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18th January, 2005



Justice Syed Mohammed

Mr. Somnath Pal

Dr. B.A.Agrawal


Order No. AAR/02(CUS)/2005


Application No.  AAR/110(CUS)/2004


Name of the  applicant

M/s.Dell India Private Limited
No.12/1, 12/2A, 13/1A
Divyasree Greens,
Ghallaghatta Village, Varthur Hobli,
Bangalore -560071

Commissioners concerned

 (i)      Commissioner of Customs & Central Excise Hyderabad-II


(ii)      Commissioner of Customs (I & G) New Delhi.


(iii)      Commissioner of Customs,Airports & Air Cargo, Chennai


(iv)      Commissioner of Customs,Air Cargo, Bangalore.


(v)       Commissioner of Customs, Ahmedabad


(vi)       Commissioner of Customs (Import), Air Cargo, Mumbai.


(vii)      Commissioner of Customs (Admn., Airport & Air Cargo), Kolkota.

Present for the applicant

Mr.S Thirumalai and Ms.Krupa Venkatesh,Consultants

Present for the Commissioner

Mr.A.K.Roy, Joint CDR.CESTAT, New Delhi




(By Mr.Justice Syed  Shah Mohammed Quadri)


            M/s Dell India Private Limited - the applicant - is a wholly owned subsidiary of M/s Dell International Inc. USA, a foreign company.  M/s Dell Computer India Private Limited is another wholly owned subsidiary of the said foreign company.  The applicant acquired the business of the trading division of M/s Dell Computer India Private Limited with effect from November 1, 2004.  It proposes to engage in import and trade of computers, desktops, notebooks, workstations, etc.   On these facts, the applicant sought advance rulings of the Authority on the following questions:-



Whether the pre-loaded software onto the computer hardware can be classified under CTH 85.24 when presented for assessment in complete computer systems; and


As a consequence of (a) above, whether the benefit of nil rate of duty specified under Sl. No.157 of Notification No.21/2002/C dated 01-03-2002 as amended is applicable for the same.


2.       On examination of the application it was noticed that prima facie the application is liable to be rejected and by Order dated 14th December, 2004, M/s.Dell India Private Ltd. was called upon to show cause as to why the application should not be rejected for the following reasons :-


question no. (a) is covered  by the judgement of Hon'ble Supreme Court of India in Commissioner of Central Excise, Pondicherry Vs  ACER India Ltd. [2004 (172) E.L.T.289 (S.C.)] ;


it appears from the comments of the Commissioners (copies of which are annexed hereto) that the applicant has already commenced importation of  the goods in question.


In response to the said notice, Mr. S. Thirumalai and Ms. Krupa Venkatesh appeared today for M/s.Dell India Private Ltd. and Mr. A.K. Roy, Joint CDR  for the Commissioners.


Mr. S. Thirumalai  has submitted that question (a) above is the main question and question (b) is a consequential question; he conceded that if no ruling is given on question (a), the determination of question (b) would not arise.


In regard to the first ground in the show cause notice Mr. Thirumalai has argued that the judgement of the Hon'ble Supreme Court in ACER's case (supra) was rendered in the context of Central Excise Act and in the present case the question of classification arises under the Customs Act, therefore, the question cannot be said to be the same and the application could not be rejected on this ground.  Mr. A.K. Roy, Joint CDR for the Commissioner has submitted that the question of classification of preloaded software was decided by the Hon'ble Supreme Court and the same is the subject matter of question no. (a) in this case.


To appreciate the above contentions, it would be necessary to refer to sub section (2) of Section 28-I of the Customs Act, which reads as follows:-


"(2) The Authority may, after examining the application and the records called for, by order, either allow or reject the application:


Provided that the Authority shall not allow the application where the question raised in the application is -


(a) already pending in the applicant"s case before any officer of customs, the Appellate Tribunal or any Court;


(b) the same as in a matter already decided by the Appellate Tribunal or any Court:

Provided further that no application shall be rejected under this sub-­section unless an opportunity has been given to the applicant of being heard:

Provided also that where the application is rejected, reasons for such rejec­tion shall be given in the order."


