2008 (1) TMI 204 - AT - Central Excise

Revenue alleged that software imported is packaged/canned software & therefore they would not be liable for the exemption from countervailing duty u/not. 6/06 - According to the assessee, the software imported is customized software held that imported software cannot be used as such but requires further modification to give it characteristic of custom designed software there is evidence to show that said software is capable of being sold, off the shelf exemption not available u/not. 6/06

Summary

Issues:
Classification of imported software under Notification C.N 21/02 and Notification No. 6/06 Central Excise for duty exemption. Determination of whether the imported software is packaged or customized software for duty benefit eligibility.

Analysis:
The appeal was filed against the Order-in-Appeal No. 182/2006/Cus (B) passed by the Commissioner of Customs (Appeals) Bangalore concerning the classification of software under CTH 8524.20 for duty exemption. The appellants claimed the benefit of nil rate under Notification C.N 21/02 and serial no. 27 of Notification No. 6/06 Central Excise. The departmental officers contended that the software was packaged software, not entitled to the exemption. The Lower Authority and Commissioner (Appeals) upheld this view, leading to the appeal before the Tribunal.

During the hearing, it was established that the software in question was part of a Distribution Control System (DCS) used in various process industries. The appellant argued that each DCS configuration for a customer was unique, making the imported software customized. The Revenue, however, claimed that the software could be used by various users after loading into Yokogawa Machines with modifications. The appellant's submissions highlighted the software's specific requirements and limitations, emphasizing its customized nature.

The lower authority's findings categorized the imported software as packaged/canned software based on various factors, including its application, licensing, and restrictions on usage. The Commissioner (Appeals) supported this view, referring to the definitions of customized and packaged software under Notification 6/06. The Tribunal analyzed the imported software's functionality and concluded that while it required modifications for each customer, the initial package could be used by multiple users off the shelf, indicating its packaged nature. Therefore, the impugned order was upheld based on the software's characteristics at the time of importation.

In summary, the judgment focused on determining whether the imported software was customized or packaged to ascertain duty exemption eligibility. Despite the software's need for modifications per customer requirements, its initial form as a standard package capable of off-the-shelf use classified it as packaged software, not meeting the criteria for duty benefit under Notification 6/06.