2003(10)LCX0219
IN THE CESTAT, SOUTH ZONAL BENCH, CHENNAI
S/Shri S.L. Peeran Member (J) and Jeet Ram Kait, Member (T)
VOICEWARE SYSTEMS LTD.
Versus
COMMISSIONER OF CUSTOMS, CHENNAI
Final Order Nos. 803-804/2003, dated 1-10-2003 in Appeal Nos. C/126/2001 and 14/2002
CASE CITED
Bay Talkitec Pvt. Ltd. v. Commissioner — 2003(06)LCX0113 Eq 2003 (156) ELT 0980 (Tri. - Chennai) — Followed [Paras 3, 5]
REPRESENTED BY : Shri Habibullah Badsha, Sr. Advocate and Ms. Kalpana Murari, Advocate, for the Appellant
Shri A. Jayachandaran, DR, for the Respondent.
[Order per : S.L. Peeran, Member (J) (Oral)]. - In both the connected appeals by the same party, the issue is common. They had imported Voice Processing Boards/Voice Fax Processing Boards from M/s. Dialogic Corporation, USA. They claimed assessment of the goods as parts of computer under chapter sub-heading 8473.30. The goods were assessed based on the declaration relied by the importer. In another Bill of Entry No. 189615, dated 12-1-2000. They declared the goods as Springware Software and the same was pending in assessment for want of “technical catalogue”. They claimed assessment in respect of this item under sub-heading 8524.99 of the Customs Tariff Act with benefit of Notification No. 20/99-Cus. (Sl. No. 231). However, the department after due examination did not accept their claim and initiated proceedings for reassessment of the goods. The appellants vide their letter dated 22-11-2000 waived the issue of show cause notice. However, they requested for a personal hearing and contended that their declaration and their claim for benefit of notification is justified. The department proceeded on the basis that the items are not software but they are parts of Telephony System for classification under chapter heading 8517.90 and it has not been granted benefit of notification. The appellants were burdened with differential duty besides imposition of penalty under Section 114A of the Customs Act besides interest on the ground that they misdeclared the goods. This order has been passed in Order-in-Original No. 4/2001 Commr. (Air) dated 6-1-2001.
2. In appeal C/14/2002, the Commissioner of Customs (Air) in Order-in-Original No. 41/2001 (ACC), dated 9-10-2001 has again ordered for assessment of same goods “Springware Software” as parts of “Telephony Systems” under chapter heading 8517.90 without benefit of notification claimed by the appellants. Their duty has also been confirmed besides imposition of penalty. The goods were also ordered to be confiscated. However, it was directed to be released on payment of redemption fine of Rs. 2 lakhs.
3. Ld. Senior Counsel Shri Habibullah Badsha along with Ms. Kalpana Murari appeared in the matter and submitted that in the like matter, in the case of M/s. Bay Talkitec Pvt. Ltd. v. CC, Chennai vide Final Order No. 511/2003 dated 20-6-2003 [reported in 2003(06)LCX0113 Eq 2003 (156) ELT 0980 (Tri.-Chennai)], this Bench have decided classification of the same item supplied by the same supplier under Tariff heading 8524.99 read with Notification No. 20/99. Ld. Sr. Counsel presented a copy of the order rendered in the case of M/s. Bay Talkitec Pvt. Ltd. and relied on the entire findings recorded therein. He submits that they rely on the same evidence in the present case also. However, their claim was not accepted by the department. He submits that since the judgment has been rendered in the case of Bay Talkitec Pvt. Ltd. (supra) which has already settled the issue, applies on all fours to the facts of the present case and the same is not distinguishable. He submits that the item is not part of Telephony Equipment but it is software required to be classified under that heading which is 8524.99 read with benefit of notification. He submits that like order may be passed in the present case also.
4. Shri A. Jayachandran, ld. DR submits that although there is an order recorded on the same facts but the Revenue has not accepted the same and are contemplating to file an appeal before the Apex Court. He submits that the item is not software but it continues to be remained as parts of telephony system. He clarifies that although a portion of the item, if considered to be hardware and another portion as software but in the overall facts and circumstances, the benefit of the notification cannot be extended to the said goods which have been supplied as a package. He refers to the arguments addressed by learned SDR in the earlier case referred to by ld. Senior Counsel noted above.
