2008 (10) TMI 58 - AT - Customs

Whether Explanation added by Not. No. 3/98-Cus., dated 11-2-98 to Not. No.11/97-Cus., dated 1-3-97 is clarificatory of the expression computer software so as to have retrospective effect revenue s contention (in view of above amendment) that software imported prior to 11.2.98 and used in telecom equipment, not to be considered as computer software, is not acceptable sine amending notification being prejudicial to importer, cannot be applied retrospectively exemption cannot be denied

Summary

Issues:
Interpretation of the term 'computer software' for exemption under Notification No. 11/97-Cus. and the retrospective effect of the Explanation added by Notification No. 3/98-Cus.

Analysis:
The case involved a dispute regarding the interpretation of the term 'computer software' under Notification No. 11/97-Cus. The respondents imported software for telecom equipment and claimed exemption under Sl. No. 173 of the Notification. The Customs authorities rejected the claim based on the Explanation added by Notification No. 3/98-Cus., stating that software for telecom purposes was not eligible for exemption. The Assistant Commissioner considered the software not to be computer software and assessed duty accordingly. However, the Commissioner (Appeals) allowed the appeal, stating that the amendment was not clarificatory and upheld the exemption for the imported software.

The key argument from the Revenue was that software used for telecom applications did not qualify as 'computer software' under the Explanation added to the Notification. They relied on Circular No. 7/98-Cus. and legal precedents to support their position. On the other hand, the respondents argued that the software should be considered 'computer software' based on previous Tribunal decisions and Supreme Court dismissals of appeals by the Department.

The Tribunal analyzed the issue and concluded that the term 'computer software' should be understood in the popular sense before the amendment. They emphasized that the software imported before the amendment date fell within the ambit of 'computer software' under the Notification, entitling the respondents to claim duty exemption. The Explanation added a technical meaning to 'computer software', excluding certain software, but this restriction introduced post-import did not apply retroactively.

The Tribunal referenced the BPL Mobile Communications case and Supreme Court dismissals of appeals against similar decisions to support their interpretation. They disagreed with the South Zonal Bench's view and Circular No. 7/98-Cus., stating that the respondents were entitled to the exemption. Consequently, the Revenue's appeal was dismissed, and the issue was resolved in favor of the respondents.

In conclusion, the Tribunal's detailed analysis focused on the interpretation of 'computer software' under the Notification, the impact of the Explanation, and the retrospective application of the amendment. The decision highlighted the popular understanding of the term before the technical clarification and relied on legal precedents to support the respondents' claim for duty exemption.