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Eligibility for exemption under entry 173 of Notification 11/93 for imported software. Analysis: The appeal before the Appellate Tribunal CEGAT, Mumbai involved the eligibility of imported software for exemption under entry 173 of Notification 11/93. The appellant, a mobile telephony service provider, used the software to obtain details for billing subscribers using voicemail facility. The key issue was whether the software fell within the exclusion criteria specified in the Explanation to the entry, which stated that software required for the operation of a machine performing a specific function other than data processing and working in conjunction with an automatic data processing machine would not be exempt. The Asstt. Commissioner and Commissioner (Appeals) had denied the exemption, arguing that the software indirectly connected to the Mobile Switching Centre via Front End Call Processing Units, which performed specific telecommunication functions, thus falling outside the exemption. However, the National Centre for Software Technology clarified that the software ran on general-purpose computers connected to front-end call processing units without real-time interface with telecom machines. The Tribunal noted that the software's use in conjunction with telecommunication equipment did not disqualify it as computer software. To apply the Explanation, the software must be required for the operation of a machine performing functions other than data processing in conjunction with an automatic data processing machine. The software in question did not meet these conditions, as it was not used for the operation of any machine but merely for performing a specific function on a computer. The Tribunal highlighted that the wording of the Explanation mirrored the Explanatory notes to the Harmonised System of Nomenclature, indicating that software required for operation of a machine performing a specific function other than data processing would fall under a different classification. Ultimately, the Tribunal found that the software, despite being used in conjunction with telecommunication equipment, qualified as computer software and was eligible for the exemption under entry 173 of the notification. The Assistant Commissioner's misdirection regarding the software's connection to the switching center was noted, and the appeal was allowed with the impugned order set aside.
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