TMI Blog2018 (6) TMI 639X X X X Extracts X X X X X X X X Extracts X X X X ..... spersed net work - No doubt, the Linux software is also preloaded into the multiplexer, however that is only an operating system amongst one of the many operating systems that are available worldwide to support the technologies like the digital net work management which the multiplexer sets out to do. The TEJNES software is thus an integral and indispensible to the multiplexer, without which the hardware cannot function. TEJNES software is an integral and indispensible requirement software, without which the multiplexer will have any functionality. The Operating System, Linux also loaded into the multiplexer cannot in any case by itself cannot make the multiplexer perform the functions it is required to do. The Ld. Advocate for the respondent has been at pains to contend to the contrary, however, no technical or expert evidence has been adduced to support those arguments. Thus, TEJNES takes the colour of “embedded software” - It is not a case of charging duty of software but it is a case of charging duty on the equipment which includes the value of such basic software. The TEJNES software has to be held as an integral and vital requirement of the multiplexers and as a softwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect that the TEJNES software is embedded software as per the system guide brought out by the assessee and that the software were installed at the factory before dispatch. ii) In the case of NCR Corporation India Pvt. Ltd. Vs CCE Pondicherry [ 2010 (251) ELT 380 (Tri.-Chennai) ] the Tribunal held that Loading of imported software on Automated Teller Machines (ARMs) amounts to manufacture and its value has to be included in assessable value of ATMs since they could not function without it immaterial whether the software was customized or packaged. iii) In the light of the various evidences as clearly brought out in the Statement of Facts of the SCN, the STM equipment viz. Multiplexers are preloaded with TEJNES software before dispatch and that the software being embedded into the equipment falling under Chapter Heading 8517, the value of the software must be integral part of the transaction value of the equipment and excise duty ought to have been paid as proposed in the SCN. iv) The adjudicating authority has failed to examine the merits of the issues involved and had in the face of differing opinions given by the customers of the assessee during cross examination exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Linux Software. v) While admitting that Multiplexers and TEJNES software billed separately, ld. Advocate also submits that separate Annual Maintenance Contracts (AMCs) are drawn up for hardware as well as TEJNES software separately. vi) Ld. Counsel relied upon the following case laws :- 1) ITI Ltd. Vs CCE Calicut 2009 (233) ELT 277 (Tri.-Bang.) 2) Vodafone Essar Gujarat Ltd. Vs CC (Imports) Mumbai 2009 (237) ELT 458 (Tri.-Mumbai) 3) CCE Pondicherry Vs ACER India Ltd. 2004 (172) ELT 289 (SC) 4) PSI Data Systems Ltd. Vs CCE 1997 (89) ELT 3 (SC) 5) Anjaleem Enterprises Pvt. Ltd. Vs CCE Ahmedabad 2006 (194) ELT 129 (SC) 6) Siemens Ltd. Vs CCE ST Pondicherry CESTAT Chennai Final Order No.40233/2018 dt. 29.01.2018 4. Heard both sides and have gone through facts and records. 5. The issue that comes up for decision is in a very narrow compass namely whether the value of the TEJNES software loaded into / supplied along with multiplexers is required to be added to the value of multiplexers manufactured and cleared by the appellants for the purpose of arriving at assessable value and discharge of Central Excise duty. 6. The adjudicating author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oil and gas companies etc) for their internal communications over optical fiber. Optical multiplexers are widely deployed in national optical fiber networks rolled out by defence, central and state governments both in India and aborad. The said equipment works on optical fiber and comes in different capacities and sizes and are installed at multiple locations in telecom networks such as at cell towers, exchanges, business premises and data centers. As per the website www.efxkits.com, A multiplexer is a device that allows one of several analog or digital input signals which are to be selected and transmits the input that is selected into a single medium. Multiplexer is also known as Data Selector. A multiplexer of 2n inputs has n select lines that will be used to select input line to send to the output. Multiplexer is abbreviated as Mux. MUX sends digital or analog signals at higher speed on a single line in one shared device. It recovers the separate signals at the receiving end. The multiplexer boosts or amplifies the information that later transferred over network within a particular bandwidth and time. The website also further informs that A4-to-1 multiplexer cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Network Management Protocol (SNMP) interface that enables Element Management Systems (EMS) to provide centralized monitoring and control of network elements in a geographically dispersed network. Since SNMP is an industry standard protocol to manage network devices and elements. TejNES provides connectivity to industry leading network management systems, including Tejas own Tejas Element Management Systems (TejEMS) 8.4 EEPROM software Paragraph-5 of the show cause notice has brought out that Tejnes software was programmed in EEPROM. Wikipedia has thus to say about EEPROM : EEPROM stands for Electrically Erasable Programmable Read-Only Memory and is a type of non-volatile memory used in computers, integrated in microcontrollers for smart cards and remote keyless system, and other electronic devices to store relatively small amounts of data but allowing individual bytes to be erased and reprogrammed. Unlike most other kinds of non-volatile memory, an EEPROM typically allows a byte (or a word) to be erased, and re- written individually, while typical flash memory erase some region in the device at once. 9. With this increased understanding of what would constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt are as under : 21.The above discussion, therefore, shows that EPROM cannot be compared to a floppy. As stated above, floppy is a dumb box. That is not the case with EPROM. EPROM is basically an integrated circuit or a chip. We agree with the department. EPROM is, therefore, classifiable as an integrated circuit under tariff item 85.42. 