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TMI Blog2021 (10) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... of such software, the value of the software has to be included in the assessable value of the hardware and it is immaterial whether it is embedded/etched software or not. The Commissioner (Appeals) has not considered in detail any of these facts with regard to the functionality of the software. At the time of hearing, the Bench had directed the parties to furnish further details of the equipment as well as the software to understand the issue. However, both the parties were not able to furnish facts regarding the finished product. The description of the product in the form of brochures, pamphlets, photographs, etc., would help to bring out the nature of the software used in the telecom equipment. Though the Department has put forward contentions explaining the function of COT, RT, NMS, etc., and argued that without the software the hardware cannot function, there is no reliable evidence placed before us by the Department to support the above arguments. On such score, we have no other option but to remand the matter to the Adjudicating Authority. The matter is remanded to the Adjudicating Authority for reconsideration of the issue. The appeal is allowed by way of remand. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctioning of the equipment and therefore, the value of the software is includible in the assessable value of the hardware/telecom equipment. After due process of law, he finalized the provisional assessment vide Order-in-Original No. 27/2007 dated 27.07.2007 and demanded Duty of ₹ 1,04,65,400/- as differential duty payable on the value of software supplied for the telecom equipment; demand of interest was also confirmed. Aggrieved by the above order, the respondent filed appeal number 142/2007 (P) dated 24.09.2007 before the Commissioner (Appeals). 3.1 Meanwhile, the respondents availed CENVAT Credit of the Duty paid on 38,971 numbers of imported ADSL modems amounting to ₹ 59,89,661/-. Out of the above, the respondent cleared 38,400 modems on payment of ₹ 35,36,526/- as Duty. The Department was of the view that the ADSL modems having been removed as such without undergoing any process of manufacture, the respondent ought to have reversed the CENVAT Credit taken on the 38,400 modems amounting to ₹ 59,01,988/- in terms of Rule 3(5) of the CENVAT Credit Rules, 2004. 3.2 A Show Cause Notice was issued proposing to recover the wrongly availed credit. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated. That the elementary management software is used for remote monitoring and managing the system from a centralized network management and that telecom system cannot be used continuously in the absence of the software. 7.2 It is submitted by him that the respondents had paid Duty only on the hardware and they did not discharge Duty on the value of the software, claiming exemption under Notification No. 06/2006-C.E. dated 01.03.2006. That it has to be noted that the COT (Central Office Terminal) and the RT (Remote Terminal) software are specific to the equipment and the hardware and software cannot be separately imported to the exclusion of the other. The broadband systems were fully tested at the respondent s factory in Puducherry and made ready for installation at site; there was no mention of loading the software at the customer s site in any of the sections of the installation manual. 7.3 Learned Authorized Representative for the Department submitted that the respondent has classified the software under Chapter Heading 8524 3111 and claimed them to be operational / application software. That as could be seen from the Supplementary Note to Chapter 85 for the purpose of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work management software developed by the respondent and supplied in CD ROMs was meant for limited functions of loading into the computer system to monitor the proper functioning of the system and for database management 7.5 He referred to the grounds-of-appeal and argued that the decision of the Hon ble Supreme Court in the case of M/s. Anjaleem Enterprises Pvt. Ltd. v. Commissioner of C.Ex., Ahmedabad reported in 2006 (194) E.L.T. 129 (S.C.) would be applicable to the issue and the value of the software has to be included in the assessable value while clearing the finished products. In the said case, the Hon ble Supreme Court held that the STD-PCO Unit (a telecom unit) is correctly classified under Tariff Item 8517 and that the value of software is includible in the assessable value of the unit. 7.6 