5. On a careful consideration of the submissions, we notice that the citation referred to by ld. Sr. Counsel is directly applicable to the facts of the case and the same is not distinguishable for the reason that the item is same and supplied by the same supplier. The entire technical evidence adduced in the case of Bay Talkitec Pvt. Ltd. reported in 2003(06)LCX0113 Eq 2003 (156) ELT 0980 (Tri.-Chennai) has been considered and a clear finding has been recorded that the item is not part of telephony equipment but a software and eligible for the benefit under Notification No. 20/99 and 23/98 in the respective serial numbers. The findings recorded in Paras 8 to 21 are extracted herein below and the same are hereby followed :-
“8. We have carefully considered the submissions made by both sides and have perused the order. It is seen that the appellants had filed the Bill of Entry in February, 2000 on the basis of entire material and other details claiming the benefit of Notification No. 20/99 under Sl. No. 231 at Nil rate of duty under the Tariff Heading 8473.30 as parts and accessories of the machine of Heading 84.71 in respect of computer software, Dialogic System Software, the claim was under Heading 8524.99 as “Other” under the heading “Records, tapes and other recorded media for sound or other similarly recorded phenomena, including matrices and masters for the production of records. The department has assessed the same and had cleared for home consumption except for a few of the software which had been kept in the warehouse. Subsequently, the department took up the investigation and proceeded to issue show cause notice on the ground that they are all parts of line telephony instrument classifiable under sub-heading 85.17 as electrical apparatus for line telephony or line telegraphy etc. and proposed to deny the benefit of Notification Nos. 20/99 and 23/98 (Sl. No. 206) in which the item had been declared with Nil rate of duty. The further ground was that total package value was bifurcated/split as Hardware/Software value for the purpose of evading customs duty to the extent of 70% of the total FOB value. It was also alleged that subject hardwares were declared as PPCBs of Personal Computer and claiming CTH 8473.30 as a part of computer which is not correct while the item is required to be used for processing the voice in conjunction with line telephone and thus are to be classified under 8517.90 as part of line telephony instruments. The appellants had given various judgments in their support including the technical data and opinion to sustain the argument that there is no misdeclaration and the item was not parts of electrical apparatus for line telephony or line telegraphy etc. under tariff Heading 85.17. However, the Commissioner has only read the catalogue which did not form the basis of show cause notice and upheld the charge without even considering the opinion given by the Professor & Head of Department (ECE), Regional Engineering College, Warangal and the Business Development Manager, Intel Asia Electronics whose opinion were produced before the Commissioner and had been recorded in the order. It is the contention of the appellants that the opinion obtained from these authorities clearly supports their case which requires to be accepted. Counsel pointed out that the issue is covered in their favour in terms of the Apex Court rendered in Spring RPG India Ltd. v. CC-I, Delhi (supra); Tribunal’s judgment rendered in the case of Barber Ship Management India Pvt. Ltd. v. CC, ACC, Mumbai; BPL Telecom Ltd. v. CC, Cochin and that of Jindal Aluminium Ltd. v. CC, Bangalore (supra).
9. On a careful consideration of the submissions of the material on record, we are required to analyse the expert opinions furnished by the appellants which is reproduced as below :
The opinion given by the Professor & Head of Department (ECE), Regional Engineering College, Warangal which is at Page 89 is reproduced herein below :-
No. ECE/2002/0288 Dated : 21-1-2002
To
Bay Talkitec (P) Ltd.
No. 42, Sardar Patel Road
Opp. Raj Bhavan Telephone Exchange
Guindy, Chennai - 600 032
Sir,
Sub. : Clarification on Dialogic Card.
With reference to the above, I have gone through the data sheets pertaining to Dialogic Card and also the Software CD of Dialogic Corporation. On going through the same, I conclude that the Dialogic Board does not have any Non-Volatile storage devices such as EPROMs or PROMs on it. Hence, there is no way that the firmware can be stored on the board.
However, the board is having Read Write Memory (RAM) on it. Due to this reason, it cannot store software, whenever the power is switched off. It is confirmed that the Firmware has to be down loaded into the on board RAM (Read Write Memory), whenever required.
To answer your specific question as to whether the board can come with the software, my answer is No.
This is for your information.
