2017 (11) TMI 433 - AT - Central Excise

Valuation - includibility - value of the customized software - Held that - We note that the appellants have placed a lot of correspondences before us which needs verification in the hands of the original adjudicating authority. Ld. Advocate has also placed decisions before us laying down that when the matter stands referred to the LB, the same reflects upon the facts of law not being clear and in a fluid state. If that be so, the assessees bonafides cannot be questioned - the issue of penalty also needs examination - appeal allowed by way of remand.

Summary

Issues involved:
- Inclusion of value of customized software in the assessable value of Automated Teller Machines (ATM)
- Imposition of penalty for non-inclusion of software value
- Availability of Cenvat credit on differential duty confirmed
- Discharge of service tax on software services
- Exemption of customized software under notification No.6/08 CX

Analysis:
1. Inclusion of value of customized software: The issue revolved around whether the value of customized software loaded in the ATM machines should be included in the assessable value of the machines. The Revenue contended that the software is an integral part of the machine and should be considered in the valuation. The Tribunal noted that the appellants imported customized software from their parent company and loaded it into the machines without including its cost in the valuation, unlike ordinary software. The matter was linked to previous Tribunal decisions and the necessity of including software value in the machine's assessable value.

2. Imposition of penalty: The appellants argued against the imposition of penalties, citing the interpretation of legal provisions and conflicting judgments. They highlighted correspondences with the Revenue to show disclosure of facts, preventing any suppression allegations. The Tribunal directed the original adjudicating authority to verify the correspondences and decide on the penalty issue based on the judgments presented by the appellants.

3. Availability of Cenvat credit: The question arose regarding the appellants' entitlement to Cenvat credit on the differential duty confirmed against them. The Tribunal observed that the appellants had not claimed the credit initially due to not including software value in the assessable value. However, considering the subsequent demand of duty, the Tribunal held that the appellants should be entitled to the credit subject to document verification by the adjudicating authority.

4. Discharge of service tax: The appellants claimed to have discharged service tax on software services provided by them. The Tribunal instructed the Commissioner to address this issue in denovo proceedings, without expressing any opinion, and to neutralize any excise duty if required.

5. Exemption of customized software: The appellants asserted that the customized software was exempted under a specific notification. The Tribunal directed the Commissioner to examine this plea in denovo proceedings, emphasizing that the exemption's applicability should be considered in light of relevant legal precedents.

In conclusion, all appeals were allowed by way of remand, with the Commissioner instructed to complete the proceedings promptly, preferably within four months. The Tribunal emphasized the need for thorough examination of issues related to software valuation, penalty imposition, Cenvat credit availability, service tax discharge, and software exemption under the notification.