2016 (9) TMI 1416 - AT - Customs

Benefit of N/N. 11/97-Cus., dated 1-3-1997 - import of Computer Software - Held that - there are no debarring provision incorporated in that notification to prohibit telecom, medical and other systems to be ineligible to get the exemption benefit when a software is imported to make the system functional - appellant is entitled to the grant of notification that has not prohibited it to get the benefit thereof - appeal allowed.

Summary

Issues:
1. Interpretation of the term 'computer software' for customs duty exemption.
2. Validity and significance of Circular No. 7/98-Cus.
3. Eligibility for exemption of software used in telecom systems.

Analysis:
1. The appellant claimed that the imported item, as described in the Bill of Entry, was 'computer software' eligible for exemption under Notification No. 11/97-Cus. The Explanation under the notification defines 'computer software' as instructions, data, sound, or image recorded in a machine-readable form for automatic data processing machines. The appellant argued that even if a Router is not a computer, it can accommodate software for its function, making it eligible for the exemption.

2. The appellant contended that Circular No. 7/98-Cus., which stated that software for telecom, medical, or other applications is not eligible for exemption, should not impact the notification's provisions. The circular's prohibition was not explicitly mentioned in the notification, and hence, the appellant argued that the benefit should not be denied based on the circular.

3. The Departmental Representative (DR) argued that software used in telecom systems, even if not meeting the criteria of 'computer software,' should not be eligible for the exemption. However, the Tribunal found that the notification did not contain any provision barring telecom, medical, or other systems from availing the exemption when software is imported to make the system functional. The Tribunal concluded that the circular contradicted the notification's mandate, and the appellant was entitled to the exemption benefit as the notification did not prohibit it.

In conclusion, the Tribunal allowed the appeals solely on the ground that the appellant was entitled to the notification's benefit as there was no provision in the notification debarring certain systems from the exemption. The circular's restrictions were deemed contrary to the notification's provisions, leading to the appellant being granted the exemption benefit.