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2023-TIOL-1063-CESTAT-BANG
CC Vs Kronos Systems India Pvt Ltd
Cus - The Assessee-company imported ' 553 series for 4500 Full A/N Prox. Exp Memory ' - The importers had claimed that this item was to be part of computer and accordingly classified items under Chapter Heading 8473 3020 as part of the computers - On examining the samples, the operation manual and the catalogue of the goods, it was found that the item imported was described as data collection device - There are known as kronos 4500 Touch ID terminal chips with an integrated badge reader - It has integrated bar code reader, integrated proximity reader and integrated magnetic reader - When an employee swipes his card in the card reader slot or enters his pin through the alphanumeric keys, the machine identifies the employee and marks his attendance and exit - The data so collected is rooted to a central server which is further processed - Based on this description and referring to Chapter Note 5(E) to Chapter 84, those in authority states that the data collection device functions like a badge reader which works in conjunction with a central server and such proximity such badge readers are rightly classifiable under chapter heading 8543 7099 - The Commr(A), after analysing the Chapter Headings of 8543 and 8471 states that 8543 is meant for "Electrical machines and apparatus having individual functions " - From the description of the product catalogue submitted by the Assessee, the same does not fall in this category - The product under import has a Central Processing Unit (CPU) runtime memory, storage memory, operating system and application software - As is the case with automatic data processing machine unit under import has the ability to accept and process data locally - The installation guides submitted by the Assessee confirmed the statement and items under import prescribed to Chapter Note under Chapter Heading 84 - Hence the Commr.(A) classified the imported item under Chapter Heading 8471 4190 by setting aside original authority's classification under Chapter Heading 8543 - Hence the present appeal. Held - As noted by the original authority, the device captures the data from the employee's card or the data of the particular employee who key in the PIN into the device - The device does not do anything except for collecting the data at the time of entry or exit and this data is transmitted to a central server for further processing like marking the attendance, preparation of payroll or for other purposes - Based on the General Rules of Interpretation and the Chapter Notes, the item needs to be classified in the heading akin to it or where the specific description is provided - In this case, the data collection device imported by the Assessee is nothing but a card reader working in conjunction with the server - Thus, this device functions such as proximity readers/badge readers, which are specifically classified under Chapter Heading No.8543 and as per Chapter Note 5(E) to Chapter 84 - The Original Authority in the order stated that the importers claimed the impugned goods i.e., data collection device as parts of computers falling under Chapter Heading 8473 3020 - However, the Commissioner (A) in the impugned order classifies the item under Chapter 8471 41 90 as Automatic Data Processing Machines which was never claimed by the importer - The Apex Court in the case of Precision Industries Pvt. Ltd. held that no new case could have been set up or decided contrary to the show-cause notices for the classification other than what was part of the notice - In this case, the importer admittedly had requested for classification under Heading 8473 while the Department classified the items under 8543 - The Commissioner (A) should have restricted himself to these headings and cannot classify the item entirely under a different heading which was not part of the order of the lower authority - Hence, the Commissioner (A)'s order is bad in law - Therefore, the product is rightly classifiable under chapter 8543: CESTAT
- Appeal allowed: BANGALORE CESTAT
2023-TIOL-1062-CESTAT-BANG
Yokogawa India Ltd Vs CCE & ST
ST - The Assessee-company is engaged in manufacturing Distributed Control Systems falling under Chapter sub heading 90328990 of CETA, 1985 - It comprises of both hardware and software - The said DCS is required and used for process automation in various industries including in refineries, petrochemicals, cement plants, power plants, fertilizer plant, etc. the main components of the DCS are: (i) hardware comprising of Field Control Stations (FCS) and Operator Stations and (ii) Software comprising of operating software, system software and application software - The customers of the Assessee place purchase orders for supply of entire DCS; the software component is supplied for enabling application and processes to be carried out using the customer specific