22. The question which remains to be answered is whether a programmed EPROM is a recorded media under CH 85.24. It was argued before us that like CD-ROM or a floppy which has a programme in it, EPROM is also a programmed device. It was argued that blank EPROMs were purchased in which the appellant embodied its programme and, therefore, the recorded EPROM constituted a recorded media under tariff item 85.24. 23. We do not find any merit in this argument. In a disk operating system, the basic input is stored in a ROM which is transferred to RAM when the system gets started. The input/output routines are written into the IC at the factory. The point to be noted is that the ICs which contain semiconductor components like diodes etc. have got to be embedded in the mother board. The ROM chip is fixed at the factory. The chip is fixed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the programmed EPROM was a ROM with a circuit in which the programme was embedded. Therefore, the judgment of this Court in the case of PSI Data Systems Ltd. (supra) is not applicable to the facts of the present case. In fact, in para 2 of the judgment of this Court in PSI Data Systems, this Court has made a clear distinction between softwares, such as, disks, floppies, CD- ROMs etc. on the one hand vis-a-vis softwares which are etched into the computer. Therefore, the judgment in the case of PSI Data Systems has no application. On the contrary, it supports our interpretation in the present case. 28. In the case of Sprint RPG India Ltd. (supra) this Court observed that hard disk is a refined form of floppy which records material in an efficient manner. In that case, the question was classification, namely, whether duty was leviable on software loaded on a hard disk drive under heading 84.71 or under 85.24. This Court held that a hard disk was a form of floppy on which the programme was stored and, therefore, the character of such a programme did not change and, therefore, the imported item was a software which was stored in the hard disk and, therefore, it was classifiable u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te status to classify it under 85.24 of CTA 1975 and excluded its value to arrive at the value of equipment. Respondents point out that the appeal filed against this decision has been admitted by the Hon ble Apex Court as reported in 2012 (286) ELT A175 (SC). However, the respondents also fairly submit that to the best of their knowledge, no stay has been granted by the Apex Court. 13. The CESTAT Mumbai Bench, on an identical case, had decided an appeal filed by M/s.Bhagyanagar Metals Ltd. in favour of the appellants therein [2007 (210) ELT 707]. Revenue had filed a Civil Appeal to the Supreme Court against the said order. Appeals against contrary decisions of CESTAT Bangalore on the same issue had also been filed in the Apex Court by other assessees. In their judgement dt. 15.10.2015, reported as 2015 (325) ELT 481 (SC), the Hon ble Apex Court inter alia, set aside the impugned decisions of the CESTAT in those appeals and remanded the matter back to the CESTAT with directions to constitute a Larger Bench and decide the matters afresh. Accordingly, a Larger Bench of the Tribunal was constituted, which decided the matter reported as Bhagyanagar Metals Ltd. Vs CCE Hyderabad-III - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as under : 5.12 The next question for consideration is with regard to the inclusion of cost of software which were downloaded and incorporated in the flash memory chip which was soldered onto the PCB of the STB. As per the literature available, flash memory is EPROM (Erasable Programmable Read Only Memory) and is an integrated chip. Thus, it is a rewriteable memory chip on which programmes are written with an external programming device before being placed on the PCBs. Thus, the flash memory is an integral part of the STB and therefore, its cost would include the cost of software loaded on to it. It is in this factual context, the decisions relied upon by the appellant have to be examined. The appellant has relied on the decisions of the Apex Court in the case of PSI Data Systems and Acer India Ltd. wherein it was held that software has independent existence and has to be classified separately as a recorded media falling under CETH 85.24. It is also contended that Note 6 to Chapter 85 also provides that records, tapes and other media of Heading 8523 or 8524 remain classified in those headings, when they are presented with the apparatus for which they are intended . The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Drive of the laptop forms an integral part of the laptop and therefore, the cost of such pre-loaded software forms part of the value of the laptop. Accordingly, the Hon ble Apex Court held that when a laptop is imported with inbuilt preloaded operating system recorded on the hard disk, the said item forms an integral part of the laptop and has to be classified as laptop and not as computer software separately. Applying the ratio of these decisions to the facts of the present case, it becomes abundantly clear that the cost of software which has been loaded on to the flash memory which in turn has been soldered onto the PCB of the STB forms an integral part of the STB and therefore, the value of the STB shall include the value of such software also . We do note that the appeal filed against the Larger Bench decision in Bhagyanagar Metals has been admitted by the Hon ble Supreme Court reported as 2016 (340) ELT A205 (SC). However, it is pertinent to note that Hon ble Apex Court has not stayed the Larger Bench decision. 14. Viewed in this light, the ratio laid down by Larger Bench will require to be followed by this Division Bench of the Tribunal. As already found in para-9, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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