ORDER
V.P. Gulati, Member (T)
1. The short point that falls for consideration in the appeal filed against the C.C.E. (Appeals), Bangalore, is whether the “mini computer” is an eligible input for the VAX/DEC units system cleared by the appellants to meet the requirement of a particular customer.
2. The learned Counsel pleaded that the appellants goods including the “mini computer” system as a whole has been assessed under 8471 and the appellants have paid the duty on the value of the entire system including the value of the “mini computer” and the authorities have held the system including “mini computer” as one entity for assessment purposes and input credit in respect of “mini computer” should have been given. He has pleaded the learned lower authority while in his order has held that the mini computer is capable of functioning as such, he has not looked into the aspect of the technical necessity of the mini computer being a part of the system for particular customer needs. He pleaded that in the computer industry there are advancements everyday and the suppliers of computers change the configuration etc. to suit the needs of the customers. In the present case, the requirement of the customers were such that the mini computer was supplied as part of the system. This mini computer he pleaded even though is capable of functioning independently it also functions as an integral part of the system. The use of the mini computers enhances the capability and the efficiency of the system from the users point of view. He pleaded that the learned lower authority has not examined the issue in depth and has only gone by the capability of mini computer being functonal by itself. As it is, the Computer systems generally comprise of independent units which are Inter-connected to answer to a particular need and use. In that view of the matter, a view cannot be taken merely based on whether one particular item of system is capable of independent functioning. In view of the changing scenario in the field of computer industry the learned lower authority should have taken into account the requirements of the buyer before deciding upon the eligibility or otherwise to the Modvat credit for the mini computer. He pleaded that the learned lower authority should have taken note of the rapid technological advancements which are taking place from time to time. He has pleaded keeping with the pace of technological advancements and the demand of the customers the appellants had to supply the configuration which suits the customers and it is that which should have weighed with the authorities while deciding the matter.
3. The learned SDR pleaded that so far as the benefit of Modvat credit is concerned, the basic point to be taken into consideration is whether a particular item is an input and whether the use of the same can be taken to be in or in relation to the manufacture of the finished product. The mini computer by itself is functional as independent. In that view of the matter, mini computer cannot be taken to be an input for the system.
4. We observe that so far as computer system were concerned, the same comprises of a number of independent units which are inter connected. The authorities have recognised this trading practice by assessing the goods as one entity including the mini computer under 8471. Having done that prima facie the appellants plea for benefit of Modvat credit should have been considered to … the mini computer as a part of the system. However, an indepth examination would be required to be done. The appellants should have been called upon by the learned lower authority to explain the capability of the system and some technical opinion should have been obtained in this regard. It is well known that the system comprises of a number of units which are integrated together for functioning and each of these independent units may be capable of some independent function also. What is to be taken note of is whether the system as cleared is the one which is so recognised for the purpose of sale and installation for a specific functional need. It is observed that the system of a particular configuration can have a different number of units integrated into it for answering to a particular unit. In the above circumstances, we hold that the matter requires a deeper examination and we therefore set aside the order of the learned lower appellate authority and remand the matter to the learned original authority for de novo consideration in the light of the above observations after affording the appellants an opportunity of hearing.