ANJLEEM ENTERPRISE PVT LTD Vs. COMMISSIONER OF CENTRAL EXISE
LAWS(SC)-2006-1-18
SUPREME COURT OF INDIA
Decided on January 16,2006

ANJALEEM EMTERPRISE PVT. LTD. Appellant
VERSUS
COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD Respondents


Referred Judgements :-

ROBERT GOTTSCHALK,ACTING COMMISSIONER OF PATENTS V/S. GARY R.BENSON [REFERRED TO]
OFFICE OF PATENT V/S. GALE [REFERRED TO]
PSI DATA SYSTEMS LIMITED VS. COLLECTOR OF CENTRAL EXCISE [REFERRED TO]
SPRINT RPG INDIA LIMITED VS. COMMISSIONER OF CUSTOMS I DELHI [REFERRED TO]
COMMISSIONER OF CENTRAL EXCISE PONDICHERRY VS. ACER INDIA LIMITED [REFERRED TO]



Cited Judgements :-

AIRCEL CELLULAR LTD. VS. COMMR. OF CUS. [LAWS(MAD)-2014-3-136] [REFERRED TO]
NATIONAL FERTILIZER LTD VS. BHAGWAN DAS PAL [LAWS(MPH)-2015-7-4] [REFERRED TO]
BHARTI AIRTEL LTD. VS. COMMISSIONER OF CUSTOMS, BANGALORE [LAWS(CE)-2012-6-24] [REFERRED TO]
MIC ELECTRONIC LTD. VS. COMMR. OF CUS. & C. EX., VISAKHAPATNAM [LAWS(CE)-2012-6-26] [REFERRED TO]
AVAYA GLOBAL CONNECT LTD. VS. COMMISSIONER OF C. EX., AHMEDABAD-III [LAWS(CE)-2007-3-60] [REFERRED TO]
AVAYA GLOBAL CONNECT LTD. VS. COMMISSIONER OF C. EX., AHMEDABAD-III [LAWS(CE)-2007-10-39] [REFERRED TO]
ITI LTD. VS. COMMISSIONER OF C. EX. & CUSTOMS, CALICUT [LAWS(CE)-2008-10-92] [REFERRED TO]


JUDGEMENT

S.H.Kapadia, J. - (1.)THE following two questions arise for determination in this civil appeal filed by the assessee under Section 35-L(b) of the Central Excise Act, 1944 (for short 'the Act'): (1) Whether a programmed or designed EPROM is an integral part of STD- PCO Unit; and (2) Whether the appellant herein was entitled to exemption under notification No.84/89 CE dated 1.3.1989 winch required the appellant to show that the programmed EPROM was a "recorded medium" under chapter heading 85.24 read with note 6 to Chap-ter 85 of the 1985 Tariff Act.
(2.)DURING the period October 1992 to March 1993 appellant was the manufacturer of STD-PCO unit. The said unit was a computer based equipment. The said unit was used to identify the time of the day and day of the week, the time when the telephone calls were made; to recognize whether the phone was on-hook or off-hook and to record the duration of a call.
The appellant filed classification list dated 29-5-1992 under which the appellant classified the above unit as an equipment under CH 85.17. In the said classification list, the appellant classified programmed memory chips, EPROM, under CH 85.21 and claimed exemption as a recorded medium under notification No.84/ 89 CE dated 1-3-1989.

Vide show-cause notice (for short 'SCN') dated 2-4-1993 the Assistant Collector (AC) stated that the programmed memory chip was an integral part of STD- PCO unit, without which the unit was nonfunctional. According to the SCN, the programme recorded in the memory chip, EPROM, could be used with STD-PCO unit only in a particular telecom region and, therefore, the said chip was an essential component of the STD-PCO unit. According to the SCN, the appellant was not entitled to the benefit of exemption as the said chip was not covered under CH 85.24 as claimed by the appellant. According to the department, the said chip was classifiable as an integral part of STD-PCO unit under CH 85.17. Accordingly, the department called upon the appellant to show cause as to why duty amounting to Rs. 21.50 lacs for the above period should not be recovered under section 11A of the Act.

(3.)AT this stage, we may clarify that on the question of extended limitation the appellant has succeeded and since the department has not come in appeal, we are not required to examine that aspect of the matter.
By reply dated 24-5-1993, the appellant submitted that it had imported EPROMs from abroad or it had obtained EPROMs from the open market. According to the appellant, empty EPROMs were subjected to programming by the appellant who had designed a programme which was loaded into the blank EPROMs. The appellant submitted that a computer software is a designed programme recorded on a media commonly called as a "recorded medium". Such recorded medium can be played in a computer or in any other system based on microprocessors. The appellant conceded that STD-PCO unit was classifiable as an equipment under CH 85.17, however, it contended that the programmed EPROM was a "recorded medium" classifiable under sub-heading 8524.90. According to the appellant, a programmed EPROM was classifiable only under sub-heading 8524.90 in view of note 6 to chapter 85, notwithstanding the fact that such recorded media was equipped with or without an apparatus. It claimed exemption under notification No.84/89-CE dated 1-3-1989, on the ground that the said exemption notification gave exemption to softwares falling under heading 85.24 from whole of duty of excise. In the circumstances, the appellant contended that the department was not entitled to include the value of the programmed EPROM in the assessable value of STD-PCO unit and that the unit was classifiable under heading 85.17 whereas the programmed EPROM was classifiable under heading 85.24. The appellant contended, inter alia, that sub-herding 85.24.30 covered recorded magnetic disks, such as a floppy containing a computer programme whereas all other types of recorded media stood covered under sub-heading 8524.90 and, therefore, even if a recorded EPROM was considered to be an integral part of STD-PCO unit the recorded EPROM was required to be separately classified under sub-heading 8524.90 in view of note (3 to chapter 85. According to the appellant, even if a particular component or a part was most essential for a machine, it was not always classifiable with the machine, if otherwise, the said component came under a specific head for its classification. In this connection, reliance was placed on note 2 to section XVI of the schedule to the 1985 Tariff under which chapter 85 falls. Therefore, according to the appellant, in the present case, the programmed EPROM was a recorded media which fell under a specific entry, viz., 8524.90 and, therefore, was not classifiable under heading 85.17. The appellant also confended that the programmed EPROM was a computer software under heading 85.24 and, therefore, the appellant was entitled to exemption under notification No.84/ 89 dated 1-3-1989.



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