2010 (9) TMI 945 - Commissioner - Central Excise

Summary

Issues:
1. Whether loading software on PLCs amounts to manufacturing for the purpose of Central Excise duty levy?
2. Whether the respondent is eligible for SSI exemption if the loading of software is considered manufacturing?

Analysis:
1. The case involved a dispute where the appellant, M/s. Pejawar Electronics, had obtained SSI registration and claimed exemption under Notification 1/93 by filing Classification List No. 2/98 without availing Modvat credit. The adjudicating authority held that loading software on PLCs did not amount to manufacturing under the Central Excise Act, relying on the Acer India Ltd. case and dropped the proceedings.

2. The Revenue challenged the decision, arguing that PLCs without software were not operational and loading software constituted manufacturing, making the goods dutiable. They contended that without software, PLCs had no utility and, therefore, loading software transformed them into marketable commodities subject to duty, thus disqualifying the respondent from SSI exemption.

3. In response, the respondent argued that loading software was a non-manufacturing activity, citing previous tribunal judgments. They also claimed that the demand was time-barred and loading software did not involve affixing a brand name. During the hearing, they explained their process of using blank PLCs from M/s. Alan Bradley and developing specific software for individual customers.

4. The Commissioner analyzed the submissions and the applicable law. The key issue was whether loading software on PLCs constituted manufacturing. The Commissioner noted that the process did not alter the physical or chemical composition of the PLCs, similar to the Acer India Ltd. case where software and computers were considered distinct commodities. The Commissioner emphasized that preloading software did not transform it into hardware subject to excise duty.

5. The Revenue relied on a different case involving EPROM chips, but the Commissioner found it not directly relevant to the current case as no additional memory chip was attached to the PLCs by the respondent. Ultimately, the Commissioner concluded that the process of loading software did not amount to manufacturing, and hence, no excise duty could be demanded from the respondent.

6. Therefore, the Commissioner upheld the impugned order, dismissing the appeal in favor of M/s. Pejawar Electronics, as the loading of software on PLCs was not considered manufacturing for the purpose of Central Excise duty levy, and the respondent remained eligible for SSI exemption under Notification 1/93.