JUDGMENT

S.P.BHARUCHA, J.

(1) THESE appeals against the judgments and orders of the Customs, Excise and Gold (Control) Appellate tribunal relate to the assessable value of computers for the purposes of excise duty. The appeals of M/s Wipro Information Technology Limited (Civil No. 79 of 1989 and M/s PSI Data Systems Limited (Civil No. 491 of 1989 relate to the tariff as it was prior to 28/2/1986. The appeal of M/s Tata Unisys Limited (Civil No. 6042 of 1994 relates to the present tariff under the central Excise Tariff Act, 1985.

(2) THE question, principally, is in relation to the inclusion of the value of software sold with the computer in the assessable value thereof. It is not the contention of the appellants that the firm or etched software that is implanted into a computer is not to be taken into account in the valuation thereof for the purposes of excise duty. It is their case that the value of the software, such as discs, floppies, CD ROMs and the like, that they may sell along with the computer is not to be taken into account for the aforesaid purpose.

(3) WE make it clear at the outset that when we shall speak of software, we shall be referring to tangible software of the nature of discs, floppies and CD ROMs and not to the intellectual property, also called software, that is recorded or stored thereon.

(4) IT is necessary, to start with, to make a distinction between hardware, which is the computer, and the programming necessary to run it, which is the software. "Software" has been stated in the same publication to describe "programmes which consist of instructions recorded on punched cards, magnetic tapes and discs. These devices instruct the computer as to what functions it will perform" to produce the desired output. In a judgment delivered by the Supreme court of Illinois in the case of First National Bank of Springfield v. Deptt. of Revenue, it was observed:

"IN the computer industry, computer hardware is the tangible part of the machinery itself. Software denotes the information loaded into the machine and the directions given to the machine (usually through the media of punch cards, discs or magnetic tapes as to what it is to do and upon what command. Software also may include counselling and expert engineering assistance furnished by the seller of software, as well as flow charts and instruction manuals.

THERE are two basic types of software programs. An operational program controls the hardware and actually makes the machine operate. It is fundamental and necessary to the functioning of the hardware. An applicational program is designed to perform specific functions once the programming information is fed into the computer."

(5) TARIFF Item 33-DD of the earlier tariff dealt with "computers (including central processing units and peripheral devices), all sorts".

(6) THE present tariff deals with computers in Ch. 84. Heading 84.71 reads thus:

"84.71 Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data on to data media in coded form and machines for processing such data, not elsewhere specified or included."

CHAPTER Note 5(a) states: "5. (a) For the purposes of heading No. 84.71, the expression automatic data processing machines means: (i) Digital machines, capable of (1 storing the processing programme or programmes and at least the data immediately necessary for the execution of the programme; (2 being freely programmed in accordance with the requirements of the user; (3 performing arithmetical computations specified by the user; and (4 executing, without human intervention, a processing programme which requires them to modify their execution by logical decision during the processing run;"

Heading 85.24 deals with "records, tapes and other recorded media for sound or other similarly recorded phenomena, including matrices and masters for the production of records and includes gr