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TMI Blog2008 (2) TMI 717X X X X Extracts X X X X X X X X Extracts X X X X ..... red to pre-deposit the following amounts :- (i) Duty of Rs. 2,89,62,572/- demanded under proviso to Section 11A(1) of the Central Excise Act, 1944. (ii) Penalty equal to the above duty imposed under Section 11AC. (iii) Interest under Section 11AB. 3. S/Shri Arvind P. Datar, the learned Senior Advocate and B.N. Gururaj, the learned Advocate appeared on behalf of the appellant. Shri K. Sambi Reddi, the learned JDR, appeared for the Department. 4. We heard both sides. 5. In this case, the appellant, an approved supplier of Telecom Equipment to BSNL had successfully bid for supply of WLL CDMA equipment under back to back arrangement with ZTE Corporation of China. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract for avoiding duty on software value because even from the initial stage, price has been quoted separately for software and hardware as per the conditions prescribed in the bid document issued by the BSNL. BSNL is a Government undertaking and there is no question of any collusion with BSNL for evading duty. He also said that the Commissioner's finding that the software is actually a 'firmware' is wrong. He tried to make a distinction between 'firmware' and 'pre-loaded software'. The software in question is an application software and not system software. Being application software, its value is not includible in the value of hardware. In the Acer India case, the decision records the fact that in computer industry, it is a practice to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called software is actually etched on the flash memory chip of the mother board of the equipment and, therefore, it is an integral part of the equipment and in terms of the Acer decision, the entire value has to be taken for duty purposes. 8. On a very careful consideration of the issue, we find that the equipment supplied by the appellant to BSNL consists of both hardware and software. It is not under dispute that software is not subjected to Central Excise duty and covered by exemption notification. The fact that the software is embedded cannot make any difference. Nowhere, we find any ruling that if the software is embedded, its value should be included in the value of the hardware. We would like to quote para 55 of the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which answer the definition of "excisable goods" and satisfy the requirement of Section 3. In view of the above observations, prima facie, we do not find any justification for including the value of the software to the value of the hardware on the ground that it is firmware. There is no evidence to show that the value has been split up artificially. The appellant's contention that the pre-loaded software is only application software deserves serious consideration. It was also contended that in telecom industry, the value of software is normally high. Just for the reason that the software is pre-loaded, we cannot deny the exemption due to it. We cannot uphold the inclusion of the value of the software to the value of the hardware. In such ci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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