1988 (11) TMI 176 - AT - Central Excise

Summary

Issues Involved:
1. Inclusion of technical service charges in the assessable value of computers.
2. Alleged suppression of facts and applicability of the extended time limit for demand.
3. Distinction between includible and non-includible technical services.
4. Specific treatment of software in the assessable value.
5. Warranty and maintenance charges.
6. Limitation period for the demand of duty.
7. Claim of discrimination and violation of Article 16 of the Constitution.

Detailed Analysis:

1. Inclusion of Technical Service Charges in Assessable Value:
The principal dispute revolves around whether technical service charges collected by the respondents should be included in the assessable value of the computers. The Assistant Collector, relying on the Supreme Court's judgment in M/s. Bombay Tyres International Limited, held that these charges enriched the marketability of the computers and were thus includible. This decision was overturned by the Collector (Appeals), who held that the charges were optional and for professional services, hence not includible.

2. Alleged Suppression of Facts and Applicability of Extended Time Limit:
The Assistant Collector accused the respondents of not disclosing the technical service charges, thus invoking the extended time limit of 5 years for duty demand due to suppression of facts. The Collector (Appeals) disagreed, stating there was no suppression. The Tribunal found the truth to lie somewhere in between, necessitating a detailed examination of each contract to determine disclosure.

3. Distinction Between Includible and Non-Includible Technical Services:
The Tribunal referred to its earlier judgments in the Sunray and Wipro cases, which differentiated between services related to manufacturing/marketability (includible) and those unrelated (non-includible). The Assistant Collector must now segregate these items for each contract.

4. Specific Treatment of Software in Assessable Value:
Respondents argued that software, being intellectual property, should not be excisable. The Tribunal reiterated its stance from the Sunray case, holding that software integral to the computer system is excisable. The distinction between basic software (firmware) included in hardware cost and other software increasing utility but not excisable was also addressed.

5. Warranty and Maintenance Charges:
Warranty charges were accepted as part of the assessable value, as respondents admitted to including them in the price or providing them in some form. Maintenance charges, being optional and post-warranty, were deemed non-includible.

6. Limitation Period for Duty Demand:
The demand covered the period from 1-1-1979 to 30-11-1983, with the show cause notice issued on 9-12-1983. The Tribunal noted the need to ascertain whether the extended time limit due to suppression applied. Each contract and price list must be reviewed to determine disclosure.

7. Claim of Discrimination and Violation of Article 16:
Respondents alleged discrimination, claiming other manufacturers were not similarly taxed. The Tribunal dismissed this argument, noting that constitutional challenges are beyond its purview and that principles from Sunray and Wipro apply uniformly.

Conclusion:
The Tribunal set aside the lower orders and remanded the case to the Assistant Collector to re-determine assessable values, segregate includible and non-includible technical services, and address the issue of suppression on a contract-by-contract basis. The cross-objection by the respondents was dismissed as time-barred and non-substantive.