TaxTMI 
TaxTMI 
2008 (10) TMI 75
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.... 1-3-1997 to 30-11-1999, they did not include the value of the software and thereby evaded the duty to the extent of Rs.10 crore and above. The show cause notice was adjudicated by the Commissioner who confirmed a demand of Rs. 8,56,97,114/- (Rupees Eight Crores Fifty Six Lakhs Ninety-Seven Thousand One Hundred and Fourteen only). Equal penalty under Section 11AC was imposed. The longer period was invoked in the show cause notice. 5. The main allegations of the department are that 'Software' is an integral part of the OCB Exchange and is essential for the functioning of the OCB Exchange. In terms of Section 4 of the Central Excise Act, 1944, the assessable value of excisable goods has to be computed by including the value of all the parts contained in and essential for the functioning of the goods specified therein. As the Purchase Orders were placed for the OCB Exchange falling under 8517 of the CETA, 1985 and as the chapter heading of the item cleared were shown as 8517 in the invoices and as software is essential for the functioning of the OCB Exchanges that were cleared from ITI, the department opined that the value of software is also required to be included while computing....
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....lso stated that he has not dealt with the documentary evidence placed before him and in particular the bid documents for the supply of Digital Local Telephone Exchange Equipment which gives the details of the software that is required to be supplied. The -Purchase Orders dated 12-5-1999 and 2-8-1999 placed by the Deputy General Manager, DOT, Kerala Circle, Trivandrum and Assistant General Manager, HP Circle, Shimla, respectively, clearly indicate the type of software required to be supplied along with the OCB exchanges manufactured and supplied by the appellants. It was urged that the Commissioner has traversed beyond the show cause notice inasmuch as in the impugned order he has cited material, vide paras 27 to 30, which were not cited or referred to as relied upon documents. This amounts to gross violation of the Principles of Natural Justice. On this ground alone the impugned order is liable to stuck down. The learned Advocate heavily relied on the decision of the Hon'ble Supreme Court in the case of CCE, Pondicherry v. ACER (Ind.) Ltd. - 2004 (172) E.L.T. 289 (S.C.) wherein it has been held that even if the software is preloaded, the value of the same is required to be excluded....
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....ed on the following case-laws: (a) Collector v. Chemphar Drugs & Liniments - 1989 (40) E.L.T. 276 (S.C.) (b) Padmini Products v. Collector - 1989 (43) E.L.T. 195 (S.C.) (c) Tamil Nadu Housing Board v. Collector - 1994 (74) E.L.T. 9 (S.C.) (d) Pushpam Pharmaceuticals Co v. Collector - 1995 (78) E.L.T. 401 (S.C.) 9. The learned advocate took us through the Purchase Order dated 12-5-1999, from the Deputy General Manager, Department of Telecommunications, Kerala Circle, Trivandrurn and especially to para 12.2, 12.3, 12.4, 12.5, 14.0 and 15.6 they are reproduced below: "12.2 : Supplier shall supply software for the dimensioning of the Exchange and the bill of materials as per site requirement. 12.3 : All technical assistance for installation, commissioning and monitoring of equipment shall be provided by the supplier at no extra cost during laboratory evaluation, validation, type approval & field trial if any. 12.4 : Tools/Testers/Instruments and Simulators required for CCS7 and ISDN testing, validation and A/T of each site shall be provided by the bidder on returnable basis. 12.5 : The supplier shall provide software versions, which have been duly validated b....
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....ting the OCB Exchange. It was explained that the software for OCB Exchange consists two parts. The first part is required for testing it is called 'BBUINT' and the second part of the software is essential for the functioning of the exchange in accordance with the needs and requirements of the customers. It was stated that the software are imported from ITI Technical Collaborator, M/s. Alcatel. The testing of software is used only for testing the exchange and is not used for further functioning of the exchange. The said software 'BBUINT' is loaded with the help of personal computers as front-end interface, and loaded on to the System, for testing the equipment. After testing the OCB exchange, the software may remain in the hard disc of the System or it may get erased before the dispatch of the equipment. Even otherwise when the new software, 'BBUMES' Application Software which is sent to the customer's site, in the form of CD-ROM's/ floppies, is loaded in situ, the testing software 'BBUINT' software gets erased. It was submitted that the cost of the testing software is already included in the cost of the hardware and is reflected in the prices offered by DOT. In other wards, the har....
