2010 (6) TMI 374 - AT - Customs

Computer Software - The Appellants manufacture and supply Telecom communication equipment and they import equipment and Application Software necessary for Telecom equipment. The Departmental Authorities have denied the exemption on the ground that the imported software cannot be considered as Computer Software even for the period prior to amendment of the cited Notification introducing the explanation quoted above. - held that - The Larger Bench which heard the reference not only decided the reference holding that the explanation cannot be given retrospective effect but also proceeded to decide the appeal itself holding that the Telecom software imported by the respondents in that case was entitled to exemption under the impugned Notification as Computer Software . We are of the considered opinion that since the Larger Bench has not only decided that the amendment is not retrospective but also that Telecom software is computer software by dismissing the appeal of the Revenue, there is no scope for us in this case to go into the question as to whether the impugned Telecom software is eligible for exemption as Computer Software or not. T

Summary

Issues Involved:
1. Entitlement of imported telecom software to exemption under Notification No. 11/97.
2. Retrospective application of the explanation added by Notification No. 3/98.
3. Distinction between 'Computer Software' and 'Telecom Software'.

Issue-wise Analysis:

1. Entitlement of imported telecom software to exemption under Notification No. 11/97:
The core dispute revolves around whether the imported telecom software qualifies for exemption under Notification No. 11/97, which initially did not define "Computer Software." The Appellants argued that their telecom software should be eligible for the exemption applicable to "Computer Software" prior to the introduction of the explanation by Notification No. 3/98. The Department, however, contended that the natural meaning of "Computer Software" does not include "Telecom Software" and that the amendment clarifying the definition should be considered retrospective. The Tribunal ultimately relied on the Larger Bench decision in Skycell Communications Ltd., which held that "Telecom Software" qualifies as "Computer Software" for the purposes of the exemption, thereby allowing the appeal in favor of the Appellants.

2. Retrospective application of the explanation added by Notification No. 3/98:
The Department argued that the explanation added by Notification No. 3/98, which provided a specific definition of "Computer Software," should be considered clarificatory and thus have retrospective effect. However, the Tribunal referred to the Larger Bench decision in Skycell Communications Ltd., which explicitly held that the explanation could not be given retrospective effect. This meant that the definition provided by the explanation could not be applied to the period before its introduction, thereby supporting the Appellants' claim for exemption for the disputed period.

3. Distinction between 'Computer Software' and 'Telecom Software':
The Department provided extensive arguments and references from dictionaries, technical literature, and judicial precedents to assert that "Telecom Software" and "Computer Software" are distinct entities. They argued that "Telecom Software" is used for encoding information over networks, whereas "Computer Software" is for data processing and controlling hardware functions. Despite these arguments, the Tribunal adhered to the Larger Bench's decision, which concluded that "Telecom Software" could be considered "Computer Software" for the purposes of the exemption under Notification No. 11/97. The Tribunal noted that the Department did not provide evidence of any higher judicial forum overturning the Larger Bench's decision.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, granting the exemption to the imported telecom software under Notification No. 11/97. The decision was heavily influenced by the Larger Bench ruling in Skycell Communications Ltd., which determined that the explanation added by Notification No. 3/98 does not have retrospective effect and that "Telecom Software" qualifies as "Computer Software" for the purposes of the exemption.