provisions of the Tariff Act, the rate of duties specified becomes part of a Parliamentary Act. Chapter Note 6 of Chapter 85 being the legal text....
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....as a separate commodity. It does not lose its character as a tangible goods being of the nature of CD-ROM.... 80. .....The legal text contained in Chapter 84, as explained in Chapter Note 6, clearly states that a software, even if contained in a hardware, does not lose its character as such. When an exemption has been granted from levy of any excise duty on software whether it is operating software or application software in terms of heading 85.24, no excise duty can be levied thereupon indirectly as it was impermissible to levy a tax indirectly...." 10. In view of the above decision, duty of customs cannot be levied on software which is exempt from duty merely on the ground that the value of the software is not separately available or separately indicated in the invoice. 11. We also note that in Final Order No. 693/2005-Cus., dated 4-7-2005 [2006 (193) E.L.T. 490 (Tribunal)] in HP India's own case, the Tribunal has held that printer driver software imported along with printer was classifiable under C.T.H. 85.24 and the invoice value of US$ 2.70 for the software was accepted. Some other decisions taking the same view as above are in the case of PSI Data Systems v. CC....
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....e C.T.A., 1975 is the statutory note on classification, and rate of duty is j therefore to be determined by application of Note 6, the importers are correct in their contention that Section 19 will not be applicable in the present case. Our view is supported by Tribunal's order in the case of R. Maganlal - 1990 (50) E.L.T. 580 wherein the Tribunal has held that Section 19 will come into play only if any law for the time being in force does not provide otherwise for determination of duty in such circumstances, that the Customs Tariff has its own rules for interpretation and if those rules provide guidelines for classification of goods, then the rules will prevail and Section 19 of the Customs Act would not be applicable. This decision was affirmed by the Supreme Court in 1991 (51) E.L.T. A65 (S.C.) and the same view has been taken by the Tribunal in Monito Enterprises v. CC - 1999 (111) E.L.T. 918 and CC v. Monito Enterprises - 2002 (139) E.L.T. 595. In the light of the above, we hold that the provisions of Section 19 have no application to the facts of this case. 13. The alternate argument of the importers is that even if Section 19 can be invoked against them, the value of soft....