TaxTMI 
TaxTMI 
2008 (10) TMI 173
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....in the equipments and which came in another consignment. In respect of the software imported in the form of CDs /tapes, the appellants claimed classification under Chapter Heading 85.24 and also claimed benefit of exemption under S. No. 157 of Notification No. 21/02-Cus. The goods were finally assessed and cleared for home consumption after payment of appropriate duty. 2. Certain investigations were carried out by the DRI which revealed that the contracts and MOUs between M/s. Fascel, the importer and M/s. Nokia Corporation indicated that the negotiated price was on the basis of (a) per subscriber base in respect of MSC equipment and (b) per TRS (Transceiver) basis in respect of BSC and BTS equipment and the statements recorded from various persons i.e. importer, the persons concerned with the installation and commissioning, all indicated that one consolidated price was negotiated in respect of each of the three equipments which was inclusive of both hardware and software and the orders were also placed in US $, per subscriber. This indicates that the price arrived at on the above basis was never for commercial purpose, however they were artificially split to show separate value....
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....ntained in the MSC unit hardware. Similarly, BSC and BTS software are contained in the hard disc contained in the BSC and BST unit respectively. This hardware unit is also referred to as Winchester disk unit. The software in question is not etched software or embedded software and is not contained in ROM or EEPROM of the hardware or the microprocessor chips. This is evident from the statements of all the persons recorded by the DRI and referred to in the show cause notice. Though the show cause notice alleges these software to be firmware, the Commissioner has not dealt with this plea which indirectly means that the software in question was not a firmware. Attention was invited to heading 85.24 of the Customs Tariff which read as under: "Records, tapes and other recorded media for sound or other similarly recorded phenomena, including matrices and masters for the production of records, but excluding products of chapter 37" Sub-heading 8524.91 covers "media for reproducing phenomena other than sound or image". Reference was invited to Chapter Note 6 to Chapter 85 as it stood prior to its amendment in 2002, which, reads as under: "6. Records, tapes and other media of heading....
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....are did not make a system workable and that without software, the hardware was incomplete, a mere dumb box which is of no use at all to the customer. A similar view was taken by the Tribunal in the case of Acer India Ltd., 2003 (161) E.L.T. 926 (T) = 2003 (59) RLT 285 (CESTAT). It was submitted that while considering the plea as to whether the value of software can be included in the value of the hardware, Tribunal observed that the software in question is not the software etched or brunt or in what computer world is known as EEPROM/BIOS software on the mother board of the computer. The software in dispute is admittedly operational software, which is loosely referred to as operational software/application software packages, commercially termed as e.g. Windows 2000, Office XP etc. It then considered four ways in which computers can be cleared by various manufacturers. (1) Hardware assembled as per configuration with EEPROM and or BIOS etched/brunt only (2) Hardware assembled to the desired configuration with EEFROM and or BIOS etched/burnt and operational/application software supplied separately on a tangible like disc, floppies, CD etc., to be loaded at the customer's premises. (3)....
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..... The Apex Court after referring to Chapter Note 6 to Chapter 85 observed that a software retain its character irrespective of the fact that as to whether it is sold with the apparatus viz, the computer or not. Once it is held that the essential characteristic of a software is not lost by reason of its being loaded in the hardware; having regard to the different headings contained in different chapters of Tariff Act, the intent and purport of the legislature, in its opinion, cannot be permitted to be withered away only because the informations contained in a software are loaded in a hardware. In other words, as the central excise duty is not leviable on a software in terms of the Act, only because it is implanted in a hardware which can be subjected to assessment of central excise under different head, the same would not attract central excise duty. It cannot be said that without an operating software, the computer becomes dysfunctional. The ld. advocate then referred to other decision of Supreme Court in the case of Sprint R.P.G. India Ltd. - 2000 (116) E.L.T. 6 (S.C.), where hard disk drive loaded with software was held to be classifiable under Chapter Heading 85.24 and not under....
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....rded on hard disc drive. The said items forms an integral part of the laptop and the laptop itself is rightly classifiable under Chapter Heading 84.71. It was submitted by the ld. advocate that though the laptop was held to be classifiable under Chapter Heading 84.71, but for the purpose of payment of duty, the value of the software loaded on the hard disc was deducted and it was separately classified under Chapter Heading 85.24. In view of this the Supreme Court order is in favour of the appellants rather than revenue. 7. On limitation, it was submitted that the appellants have filed bills of entry wherein they have declared the correct description of goods imported by them. The value as indicated in the invoice and other relevant particulars were also declared in the bills of entry. There is no extra remittance by the appellants to M/s. Nokia Corporation, the suppliers. What is required in law is to describe the goods imported by the appellants and declare the corresponding value. It has been held by various decisions that even if software is preloaded in the hardware imported, it is to be treated as import of two commodities and the value is required to be mentioned separatel....
