2002 (2) TMI 192 - AT - Customs

Summary

Issues:
Classification of computer software under Customs Notification No. 11/97 for duty exemption.

Analysis:
The case involved the classification of computer software imported by manufacturers of Push Button Telephones and EPABX systems under Heading 8529.90 for duty exemption. The dispute arose when a show cause notice was issued demanding duty based on the interpretation that the exemption under Notification No. 11/97 applied only to software required for data processing machines falling under Heading 84.71. The lower authorities denied the benefit under the notification, citing that the software in question was not classified as computer software for assessment purposes as it was telecom software used for voice mail storage in EPABX systems.

In appeal, the Commissioner (Appeals) examined the scope of the expression "computer software" under Customs Notification No. 11/97 and concluded that the specific function of the software determined its classification. The Commissioner found that the software in question, used for telecom purposes in EPABX systems, did not involve data processing and, therefore, could not be classified as computer software under the notification. Consequently, the benefit under Notification No. 11/97 was denied, and the duty was confirmed.

Upon further review, the Tribunal considered the arguments presented by the appellants. They contended that the software, which controlled the operation of a voice mail card in a computer, should be classified as computer software under Heading 8524.90 and entitled to the duty exemption. The Tribunal disagreed with the lower authorities' interpretation of the exclusion clause introduced by Notification No. 3/98, stating that the software used in conjunction with an automatic data processing machine should be eligible for the benefit of Notification No. 11/97 as amended. The Tribunal also noted that the amendment effective from 11-2-98 could not be applied to imports made before that date, as the benefits were available to 'computer software' without a defined term in the notifications.

Additionally, the Tribunal referenced previous cases where similar interpretations of Notification No. 11/97 were upheld, supporting the appellants' claim for duty exemption on the imported software. The Tribunal concluded that the software's function of converting sound data from analog to digital and vice-versa qualified it as computer software under the notification, entitling the appellants to the benefit. Consequently, the appeal was allowed, and the orders denying the benefit under Notification No. 11/97 were set aside.