TMI Blog1999 (12) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... h as telephone number called, duration of the call and charges payable. They also apply, according to the telephone tariff in force, the amount and, depending upon the time of the call and place of call, the rate per unit of time for the call. For carrying out such calculation, the appellant's equipment contained information encoded on eraseable programmable read only memory (EPROMs for short). For the purpose of this appeal, it is not necessary for us to go into the details of this article, except to say that it is a chip made of silicon or similar semi conductor material, which has been so manufactured as to contain a large number of integrated circuits. The EPROMX can be initially programmed with fresh data and subsequently reprogrammed with fresh data, after erasing the initial data. 3. The appellant does not manufacture unrecorded EPROMs but purchases them and records the data required on them. 4. The appellant did not include in the value of the STD/PCO units manufactured by it, the cost of the recorded EPROMs. The assessee took the view that these were classifiable under Heading 8524.90 of the Central Excise Tariff, and exempted by Notification 84/89-C.E., dated 1-3-1989 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be classified under Heading 8524 and should be computer software. The Supreme Court's judgment in PSI Data System v. CCE - 1997 (89) E.L.T. 3 is cited in support of the contention that software is exempted from duty. 7. It is contended in Appeal E/1186/96 that the demand is barred by limitation. Classification claimed by the appellant under Heading 85.24 with the benefit of notification has been approved, the details of the programming performed on the integrated circuits had been communicated to the department. Therefore, the larger period will not apply. Amounts collected in the form of extra freight and insurance but not actually incurred cannot be added to the assessable value. The Supreme Court s decision in Baroda Electric Meters v. CCE - 1997 (94) E.L.T. 13 is cited. 8. The departmental representative contends that the machine has always been cleared fitted with EPROMs and cannot function without EPROMs and cites statements of PC Patel, ex employee of the appellant and DR Patel, ex-employee of the appellant. Therefore, its value has to be included in the value of the machine and its classification separately would not arise. He alternatively contends that Heading 8524 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the final cost of the machine and hence its assessable value. There can equally hardly any dispute that the manufacturer takes into account in deciding the cost of the goods manufactured by it, the cost incurred by him for its manufacture to which would no doubt add a reasonable margin of profit. No manufacturer otherwise be in business. Therefore, unless the sale price of the machine is arrived at (as may be in exceptional circumstances by order or for the purposes required by law) on a basis entirely independent of the cost of manufacture and of parts, it is reasonable to conclude that the EPROMs will form part of the final cost of the machine. 12. The other argument against this is that the goods are classifiable under Heading 85.24 and that therefore by virtue of Note 6 to this chapter the goods are to be separately classified under Heading 8524 and that since the software is exempted, that the Notification 84/89 exempting the software will apply. It is in this context that the Supreme Court s decision in PSI Data Systems v. Union of India is cited. 13. This Heading 85.24 is clearly for recorded media. Heading 85.23 is for prepared unrecorded media of sound recording or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y modern machines, for example, washing machine, mechanical appliances etc. This was, in fact, one of the arguments of the appellant that each of them is a computer. This argument has to be accepted. 16. However, Explanatory Note 2 to Heading 8471 for automatic data processing machine and units thereof excludes from its classification integrated circuits functioning as microprocessor which it indicates shall be classified under Heading 85.42. This is an example of an integrated circuit which, although it might be classifiable under Heading 84.71 in terms of its function, is required to be classified not under that heading but under Heading 85.42 in conformity to Note 5 of Chapter 85. This is an example of the manner in which that note has to be applied. The conclusion therefore is that this EPROMs whether recorded or unrecorded fall under Heading 85.42. 17. The conclusion that follows from this is that the exemption available to software in the notification in question will not apply to these goods. It cannot be disputed, and nor was it disputed before us by the departmental representative that what is recorded on these goods is software. However, the exemption at the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt, the Supreme Court used the term computer , and strictly speaking, the microprocessor is a computer. Sufficient data to this effect was produced. However, the microprocessor with which we are concerned with, and the goods similar to it, are distinct from the computers software of which was the subject matter of the Supreme Court's judgment. Each of the computers by itself is a distinct and separate entity, distinct from the software. Each of them can be put diverse uses for different purposes using different software designed for a particular purpose. Microprocessors, with which we are concerned, can not be so used. Each of them is programmed to perform a particular function and that function cannot be altered. Thus, the microprocessor fitted into a washing machine has a programme which will enable it to be used only for that purpose. It cannot, at all, be used for any other purposes. The information required to operate the machine is recorded on the chip, and fitted into the washing machine at the time of its manufacture. Therefore, while, strictly speaking, microprocessor is a computer, it is not a data processing system of the type classifiable under Heading 8524. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing month that is the date on which monthly RT-12 returns showing clearing of these goods required were filed) as specified in the Explanation to Section 11A of the Act. The notice cites the extended period contained in the proviso to Section 11A of the Act on the ground of intention to evade duty on the STD/PCO machine by suppressing the real value of the product. Now, the classification list filed by the appellant for the years from 1988 claiming classification of the product under Heading 85.24 with the benefit of Notification 84/89 had been approved by the department. The Department was therefore fully aware that the appellant claimed classification of the goods differently from the main machine in which it was fitted. The relevant information required for assessment therefore had not been suppressed; nor could it be said in these circumstances that there was an intention to evade payment of duty. There can be no evasion since the goods were removed in pursuance of an approved classification list. The demand for this part of the period would therefore be barred by limitation. Further, by applying the ratio of the Supreme Court in CCE v. Cotspun Ltd. - 1999 (113) E.L.T. 353 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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