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....ications like MS Word operate on top of the Windows OS with a single computer board. Mobile technology is built with a large number of distributed boards held together by software working at various levels. This entails a full integration of the software with the hardware. Further, the interface protocols between key sections of hardware are exclusive to telecommunications. These equipments are therefore not in the nature of general purpose computers or computers with special applications or automatic data processing machines, as understood under Indian Customs Tariff. Their architecture and software are significantly different and distinct. Software used in these equipments is known as switching software and generally resides in a flash memory and/or RAM. Software for the DX-200 platform is in Winchester Disks. It is non-interactive and protected from being corrupted. Switching software is not an accessory but an essential part of the hardware, i.e. the equipments, without which it cannot function. It is machine specific and custom made. Software, meant for one exchange cannot be used for another as a unique "C" No. is assigned to it. In the MSC, the software is hard coded. The ti....
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....case of crash is indeed of doubtful validity. The appellants failed to indicate in the bills of entry that the software required to operationalise the equipment were preloaded and integrated with the equipment to make it functionally ready. These facts were suppressed to gain duty exemption without being entitled to it and therefore the extended period has been correctly invoked. 12. Ld. consultant referred to the submissions of the appellants wherein attention was invited to Note 6 to Chapter 85 which states that "records, tapes and other media of heading 85.23 or 85.24 remain classified in those headings when presented with the apparatus for which they are intended" would cover even cases where such goods are assembled with constituent parts of machines. A simple interpretation of the expression 'presented with' would seem to suggest that it should cover only instances where the recorded media is supplied along with the apparatus but separately, i.e. not necessarily incorporated in the apparatus. He invited reference to the words used in Note 5E to Chapter 84 which reads as under: "Machines incorporating or working in conjunction with an automatic data processing machine an....
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....aforesaid equipments under heading 85.24 is not at all justified, legal and proper. 15. Referring to the decisions in the case of Sprint RPG, Barber Ship Management, PSI Data Systems, Acer India (cited supra), it was submitted that these decisions concern only with classification and the issue was regarding exciseability of software loaded in hard disc drive, which according to Note 6 to Chapter 85 were held to be classifiable under heading 8524 and not under 8471. This reasoning do not apply to the present case as they concern with mobile telephone equipments i.e. machines with specific functions falling under Heading 85.17/85.25, and not HDDs which are mere storage device media and further Note 6 to Chapter 85 is relevant only in respect of machines falling under heading 84.69 to 84.71 and not to machines falling under heading 85.17 and 85.25. In this case, software cannot be considered as an accessory as has been held by the Apex Court in the case of Acer India, as this software is preloaded and integrated, that equipments fall under heading 85.17/85.25. Further, in the Acer India case, while calculating the value of the computer, the value of the hard disc, the value of the ....
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....be included in that of hardware. 18. In the rejoinder, the ld. advocate for the appellants submitted that the imported software was not in the nature of firmware and though it was so alleged in the show cause notice, the Commissioner discarded this plea and various statements recorded clearly indicate that it was not etched or embedded on a memory chip or microprocessor which alone is called a firmware and therefore assertion that it was a firmware is contrary to facts. It was submitted that the equipments falling under Chapter Heading 85.17 and 85.25 are in the nature of special purpose computer and not general purpose computer. The processor used in computing are Pentium processors which are also employed in general purpose computer and therefore they are also in the nature of automatic data processing machines. Reference was invited to the Tribunal's decision in the case of BPL Mobile Communications Ltd. (supra) which held that software such as MSC, BSC etc. are computer software and has referred to various technical books and came to the conclusion that the telecom equipments are special purpose computers. This decision h....
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....rdware. While the revenue's contention has been that this software was not required to be imported separately as it was already preloaded in the supplier's factory which loading was a technical necessity, requiring special skills not available in India and was never used and lying in original packed condition, the appellants contention is that being operational software, it falls under Chapter Heading 8524 and its value cannot be included in the value of the hardware as held by the Supreme Court in its various decisions starting from PSI Data Systems Ltd., Acer India Ltd., Hewlett Packard (supra) and other decisions referred to in the submissions from both sides. We find that the issue whether the value of the software whether imported separately or already loaded in the hard disc of the computer can be added in the value of the hardware or has to be excluded, has been decided against the revenue by a plethora of Supreme Court and Tribunal's decisions cited by the appellants holding that it cannot be so added. The revenue's only contention is that these decisions are not applicable in the present case as the software relating to the equipment imported is integrated and incorporated....
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....rein at page 7 it has been stated that "computers are classified loosely as microcomputers, minicomputers and mainframe computer Minicomputers are general-purpose machines. Sometime they may be used as part of a large piece of equipment -- for example, as the switching controller in an automatic telephone exchange...". Further at page 23 in the same book, it has been stated as under: ".... Quite often a general purpose mini or microcomputer is tailored to a communications application by using special interface hardware and appropriate real-time software." This all show that even the telecommunication equipment imported by the appellants are nothing but computers and therefore the software meant for such computers is also classifiable under Chapter Heading 85.24. This has also been held by the Tribunal in the case of BPL Communications. (supra) where the software for MSC, BSC and BTS have been specifically, held to be classifiable under Chapter Heading 85.24 and: this decision has been upheld by the Apex Court. The appellant's contention that the decision relates to exemption notification is therefore not relevant is not correct as this, very exemption notification treats soft....