9911796707
TMI Blog2006 (5) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, we have dispensed with pre-deposit of the duty amount. Further, having heard both sides at length and having regard to the high stake involved in the case, we have also taken up the appeal for final disposal. 2. The appellants are engaged in the manufacture of, and trading in, computers including Laptops (otherwise called Notebooks ) falling under Heading 84.71 of the CTA Schedule. They imported Notebooks (Laptops) with Hard Disc Drives (Hard Discs, for short) pre-loaded with Operating Software like Windows XP, XP Home, etc. These computers were also accompanied by separate Compact Discs (CDs) containing the same software, which were intended to be used in the event of Hard Disc failure. The Bills of Entry filed by the importer declared the value of Laptop and the value of Software separately, the software value including the Hard Disc value also. The Bills of Entry classified the Software-loaded Hard Discs under Heading 85.24 of the CTA Schedule and claimed exemption in terms of Sl. No. 157 of Notification No. 21/2002-Cus. ibid. These Bills of Entry were filed with the Chennai Air Customs authorities in July, 2005. Long before this, by a letter dated 7-10-2003, the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er hearing the party and considering their submissions, found Hard Disc as integral part of Note-book computer and accordingly passed Order-in-Original dated 31-10-2005 classifying the Note-books together with the Hard Discs assembled therein, under Heading 84.71 as automatic data processing machines . This order was upheld by the Commissioner (Appeals) as per Order-in-Appeal dated 25-11-2005. It is on the basis of the appellate Commissioner s order that the assessments were finalised. Hence the demand of duty which is on the assessable value comprising the value of the Note-book computers with Hard Discs excluding the value of Software. The present appeal is against the appellate Commissioner s order. 5. Ld. Counsel for the appellants claimed that the Tribunal s decision in Barber Ship Management (supra), which was affirmed by the Apex Court in 2002 (144) E.L.T. A 293, was squarely applicable to the facts of this case. He also pointed out that, in the appellants own case involving import of similar goods at Delhi, this Tribunal had classified Software-loaded Hard Disc Drives under Heading 85.24. It was argued that the issue arising in this case had already been conclusively de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e functioning of the computer. Its value constituted the major component of the value of the computer system. The value of software in the case of Sprint RPG was more than hundred times the value of the Hard Discs in which the software was contained. According to learned SDR, General Interpretative Rule 3(b) was applicable to those softwares and they would be classifiable only under Heading 85.24 upon consideration of the fact that the value of software was pre-dominant vis- -vis the value of hardware (Hard Discs containing the software). In the present case, SDR pointed out, the value of hardware (laptop computer and hard disc), was much higher than the value of software recorded in the hard disc and, therefore, there was, no parallel between this case and the above cases. With commendable ingenuity, Ms. Bhagya Devi likened software-recorded media to a container containing liquid lubricant. Ld. SDR analysed the matter as under :- The Media on which the software is contained has been likened to a container. The following table shows a parallel between a containery of a liquid such as a lubricant and the different Media that data can be written on : S. No. Data S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SDR pointed out that, in the case of Sprint RPG (supra) considered by the Supreme Court, the goods imported by the party was only Software-recorded Hard Disc which was not accompanied by computer or other apparatus and therefore it was classified under Heading 85.24. The decision in Sprint RPG was followed by the court for upholding the Tribunal s decision in Barber Ship Management case (supra), overlooking the fact that the goods which fell for classification in the latter case was Software-loaded Hard Disc Drive assembled with Computer. Ld. SDR argued that, as the facts of Sprint RPG were not similar to those of the instant case, it was not correct to follow, in the instant case, the Apex Court s decision (in Barber Ship Management) based on its decision in Sprint RPG case. With regard to valuation, ld. SDR relied heavily on the Supreme Court s decision in Acer India (supra), wherein the value of Operating Software was held not includible in the assessable value of the computer in which the software was loaded. An endeavour was also made to invoke Section 19 of the Customs Act for assessment of the subject goods to duty. In this connection, the imported goods consisting of laptop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inventory management. Thus, it appears, software can be broadly categorized as Operating Software and Application Software . Popular operating software includes Windows 98, Windows NT, Mac OS and UNIX vide Microsoft Computer Dictionary. With this minimal information, we observe that the goods imported by the appellants were Laptop Computers assembled with Hard Discs pre-loaded with Operating Software. The Revenue wants to classify the system under Heading 84.71 and charge it to Customs duty after excluding the value of software from the total value. According to the assessee, Hard Disc with Software loaded therein has to be separately classified under Heading 85.24 leaving the rest of the system to be classified under Heading 84.71. Hdg. 84.71 Hdg. 85.24 Computer + Hard Disc Drive + Assessee Software Heading 84.71 Revenue We have found that the imported system is, physically, an assemblage of Computer and Hard Disc, which are physically separable. The Hard Disc in this assemblage is pre-loaded with Operating Software. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t see any reason to hold that the decision in Barber Ship Management (supra) is not applicable to the facts of the instant case. The facts of the present case, which we have already stated, are quite similar to those of Barber Ship Management (supra). The question is whether the Software-loaded Hard Disc presented as part of computer system by the appellants is classifiable under Heading 85.24. The correct answer to this question is readily available in Barber Ship Management. 9. In the appellants own case, the Tribunal s North Regional Bench has already classified identical goods under Heading 85.24 vide 2005 (126) ECR 124 (Tri. Del.). No material has been brought on record to show that the said decision is not acceptable to the Revenue, nor has any attempt been made to distinguish those goods from the goods in question. 10. Ld. SDR sought to distinguish the case of Sprint RPG (supra). Dealing with the appeal preferred by the Revenue against the Tribunal s decision in Barber Ship Management (supra), the Supreme Court ordered as under :- The issue in this appeal by the Revenue, in the first place, is an issue of classification with which this Court does not ordinarily deal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d thereupon indirectly as it is impermissible to levy a tax indirectly. Thus exemption which was admissible to software classifiable under Heading 85.24 was allowed to M/s. Acer India Ltd. Thus the decision in Acer India (supra) only supports the appellants case as observed by the Tribunal in Final Order No. 380/2005 [2005 (126) ECR 124]. As learned SDR herself has sought to draw analogy between the above Central Excise case and the present Customs case, it is effortless for us to hold that the ruling in the former is squarely applicable to the latter. Further applying the principle of valuation stated by the Apex Court in Acer India case (vide supra), we must consider that Section 19 of the Customs Act is not applicable to cases like the present one as held by WZB in the appellants own case vide Order Nos. A/199 200/WZB/2006, ibid. [2000 (199) E.L.T. 317 (Tribunal)] 12. For the reasons noted by us, the impugned order is set aside and this appeal is allowed. Accordingly, the Software-loaded Hard Discs are held to be classifiable under Heading 85.24 of the CTA Schedule and, in respect thereof, the appellants will be eligible for duty exemption under Notification No. 21/2002- ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