hardware supplied thereof - The basic software modules are imported in recorded media from their parent company viz. Yokogawa Electric Corporation, Japan and other group companies in Singapore and on which applicable CVD was paid at the time of import as a packaged/canned software - The software modules imported which are specific and unique for each of the hardware is further developed and customized by the Assessee depending on the requirement of individual customers - The Assessee are also registered for providing various taxable services viz. Maintenance or Repair Services, Management Consultancy Service, Material Handling Service, Online information and database retrieval service, Commercial training and coaching service, Erection, Commissioning and Installation Service, Business Auxiliary Service, Intellectual Property Right Services and Transport of Goods by road service - The Assessee have been availing exemption under Notification No. 6/2006-CE dt. 01/03/2006 under the category of Customized Software mentioned at Sl. No. 27 of the said notification by treating the customized software as goods. After introduction of service tax on 'Information Technology Software Services (ITSS, for short) w.e.f. 16/05/2008 and subsequent amendments to the said definition in 2009, it is alleged by the Department that the activities undertaken by them viz. development, adaptation, upgradation, enhancement, implementation, design and promotion and other similar services relating to ITSS as per the requirement of the customers, they failed to discharge service tax on the customized software for the period from 16/05/2008 to 31/08/2009 - Periodical Show-cause notices were issued to the Assessee for recovery of the said Service Tax amount along with interest and penalties thereafter - The said demand Notices were later adjudicated and confirmed with interest and penalties under Section 76 and 77 of the Finance Act, 1994. Held - The core issue involved in the present Appeals for determination is: whether the imported software, customized and sold/cleared by the Appellant along with DCS, classifying the same under Chapter sub-heading 85238090 of CETA, 1985 (by availing exemption under Notification No.6/2006CE dt.01.3.2006 and No.12/2012-CE dt. 17/03/2012 as amended, as the case may be) continue to be an 'Excisable goods' or the said software sold/supplied on the CD is a 'service' and leviable to service tax w.e.f. 16/05/2008 under the taxable category of 'Information Technology Software Services' (ITSS) as held in the Order - A plain reading of the 'scope of work' under the above purchase order reveals that the Appellants are required to deliver at the site of the customer, the entire DCS system which includes both hardware and software and consumables - There is no dispute on the clearance/sale of customized software under separate excise invoices along with DCS classifying the same under Chapter sub-heading 85238090 of CETA,1985 and availing benefit of exemption Notification No.6/2006-CE dt. 01/03/2006 prior to 16/05/2008 - It is also not is dispute that Canned software/Customized software as "goods" being held in a series judgments accepted by both sides - But, the dispute arose only after introduction of the service tax on 'Information Technology Software Service' w.e.f. 16/05/2008 - Thus, the precise question is, whether the same activity of supply/sale of customized software by the Appellant could be chargeable to Excise duty and/or also service tax post 16.5.2008 as admittedly there is no change in the facts and circumstances of the case: CESTAT Held - The Commissioner has misdirected himself in understanding the scope of the applicability of excise duty on manufacture of 'Information Technology Software' and levy of service tax on 'Information Technology software service' introduced w.e.f 16.5.2008 and applying the same to the facts of the present case. No doubt excise duty or service tax is leviable on the Information Technology software if sold/supplied after 16.5.2008 as an excisable goods or as a service, as the case may be, but the said levies cannot be imposed simultaneously on the same activity/transaction. In a given case it needs to be examined whether excise duty is attracted or the activity is a pure service. It is also true that merely because either duty or tax discharged in a given case, the other levy is not automatically excluded. On the contrary, the true nature of the transaction is the determinant for levy of excise duty or service tax - In BSNL's case the Supreme Court has held that VAT or Service Tax could levied on the sale/supply of SIM card, but to ascertain which tax is levied in a particular case, it is relevant to find out the intention of the parties to the contract, which is the determining factor, in deciding whether the activities in question is a transaction of sale or a pure service - Looking from the said angle and considering the Purchase