1996 (6) TMI 265 - AT - Central Excise

Summary

Issues:
Application for waiver of pre-deposit and stay of recovery of duty on the value of Systems Software, application Software, and Peripherals included in the assessable value of computer systems.

Detailed Analysis:

1. The applicants, manufacturers of computers and computer systems, contested the inclusion of the value of peripherals and software in the assessable value of computer systems. The Department demanded duty on peripherals and software, which was reduced to Rs. 4,88,48,034/- after Modvat credit adjustments. The applicants sought waiver of pre-deposit for the duty on software, arguing that software should be classified under Heading 85.24 with exemption Notification No. 84/89. They also referenced a previous stay order in their favor and disputed the method of valuation used by the Department.

2. The Department argued that the assessment should consider the entire computer system supplied by the applicants, not just software separately. They relied on a Tribunal order in a similar case to support their stance. However, they could not confirm if the assessable value accounted for duty deduction as required by Section 4(4)(d)(ii). The Department opposed the stay application based on these grounds.

3. The Tribunal acknowledged the conflicting decisions on the inclusion of software in the assessable value of computer systems. They noted that the matter had been referred to a Larger Bench for further scrutiny due to the impact of Chapter Note 6 to Chapter 85. Following the practice of maintaining status quo in such cases, the Tribunal waived the pre-deposit requirement and stayed the recovery of duty until the Larger Bench provided a decision on the matter.

4. The Vice President of the Tribunal emphasized that the valuation of software was a crucial aspect of the case, as duty on peripherals had already been deposited. There were discrepancies in the calculations presented by both parties regarding the net duty liability, raising questions about the clarity of the Department's case. The Vice President agreed with the decision to wait for the Larger Bench's ruling and allowed the application for waiver of pre-deposit and stay of duty recovery.

5. The Vice President highlighted the need for a comprehensive evaluation of evidence to determine if the purchased items were sold independently of the manufacturing activity. Regarding the valuation of software, the Vice President leaned towards the Department's argument that Section Notes and Chapter Notes primarily address classification rather than valuation. Given the pending appeal against the Tribunal's decision and the referral to a Larger Bench, the Vice President supported the decision to wait for a definitive ruling before proceeding with the case.

In conclusion, the Tribunal granted the application for waiver of pre-deposit and stayed the recovery of duty on software pending a decision by the Larger Bench, considering the conflicting interpretations and the need for further clarification on the valuation and classification of software in the assessable value of computer systems.