TaxTMI 
TaxTMI 
2009 (6) TMI 590
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....of 16% ad valorem on the ATMs on a value including the value of the Windows. For the purpose of assessment of ATMs they did not include the value of Aptra software on the plea that they were customized software and exempt from payment of duty. Adjudicating allegations of short payment of duty and concomitant violations of statutory provisions, the Commissioner of Excise demanded differential duty of an amount of Rs. 4,82,61,536/- along with applicable interest. She also imposed penalty of Rs. 1,50,00,000/- on NCR under Rule 25 of the Central Excise Rules, 2002 (CER). The instant application seeks waiver of pre-deposit of these dues adjudged in the above Order No. 15/08(C) 30-9-08 of the Commissioner impugned in the appeal. 2. The impugned clearances of ATMs had taken place during January, 2007 to March, 2008. The Commissioner found that the ATM could not function if the same was not pre-loaded with Aptra software. Aptra software provide the most essential and basic characteristics of the ATMs. Pre-loading of Aptra software on the HDD involved process of manufacture. That NCR paid duty on ATM including the value of Windows showed that according to the assessee itself pre-lo....
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....d together in a computer, were held as different commodities for the purpose of classification on the basis of the above note. Once this Note was omitted, the ratio of the above judgments could not be applied in deciding the case on hand. On pre-loading of the software identity and became part of the ATM. he assessable value of the ATM could not exclude the of value of the pre-loaded software. Hence the subject demand of duty. 3. In the appeal before us the appellants have taken the ground that Aptra XFS and Aptra NDC software were custom-built for use by the Appellant-company and were exempted as customized software in terms of Notification No. 6/06 dated 1-3-06. They relied on the judgment of the Apex Court in PSI Data Systems Ltd. (supra) and Acer India Ltd. in support of the plea that the value of the software could not be included in the assessable value of the ATMs. In the case law cited, the Apex Court had held that computer and operation software were different marketable Commodities and in the legal context contained in the Chapter 85 and explained in Note 6 of that Chapter, the software did not lose its characteristics and were eligible for exemption applicable t....
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....r 85, software had to be classified under the heading meant for software when they were presented with the apparatus for which they were intended. The Note indicated the relevant heading to be 8523 or 8524. By virtue of this Note software had to be classified as software even if it formed part of an article as long as the above Chapter note was on the statute book i.e., up to 1-1-07. Various case law relied upon by the appellants, we find, have been so decided owing to this Note. The ld. reiterated the findings of the Commissioner and sought support from the following case law. We have perused them. 4.5 We find that in the Hewlett Packard case (supra), the Apex Court dealt with valuation of imported laptops containing pre-loaded HDD. The Hon'ble Court found that pre-loaded operating system on the HDD of the laptop was formed integral part of the laptop. When a laptop was imported with in-built pre-loaded operating system recorded on HDD, the said item formed integral part of the laptop and the Department was right in treating laptop as a unit and it had given deduction for the value of the software. There was no error in the computation. We find that the Apex Court held th....
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....e appellants. 5. The appellants have submitted that value of the impugned software could have been validity included in the value of ATMs, had the appellants themselves manufactured them in their factory and loaded it on ATMs. In the instant case, customized software was imported and loaded on the ATMs. We are unable to appreciate the distinction sought to be made out by the appellants. The appellants' argument is on the basis that loading of imported Aptra software does not involve manufacture in the absence of a Chapter Note deeming such process as manufacture. Imported software per se could not be classified under the Central Excise Act in the absence of a deeming fiction. We reject this argument as misconceived. Prima facie, the finding of the Commissioner that the impugned software formed essential part of the ATM without which the machines could not function as ATM is correct. The loading of the software converts the hardware manufactured in the assessee's factory into functioning ATMs. This process amounts to manufacture. The assessee itself treats loading of Windows, another procured software, as a process of manufacture and pays duty towards the value addition. In....