AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 1532
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....nd has also imposed penalty of Rs. 50,00,000/- under Section 112 of the Customs Act, 1962.The appellants have filed an appeal No. C/443/2005 against such order. The appellants thereafter have got the equipment released and after undertaking certain processes and have cleared the goods to M/s. BSNL. However, the appellants have split the pricing into hardware and software component and paid duty on the hardware component only. An audit of the appellants was conducted, the appellants have been issued a show-cause notice demanding differential duty on the alleged artificial splitting of the price of goods supplied to BSNL. Commissioner of Central Excise vide Order-in-Original No.05/2007 dated 15.3.2007 has confirmed Central Excise duty of Rs. 2,89,62,572/- and imposed equal penalty under Section 11AC of the Central Excise Act, 1944. The learned Commissioner has held that the software supplied is in the nature of firmware and the value is to be included in the value of excisable goods, as the so-called software is already loaded on the hardware and that, no software has been cleared separately. The appellants have filed appeal No. E/417/2007 against this order. 2. The learned counsel ....
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....rrectly loaded the value claimed for software. He relied upon Anjaleem Enterprises Ltd. vs. CCE: 2006 (192) ELT 690 (SC). He further submitted that in respect of the Customs case, the Commissioner had already taken a lenient view in imposing penalty. In respect of the Excise case, he submitted that though the appellants were aware of the fact that their effort to separate the value of software and hardware was not successful before the customs authorities, and though, they have availed Notification No.36/96 dated 23.7.1996, they did not disclose the same to the Central Excise authorities and have given an impression that the hardware and software were cleared separately. Therefore, the intention of the appellants to evade duty was very clear. 4. Heard both sides and perused the records of the case. We find that at the time of import, Customs authorities have found that the goods imported by the appellants were an integrated business of CDMA WLL technology equipment consisting of BTS/BSC/MSC consisting of obvious hardware and software with the software loaded into the hardware. Though the billing was purported to be separate, the Customs Authorities have concluded that the software....
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....irmware. The computer program is written into the PROM electrically at higher than usual voltage, causing the bits to "retain" the pattern as it is "burned in". Firmware is nonvolatile. It will not be "forgotten" when the power is shut off. Handheld calculators contain firmware with the instructions for doing their various mathematical operations. Firmware programs can be altered. An EPROM is typically erased using intense ultraviolet light." We find that the learned Commissioner has relied upon the Apex Court‟s ruling in M/s. Acer India Ltd. and M/s. Anjaleem Enterprises Pvt. Ltd. (both supra). 6. The appellants have vehemently contested that the Commissioner has used the word software, firmware, hardware etc without going into the exact nature of the same and used options or alternatives like ROM/EPROM/EEPROM. However, the appellant submitted that what was required to be determined was whether the value of software supplied in whatever mode BT CDS or IT units, form a part of the transaction value. We find that as per the statement of Shri B. Sreenivasappa dated 01.02.2004, the appellants have received information from JTE that they have loaded/embedded the concerned softwa....
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.... Therefore, whatever software that has been imported is remained in the system and is not separated before delivery of the equipment to M/s. BSNL. Therefore, the transaction is inclusive of the software that is loaded by ZTE Corporation prior to supply of goods to the appellants for import. We find that this Tribunal in the case of Bharti Airtel Ltd. has held as under: "14.2 On a close analysis of the decisions relied upon by both sides, in matters relating to classification/valuation, the following important guidelines/principles emerge apart from the meanings of various relevant 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-a....
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....ion in CCE, Pondicherry v. Acer India Ltd. (supra) and distinguished the same as not applicable to facts of the case of STD - PCO telephones. It was held that the software loaded in the IC Chip, constitutes the „brain‟ of the system. The levy is on the unit and not on the programmed EPROM. The programme embedded is not easily removable. Hence, the Apex court held that it will not fall in the category of recorded media under Tariff item 85.24 and remains an IC under Tariff Item 85.42." 10. The appellants have contested the use of words firmware by the learned Commissioner. Whatever be the connotation of the software the important point to be seen is whether or not the same is preloaded, embedded etc in the equipment. Such a system with preloaded software has certainly more intrinsic value then a system which is not loaded with the same. Therefore, the essentiality test is to see the condition in which the system or equipment is cleared from the factory. In the instant case we find that the equipment were preloaded with the software and CVD was paid on the value which included the value of software. Therefore, such software irrespective of its nomenclature has become int....
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....y. Arguably, the goods need to be assessed to duty at the time of clearance, in the condition in which they are removed from the factory. We find that the appellants objection on the basis of the use of words like ‟firm ware‟ „Etched ware" "Eprom" etc., by Commissioner would in no way alter the character of the goods and the fact that the hardware is loaded with software. We find as submitted be the Learned Authorised Representative, that in an analogous situation a manufacturer of excisable goods using either exempted goods or non-excisable goods in the manufacture of excisable goods removed, may claim that a part of the price related to such goods and hence, duty is not payable on the same. Therefore, we find that as held by the Hon‟ble Supreme Court in Anjaleem's case(Supra) The Learned Commissioner has rightly upheld the demand of duty on the goods supplied by the appellants to M/s. BSNL in spite of the fact that the price was split between hardware and software in the invoices. 12. Coming to the other issues involved in the case, we find that the appellants are under a contract with the Government company i.e., BSNL. They have claimed that in terms of ....