6.       A plain reading of the provisions, quoted above, makes it clear that after examining the application and the records called for, the Authority may either allow or reject the application, however, the first proviso leaves no option with the Authority in regard to matters falling under clauses (a) and (b) thereof.  The basis of first ground in the notice is clause (b) which mandates that the Authority shall not allow the application when the question raised in the application is the same as in a matter already decided by the Appellate Tribunal or any Court.  Obviously, the intention of the Parliament is that the Authority shall not entertain an application in which the question posed for seeking advance ruling has already been decided by the Appellate Tribunal or any Court.   What is germane is the identity of the substance of the question and not the identity of the enactment in the context of which the question is decided by the Appellate Tribunal or any Court.


7.       The Customs Act and the Central Excise Act are sister enactments.  The scheme of classification of goods under the Central Excise Tariff Act, 1985 and the Customs Tariff Act, 1975 is based on Harmonised System of Nomenclature (HSN).  The respective First Schedules to the Central Excise Tariff Act and Customs Tariff Act, have mostly identical sections and chapters; a large number of main tariff Headings are also identical.  Having regard to the provision of an entry in the First Schedule  to  the Central Excise Tariff Act, if any "goods" are classified under a particular main heading, the same would also hold good for classification of the same "goods" under the Customs Tariff Act.

We may quote here the relevant main tariff heading 8524 as in the    First Schedule to Customs Tariff Act and First Schedule to Central Excise Tariff Act


Customs Tariff Act, 1975

Central Excise Tariff Act, 1985



Records, tapes and other recorded media for sound or other similarly recorded phenomena, including matrices and masters for the production of records, but excluding products of Chapter 37

Records, tapes and other recorded media for sound or other similarly recorded phenomena, including matrices and masters for the production of records, but excluding products of Chapter 37


A glance at the above entries shows that they are identical. It is true that under the Customs Tariff Act, software falls under the sub heading 8524 31 and under the Central Excise Tariff Act, software falls under the sub Heading 8524.20, but it cannot be lost sight of that under both the enactments, software is classified under the main heading 85.24.


8.       The distinction sought to be made by Mr. Thirumalai on the ground that in the case before the Hon'ble Supreme Court it was valuation of the goods that was under consideration, is not relevant.  The fact remains that the Hon'ble Supreme Court  did advert to the question of classification, of preloaded softwares,  with reference to the valuation, which is none the less binding as the law of the land.  The fact that the present case arises under the Customs Act would, for the aforementioned reason, make no difference. 


9.In ACER's case, the Hon'ble Supreme Court observed:


   "...The computer and software are distinct and separate, both as a matter of commercial parlance as also under the statute.  Although a computer may not be capable of effective functioning unless loaded with softwares, the same would not tantamount to bringing them within the purview of the part of the computer so as to hold that if they are sold along with the computer their value must form part of the assessable value thereof for the purpose of excise duty.  Both computer and software must be classified having fallen under 84.71 and 85.24 and must be subject to corresponding rates of duties separately..."

".......The legal text contained in Chapter 84, as explained in Chapter Note 6, clearly states that a software, even if contained in a hardware, does not lose its character as such.  When an exemption has been granted from levy of any excise duty on software whether it is operating software or application software in terms of heading 85.24, no excise duty can be levied thereupon indirectly, as it was impermissible to levy a tax indirectly.  In that view of the matter the decision in PSI Data Systems (supra) must be held to have correctly been rendered."


For the aforementioned reasons we hold that question (a) in the application is the same as is already decided by the Hon'ble Supreme Court in ACER's case (supra).  


10.     In view of the conclusion arrived at on the first ground given in the notice; we do not consider it necessary to deal with the second ground.  In the result, in view of the provisions of clause (b) of the first proviso to sub-section (2) of section 28-I of the Customs Act, we reject the application.


             Pronounced in the Court of this Authority on January 18, 2005



(Somnath Pal)   

(Justice S.S.M. Quadri) 

 (B.A. Agrawal)