At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Chennai
By, THE HONORABLE JUSTICE: SULEKHA BEEVI
By, MEMBER AND THE HONORABLE JUSTICE: B. RAVICHANDRAN
For Petitioner: Raghavan Ramabhadran, Advocate And For Respondents: S. Govindarajan, AC (AR)
1. The appellant has filed miscellaneous application for change of cause-title to the new name M/s. Siemens Ltd. instead of M/s. Siemens Building Technologies Pvt. Ltd. They have submitted necessary supporting documents to this effect. Accordingly, the miscellaneous application for change of cause-title is allowed and the appeal itself is taken up for hearing and disposal.
2. The appeal is against the Order dated 24.02.2010 of the Commissioner (Appeals), Central Excise, Chennai. The appellants are engaged in the manufacture of Electronic Circuit and Safety Equipment falling under CETH 8471 1900 of the CET liable to Central Excise duty. The said goods are cleared on pa
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yment of duty. The dispute in the present appeal relates to certain software separately supplied, to be loaded in the computer of the customer, who procured the electronic circuit and safety equipment from the appellants. The Revenue help a view that the said software is also to be categorized along with the said equipment at the rate applicable to the equipment. The appellant resisted the demand on the ground that the equipment was supplied along with integrated and embedded software to make it fully functional. To monitor the functionality they have developed customized software and supplied separately, which is loaded in the computer connected to the safely equipment. The main function of the software loaded in the computer is to monitor the data of access details from the said safety equipment. Accordingly, it is the view of the appellant that these are not to be classified along with the equipment to be taxed as safety equipment. They have paid Central Excise duty on this software as a software classifiable under 8523/8524.
3. We have heard both sides and perused the appeal records.
4.1 We note that the safety equipment manufactured and supplied by the appellant is essential access control system used for restricting entry to a particular area or a room by fixing the said system in the door. The said system consists of main controller and various other components like card reader, magnetic controls, lock, power supply unit etc. The controller unit contains printed circuit board with required components like ICs, transformers etc. The basic operating software is loaded in the microprocessor of the said system. Once installed and supplied with power, the system controls the entry of any person based on the approved access cards. The software now in dispute is developed by the appellant for specific use of the customer. This is mostly a time and attendance management software which gives access to the controlling manager to know the entry/exit of various persons who entered through the access controller. Such software is supplied as per the requirement of the client in a form of CD and it is loaded in the premises of the client in their computer. This software essentially maintains attendance register. This is not a software for physical access control which is loaded in the system and suffered duty as part of device. In other words, the said integrated software which makes the device functional suffered tax as part of the device. This is not contested by both sides. In order to access the data including details of time and person who accessed the restricted area, the client would like to extract such data from the device for which the appellant develops a program and loads it in the computer of the client so that they can capture the data and also use it in whatever manner they want. This is essentially an attendance monitor system where the manager will have details of persons, time of their entry etc., extracted from the access control device. We are of he considered opinion that while the software as firmware supplied by the appellant has to suffer duty as applicable to the device, the same cannot be extended to software supplied separately to get details from the device. Admittedly, the access control device can work without this software. The data which is captured by such device is retrieved and used by the client using the present software.
4.2 Revenue emphasized that Note 6 of Chapter 85 which reads as under:-
6. Records, tapes and other media of heading 8523 or 8524 remain classified in these headings, when they are presented with the apparatus for which they are intended.
The said Note was deleted w.e.f. 01.01.2007. View of the Revenue is that after such deletion the software now supplied in CD should form part of the tax liability of the apparatus itself. We note in the present case, the software in the CD was not supplied along with the device. Hence, on a plain reading of the Note, the same is not having any implication for determining the dispute on hand. It is also to be noted that the software which is called V SAMS and V TAMS supplied separately and loaded in the computer of the client, even if it is considered that the appellant intentionally supplied it separately, the question will arise what will be the tax liability of such software which is made afresh due to changed requirements or modified from the original version. In such situation the value collected for a fresh supply or updated supply of software cannot be attached to the value of the devise which was cleared much earlier and suffered duty of excise.
4.3 Revenue relied on the decision of the Anjaleem Enterprises Pvt. Ltd. Vs. Commissioner : 2006 (194) ELT 129 (S.C.). We note that the said case dealt with read only memory of a computer circuit which is not programmable later. In other words, they are embedded firmware. The decision in the said case has no application to the present dispute.
4.4 The appellant relied on the judgment of the Hon'ble Apex Court in the case of CCE, Pondicherry Vs. Acer India Ltd. : 2004 (172) ELT 289 (S.C.). The Hon'ble Apex Court held that even operational software does not form an essential part of the hardware. In the present case, the device cleared by the appellant containing embedded software and has suffered duty along with the device. We are dealing with a software to retrieve data from the said device for monitoring and follow-up.
4.5 We note that the lower authorities have inter-mixed the embedded software with the customized software supplied latter for monitoring and data retrieval from the device. From the discussions above, it is clear that a devise should suffer Central Excise duty along with essential operating software which is part and parcel of the same. The same has been the case here. However, the software which is supplied separately for loading in the computer of the client linked to the devise for retrieval and monitoring of data cannot be considered as part and parcel of he said access control device.
5. In view of the above discussions and analysis, we set aside the impugned order and allow the appeal