2001 (8) TMI 1089 - AT - Customs

Summary

Issues Involved:
1. Classification of the imported software under customs notification No. 11/97.
2. Eligibility for exemption from customs duty under the said notification.
3. Determination of whether the software is considered "computer software" or "application software" for specific functions.
4. Applicability of Central Value Added Tax (CVD) on the imported software.

Issue-wise Detailed Analysis:

1. Classification of the Imported Software:
The primary issue revolves around the classification of the imported software, which includes "Application Software for routing ATM Transactions" and "Application Software for POS Transactions." The original authority classified these items as software required for the operation of ATM machines, which perform specific functions other than data processing. This classification excluded them from being considered as "computer software" under customs notification No. 11/97.

2. Eligibility for Exemption from Customs Duty:
The appellants claimed exemption from customs duty under notification No. 11/97, Sl. No. 173, which grants exemption to "computer software." The original authority and the Commissioner (Appeals) denied this benefit, holding that the software in question was not "computer software" but rather application software necessary for operating ATM machines, which perform specific banking functions. The Tribunal had previously remanded the case for reconsideration, directing the original authority to examine additional evidence and expert opinions.

3. Determination of Whether the Software is "Computer Software" or "Application Software":
The Tribunal, in its final order, directed the original authority to consider the technical literature and expert opinions provided by the appellants. The Deputy Commissioner of Customs, upon re-adjudication, acknowledged that the software was application software for banking applications but held that it was necessary for the operation of machines performing specific functions other than data processing. This interpretation was supported by the technical opinion from the Professor of IIT Madras, which confirmed that the software handled data processing related to banking transactions and worked in conjunction with automatic data processing machines.

4. Applicability of Central Value Added Tax (CVD):
The Deputy Commissioner of Customs allowed the appellants' claim regarding the non-applicability of CVD on computer software falling under tariff sub-heading 8524.20, as the duty chargeable was NIL. Consequently, the amount of Rs. 28,43,272/- collected as CVD was ordered to be refunded. The Commissioner of Customs (Appeals) upheld this decision, agreeing that no CVD was payable on computer software under the relevant tariff heading.

Conclusion:
The Tribunal's remand order was not fully adhered to, as the technical literature and expert opinions were not thoroughly considered. The imported software was classified as application software necessary for operating ATM machines, thereby excluding it from the definition of "computer software" under customs notification No. 11/97. Consequently, the benefit of the customs notification was denied. However, the refund of the CVD amount was upheld, as the imported software was classified under a tariff heading with a NIL duty rate for computer software. The appellants' appeal regarding the denial of customs notification benefits was dismissed, but their claim for a refund of the CVD was accepted.