TaxTMI 
TaxTMI 
2021 (10) TMI 889
X X X X Extracts X X X X
X X X X Extracts X X X X
..... On 30.03.2005, foreseeing price escalation of telecom equipment, the respondent requested for provisional assessment of telecom broadband systems along with spares meant for supply to M/s. ITI Ltd., Allahabad. Their request for provisional assessment was acceded to by the jurisdictional Assistant Commissioner, Cuddalore vide his letter dated 30.03.2005. The respondent cleared telecommunication equipment and spares during March 2005, August 2005 and January 2006 under provisional assessment. They also cleared software along with telecom equipment, which was imported / developed at their Bangalore office. The value of the software, which was supplied in CD ROMS separately, was declared in the invoice separately along with the value of the telecom equipment. The respondent paid Central Excise Duty on the value of telecom equipment only and did not pay Duty on the value of the software contending that no Duty is payable as the software falls under Tariff Heading 8524 (applicable till 31.12.2006) and later under Heading 8523 (with effect from 01.01.2007) and that such software was exempted under Serial Number 27 of Notification No. 06/2006-C.E. dated 01.03.2006, as amended. 2.2 At ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ner (Appeals) and remanded the matter, directing the Commissioner (Appeals) to hear both the appeals together as they were inter-connected. 5. In de novo adjudication, the Commissioner (Appeals) along with the above two appeals, linked other two appeals where demand was confirmed for the period January 2007 vide Order-in-Original No. 19/2008 dated 29.08.2008 and also the demand confirmed for the period from July 2008 and September 2008 vide Order-in-Original No. 89/2010 dated 25.03.2010. Thus, common Order-in-Appeal Nos. 137 to 140/2012 (P) dated 17.10.2012 was passed by the Commissioner (Appeals). 6. The present appeal is filed by the Department aggrieved by the decision in respondent's appeal number 142/2007 (P) dated 24.09.2007 [renumbered as 166/2008 (P) dated 28.07.2008] by which the demand of Rs. 1,04,65,400/- on the value of software was set aside. The period involved is from March 2005 to January 2006. 7.1 The Learned Authorized Representative Shri Arul C. Durairaj appearing for the Department reiterated the grounds-of-appeal. He asserted that the software supplied along with the hardware (telecom equipment) is integral and specific to the machine and necessary for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mmunication system that carries telephone signals from a central office to subscribers in the local loop using digital signals as the transport mechanism. That the DLC may be used to transport signals to and from the central office over digital high speed connections to a Remote Terminal. The Remote Terminal (RT) might be located at any distance from the Central Office. That the Central Office Terminal (COT) software provides additional facilities such as database of the customer profile, etc., remote monitoring of the COT hardware from the centralized management system and that the Remote Terminal (RT) software provides the remote monitoring of the COT hardware from the centralized management system and service provisioning details. That it can be seen that the Broadband DLC system had to work as a whole with the COT and RT with respective software for effective functioning of the system. It is also seen that the functions assigned to various software as additional functions are required to be performed by the Broadband DLC systems. 7.4.2 It is argued by him that the telecom equipment supplied by the respondent carries out more functions namely connectivity of broadband to subs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ong with telecom transmission equipment. The respondents paid Excise Duty on the hardware portion and claimed exemption on the value of the software vide Notification No. 06/2006-C.E. dated 01.03.2006. That the software was separately shown in their invoices. The software developed by the respondent in their R&D unit at Bangalore as well as the imported software are operational / application software which is loaded into CD ROMs and supplied separately along with the hardware. That an installation maintenance manual is also supplied by the respondent. In some cases, whenever the customers require testing before clearance of the goods, the software in CD ROM is uploaded into the hardware and tested for various parameters. He asserted that the software supplied in the CD ROMs is application / operational software and hence, the value of such software cannot be included in the value of the hardware. 8.2 Learned Counsel for the respondent submitted that Chapter Note 6 to Chapter 85 of the Central Excise Tariff Act, 1985 during the relevant period (prior to 01.01.2007) specifically provided that software falling under Chapter Heading 8523 or 8524 would be assessable to Duty only unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Deputy Commissioner during provisional assessment. However, while clearing the goods, the assessee had classified the hardware parts under Tariff Item 8517 5050 whereas the Tariff Item number shown for software was 8524 3111. That the respondents paid Duty on the hardware parts alone and indicated that they were not liable to pay duty on the software parts claiming exemption under Central Excise Notification No. 06/2006 dated 01.03.2006. 11. The items supplied to M/s. ITI Ltd., Allahabad is Digital Loop Carrier (DLC) system and are classifiable under Tariff Item 8517 5050. The said Chapter Heading during the relevant period is reproduced below: Tariff Item Description of goods Unit Rate of duty (1) (2) (3) (4) "8517 ELECTRICAL APPARATUS FOR LINE TELEPHONY OR LINE TELEGRAPHY, INCLUDING LINE TELEPHONE SETS WITH CORDLESS HANDSETS AND TELECOMMUNICATION APPARATUS FOR CARRIER-CURRENT LINE SYSTEMS OR FOR DIGITAL LINE SYSTEMS; VIDEOPHONES - Telephone sets; videophones: 8517 11 -- Line telephone sets with cordless handsets 8517 11 10 --- Push button type u ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to January 2006. It is pertinent to note that the said Chapter Heading 8524 has been omitted with effect from 01.01.2007. 14. In this context, it is also necessary to refer to Chapter Note 6 of Chapter 85 and the Supplementary Note to Chapter 85, which read as under: " Chapter 85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles NOTES . . . 6. Records, tapes and other media of heading 8523 or 8524 remain classified in those headings, when they are presented with the apparatus for which they are intended. . . . SUPPLEMENTARY NOTE For the purposes of heading 8524, "Information Technology Software" means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine." 15. The respondent has developed the software in their R&D unit at Bangalore and also imported software. It is contended by them that it is operation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....riginal, which reads as under: "WRITE-UP ON BROAD BAND DLC SYSTEMS (HARDWARE & SOFTWARE) COT Hardware: COT Hardware provides the following functionalities: • DSALAM (to extend DSL lines to the connected subscriber) with 256 DSL lines capacity. The broadband connection is extended to the subscribers through these lines. • Ethernet aggregation and switching to aggregate the DSLAM output • Bandwidth control to control the bandwidth for every subscriber connection • Provides interfaces for forming RPR (Resilient Packet Ring) Ethernet ring. COT Software: COT Software is provided in a CD. By loading this software into the COD hardware the following additional functionalities will be available. • Data base of the customer profile, address, customer special privileges, customer connection location • CDR (call data record) for billing generation • Remote monitoring of the COT hardware from centralized management system • Service provisioning details RT Hardware: RT Hardware provides the following functionalities: â€....