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Central Excises and Salt Act, 1944: Section 5-A(1). Excise duty-Notification dated 1.3.1989-Exemption to computer software falling under heading 85.24. Central Excise Tariff Act, 1985: Schedule-Chapter 84 Headings 84.71 and 85.24-Note 5(a) and 6. Excise duty-Valuation-Computer-Software such as discs, floppies, CD-ROMs sold along with computers-Value of such software held not in-cludible in assessable value of computers. The question in these appeals is whether the value of software, such as discs, floppies, CD ROMs and the like (not the intellectual property recorded or stored thereon), also called software, that is sold along with the computer, was to be included in the assessable value of computers for the purposes of excise duty. The Customs, Excise and Gold (Control) Appellate Tribunal proceeded upon the basis that the appellant-assessee sold computer systems and that a computer system was incomplete without systems software inasmuch as mere hardware without systems software did not make the system workable. Accordingly it held that the exdse liability of the computer system had to be determined with reference to the computer system itself and for assessment of the computer system it was immaterial whether the software was a bought out item. In the assessment of the computer system an individual part lost its independent identity and became a part of the computer system. Against the judgments and orders of the Tribunal appeals were filed before this Court. Allowing the appeals and setting aside the impugned judgments and orders, this Court HELD : 1. In the first place, the Tribunal confused a computer system with a computer; what was being charged to excise duty was the computer. Secondly, that a computer and its software are distinct and separate is clear, both as a matter of commercial parlance as also upon the material on record. A computer may not be capable of effective functioning unless loaded with software such as discs, floppies and C.D. ROMs, but that is not to say that these are part of the computer or to hold that, if they are sold along with the computer, their value must form part of the assessable value of the computer for the purposes of excise duty. Thus, the value of software, if sold along with the computer, cannot be included in the assessable value of the computer for the purposes of excise duty. [272-A-B] Collector of Central Excise, Bangalore v. Sunray Computers Pvt. Ltd., (1988) 33 ELT 787, overruled. State of Uttar Pradesh v. M/s. Kores (India) Ltd., [1977] 1 SCR 837 and State of Mysore v. Kores (India) Ltd., (1970) 26 S.T.C. 87 (Mys.), referred to. Robert P. Biglow, Computer Contracts: Negotiating and Drafting Guide, referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 491 of 1989 Etc.

PETITIONER: M/S PSI DATA SYSTEMS LTD. Vs. RESPONDENT: COLLECTOR OF CENTRAL EXCISE DATE OF JUDGMENT: 17/12/1996 BENCH: S.P. BHARUCHA, S.B. SEN ACT: HEADNOTE: JUDGMENT: WITH (C.A. No.79/89 and C.A. No.6042/94) J U D G M E N T BHARUCHA. J.: These appeals against the judgments and orders of the Customs, Excise and Gold (Control) Appellate … Continue reading

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