2014 (9) TMI 1035 - AT - Customs

Eligibility for exemption- Notification No. 21/2002-Cus. and 6/2006-CEX- Import of Customized Software- Revenue contended that the software loaded on the CDs is not a customized software, as the software is to be used by nodal maintenance centres, franchise maintenance centres, channel partner and to some extent by the end users therefore, covered under definition of canned software Held that As per the explanation in the notifications, the customized software, is any custom design software developed for a specific user or client, other than packaged and canned software and a packaged software or canned software means a software developed to meet the needs of a variety of users. Respondent have produced a certificate from the suppliers certifying that the software, in question, supplied to the respondent is a software design specifically for them to meet the software requirements of fixed wireless phones/terminals supplied by the respondent against order on them from BSNL against tender No. MM/SW/072004/000277, dated 17-7-2004. Also the opening para in the catalogue states that software is a subject interactive software, which is specifically developed for use of the manufacturers and operators to do the programming of wireless phone before delivery to the customers. Thus it is BSNL who is using the software for specific purposes and the same is loaded at the BSNL s Centres, from where the value added service is provided to the subscribers after programming their phone. The subscriber s phones are programmed to be compatible with the software used by the BSNL. From supplier s catalogue and supplier s certificate, it is clear that the software has been specifically developed for the BSNL and as such the same has to be treated as a customized software. Therefore, from supplier s catalogue and supplier s certificate, it is clear that the software has been specifically developed for the BSNL and as such the same has to be treated as a customized software. - Decided against Revenue

Summary

Issues:
1. Whether the imported software on CDs qualifies as customized software for exemption under specific notifications.

Analysis:
The appeal involved a dispute regarding the eligibility of imported software on CDs for exemption under Notification No. 21/2002-Cus. and 6/2006-CEX, which exempt customized software from customs and excise duties. The respondent, a manufacturer of telecommunication equipment, imported software declared as "Customized Software - Loader software for cellular phone." Customs officers initially deemed the software not customized, leading to an order denying the exemption. However, the Commissioner (Appeals) overturned this decision, stating that the software was customized based on specific criteria. The Revenue appealed this decision.

During the hearing, the Revenue argued that the software was developed for various users and not tailored to a specific client. They highlighted that the software was designed for a particular hardware and intended for multiple users, as indicated by the bill of entry and purchase order. On the other hand, the respondent's counsel defended the Commissioner's decision, emphasizing that the software was specifically developed for a single client, BSNL, for their CDMA service. They presented evidence, including a supplier certificate and a catalogue, demonstrating the software's customization for BSNL's requirements.

After considering both sides' submissions and examining the records, the Tribunal analyzed the definition of customized software under the relevant notifications. They noted that customized software is designed for a specific user or client, unlike packaged or canned software meant for general users. The Tribunal found that the software imported by the respondent was tailored for BSNL's specific needs, as evidenced by the supplier's certificate and catalogue. The software was used by BSNL for programming wireless phones, troubleshooting, and other specific functions, indicating its customization for the client. Consequently, the Tribunal upheld the Commissioner's decision, dismissing the Revenue's appeal and affirming the software's eligibility for exemption as customized software under the notifications.

In conclusion, the judgment clarified the criteria for determining customized software eligibility for duty exemptions under specific notifications. The decision emphasized the importance of software tailored for a specific user or client, as opposed to generic software for multiple users. The case highlighted the significance of evidence, such as supplier certificates and catalogues, in demonstrating software customization for a particular client's requirements.