Case: Comnr. Of Customs Chennai Vs. M/S. Hewlett Packard India Sales (P) Ltd

laptop and has claimed the benefit of Notification No.21/2002-Cus dated 1.3.2002. 8. To answer the above controversy meaning of the words software, hard disk and platter need to be noted (See: Computer Dictionary by Microsoft - Fifth Edition at pp.489, 246 and 408 respectively): "Hard disk. A device containing one or more inflexible platters coated with material in which data can be recorded magnetically, together with their read/write heads, the head-positioning mechanism, and the spindly motor in a sealed case that protects against outside contaminants. The protected environment allows the head to fly 10 to 25 millionths of an inch above the surface of a platter rotating typically at 3600 to 7200 rpm; therefore, much more data can be stored and accessed much more quickly than on a floppy disk. Most hard disks contain from two to eight platters. See the illustration. Also called: hard disk drive. Hard disk drive n. See hard disk Platter. One of the individual metal data storage disks within a hard disk drive. Most hard disks have from two to eight platters. See the illustration. See also hard disk.Software. Computer programs; instructions that make hardware work. Two main types of software are system software (operating systems), which controls the workings of the computer, and applications, such as word processing programs, spreadsheets, and databases, which perform the tasks for which people use computers. Two additional categories, which are neither system nor application software but contain elements of both, are network software, which enables groups of computers to communicate, and language software, which provides programmers with the tools they need to write programs. In addition to these task-based categories, several types of software are described based on their method of distribution. These include packaged software (canned programs), sold primarily through retail outlets; freeware and public domain software, which are distributed free of charge; shareware, which is also distributed free of charge; although users are requested to pay a small registration fee for continued use of the program; and vaporware, software that is announced by a company or individuals but either never makes it to market or is very late. See also application, canned software, freeware, network software, operating system, shareware, system software, vaporware, Compare firmware, hardware, liveware." 9. On the basis of the above dictionary meanings it becomes clear that a software is a computer programme. It consists of instructions that make hardware work. There are two types of softwares, namely, system software which controls the working of the computer and application software such as word processing programmes, databases etc., which perform the tasks for which we use computers. In addition, we now have network software which enables groups of computers to communicate, and language software which provides programmers with the tools with which they write programmes. We also have what is called as packaged softwares which are sold through retail outlets. In the present case, the respondent imported laptops containing preloaded HDD. The said drives were preloaded with operating systems (software), which, as stated above, controls the working of the computer. The value of the laptop depends on the operating system, which is preloaded. The computer cannot open without the operating system. The laptop without an operating system is like an empty building. At this stage, it may be clarified that the operating system can also be imported as a packaged software which is like an accessory and which in the present case is classified by the department under CTH 85.24. However, a preloaded operating system recorded on HDD is an integral part of the laptop (unit). Such preloaded operating system on the HDD forms an integral part of the laptop. It is important to note that laptop as a stand-alone unit is classifiable under CTH 84.71. A laptop is a small portable Personal Computer (in short PC). It runs either on battery or electricity. Laptop has a screen and a small key board. Most of the laptops run on the same software as their desktop counterparts. Most of the laptops accept floppy disks, CD ROM Drives, External or Internal Modem etc. A notebook computer is a laptop. It is a machine. A CD or a floppy disk is a peripheral.10. Applying the above tests to the facts of the present case, we are of the view that preloaded operating system recorded in HDD in the laptop (which is the item of import) forms an integral part of the laptop. What was imported in the present case was a laptop as a stand alone item (unit). Present dispute relates to the transaction value of the unit. An importer who buys a laptop containing an operating system pays for the laptop as a unit. As stated above, without the operating system, like Windows, the laptop cannot work. The computer cannot open without operating system. In the present case, the respondent has not only imported laptops, it has also imported HDDs on which the operating system was recorded (packaged software) which has been classified by the Department under CTH 85.24. However, when a laptop is imported with in-built preloaded operating system recorded on HDD the said item forms an integral part of the laptop (computer system) and in which case the Department is right in treating the laptop as one single unit imported by the respondent. The Department has rightly classified the laptop as a unit under CTH 84.71, quoted above.11. Before concluding it may be pointed out that in none of the decisions cited on behalf of the respondent, the question raised in the present dispute was ever raised. Although laptop is similar PC, the former is more compact. It cannot be assembled as easily as PC. In the present case, the Department has rightly taken the value of the laptop as a unit and it has given the deduction for the value of the software. There is no error in the computation, particularly, when the respondent has refused to give the value of the software to the adjudicating authority despite being called upon to do so.