The question and answer given by the Business Development Manager of Intel to the appellants in respect of goods have already been brought out by the Counsel in the arguments and noted down supra which clearly described that the item springware is not embedded software and what is given in the data book is more of a jargon and it is not technically correct. The data book also calls springware as downloadable firmware and that it is definitely not embedded on to the voice/fax processing boards. Further clarification given by M/s. Intel was that the pricing for hardware and software was more than as a marketing strategy and the pricing policy was decided by the Management of Dialogic and it was not a customer’s specific. There are various clarifications given to show that this item is computer software and not part of line telephony instrument. The Commissioner ought to have taken the certificates produced by the party, while recording the findings. The details furnished in the catalogue was not relied in the show cause notice and the Commissioner ignored these two pieces of evidences which were before her which clearly shows that the impugned order is not at all correct one and the order requires to be set aside. The opinion given by Dr. N.S. Murthy, Prof. & Head of Department of ECE, Regional Engg. College, Warangal also satisfies the question that the item is not a part of Line Telephony Instrument. He has clarified that Dialogic Board does not have any Non-volatile storage devices such as EPROMs or PROMS on it and that there is no way that the firmware can be stored on the board.
10. The Commissioner ought to have obtained the opinion from National Informatics Centre (NIC) with regard to the items as per Board’s Circular which has not been done. The appellants have obtained the same and have produced the same before us, which is reproduced herein below :-
Sub. : Clarifications regarding Dialogic Board and Software.
Ref. : Your letter dated 21-2-2003.
This has reference to the above letter seeking clarifications on the Dialogic Board Software used in the IVRS Systems. Following are the answers to your queries :
1. Can the Dialogic Voice/Fax cards work without a PC?
Ans : As these cards are ADD ON cards and taking power from the PC, these cards cannot work without a PC.
2. Does the Dialogic Voice/Fax Boards come with software embedded on to the board itself?
Ans : The Dialogic software comes on CDs and this gets downloaded on to the RAM of the card on an appropriate command. Since this card does not have a permanent storage device the software cannot be embedded on to the card.
3. Can the Dialogic Voice/Fax Boards work without the software (Springware) given in the CDs?
Ans : No. The “Springware” Software given in the CD is required to be downloaded during the use.
4. Does the Springware software gets downloaded when the PC is Powered ON and appropriate command given?
Ans : Yes, the software gets downloaded when the PC is powered ON either from CD or Hard disk when appropriate command is given.
5. Once the Dialogic board is powered off by switching off the PC on which it is installed, can the board retain the software?
Ans : Dialogic Card cannot retain the Software when the PC is powered off as there is no permanent storage device on it.
11. The opinion of BSNL furnished by appellants is as follows :-
Sub. : Clarifications regarding Dialogic Board and software.
Ref. : Your letter dated 22nd February, 2003 on the subject.
With reference to your letter seeking clarification on the Dialogic Board software used in the IVRS systems you have supplied to Bangalore Telecom District the following clarifications are offered :
1. Can the Dialogic Voice/Fax Boards work without a PC?
Ans : Dialogic Voice/Fax boards are PC add on cards. The power supply itself is derived only from the PC and the interface connector is a PC bus connector. The card has to be plugged into the PC for working. There is no way the Cards can work without a PC.
2. Does the Dialogic Voice/Fax boards come with software embedded on to the board itself?
Ans : The software comes on the CDs. Once the card is plugged into the PC and software is installed from the CD, on appropriate command the software gets downloaded on to the RAM of the board. Since the board does not have any permanent storage device, the software cannot be embedded on to the board.
3. Can the Dialogic Voice/Fax Boards work without the software (Springware) given in the CDs?
Ans : No, the boards cannot work without the springware software on the CDs. The entire intelligence to the board is provided in the software, which come in the CDs.
4. Does the Springware a software gets downloaded when the PC is powered ON and appropriate command given?
Ans : Yes, the software gets downloaded when the PC is powered ON and appropriate command is given. It is also possible to load the version of the software, power the PC OFF and load a different version of the software.
5. Once the Dialogic board is powered off by switching OFF the PC on which it is installed, can the board retain the software?
Ans : As mentioned earlier the board does not have any permanent storage device which can store the software. Each time the software gets downloaded when the board is powered ON.
12. We also extract the opinion of South Central Railways obtained by appellants as follows :-
TO WHOMSOEVER IT MAY CONCERN
This is to clarify on the technical specification of Dialogic Voice/Fax cards. To the best of my knowledge, the information given below is correct.
1 Can the Dialogic Voice/Fax Boards work without a PC?
No. The Dialogic/Voice Fax boards cannot work without PC. Dialogic Voice/Fax boards are Add on cards for PC. The power supply for these boards is derived only from the PC and the interface connector is a PC bus connector. The card needs to be plugged into the PC for working.
