2003 (5) TMI 110 - AT - Central Excise

Summary

Issues: Classification of CD-ROMs under specific sub-headings of Heading 85.24

Issue 1: Classification under sub-heading 20 or 90
The appeal concerns the classification of CD-ROMs manufactured by the appellant under sub-heading 20 or sub-heading 90 of Heading 85.24 of the tariff. The appellant claimed classification under sub-heading 20, while the show cause notice proposed classification under sub-heading 90. The Assistant Commissioner and the Commissioner (Appeals) accepted the proposal in the notice, demanding duty, which led to this appeal.

Issue 2: Relevance of Manufacturing Process to Classification
The Assistant Commissioner and the Commissioner (Appeals) argued that the CD-ROMs should be classified under sub-heading 90 because the product does not arise from recording digital data on a blank disc but is directly molded with data after metallization and coating. However, the relevance of the manufacturing process to classification was questioned, as the end result is a disc containing digitized data regardless of the method used.

Issue 3: Application of "Universal Law" in Classification
The Deputy Commissioner applied what he termed as "universal law" to classify the CD-ROMs. He highlighted the unfair advantage of classifying the appellant's product under sub-heading 20, as it would differ in duty burden from recording data on a blank disc. However, the relevance of duty burden to classification was disputed, emphasizing that taxation laws are to be strictly construed without considering equity.

Issue 4: Interpretation of "Computer Software" Sub-heading
The introduction of sub-heading 20 specifically for "computer software" in 1996 raised questions about the interpretation of software classification. The appellant cited a circular clarifying the exemption criteria for computer software, arguing that the CD-ROMs manufactured should be treated similarly to interactive software eligible for exemption.

Issue 5: Interactive Software Classification
The Commissioner (Appeals) raised concerns about the interactivity of the software in question, distinguishing between interactive and batch processing software. The appellant's software, including telephone directories and educational materials, was argued to be interactive, thus qualifying for exemption as computer software.

Judgment
The Tribunal allowed the appeals and set aside the impugned orders, emphasizing the relevance of the circular's definition of computer software for classification purposes. The classification under sub-heading 20 for the CD-ROMs was deemed appropriate, aligning with the interactive nature of the software manufactured by the appellant. The judgment clarified that the manufacturing process and duty burden should not dictate classification, highlighting the importance of interpreting tariff headings in line with relevant definitions and exemptions provided by official circulars.