2012 (12) TMI 181 - HC - Customs

Whether software imported by the respondent-assessee is exempt being computer software appeal against the order of the tribunal 2010 (6) TMI 374 - CESTAT, NEW DELHI - Held that - prior to notification dated 11th February, 1998, in several decisions it was held that software imported by telecom operators was covered by the term computer software and these decisions were not upset and set aside by the Supreme Court. It was in these circumstances that the Revenue decided to interpret and has issued amending Notification No. 3/1998 dated 11th February, 1998. The Larger Bench of the Tribunal after examining the controversy came to the conclusion that the amending notification should not be given retrospective effect. - Decided against the revenue.

Summary

Issues:
1. Interpretation of the term "computer software" for exemption from duty under the Customs Act, 1962.
2. Retroactive application of an amending notification defining "computer software."
3. Conflict in decisions regarding the eligibility of certain software for duty exemption.

Issue 1: Interpretation of the term "computer software" for exemption from duty under the Customs Act, 1962:
The appeal in this case revolves around whether the software imported by the respondent-assessee qualifies for exemption as "computer software" under the Customs Act. The definition of "Computer Software" was crucial, as it determines whether the software is exempt from duty. The explanation added to the Act clarified that computer software includes instructions, data, sound, or image capable of being manipulated by an automatic data processing machine. However, software for specific functions other than data processing is excluded from this definition.

Issue 2: Retroactive application of an amending notification defining "computer software":
The controversy arose due to conflicting decisions regarding the retrospective effect of an amending notification defining "computer software." The Tribunal held that the restriction introduced by the notification on 11th February 1998 should not have retrospective effect. This decision was based on the understanding that the restriction did not apply to software imported before the notification date.

Issue 3: Conflict in decisions regarding the eligibility of certain software for duty exemption:
Several decisions highlighted the ambiguity surrounding the eligibility of software for duty exemption, especially software related to telecom, medical, or other applications. The Tribunal referred to a Larger Bench case where it was clarified that software required for specific functions other than data processing would not qualify as "computer software" for duty exemption. The Tribunal emphasized that decisions upholding software imports by telecom operators as "computer software" were not challenged or overturned by the Supreme Court.

In conclusion, the High Court dismissed the appeal by the Revenue without costs, emphasizing the importance of interpreting the term "computer software" for duty exemption under the Customs Act and clarifying the non-retrospective application of certain amendments defining software eligibility for exemption.