2. Does the Dialogic Voice/Fax boards come with software embedded on to the board itself?
The software is supplied on the CDs. Once the card is plugged into the PC and software is installed from the CD, the software gets downloaded on to the RAM of the board, through a command. As the board does not have any permanent storage device, the software cannot be embedded on to the board.
3. Can the Dialogic Voice/Fax Boards work without the Software (Springware) given in the CDs?
No, the boards cannot work with out Springware software, that comes along with Dialogic Card in the form of a CDs. The board derives its intelligence only from the software provided on the CD.
4. Does the Springware software gets downloaded when the PC is powered ON and appropriate command is given?
Yes. The software gets downloaded when the PC is powered ON and appropriate command is given. It is also possible to load one particular version of the software, switch OFF the PC and load a different version of the software.
5. Once the Dialogic board is powered off by switching OFF the PC on which it is installed, can the board retain the software?
No. Dialogic Card cannot retain the Software when the PC is powered OFF. Because, the board does not have any permanent storage device which can store the software. So, whenever PC is powered ON along with Dialogic Card present in it, the software gets downloaded into RAM present on the board itself. The software thus loaded will be lost when the board is powered off.
13. On a cumulative reading of technical details furnished, it is clear that the item is a computer software and parts thereof which are required to be classified under the heading provisionally assessed by the department as claimed by the party. They are not parts of Line Telephony Instrument. The same item came up for consideration before the Apex Court in the case of Sprint RPG India Ltd. v. CC-I, Delhi (supra). In that case also the valuation on the entire software had been assessed at a very high value so also in the present case. The Apex Court has gone into great detail on all aspects of the matter and upheld the classification as claimed by the party and held that the item cannot be classified as part of the hardware.
14. So also in the case of Barber Ship Management India Pvt. Ltd. v. CC, ACC, Mumbai (supra) which has since been approved by the Apex Court, the Tribunal has clearly held that storage device with software recorded thereupon is classifiable under Heading 85.24 of the Customs Tariff Act, 1975 and eligible for the benefit of Notification No. 23/98. The Tribunal have ruled out the classification as parts under 84.71.
15. Similar view was expressed by the Tribunal in the case of BPL Telecom Ltd. v. CC, Cochin (supra), wherein the very item came up for classification and the Tribunal upheld the classification as claimed by the party.
16. In the case of Jindal Aluminium Ltd. v. CC, Bangalore (supra), the Tribunal rejected the claim of the department for classifying the parts of data processing unit as part of machines incorporating or working in conjunction with an automatic data processing machine and held that they are not to be classified under Heading 84.71.
17. The judgment rendered in CC, New Delhi v. HCL Hewlett Packard (supra) pertaining to the classification of Sound blaster cards work as accessories to computer under chapter sub-heading 8473.30 of CTA, 1975 and the finding is that it is not covered under sub-heading 8519.99. This citation also applies to the facts of this case.
18. The Commissioner is not justified in disregarding the technical opinion furnished by the appellants and such disregarding of expert opinion has not been approved by the Madhya Pradesh High Court as rendered in the case of Panama Chemical Works v. UOI (supra); Mangal Textile Mills Pvt. Ltd. & Anr. v. UOI (supra); Medwin Imageology Center Ltd. v. CC, Hyderabad (supra) and that of Life Line Systems Pvt. Ltd. v. CC, New Delhi (supra).
19. We also agree with the ld. Counsel that in the present case the extended period of limitation is not invocable when the split up value of the item had been furnished and there was no challenge to the valuation taken up by the department. The valuation has been accepted. Therefore, it cannot be held that there was any suppression in the matter. In this regard, the citation referred to by the Counsel is applicable i.e. Tata Infotech Ltd. v. CC, Mumbai/New Delhi (supra).
20. The order of confiscation is also not sustainable in the light of the judgment rendered by this Bench in the case of CCE, Madras v. Aradhi Associates (supra).
21. In that view of the matter, the contention of the appellant is accepted and the impugned order is set aside by allowing the appeal with consequential relief, if any. Ordered accordingly.
6. Respectfully following the ratio of our earlier order, the impugned orders are set aside and both the appeals are allowed with consequential relief, if any.
Equivalent 2004 (178) ELT 0301 (Tri. - Chennai)