2017 (8) TMI 59 - AT - Central Excise

Softwares - demand on the ground that these Software are required for functioning of simulators - Held that - this issue of calculating the value of the software in simulator in respect of the appellant was being agitated for the period 03.05.2002 to 08.07.2003 and for the period 06.12.2003 to 29.10.2004. It is noticed that both these proceedings culminated in dropping of the proceedings raised in the show cause notice and these proceedings have been accepted by the Committee of Chief Commissioners and no appeals are preferred before the Commissioner. On this factual matrix, the findings of the adjudicating authority in this appeal seems to be in consonance of the law - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Correctness of dropping proceedings initiated by show cause notice.
2. Calculation of value of software in simulator for excise duty.

Analysis:
1. The appeal concerned the correctness of dropping proceedings initiated by a show cause notice regarding the demand for Central Excise Duty on software cleared by the appellant for simulators. The lower authorities demanded duty for a specific period, alleging the software's necessity for the simulators. The appellant contested the issue before the adjudicating authority, which ultimately dropped the proceedings. The Revenue appealed against this decision, arguing that the software's essentiality for the simulators was evident from the price charged by the respondent. The respondent's counsel highlighted that similar proceedings against them were dropped earlier, accepted by the Commissioner and the Committee of Chief Commissioners. The Tribunal considered the previous proceedings and upheld the adjudicating authority's decision, stating that the charge faltered as the software was not etched or burnt into the system, making its value excludable from the product's value.

2. The key issue revolved around calculating the software's value in the simulator for excise duty purposes. The adjudicating authority's decision was based on the Board Circular, which the Revenue argued was not considered properly. However, the Tribunal found that the software was not etched or burnt into the system but supplied separately and loaded onto the computer at the customer's premises. This fact led to the exclusion of the software's value from the product's value, thereby negating the demand for additional duty, denial of exemption, and penalties. The Tribunal upheld the adjudicating authority's findings, citing that the charge faltered at the threshold due to the nature of software supply, and rejected the appeal, finding no infirmity in the order.

In conclusion, the Tribunal upheld the dropping of proceedings initiated by the show cause notice and affirmed the exclusion of software value from the product's value for excise duty calculation, ultimately rejecting the appeal filed by the Revenue.