Order, we are of the opinion that the software imported by the appellant was customized according to the need of the individual DCS, supplied the same along with hardware being a condition of the of sale of said DCS - The said software cannot be used by anybody else other than the customer to whom the same are supplied along with the hardware. This clearly indicate that the intention of the appellant in supplying the software to their customers, is for its use along with the hardware; it does not indicate that the ownership of the software is retained by the Appellant. On the contrary, it is transferred to the customers in a media i.e. CD and the price of the said software separately indicated in the Appendix B to the purchase Order. Hence, the presence of an element of pure service as alleged by the Revenue and confirmed by the Commissioner is not the intention of the parties to the transaction - Thus, the sale of customized software by the Appellant is 'excisable goods' and classifiable under Chapter sub- heading 85238090; hence leviable to Excise Duty, and subject to the exemption notification No. 6/2006-CE dt.1.3.2006 and 12/2012-CE dt. 17.03.2012, as the case may be, on fulfilment of laid down conditions as claimed by the appellant: CESTAT Held - The Apex Court in Suzlon Energy Ltd. has rejected the argument - Their Lordships observed that merely because the Customs Notification considered the same as 'goods', hence, the said activity cannot be considered for tax as service is not the correct proposition as the levy is on different aspects - Reversing the judgment of the Tribunal which held on the said premise that the design and drawings are goods but not service, their Lordships remanded the matter to the CESTAT to examine the issue - In delivering the said judgment, their Lordships referred to its earlier judgment in BSNL's case - In other words, without scrutiny of the intention of parties, merely because the relevant customs Notification refers to drawing and designs as 'goods' and assessed so by the Customs Authorities, the levy of service tax on the same cannot outrightly be discarded - The intention of the parties to the transaction needs to be ascertained - In the present case, the Purchase Orders placed by the customers on the appellant reveal that the transaction between the appellant and their customers are not for supply of software as that of a 'service', but it is sale of the customized software on a CD as part of the DCS; accordingly, the same should be considered as 'excisable goods' and not as 'service', precisely, ITSS: CESTAT
- Appeals allowed: BANGALORE CESTAT
2023-TIOL-1061-CESTAT-BANG
Bangalore Housing Development And Investments Vs CCT
ST - Two issues involved for determination are, whether CENVAT Credit is admissible on banking and financial service used by appellant in providing Renting of Immovable Property service during relevant period; Interest rate be 15% or 25% for belated payment of service tax - The Commissioner (A) accepting Revenue's stand that Renting of Immovable Property is only right to use the said property and immovable property is neither subjected to excise duty nor service tax, hence, the input service is not rendered in providing any output service - This reasoning has been considered by Tribunal in light of Board's Circular 98/1/2008-ST in case of Golflinks Software Park Pvt Ltd and rejecting the said view observed that cenvat credit is admissible on service tax paid on various services used in maintenance of immovable property; this decision of Tribunal later on appeal by Tribunal has been rejected by Karnataka High Court endorsing the view of Tribunal - Following the said judgement in Oberon Edifices & Estates Pvt Ltd's case = 2023-TIOL-850-CESTAT-BANG , it was held that various input services used in providing Rental of Immovable Property service are admissible to CENVAT credit - Following the aforesaid decision of Tribunal, CENVAT Credit availed on 'banking and financial services' used in providing Renting of Immovable Property service is admissible - Regarding the demand of differential interest for respective periods, department has specifically alleged in notice that appellant had collected rent on monthly basis along with service tax from tenants; however, they have not deposited service tax so collected as on due date - The appellant have been disputing said allegation of Revenue at all levels - On being inquired during hearing to place the invoices under which rent was collected from tennants, appellant expressed inability to produce a single copy of invoices - Thus, appellant could not establish that service tax was not collected earlier, hence could not be deposited before due date - The applicable interest would be @24% on service tax amount paid belatedly even though collected from service receivers: CESTAT
- Appeal disposed of: BANGALORE CESTAT |
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