2008 (3) TMI 219 - AT - Central Excise

Software manufactured by appellants supplied along with the system Programmable Logic Controllers (PLC) or independently as spares - Commissioner stating that computer software consists of all types of software including operation software and application software is incorrect - excise tariff does not make a distinction between software and computer software and in common parlance all types of software are considered as computer software only - Exemption claimed u/not. no. 48/94 is correct

Summary

Issues: Classification of software - Application software vs. Computer software

Analysis:
1. The case involved the classification of software manufactured by the respondent, specifically whether it should be considered as computer software or application software for excise duty purposes. The respondent claimed exemption under notification 48/94 for computer software, while the revenue contended that the software should be classified differently.

2. The Tribunal analyzed the nature of the software in question, emphasizing that the software developed by the respondent was used exclusively for operating Process Control Systems (PCS) and Programmable Logic Controllers (PLC), not for general computer operations. The distinction between application software and operational software was crucial, with the former being designed for specific functions within the PCS and PLC systems.

3. The Commissioner (Appeals) had interpreted computer software broadly to include all types of software, contrary to the specific classification provided under tariff entries 8524.20 for computer software and 8524.90 for other software. The Tribunal highlighted the definition of computer software under notification 3/98, which focused on instructions recorded in a machine-readable form for user interactivity, reinforcing the need for a specific classification.

4. The respondent argued that in trade parlance, computer software encompassed all software types, including application software. They referenced previous Tribunal decisions to support their stance, emphasizing that industry professionals and common understanding treated software and computer software interchangeably.

5. The Tribunal, after considering the arguments and precedents, concluded that the terms software and computer software were not distinctly defined in technical references and were commonly perceived as synonymous in the computer industry. Citing previous cases with similar software classification disputes, the Tribunal upheld the respondent's classification as computer software, rejecting the revenue's appeal.

In summary, the judgment clarified the distinction between application software and computer software for excise duty classification, emphasizing specific definitions and industry understanding to determine the software's classification. The decision aligned with previous rulings and common industry practice, ultimately upholding the respondent's classification as computer software for exemption purposes.