TMI Blog2003 (8) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... value/transactional value of computers manufacturing and cleared by them on demand of duty w.e.f. 1-7-2000, which was required. It was the view of the department that the value of such operational software loaded on the computers and cleared when it was being done for the customers before removal, in connection with the sale of computers, by the appellants, it would form part of Transaction Value of the computers, as per the provisions of substituted Section 4 of the Central Excise Act, 1994 (effective from 1-7-2000). Certain other charges of violation of Central Excise Rules were also found and invoked in the two show cause notices issued. The same had been decided by the Commissioner, who after considering the material on record determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved from his factory. 3. The Commissioner, thereafter, distinguished the case of Hon'ble Supreme Court in the case of PSI Data Systems Ltd. [1997 (89) E.L.T. 3 (S.C.)] in as much as, in the facts of the present case, since operational software in question was pre-loaded or installed before being removed from the factory the question was not in relation to the inclusion of the value of software sold, with the computer, in the form of disks, floppies, CD Roms and the like. He concluded the valuation of the computers by coming to the following findings :- "As far as the question of inclusion or otherwise of the cost/value of the operational software (installed by the assessee on the computers before clearance from the factory) in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, under new Section 4, effective from 1-7-2000, and then noting that it was well-settled law that all those expenses incurred by the assessee, which enrich the value of the goods before their marketing are includible in the assessable value/transaction value of such goods for the purpose of levy of excise duty, he was of the view that the expression "by reason of sale" or "in connection with the sale" cannot be ignored in the scheme for values of goods under substituted Section 4 effected from 1-7-2000 and in this case, he held that undoubtedly, the pre-loaded operational software enriches the value of computers and therefore was required to be added. The Commissioner also came to the conclusion that classification of operational software ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered by show cause notice dated 8-8-2002. Hence, this appeal. 4. After hearing both sides and considering the material on record, it is found :- (a) The software, value of which and in decision thereof is in dispute is imported. It is not the software etched or burnt or what in the computer world is called as EEPROM (Electrically Erasable Programmable Read Only Memory)/BIOS software on the mother board of the computer. The software, in dispute, is admittedly operational software, loosely these could be referred to as operational/application software packages, commercially termed e.g. Windows-2000, Office-XP etc. They are not for running the computer per se, but are useful to run the programmes as desired by the user of the computer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal/Application. (c) Similarly, wherein cases at Sl. No. (iii), where Operational/Application Software is loaded and is supplied separately on a tangible like disc, floppy and CD Rom. The value of such tangibles cannot be reckoned for the purposes of duty under the Central Excise law. (d) As regards the clearances effected as at Sl. No. (iv) i.e. where the Operational/Application Software is loaded and not separately supplied on a tangible like disc, floppy and CD, the full value of such tangibles cannot be loaded by application of definition of 'Transaction Value' of the substituted Section 4 of the Central Excise Act, 1944. A reading of the definition of Transaction Value does not entitle the addition of the value of an accessory. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellants, the element of the cost of galvanization must form a part thereof." It was further contended that the total consideration being received for tangible Operational/Application software was, a fee, for the 'right to use' and not a sale price. The costs of loading were already included in the assessable value on which duties were determined. Both sides agree that more than one computer could be loaded by the said programmes as a technological possibility but it was not permissible in law. The supply of the tangible was being effected only to re-load the programme, in case of crash of computer, during usage. On considering this aspect and the case law and the facts, we would hold that it was only the cost for loading the Operational/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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