AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2013 (4) TMI 220
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....rat Electronics Ltd., Bangalore (BEL, for short) on the appellant for manufacture and supply of Digital Loop Carriers (hereinafter referred to as 'DLCs'). The orders were placed for supply of Hardware and also the operating software and spare parts. BEL, in turn delivered the goods to M/s. MTNL for their ultimate use. (c) The invoice raised for supply of the goods to BEL, indicates the value of Hardware and Software separately, The Hardware was cleared on payment of applicable rate of duty, whereas software was cleared at NIL rate of duty. (d) It appears that there was correspondence in February 2003 regarding the supply of software by the appellant and the department. Further, the audit of the appellant's factory was conducted during December 2003. (e) A show-cause notice dated 05.07.2007 was issued alleging that the software supplied along with DLC was not a software of its own but an integral part of the DLC; that the software was not distinct and separate product from the equipment; that the value of software should be included in the value of hardware cleared and supplied to BEL. Consequently, there was proposal for demand of Rs.2,12,23,061/- relating to the period 05/2002 ....
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.... with the equipment itself. (l) The issue involved in the present case is squarely covered by the decision of the CESTAT, South Zonal Bench, Bangalore in the case of ITI Ltd. Vs. CCE and Customs Calicut; 2009 (233) E.L.T. 277 (Tri.-Bang.). The facts and issue involved in the above case and the present case are similar and identical. In this regard he relies on the following decisions: (i) Jayaswals Neco Ltd. Vs. CCE, Nagpur [2006 (195) E.L.T. 142 (S.C)]. (ii) CCE, Navi Mumbai Vs. Amar Bitmen & Alied Products Pvt. Ltd. [2006 (202) E.L.T. 213 (S.C)]. (iii) IOCL Vs. CCE, Baroda [2006 (202) E.L.T. 37 (S.C)]. (iv) CCE, Hyd-I Vs. Aurobindo Pharma Ltd. [2010 (259) E.L.T. 673 (AP)] (v) CCE Vs. Aurobindo Pharma Ltd. [2011 (269) E.L.T. A147 (S.C)] (m) There is no intention on the part of the appellant to evade duty. As per the contract with BEL, the applicable central excise duty is to the account of BEL. There is no incentive or benefit to the appellant for the alleged evasion of duty. The invocation of larger period is, therefore, not valid & legal. In this regard he relies on the following decisions: (i) Collector of Central Excise Vs. Chemphar Drugs & Laminates, [1989 (40) E.L.T.....
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.... the Instrument/product has its own software component facilitating the function of that particular module/part. The customer places order for required parts for replacement. And on such replacement, the corresponding software automatically gets replaced. There is no need for re-loading of the entire software to the product/instrument on replacing of such defective parts/modules. g) Integration and testing is done at the customer's premises. Nowhere it is stated in the procedure that the software is loaded or down-loaded at the time of testing. h) Nowhere in the replies, the appellant-assessee has stated that software has been up-loaded on their site to be downloaded by the customers. Nowhere it is stated by the appellant that software was cleared in floppy/CD form. i) If software has been cleared separately treating it as goods, payment of sale tax/VAT has not been evidenced. 5.2. On merits, he relies on the following case-laws: Anjaleem Enterprises Pvt. Ltd. Vs. CCE, Ahmedabad - [2006 (194) E.L.T. 129 (SC)] wherein it has been held by the Hon'ble Supreme court that when software is embedded into the parts/modules/instrument its assessment has to be made as part of the system....
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....t technical terms: (a) In classification of products, the commercial understanding is more relevant than technical specifications except in respect of commodities for which such specifications are prescribed requiring the assistance of experts in the respective fields. In other words, the method to be adopted for classification is to be based on easily understandable parameters. (b) The decisions in respect of software and hardware in relation to computer are to the effect that if any software is embedded/etched/burnt then it has to be included as part of the hardware and cannot be treated as stand-alone software and that the value of such embedded software should be part of the value of computer. However, it cannot be concluded that only the value of software which is embedded/ etched/burnt is to be included in the value of the computer. (c) It is not as if essentiality is an irrelevant criterion for determining the classification/valuation and at the same time essentiality is not the sole criterion for deciding the classification or determination of value. (d) In the matter of valuation, one of the important aspects to be taken into account is the condition of the goods/produ....
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.... enhance its utility. With the above in mind, we may proceed to consider the ratio of case law relating to computers. (a) 'Basic Input Output Software' (BIOS) which is etched onto the memory chip or burnt into EEPROM and is called a 'firmware' is treated as integral part of computer and there is no question of separate classification or excluding the value of the same from the computer (as could be inferred from para 24 & 25 of the judgment in the case of Acer). This is a case where the software loses its identity and becomes part of hardware. (b) However, the software in the form of disks, floppies, CDs sold along with the computer is not to be included in the assessable value of the computer as such software is distinct and separate from the computer and is also being sold independently in the market (as held in the case of PSI Data Systems). (c) Hard disc loaded with software installed in a laptop, has to be treated as integral part of the laptop and cannot be subject to separate classification and grant of exemption (as held in the case of Hewlett Packard case). d) Tangible software recorded in disks, floppy, CD Rom are being bought and sold in the market separately. A pers....
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.... parcel of the cell phone. A cell phone can also have added facility like camera, etc. There can be doubt about software relating to such add - on functions as to whether they are part and parcel of cell phone, but not about the software which gives the cell phone its identity. 16.1. Scientists and engineers work hard to invent more and more complicated systems and devices so that the life of customers who use them become more and more simple. 16.2. In particular, improved versions of crucial storage device ROM (read only memory) namely PROM, EPROM, EEPROM and flash memory have been invented. ROM stands for "read only memory". ROM became programmable by the user himself leading to the emergence of PROM which stands for "programmable read only memory". Further development led to discovery of method for erasing the programme in ROM using ultraviolet light and thus "EPROM" (Erasable, Programmable Read Only Memory) came to be invented. From EPROM which was erasable using ultraviolet light, electrically erasable PROMs came to be invented and thus EEPROM came into existence. Flash memory is a specific type of EEPROM. 16.3. The storage devices meant for storing data/programmes have thu....
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....ssumed in the audit report, they are not loaded into the hardware products and cleared." 7.3. Thereafter, without conducting any further investigation, a show-cause notice dated 05.07.2007 was issued inter alia alleging that DLC ring supplied by the assessee to BEL, in common trade parlance, was complete and inclusive of software customized for the said equipment; that there was no separate Identity for the software; that unless the ring was loaded with software no testing was possible; DLC rings were delivered to MTNL only after being loaded with required software; that highly customized software was compatible only with the DLC ring manufactured. 7.4. When the appellants have categorically stated in their reply dated 27.04.2005 to the audit objection that the software was not loaded at the time of clearance, it was necessary on the part of the department to have conducted further investigation with BEL. The show-cause notice merely alleged that DLC ring could not be tested unless ring was loaded with software. This is not being disputed by the assessee. It is their case that the software was loaded at the premises of BEL and tested in presence of quality control personnel of BE....