LexANJALEEM ENTERPRISES PVT. LTD. versus COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD
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A ANJALEEM ENTERPRISES PVT. LTD. v. COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD JA1'.UARY 16, 2006 B [ASHOK BHAN AND S.H. KAPADIA, JJ.] Central Excise Act, 194./. Section 35UCentral Excise Tariff Act. 1985; Tariff Headings 85.17, 85.24 and 85.42: Note 6 lo Chapter 85 of the Act; Note C 2 lo Section XVI/Exemption Notification No.84189 dated 1.3.1989: Valuation-(:omputer based STD-PCO Uni/ with Programmed memory chip!EPROM-Levy of excise dury-Exemplion Notifica1ion--Applicabili1y of- Held: The subject mailer of !he levy is STD-PCO unit/the final product and no/ the programmed EPROM·--EPROM cunstitule parllcomponenl of the D complete unit--Price of the unit includes price of the componenlfor 1he purpose of assessing the value of 1he unit--Since the compl•:le unit cleared al factory gale includes ifs par1s!co111ponen1. £PROM dassifiahle under the same Tariff Heading 85.17--Hence Revenue rightly included 1he value of1he programmed £PROM in the assessable value of the unit. E Classificatio11-Progra111111ed £PROM -Tariff Heading 85.24 or 85.42- F G If Held: £PROM is basically a chip/Integrated C 'irrnil (IC) capahle of performing various functions-IC makes a programme work when fixed in a Computer, hence classifiable under the Tariff Heading 85.42- .Since software plays a dominant role in the working of floppy, a recorded media, ii is classifiable under the Tariff Heading 85.24·-Hence. Revenue rightly held that the Exemption Notification not applicable since £PRUM is not a recorded media classifiable under Tariff Heading 85.24. Valuation--lngredients of-Discussed. IC/Chip vis-a-vis Floppy--Distinclion between. IC. Mother Board. £PRUM-Meaning of The questions which arose for consideration in this appeal filed by the assessee, manufacturer of STD-PCO Unit, were as to whether a 400 'J J --\ A\JALEE~1 E\TERPRISES P\'T LTD. r. COMMR. OF CENTRAL EXCISE. AllMEDABAD 40] programmed or designed EPROM is an integral part of STD-PCO unit A for the purpose of levying of Excise duty; and as to whether the assessee was entitled to exemption from payment of the excise duty in terms of the Exemption Notification No. 84/89 dated 1/3/1989. In order to claim exemption Notification, assessee was required to show that the programmed EPROM was a recorded medium classifiable B under Tariff Heading 85.24 read with Note 6 to Chapter 85 of the Central Excise Tariff Act. Al)pellant-assessee contended that the ST D-PCO unit was classifiable under CH 85.17 as electrical apparatus for line telephony; that C the said equipment has an inbuilt microprocessor classifiable under CH 84.71; that in order to perform various tasks, the microprocessor requires a software/programme and the programme in question was developed by the assessee; that the programme was recorded on EPROM (a medium) classifiable under CH 85.42 as an integrated circuit; that he encoded the programme developed by him on the blank EPROM, which programme D could be erased from ultra violet radiation; that the EPROM was not classifiable under CH 85.17 and accordingly, its value was not includible in the total assessable value of STD-PCO unit, because once a software stood recorded on the blank EPROM, the blank EPROM no longer be considered as an electronic integrated circuit; and that the essential character of the recorded EPROM was that of computer software E classifiable under Chapter Heading 85.24 as a recorded media. Revenue submitted that note 6 to chapter 85 of the Act was 1oot applicable to the computer-based device/STD-PCO unit, the final product; that as a programmed EPROM constituted an integral part of the STD- PCO unit, it did not fall under Chapter Heading 85.24; that the final product cleared from the factory gate of the assessee was STD-PCO unit which contained "the recorded EPROM"; that since the programmed ICs/ EPROM were integral parts of the STD-PCO uni'ts, the assessee was not entitled to claim exemption under notification no.84/89. Dismissing the appeal, the Court HELD. I.I. In the matter of valuation, one of the important aspects to be taken into account is the condition of the goods/product at the time F G the goods leave the factory. In the present case one has to see at the "condition" of STD-PCO unit at the time of clearance and, therefore, the H 402 SUPREME COt:Rl REPORTS !2006] I S.C.R. A issue which arises for consideration, in the first instance, is whether the recorded EPROM was an es
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