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CX - Upgrade units though helps in enhancing capacity of computer but unit itself is not complete machine, therefore, it cannot fall under chapter 8471: CESTAT

By TIOL News Service

MUMBAI, JAN 03, 2018: THE appellant is engaged in manufacture of Terminal and Computer upgrades/up-gradation and classified the same under CSH 8471.00 of the CETA.

Revenue viewed that the goods are correctly classifiable under CST 8473.00.

In adjudication, demand raised in respect of terminal was dropped. However, the adjudicating authority confirmed the demand in respect of computer upgrades/up-gradations.

The Commissioner(Appeals) upheld the O-in-O, therefore, an appeal came to be filed before CESTAT.

In the grounds of appeal, it is submitted that computer upgrades units manufactured by them are used to upgrade the existing computer system to enhance their memory, speed, storage capacity, printing capacity, connectively; that up-gradation is done as alternative to buying new computers; that computer upgrades units are assembled as per the requirement and to be added to an existing machine; that the computer upgrades unit itself are complete Machine and cannot be called as parts of computer, accordingly, the said product is correctly classifiable under CSH 8471.00.

The AR while reiterating the findings of the impugned order submitted that computer upgrades unit is fitted in the existing computer, therefore, upgrades cannot be called as new computer or complete system. Further, most of the parts of the computer are already in place in existing computer, therefore, the activity is re-conditioning of existing computer; the upgrades unit itself is not complete system, therefore, it is only sub-assembly and correctly classifiable under chapter sub heading 8473.00.

The Bench observed -

"5. We find that fact is not much in dispute that computer upgrades systems though used for upgrading existing computer but it is not complete system in itself. It is placed in the existing computer, the computer is classifiable under Chapter sub heading 8471.00 but upgrade unit is only one of the part/sub assembly and not being complete system cannot be classifiable as complete machine under 8473.00. It is admitted by the appellant that upgrade is sub assembly consisting of various parts which held in system to enhance its memory, speed, storage capacity, printing capacity, connectively. However, even after change of computer upgrades the other parts such as computer system, monitor, keyboard, mouse etc. are unchanged. In this fact, it is clear that upgrade units though helps in enhancing the capacity of the computer but unit itself is not complete machine therefore it cannot fall under chapter 8471.00…"

Holding that the impugned order is correct and legal and does not require any interference, the same was upheld and the appeal was dismissed.

(See 2018-TIOL-42-CESTAT-MUM)


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