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]8. To answer the above controversy meaning of the words software, hard disk and platter need to be noted (See: Computer Dictionary by Microsoft - Fifth Edition at pp.489, 246 and 408disk. A device containing one or more inflexible platters coated with material in which data can be recorded magnetically, together with their read/write heads, the head-positioning mechanism, and the spindly motor in a sealed case that protects against outside contaminants. The protected environment allows the head to fly 10 to 25 millionths of an inch above the surface of a platter rotating typically at 3600 to 7200 rpm; therefore, much more data can be stored and accessed much more quickly than on a floppy disk. Most hard disks contain from two to eight platters. See the illustration. Also called: hard disk drive. Hard disk drive n. See hard disk Platter. One of the individual metal data storage disks within a hard disk drive. Most hard disks have from two to eight platters. See the illustration. See also hard disk.Software. Computer programs; instructions that make hardware work. Two main types of software are system software (operating systems), which controls the workings of the computer, and applications, such as word processing programs, spreadsheets, and databases, which perform the tasks for which people use computers. Two additional categories, which are neither system nor application software but contain elements of both, are network software, which enables groups of computers to communicate, and language software, which provides programmers with the tools they need to write programs. In addition to these task-based categories, several types of software are described based on their method of distribution. These include packaged software (canned programs), sold primarily through retail outlets; freeware and public domain software, which are distributed free of charge; shareware, which is also distributed free of charge; although users are requested to pay a small registration fee for continued use of the program; and vaporware, software that is announced by a company or individuals but either never makes it to market or is very late. See also application, canned software, freeware, network software, operating system, shareware, system software, vaporware, Compare firmware, hardware, liveware.On the basis of the above dictionary meanings it becomes clear that a software is a computer programme. It consists of instructions that make hardware work. There are two types of softwares, namely, system software which controls the working of the computer and application software such as word processing programmes, databases etc., which perform the tasks for which we use computers. In addition, we now have network software which enables groups of computers to communicate, and language software which provides programmers with the tools with which they write programmes. We also have what is called as packaged softwares which are sold through retail outlets. In the present case, the respondent imported laptops containing preloaded HDD. The said drives were preloaded with operating systems (software), which, as stated above, controls the working of the computer. The value of the laptop depends on the operating system, which is preloaded. The computer cannot open without the operating system. The laptop without an operating system is like an empty building. At this stage, it may be clarified that the operating system can also be imported as a packaged software which is like an accessory and which in the present case is classified by the department under CTH 85.24. However, a preloaded operating system recorded on HDD is an integral part of the laptop (unit). Such preloaded operating system on the HDD forms an integral part of the laptop. It is important to note that laptop as a stand-alone unit is classifiable under CTH 84.71. A laptop is a small portable Personal Computer (in short PC). It runs either on battery or electricity. Laptop has a screen and a small key board. Most of the laptops run on the same software as their desktop counterparts. Most of the laptops accept floppy disks, CD ROM Drives, External or Internal Modem etc. A notebook computer is a laptop. It is a machine. A CD or a floppy disk is a peripheral.10. Applying the above tests to the facts of the present case, we are of the view that preloaded operating system recorded in HDD in the laptop (which is the item of import) forms an integral part of the laptop. What was imported in the present case was a laptop as a stand alone item (unit). Present dispute relates to the transaction value of the unit. An importer who buys a laptop containing an operating system pays for the laptop as a unit. As stated above, without the operating system, like Windows, the laptop cannot work. The computer cannot open without operating system. In the present case, the respondent has not only imported laptops, it has also imported HDDs on which the operating system was recorded (packaged software) which has been classified by the Department under CTH 85.24. However, when a laptop is imported with in-built preloaded operating system recorded on HDD the said item forms an integral part of the laptop (computer system) and in which case the Department is right in treating the laptop as one single unit imported by the respondent. The Department has rightly classified the laptop as a unit under CTH 84.71, quoted above.11. Before concluding it may be pointed out that in none of the decisions cited on behalf of the respondent, the question raised in the present dispute was ever raised. Although laptop is similar PC, the former is more compact. It cannot be assembled as easily as PC. In the present case, the Department has rightly taken the value of the laptop as a unit and it has given the deduction for the value of the software. There is no error in the computation, particularly, when the respondent has refused to give the value of the software to the adjudicating authority despite being called upon to do so.