TaxTMI 
TaxTMI 
2018 (6) TMI 639
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.... is required to be added to the value of their multiplexers for the purpose of discharging the duty liability. Differential duties were accordingly demanded vide these show cause notices along with interest as also imposition of penalties under various provisions of law. In adjudication, the adjudicating authorities concerned, vide the orders impugned, set aside the proposals made in the SCNs. Hence the department is before this forum. The main grounds of appeal preferred by department are as follows : i) The adjudicating authority has failed to examine the facts and evidences available on company's own website and company's own literature and user manual and also from the statement of Sri A.S. Narayanchar, officer-manager in charge of General Administration and Indirect Taxes and Arvind, Senior Engineer, Testing, to the effect that the TEJNES software is embedded software as per the system guide brought out by the assessee and that the software were installed at the factory before dispatch. ii) In the case of NCR Corporation India Pvt. Ltd. Vs CCE Pondicherry [ 2010 (251) ELT 380 (Tri.-Chennai) ] the Tribunal held that Loading of imported software on Automated Teller Machine....
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....d in 2016 (346) ELT A205(SC). 3. On the other hand, on behalf of the respondents, Ld. Counsel Ms. Rukmani Menon made number of submissions which can be summarized as under : i) The impugned goods were removed after embedding "Linux Software" which is an operating software and the assessee has discharged liability on the cost of Linux Software. ii) TEJNES software is customized software since for different customers it is customized as per their individual requirements. iii) TEJNES software is loaded on to the multiplexers only in respect of supplies to Public Sector Undertakings, however in respect of clearances to private companies, this software is not loaded at the factory but at the customer's site. iv) In response to a query by the Bench, ld. Advocate states that the item can function on its own only on the Linux Software. v) While admitting that Multiplexers and TEJNES software billed separately, ld. Advocate also submits that separate Annual Maintenance Contracts (AMCs) are drawn up for hardware as well as TEJNES software separately. vi) Ld. Counsel relied upon the following case laws :- 1) ITI Ltd. Vs CCE Calicut 2009 (233) ELT 277 (Tri.-Bang.)....
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....ingle device or transmission conductor such as a copper wire or fiber optic cable. A MUX functions as a multiple- input, single-output switch. In telecommunications the combined single, analog or digital, are considered a single-output higher-speed signal transmitted on several communication channels by a particular multiplex method or technique. With two input signals and one output signal, the device is referred to as a 2-to-1 multiplexer; with four input signals it is a 4-to-1 multiplexer; etc." In the write up given by the Ld. Advocate, "multiplexer" has been explained as under : "An optical multiplexer is an electronics equipment used by mobile, landline and broadband service providers in their telecommunication networks. Optical multiplexers are also used by utility companies (e.g., railways / metro rail, power transmission companies, oil and gas companies etc) for their internal communications over optical fiber. Optical multiplexers are widely deployed in national optical fiber networks rolled out by defence, central and state governments both in India and aborad. The said equipment works on optical fiber and comes in different capacities and s....
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....y, service, alarms and performance management. Software plug-ins are also made available for integration with third-party controllers and for suitable enhancements by third-party application developers." The website of www.welku.com has this to say about Tejnes : "TejNES, the embedded Network Element Software suite resident in each network element provides control and management of individual network elements. Service providers can individually configure and control Tejas network elements through a simple and easy to use World Wide Web (WWW) browser interface using the widely used and popular Hypertext Transfer Protocol (HTTP). The popularity of HTTP implies that configuration and control can be performed through the public Internet (with the provided security management), bringing unsurpassed flexibility to service provider operations. Optionally, TejNES provides Simple Network Management Protocol (SNMP) interface that enables Element Management Systems (EMS) to provide centralized monitoring and control of network elements in a geographically dispersed network. Since SNMP is an industry standard protocol to manage network devices and elements. TejNES provides connecti....
