Circular No. 497/63/99-Central Excise

dated 30/11/1999

Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs

Subject : Duty liability on the activity of creating a computer network from duty computers Regarding.

I am directed to say that doubts have been expressed whether computer network installed at customer premises by inter-connecting duty paid computers and peripherals will amount to manufacture under the Central Excise Act, 1944.

2. The matter has been examined by the Board. It is observed that, Computers and computer network are covered under heading 84.71 of Central Excise Tariff. A computer network can be defined as two or more computers & devices like printers connected together. A network is built in order to share the devices like printer or scanner among many computers and to share the information available on different computers. Network enables simultaneous work on different computers which is coordinated  by the father-computer called “Server”. It also facilitates communication between two computers by different means.

3. There may be different types of networks and many ways in which these can be used. A local area network (LAN) is a number of related computers & electronics devices that share information over a transmission media. A similar network over a large scale involving offices over different cities and countries is known as Wide Area Network (WAN).

4. A network does not remain static. There would be changes , additions and deletions from the network. With each addition, a new network comes into existence which is different from the previous network.

5. In view of the above facts and taking note of the existing law, Board is of the view that the activity of creating a computer network from duty paid computer network from duty paid computers and peripherals would not amount to manufacture, in so far as the network does not bring into existence good with a distinct new name, character and use.

6. Trade and field formations may be informed accordingly.

7. Receipt of this Circular may please be acknowledged.

(Sanghamitra Panda)
Director (CX-4)

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