2009 (5) TMI 299 - AT - Central Excise

Issue in hand is whether the servers imported by the appellants are entitled for the benefit of exemption Notification No. 6/2002, Sl. No. 261, as amended. - The imported item is a server and there are several decisions which hold that the server is also a computer. It is nobody s case that the server is not covered under Chapter heading 84.71. Hence when this server is a computer, it conforms the definition of computer and when it falls under 84.71 as given in the entry in the notification then the benefit cannot be denied. For reason that an amendment was carried out on 9-7-2004 and the amendment gives the explanation that the computer includes CPU cleared separately, the Commissioner comes to the conclusion that the CPU cleared separately prior to this date would not be entitled for the exemption notification. Such reasoning is wrong. In our view this explanation is only clarificatory in nature and it will have retrospective effect in the light of the case laws submitted by the appellants. Consequently the impugned order has no merit and is liable to be set aside.

Summary

Issues:
Classification of imported servers under Chapter heading 8471, entitlement to benefit of Notification No. 6/2002-C.E., dated 1-3-2002, as amended.

Analysis:

1. Classification of Servers: The appellants imported servers and claimed the benefit of Notification No. 6/2002-C.E., dated 1-3-2002, as amended, reducing the CVD for 'Computers' from 16% to 8%. The department disputed this claim, contending that servers (CPU) were not eligible for the notification. However, an amendment was made to include CPU separately as part of the definition of 'computer'. The appellants argued that servers are computers used in managing networks and referred to technical definitions supporting their classification as computers.

2. Legal Interpretations: The appellants cited relevant circulars, proceedings of the Tariff Conference, and a decision of the Bench in a similar case to support their position that servers should be classified as computers under Chapter 84.71. They highlighted that the amendment including CPU separately was clarificatory in nature and should have retrospective effect, as per established legal principles from previous cases.

3. Notification Entries: The Tribunal examined the entries in the relevant notifications - No. 6/2002-C.E., dated 1-3-2002, as amended by subsequent notifications. The key issue was whether the imported servers could be considered computers for the purpose of the exemption notification. The Tribunal noted that the description in the notifications referred to 'computer' and subsequent amendments clarified the inclusion of CPU separately as part of the computer definition.

4. Decision: After careful consideration, the Tribunal concluded that the imported servers should be classified as computers under Chapter 84.71, in line with the definition provided in the notifications and supported by technical interpretations. The Tribunal found the reasoning of the Commissioner erroneous in denying the benefit based on the timing of the amendment. It held that the clarificatory nature of the amendment meant that CPU cleared separately should be entitled to the exemption notification. Consequently, the appeal was allowed, and relief was granted to the appellants.

In conclusion, the Tribunal's judgment clarified the classification of servers as computers under the relevant notifications, emphasizing the technical aspects and legal interpretations supporting the appellants' position. The decision highlighted the retrospective effect of clarificatory amendments and provided relief to the appellants based on a thorough analysis of the legal provisions and precedents.