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....e of software along with value of hardware, as decided by the Tribunal and especially by the Hon'ble Apex Court, in recent times. One of the earlier decisions on this issue by the Hon'ble Apex Court was that in the case of CCE Pondicherry Vs Acer India Ltd. - 2004 (172) ELT 289 (SC). In that judgment, the Hon'ble Apex Court held that in respect of a computer loaded with operational software, value of operating software is not includible in the assessable value of such computers. 11. However, in their subsequent judgment in Anjaleem Enterprises Pvt.Ltd. Vs CCE Ahmedabad - 2006 (194) ELT 129 (SC), the Hon'ble Apex Court held that STD-PCO unit cleared from factory with Erasable Programmable Read Only Memory (EPROM) is an incomplete unit without EPROM for its functioning and that the price of EPROM is includible in the assessable value of the unit. The relevant portions of this judgment are as under : "21.The above discussion, therefore, shows that EPROM cannot be compared to a floppy. As stated above, floppy is a dumb box. That is not the case with EPROM. EPROM is basically an integrated circuit or a chip. We agree with the department. EPROM is, therefore, classifiable as ....
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.... ATMs, Cellular telephones etc. In embedded systems, the software resides in ROM IC Chip (See: www.answers.com). These chips are more than mere carriers. Example of embedded system: microwave ovens, cell phones, calculators etc." The Hon'ble Apex Court distinguished its earlier judgment in Acer India Ltd. (supra), PSI Data Systems Ltd. (supra) and Sprint R.P.G.India Ltd. - 2000 (116) ELT 6 (SC) as under : "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 Sy....
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....t known as ROM which is required to be fixed to the mother board and only on such fitment the STD-PCO unit became operational. Therefore, the judgment of this Court in ACER India Ltd. (supra) has no application to the facts of the present case. In fact, in the judgment of this Court in ACER India. Ltd. (supra) the Court was not required to examine the scope of CH 85.42. 12. Relying inter alia on Anjaleem Enterprises (supra) and distinguishing the judgments in Acer India (supra), PSI Data Systems (supra) and Vodafone Essar Gujarat, the Bangalore Bench of the Tribunal in Bharti Airtel Ltd. Vs CC Bangalore - 2012 (286) ELT 270 (Tri.-Bang.), inter alia held that switch software for telecom equipment system based on programming languages with a back up preloaded and stored in imported hardware, there was no justification to "pull out" or disintegrate the preloaded software from imported equipment, grant it separate status to classify it under 85.24 of CTA 1975 and excluded its value to arrive at the value of equipment. Respondents point out that the appeal filed against this decision has been admitted by the Hon'ble Apex Court as reported in 2012 (286) ELT A175 (SC). However, the res....
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....side the telephone and is an integral functional component. Hence, in the present case there are no two items for valuation. The item of import is FWT and as such should be subjected to classification and assessment accordingly... 40. Close analysis of the ratio and finding in the several precedents placed before us, lead to the compelling conclusion that in the present case, the Fixed Wireless phones as imported require to be classified and assessed as phones with no segregation of value assignable to the software separately, as claimed by the importers." While arriving at these conclusions, the Larger Bench has also taken note of the decision of the Tribunal in Jabil Circuit India Pvt. Ltd. Vs CCE Pune 2014 (307) ELT 891 (Tri.-Mumbai), where the Tribunal considered the inclusion of the cost of the software loaded in the "Flash Memory Chip" inside the Set Top Boxes (STB). The Tribunal in that decision had held as under : "5.12 The next question for consideration is with regard to the inclusion of cost of software which were downloaded and incorporated in the flash memory chip which was soldered onto the PCB of the STB. As per the literature available, flash me....
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....ion of the Hon'ble Apex Court in the case of Anjaleem Enterprises Pvt. Ltd. would be more appropriate and correct in the facts of the case before us. This ratio of the Apex Court was followed by this Tribunal in the case of Avaya Global Connect Ltd. (supra) wherein also it was held that software supplied along with system, namely, EPROM, as embedded in the system becomes an integral part and the value of such software is includible in the assessable value of the system supplied. This Tribunal further held that when the software is embedded in the system and becomes an integral part of the equipment, it is not a case of charging duty on software but it is a case of charging duty on the equipment which includes the value of such basic software. In the Hewlett Packard Sales (P) Ltd. case, the Hon'ble Apex Court once again reiterated the above view, wherein it was held that pre-loaded operating systems software in the Hard Disk Drive of the laptop forms an integral part of the laptop and therefore, the cost of such pre-loaded software forms part of the value of the laptop. Accordingly, the Hon'ble Apex Court held that when a laptop is imported with inbuilt preloaded operating system re....