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TMI Blog2006 (3) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... by virtue of Note 6 to Chapter 85, software is liable to be classified under Heading 85.24 and the value of software cannot be included in the value of hardware, i.e. computer. The apex court also held that computer and software are two distinct commodities classifiable separately. Thus, duty of customs cannot be levied on software which is exempt from duty merely on the ground that the value of the software is not separately available or separately indicated in the invoice. Applicability of Section 19 - From the language of the Section 19, it is clear that if there is any other law in force under which the rate of duty on imported goods is determined, then Section 19 will not apply. The imported goods are liable to duty at rates specified in the Customs Tariff Act, 1985 as per Section 12 of the Customs Act and the schedule to the Customs Tariff Act, 1975 provides for classification of goods and also rate of duty and since Note 6 to Chapter 85 of the C.T.A., 1975 is the statutory note on classification, and rate of duty is j therefore to be determined by application of Note 6, the importers are correct in their contention that Section 19 will not be applicable in the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption from duty in terms of serial No. 285 of the table to notification 17/2001-Cus. The invoice under which both the items were imported did not indicate the value of the items separately and a composite price of US $ 150.27 was indicated therein. Hence the importers indicated the following value in the bill of entry filed for assessment of the imported goods :- (1) Value of printer - US $ 147.57 (2) Value of software - US $ 2.70 The department was of the view that both software and printer are classifiable under Chapter Heading 84.71 of the Customs Tariff and after due process of adjudication, the Assistant Commissioner passed order dated 20th October, 2001 classifying the printer and the software under CTH 84.71. However, the value declared for the software was not questioned by the department. On appeal filed by HP India, the Commissioner of Customs vide order dated 6-2-2002, set aside the adjudication order accepting the importers contention that printer and software are classifiable separately under CTH 84.71 and 85.24 respectively and accepting the value of the software declared by the importers. The Revenue challenged this order before the Tribunal which vide its order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner (Appeals) in view of the Tribunal s decision dated 11-6-2003; the importers have thus filed Appeal No. C/110/2005 against the Commissioner (Appeals) s order dated 25-11-2004. 4. We have heard both sides. 5. We find that the software is imported in the form of CD which contained driver software and other utility/application software such as optical character recognition software in order to enable the scanned text to be converted to word file, photo-print software so as to enable the printer to take colour print out of photographs. The printer is an output device for the computer and the tuning/configuration of the computer is done by installing the software imported in the present case, on to the hard disk inside the computer. From the user manual/operation manual of the printer, it is seen that software loaded/installed on the computer in its hard disk is easily erasable. The software imported is specific to the model of the printer and not to its specific serial number. If the computer crashes or is infected with a virus and therefore requires to be re-formatted, the printer software is also required to be installed again to enable the user to take print-outs fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same book, Config.sys is defined as under : A file stored in the root directory of your hard disk that DOS reads each time you start up your computer. It includes instructions for DOS about how to set up memory and other system configurations. 7. The plea of the importers is that the printer software is not the firmware of the printer while the case of the department is that it is a firmware. We note that this contention has been made for the first time by the learned DR. In order to appreciate the correctness of the above submissions, it is necessary to consider what is firmware. In the Dictionary of Modem Electronics Technology by Andrew Singmin, firmware is defined as a computer system software resident in read only memory (ROM) . ROM is defined in the same book as a semiconductor device for storing data in permanent non-erasable form usually accomplished through the configuration of the metal mask pattern during the fabrication process. In the book titled Computing Terminology, published by the Chartered Institute of Management Accountants, London, firmware is defined as the term used to describe software which is permanently resident in the memory of a computer i.e. that which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the first and second schedules thereto. The Schedule to the Customs Tariff consists of - (a) General Rules for Interpretation of the Customs Schedule (b) Section Notes (c) Chapter Notes. Rule 1 of the General Rules for Interpretation stipulates that Classification of goods in this Schedule shall be governed by the following principles : 1. The titles of Sections, Chapters and Sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings, and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions: By virtue of Note 6 to Chapter 85 which provides that Records, tapes and other media of heading No.85.23 and 85.24 remain classified in those headings, whether or not they are presented with the apparatus for which they are intended , the software recorded in a media will fall under CTH 85.24 which covers Records, tapes and other media for sound or other similarly recorded phenomena, including matrices and masters for the production of records, but excluding products of Chapter 37. The HSN Explanatory Notes to Heading 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value can neither override the charging provision nor by reason thereof a goods which is not excisable would become an excisable one only because one is fitted into the other, unless the context otherwise requires. 56. .. In the invoice, the composite price of the computer and software is being shown, as noticed hereinbefore and therefrom, the price of the software is only being deducted. The invoice price, thus, also shows the actual price of the computer as also the price of the software together with the licence to use the same. 64. The softwares, thus, whether they are cleared with the apparatus for which they are intended, viz., with the computer or not they remain classified under the same heading. By reason of the provisions of the Tariff Act, the rate of duties specified becomes part of a Parliamentary Act. Chapter Note 6 of Chapter 85 being the legal text must be taken aid of for the purpose of interpretation of the different headings in preference to the interpretation rules. Suffice it to point out that once no duty is payable on softwares being classified under 8524.20 being a magnetic tape, the recorders whereof is classified under 8520.00, a duty would not be payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise duty on software whether it is operating software or application software in terms of heading 85.24, no excise duty can be levied thereupon indirectly as it was impermissible to levy a tax indirectly.... 10. In view of the above decision, duty of customs cannot be levied on software which is exempt from duty merely on the ground that the value of the software is not separately available or separately indicated in the invoice. 11. We also note that in Final Order No. 693/2005-Cus., dated 4-7-2005 [2006 (193) E.L.T. 490 (Tribunal)] in HP India s own case, the Tribunal has held that printer driver software imported along with printer was classifiable under C.T.H. 85.24 and the invoice value of US$ 2.70 for the software was accepted. Some other decisions taking the same view as above are in the case of PSI Data Systems v. CCE - 1997 (89) E.L.T. 3 (S.C.), ORG Systems v. CCE, Vadodara - 1998 (102) E.L.T. 3 (S.C.), Digital Equipment (I) Ltd. v. CCE, Bangalore - 1997 (70) ECR 326 (Tri. - LB) and the Tribunal s order reported in 2000 (116) E.L.T. 667 in the case of the same importers. This would show that the value indicated by the importers for software in the present case is correct. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orce does not provide otherwise for determination of duty in such circumstances, that the Customs Tariff has its own rules for interpretation and if those rules provide guidelines for classification of goods, then the rules will prevail and Section 19 of the Customs Act would not be applicable. This decision was affirmed by the Supreme Court in 1991 (51) E.L.T. A65 (S.C.) and the same view has been taken by the Tribunal in Monito Enterprises v. CC - 1999 (111) E.L.T. 918 and CC v. Monito Enterprises - 2002 (139) E.L.T. 595. In the light of the above, we hold that the provisions of Section 19 have no application to the facts of this case. 13. The alternate argument of the importers is that even if Section 19 can be invoked against them, the value of software is not taxable by virtue of proviso (b) to the Section which states that if the importer produces evidence to the satisfaction of the proper officer regarding the value of any of the articles liable to different rates of duty, then such article shall be chargeable to duty separately at the rate applicable thereto. The value of software was arrived at by HP India under Rule 7A of the Customs Valuation Rules, 1988. The department ..... X X X X Extracts X X X X X X X X Extracts X X X X
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