1996 (7) TMI 281 - AT - Customs

Summary

Issues Involved:
1. Classification of imported Gas Chromatography Software under the appropriate Customs Tariff Heading.
2. Determination of whether the software is an integral part of the Chromatograph or a separate item.
3. Applicability of Chapter Note 2(b) of Chapter 90 for classification purposes.
4. Consideration of evidence and expert opinions regarding the nature and use of the software.

Detailed Analysis:

1. Classification of Imported Gas Chromatography Software:
The primary issue in this appeal is the correct classification of the imported Gas Chromatography Software. The appellants argued for assessment under Heading 9027.90, while the department assessed it under sub-heading 8524.90. The Assistant Collector rejected the appellants' plea, stating that the software had been separately valued and should be classified under sub-heading 8524.90.

2. Integral Part vs. Separate Item:
The appellants contended that the software should be considered an integral part of the Chromatograph, essential for its operation, and not a separate item. They relied on a certificate from the Foreign Supplier's agent in India, which confirmed that the software is a "MUST" for the operation of the Chromatograph. The Department of Electronics, Government of India, also opined that the software is an integral part of the Chromatograph and cannot function without it.

3. Applicability of Chapter Note 2(b) of Chapter 90:
The appellants argued that according to Chapter Note 2(b) of Chapter 90, parts and accessories suitable for use solely or principally with a particular kind of machine should be classified with that machine. They cited a previous ruling (Chemilab Corporation v. Collector of Customs, New Delhi) where items used as parts of a Chromatograph were classified under sub-heading 9027.20. The appellants maintained that the software, being inbuilt and essential for the Chromatograph's operation, should be classified under Heading 9027.20.

4. Consideration of Evidence and Expert Opinions:
The Tribunal carefully considered the submissions and evidence presented by both sides. The department classified the software under sub-heading 8524.90, which refers to "Records, tapes and other recorded media for sound or other similarly recorded phenomena." However, the Tribunal found that the imported software does not fit this description. The HSN Noting at page 1373, S. No. 8, refers to items falling under sub-heading 8524.90 only if the machines are covered under Heading 84.69 to 84.72, which was not applicable in this case.

The Tribunal also reviewed the definition of "software" from the Modern Dictionary of Electronics, which describes software as programs and routines for use with digital computers, controlling the operation of a data processing system. The Tribunal concluded that the software in question is not a separate item but an integral part of the Chromatograph.

The Tribunal noted that the appellants had shown the software's value separately for Customs Valuation purposes, as required by the Customs Rules. However, this does not imply that the software is an independent item requiring classification under sub-heading 85.24.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, ruling that the imported Gas Chromatography Software should be classified under sub-heading 9027.20 as an integral part of the Chromatograph, in line with Chapter Note 2(b) of Chapter 90 and the cited ruling in the Chemilab Corporation case. The department's classification under sub-heading 8524.90 was found to be erroneous.