2005(07)LCX0215

IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI [COURT NO. II]

S/Shri S.S. Kong, Vice-President and C.N.B. Nair, Member (T)

Hewlett Packard India P. Ltd.

Versus

Commissioner of Customs, (I & G), New Delhi

Final Order No. 693/2005-Cus. (PB), dated 4-7-2005 in Appeal No. C/72/2004-B

Departmental Clarification Quoted

C.B.E. & C. Circular No. 51/2002-Cus., dated 12-8-2002 [Paras 4, 6]

Advocated By -

Shri B.L. Narasimhan, Advocate, for the Appellant.
Shri P.K. Rai, DR, for the Respondent.

[Order per : C.N.B. Nair, Member (T)]. -

The issue raised is the classification and assessment of software imported along with printer. The appellant claimed classification and assessment of the software under Heading 85.24 and classification and assessment of the printer under Heading 84.71. Under the impugned order, classification of both software and printer has been ordered under 84.71. The present appeal challenges that order.

2. Appellant's claim for classification is based on Note 6 to Chapter 85. That Note reads as under:-
"Records, tapes and other media of Heading 85.23 or 85.24 remain classified in those headings when presented with the apparatus for which they are intended.
This Note does not apply to such media when they are presented with articles other than the apparatus for which they are intended".

3. The claim of the appellant is that the software was intended for the printer. This claim was rejected in the impugned order with the following observations :-
"8. On facts, there is no dispute. The impugned item is software contained on CD ROM which accompanies Printers etc. imported by the appellant. Whenever these printers are connected to a computer for the first timer, the CD ROM is inserted into that Computer and the contents (Printer Driver) are transferred to the storage device fitted in that computer. The CD ROM is then removed and is not required again till the time the printer is not removed from that computer. It is abundantly clear to me that this CD ROM will always be sold with the Printer (the two of them forming a package for retail sale that the CD ROM cannot be inserted into the printer. I am therefore of the considered opinion that the CD ROMs are intended for the Computer to which the printer is to be attached. The CD ROMs are not intended for the printer. As such, I am of the considered opinion that the CD ROMs and the software contained thereon would be classifiable along with the printer (with which they make a package for retail sale) in terms of General Interpretative Rule 3(b). I notice that appellant have themselves accepted this position, willingly and in writing by foregoing the claimed Notification benefit in the case of a few Bills of Entry two of which have been cited in the impugned order and also in Para 2 above. It is apparent that their own stand is not constant/consistent and can be self-contradictory according to the exigencies of the situation. I am unable to accept this reasoning. Overall, I find myself in complete agreement with the lower authority and uphold the impugned order".

4. In the present case, the submission of the appellant is that the software in question is specifically for the printer. The system works like this. The software is loaded on the computer and upon that, the printer and the computer become compatible and the printer would print out materials as instructed by the computer. The Counsel has submitted that Commissioner was in error in holding that the software was not for the printer since it cannot be loaded on the printer. According to the Counsel, what is relevant is not whether the software can be loaded on the printer itself but whether the software is for the printer. He has further submitted that this position remains settled by the clarification contained in Paras 3 and 4 of Circular No. 51/02-Cus., dated 12-8-2002. Those paras read as under:-
"3. It appears that the doubt has been raised on account of the words, "those headings" mentioned in Chapter Note 6 to Chapter 85 of the Customs Tariff. A plain reading of Note 6 as it stands, makes it amply clear that the reference to "those headings" in this Chapter Note refers to headings "85.23 or 85.24"and not to the headings of the equipment/apparatus. Therefore, the question of software being classified under Headings/sub-headings applicable to equipment/apparatus for which it is intended does not arise. A comparison of the revised Chapter Note 6 with the Chapter Note 6 as it stood prior to the amendment would reveal that the objective of the amendment was to restrict the coverage of software contained in media under CTH 85.23 or 85.24 only to such of those software which is presented along with the apparatus for which it is intended. Prior to the amendment, regardless of whether or not such software was intended for the apparatus along with which it was presented, the classification remained under CTH 85.23 or 85.24.

4. This aspect is clear from the remarks column of the Correlation Table which compares the changes between the HS-1996 and HS-2002 version. It states that -
"Records, tapes, etc. presented with articles other than the apparatus for which they are intended can be classified with these articles if they constitute a set".
Hence it is evidently clear that the revision in the above Chapter Note was effected keeping in view the situations where recorded media (audio cassette, video cassette, software on floppy/CD etc.) was imported along with merchandise for which it is not intended, e.g. a book, which as a set would form educational material for retail sale. The earlier Chapter Note posed difficulty in classifying such goods. The amendment has been effected to solve this difficulty". .

5. We have perused the records and heard learned DR also.

6. It is clear from the Note to Chapter 6 (sic) [Note 6 to Chapter 85] that the 'media' when presented along with apparatus for which it is intended has to be assessed as media. In the present case, it is clear that the media in question (software) is for the printer inasmuch as the media makes the printer for which it is meant compatible with computer. Therefore, classification continues to be according to its identity under Heading 85.24. This position remains clarified by the Board's circular also.

7. In the present case, the media has been imported along with printers and remains separately entered in the invoices. Prices are also indicated separately.

8. In the factual and legal situation noted above, the correct classification of the media in question is under Heading 85.24. It was also required to be valued separately and assessed. The order to the contrary is not sustainable.

9. In view of what is stated above, the appeal is allowed after setting aside the impugned order, with consequential relief, if any, to the appellants.

(Pronounced and dictated in the open Court).

Equivalent 2006 (193) ELT 0490 (Tri. - Del.)