Learned Authorized Representative for the Department submitted that software is an essential component of the COT and RT for making it operational and therefore, the software is an integral part of the unit and it serves the purpose of transmitting signals, establishing broadband connectivity, remote monitoring, etc., and that these software are essential for making the unit ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise statute and classified under different headings; hence, the question of inclusion of value of software in the assessable value of hardware does not arise. That mere loading of software before its clearance from the factory solely for the purpose of testing, that too at the specific instruction of few customers, cannot by itself be a ground for inclusion of value of software in the assessable value of hardware. 8.3 He placed reliance on the decision of the Hon ble Apex Court in the case of M/s. Acer India Ltd. (supra). That the said decision has been consistently followed by various judicial fora as reported below: (i) C.C.E., Pondicherry v. M/s. Acer India Ltd. [2004 (172) E.L.T. 289 (S.C.)]; (ii) C.C., Mumbai v. M/s. Datamatics Ltd. [2016 (206) E.L.T. 171 (Tri. Mum.)]; (iii) M/s. HP India Pvt. Ltd. v. C.C.E., New Delhi [2006 (193) E.L.T. 490 (Tri. Del.)]; (iv) C.C., Mumbai v. M/s. HP India Ltd. [2006 (199) E.L.T. 317 (Tri. Mum.)]; (v) M/s. Baghyanagar Metals ltd. v. C.C.E., Goa [2007 (210) E.L.T. 707 (Tri. Mum.)]; (vi) M/s. Hewlett Packard India Sales Pvt. Ltd. v. C.C., Chennai [2006 (203) E.L.T. 477 (Tri. Chennai)]; (vii) M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8517 11 10 --- Push button type u 16% 8517 11 90 --- Other u 16% 8517 19 -- Other --- Telephone sets: 8517 19 11 ---- Push Button type u 16% 8517 19 12 ---- Rotary dial type u 16% 8517 19 19 ---- Other u 16% 8517 19 20 --- Videophones u 16% - Facsimile machines and teleprinters: 8517 21 00 -- Facsimile machines u 16% 8517 22 00 -- Teleprinters u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --- Other u 16% - Discs for laser reading systems: 8524 31 -- For reproducing phenomena other than sound or image: --- Software: 8524 31 11 ---- Information Technology Software u Nil 8524 31 19 ---- Other u Nil 8524 31 90 --- Other u 16% .. (Emphasis added) 13. The period involved is from March 2005 to January 2006. It is pertinent to note that the said Chapter Heading 8524 has been omitted with effect from 01.01.2007. 14. In this context, it is also necessary to refer to Chapter Note 6 of Chapter 85 and the Supplementary Note to Chapter 85, which read as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atching the entire system. 17. The description of the goods in the provisional purchase order and final purchase order correspond to the following details: COT without CPE COT HW Central Office Terminal (Hardware) COT SW Central Office Terminal (Software) RT without CPE RT HW Remote Terminal (Hardware) RT SW Remote Terminal (Software) NMS NMS HW Network Management System (Hardware) NMS SW Network Management System (Software) Maintenance Spares MTC SPR HW Maintenance Spare (Hardware) MTC SPR SW Maintenance Spare (Software) DSL Modem CPE DSL Modem CPE HW Digital System Line Modem Customer Premises Equipment Hardware DSL Modem CPE SW Digital S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m equipment / hardware. 20.1 The Commissioner (Appeals) has not gone into the details as to whether the software is only an operational / application software, as contended by the respondent, whether the software is an integral part of the telecom equipment/hardware without which the telecom equipment cannot function. In paragraph 4.2 of the impugned order, it is merely stated that the telecom equipment can function without the usage of said Network Management Software . This finding is not seen supported by discussion of necessary evidence. 20.2 If the software is operational / application software, the decision in M/s. Acer India Ltd. (supra) would apply and the value need not be included. If the software is integral to the hardware and the said equipment cannot function without the use of such software, the value of the software has to be included in the assessable value of the hardware and it is immaterial whether it is embedded/etched software or not. The Commissioner (Appeals) has not considered in detail any of these facts with regard to the functionality of the software. 21. At the time of hearing, the Bench had directed the parties to furnish further details of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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