HCL INFO SYSTEMS LTD. Vs. CCE

JUDGEMENT

(1.) The appellants are manufacturers of computers. They pay central excise duty on the value of the computers at the rate applicable under tariff heading 4871.00. They supply software also along with computers. The software is either loaded or is supplied separately. So is the manual of the software. Under the order impugned in the present appeal, Commissioner of Central Excise, Pondicherry has held that the appellant should discharge duty on the computers after including the value of the software also in the assessable value. Para 39(i) of the Order states as under:

(2.) The contention of the appellant is that duty demand is entirelycontrary to the settled law. They submit that it is well settled PSI Data Systems Ltd. v. CCE that computer and computer system are different and what is subjected to duty under 84.71 is computers only and not computer systems. The learned Counsel for the appellant has stressed that Commissioner has confirmed the duty demand on account of confusing computer system with computers. He has submitted that computer comes into existence and is complete and functional without the loaded operating software. The software that forms part of the computer is the software etched or burnt into the integrated circuit called Electrically Erasable Programmable Read only Memory (EEPROM) that is soldered on to the mother board. Operating software like Windows do not form part of the software of a computer. These are additional and optional and are loaded at the demand of the buyer.

(3.) According to the appellant, the Commissioner has also fallen into the error of believing that the valuation provision for treating transaction value as assessable value of excisable goods provides for treating the sale value of items sold in a particular sale as the assessable value of excisable goods, even when the excisable goods under sale constitute only part of the items under sale. According to the learned Counsel, since only computers are liable to central excise duty, the transaction value of the computers only should form assessable value and not the value of software sold along with computers. Learned Counsel has pointed out that the distinction between computers and software is clearly understood. Learned Counsel has also relied on the decision of the Apex Court in the case of Sprint RPG India Ltd. v. CC -I, Delhi and many other decisions on the subject.