2005 (1) TMI 136 - AT - Customs

Summary

Issues Involved:
1. Classification of imported telecommunication software under Exemption Notification No. 11/97-Cus.
2. Retrospective applicability of the explanation added by Notification No. 3/98-Cus.
3. Interpretation of the term "computer software" in the context of exemption notifications.

Detailed Analysis:

1. Classification of Imported Telecommunication Software under Exemption Notification No. 11/97-Cus.
The respondents imported telecommunication software and filed a Bill of Entry on 6-2-1998, claiming it as computer software under Sl. No. 173 of Exemption Notification No. 11/97-Cus. The Customs authorities, however, found that the software was intended for telecommunications and did not qualify as "computer software" under the said notification. The Assistant Commissioner of Customs assessed the goods to duty on merits, rejecting the exemption claim. The Commissioner of Customs (Appeals) later allowed the exemption, stating that on the date of filing the Bill of Entry, there was no distinction between ordinary software and software for specific purposes.

2. Retrospective Applicability of the Explanation Added by Notification No. 3/98-Cus.
The Customs authorities argued that the explanation added to Sl. No. 173 of Notification No. 11/97-Cus. by Notification No. 3/98-Cus. was clarificatory and retrospective, thus affecting the subject import. The Tribunal's Bench in Penta Media Graphics Ltd. supported this view, holding that the explanation was clarificatory and had retrospective effect. Conversely, the West Zonal Bench (WZB) in BPL Mobile Communications Ltd. and the East Zonal Bench (EZB) in Usha Martin Telekom Ltd. did not consider the explanation as clarificatory and hence did not apply it retrospectively.

3. Interpretation of the Term "Computer Software" in the Context of Exemption Notifications.
The explanation added by Notification No. 3/98-Cus. defined "computer software" as excluding software required for the operation of any machine performing a specific function other than data processing. The Tribunal had to decide whether this explanation was merely clarificatory or introduced a new condition. The Tribunal referred to the Supreme Court's rulings in Indian Charge Chrome and Woodcraft Products Ltd., which held similar explanations as clarificatory and retrospective. The Tribunal concluded that the explanation in Notification No. 3/98-Cus. was clarificatory, thus applying retrospectively to the import in question.

Conclusion:
The Tribunal disagreed with the views of the WZB and EZB, which had not considered the explanation as clarificatory. It decided to place the matter before a Larger Bench to resolve whether the explanation added by Notification No. 3/98-Cus. was clarificatory and had retrospective effect from 1-3-1997. The Tribunal directed the Registry to place the records before the Hon'ble President to constitute a Larger Bench for this purpose.