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....v. Collector of Central Excise - 1997 (89) E.L.T. 3 (S.C.) (b) O.R.G. Systems v. Collector of Central Excise, Vadodara - 1998 (102) E.L.T. 3 (S.C.) (c) CMS Computers Pvt. Ltd. v. Commissioner of Central Excise, Mumbai-I - 1999 (108) E.L.T. 525 (Tribunal) (d) Sprint R.P.G. India Ltd. v. Commissioner of Customs-I, Delhi - 2000 (116) E.L.T. 6 (S.C.) (e) Sunray Computers (P) Ltd. v. CCE, Bangalore - 1999 (112) E.L.T. 540 (T) (f) Similar decision was taken in the case of CCE, Hyderabad v. OMC Computers Ltd. - 2000 (XC1)-GJX-3804-Tribunal 13. It is a well settled law that even if the software is pre-loaded, the value of the same, is required to be excluded from the assessable value of the Hardware and the same cannot be added for arriving at the assessable value. Reliance was placed on the decision of the Apex Court in the case of CCE, Pondicherry v. ACER India Ltd. cited already. A careful reading of the decisions would show that the issue is no longer res integra, and stands settled to the effect that value of software, is not includible in the value of hardware, whether such software is embedded/ loaded in the hardware or supplied separately. The learned Advocate dis....
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....leared by ITI during the period from 1-3-1997 to 30-11-1999 were 'provisional' and were subsequently revised the DOT. The question whether the assessments during the said period were provisional or otherwise was decided by this Bench in the Final Order No. 2068 to 2072/2005 dated, 10-11-2005 [2006 (201) E.L.T. 177 (Tribunal)]. In the order the Tribunal had held that the assessments made continued to be provisional for the years 1994-95 onwards and no final assessments were made under Rule 9B (5) for the period in question. It was also held by the Tribunal that the Show Cause Notice was premature and the assessments continued to be provisional for the period covered by the Show Cause Notice and were required to be finalized under Rule 9B (5), vide para 15. Further, reliance was placed on the following decisions: (a) ITC Ltd. v. CCE, Patna - 1998 (102) E.L.T. 660 (Tri.) (b) CCE, Madras v. Enfield India Ltd. - 1999 (114) E.L.T. 162 (Tribunal) = 1999 (30) RLT 560 (Tri.) (c) CCE, Madras v. IndiaTyre and Rubber Co. Ltd. - 1997 (94) E.L.T. 495 (Madras High Court) (d) Ponds (I) Ltd. v. ACCE, Madras - 1994 (73) E.L.T. 272 (Madras) (e) CCE v. Incab Industries Ltd. - 1990 (45) ....
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....viduals that the software is loaded into the machines when they are dispatched. He has also distinguished the case-laws cited by the learned Advocate on the ground that they relate only to computer and not to other machines like OCB Exchanges. He has also stated that-prior to 1-3-1997 the appellants were clearing the OCB Exchanges and paying duty on the entire value without splitting up the value into software and hardware. In view of all these grounds, he has come to the conclusion that the value of the software has to be included in the value of the OCB exchange and duty has to be paid. He has also invoked the longer period stating that there was suppression of facts. 19. We find that the appellants had already given in the declaration the separate classification in respect of software. Since the 173 Bid declaration has been submitted to the department. It cannot be said that there is suppression of facts. Therefore, we are of the view that the longer period could not have been invoked in this case. Having said that we want to examine the issue on merits also. It is not correct to reason that since software is very essential for the functioning of the OCB, its value has to be ....