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TMI Blog2018 (4) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... ether it is in the nature of packaged software or canned software i.e. software developed to meet the needs of a variety of users and which is intended for sale or capable of being sold off the shelf? - Held that: - in respect of Finacle software, there is an element of supply of software developed to meet the needs of a variety of users. Since Finacle software is not developed, ab initio, for supply to each and every customer, such software falls within the category of packaged or canned software. Such software cannot be considered as customized software designed and developed for a specific user. Benefit of N/N. 22/2009 dt. 07.07.2009 - Held that: - the software licence only allows the purchaser of the software to use the Finacle software. Since the transfer of licence is not for the purposes cited in the notification, the appellant will not be eligible for the benefit of the notification. Time limitation - Held that: - department was not aware of the fact since 16-05.2008, demand not hit by time limitation. The issue is remanded to the adjudicating authority for requantifying the demand - appeal allowed by way of remand. - Appeal No. E/2200/2012, E/25702/2013, E/27431/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articular bank. The appellants stated that once the software has been implemented for a particular banking company, the same cannot be used by any other banking company and is not suitable for any other sector. 3. The issue in all these appeals relates to demand of Central Excise duty on Finacle Software developed and customized for banks by the Appellant. Information Technology Software has been listed in CETH 8523/ 8524 as excisable goods and carried NIL rate of duty up to 1.3.2006. W.e.f. 1.3.2006, the Union started levying CE duty on Software by amending Chapter CETH 8523/8524. However, an exemption notification u/s. 5A of the CE Act was issued vide No.6/2006-CE dated 1.3.2006 (Sl, No.27) which exempted - Any customized software (that is to say, any custom designed software, developed for a specific user or client), other than packaged software or canned software . An Explanation was inserted to define packaged software or canned software . This exemption was continued in amended form from time to time during the period of dispute. 4. In addition to granting exemption from payment of CE duty on 'customized software as stated above, the Central Government issued ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of Finacle and after doing so, issued the first show cause notice dt. 31.1.2011 demanding CE duty for the period March 2006-Dec 2009. Thereafter the Commissioner of Central Excise, Bangalore issued periodical notices for the period upto September, 2014, in which CE duty was proposed to be demanded. 8. The duty demands for Central Excise duty was finalised by the adjudicating authority through issue of various Orders-in-Original, confirming the same along with interest and imposition of penalties. The adjudicating authority took the view that the Finacle software supplied by the appellant to various banks would merit classification under 8523 8020 as Information Technology Software and liable to payment of Central Excise duty since the goods are in the form of packaged or canned software and not software. Accordingly he also denied the benefit of Notification No.6/2006 as amended from time to time and successor notifications. Aggrieved by the above decisions, the present set of appeals have been filed, Since the issue involved in all the appeals are same, they are taken up for decision through this common order for the sake of convenience. 9. With the above background, we h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture of goods, that would result in emergence of customized software since It was specifically designed and customized to a particular banking customer and thus exemption from payment of central CE duty vide notification No.6/2006CE was available as also under continuing notifications; v. The assessable value adopted for demanding CE duty was the same as the value of taxable service on which the appellant had paid service tax w.e.f. 16/05/2008. Hence the demand of central excise duty on the very same activity / value once over was impermissible being nothing but double taxation; that exemptions were available for that portion of value on which service tax was paid. vi. In support of the claim of the appellant that Finacle UBS was a 'customised software', the appellant led expert evidence from Prof. Sadagopan of Indian Institute of Hardware Technology (IIHT); vii. In case the Central Excise department demanded CE duty, service tax already paid had to be given due credit / set-off / adjustment. This was because there could not be levy of both CE duty as also service tax on the very same activity. viii. Assuming without admitting that Finacle software wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded that even though Finacle software needs customisation for each bank, the same can be implemented by the customer himself provided the customer has the knowledge of the software. He has taken the view that Finacle is not a customised software developed for a specific user or a client but sold to many and has been developed to meet the needs of a variety of users and which is capable of being sold off the shelf. 16. In the impugned order No.32/2012 dt. 30/11/2012, the adjudicating authority in para 16 has observed further that the Finacle software is in the nature of packaged software for the further reason that the appellant supplies only the object code at the time of selling the software to the customer. The source code, which is the language in which the software has been written, is not transferred to the customer. The end user is made to sign an end-user licence agreement, but the ownership of the software remains with the appellant, and only the right to use one or more copies of the software is transferred on payment of the licence fee. 17. After considering the submissions by both sides and the observations of the adjudicating authority in the various impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at having charge service tax w.e.f. 16.05.2008, it is not open to the Department to levy excise duty, right from March, 2006. 20. The adjudicating authority in the Order-in-Original Noe 9/10/2012 para No. 25.4 of O-I-O dt. 27.04.2012 has observed that the appellant has been recovering the price of the Finacle software by means of a charge as licence fee. The charges towards all other services in connection with supply of software are recovered through separate invoices. To resolve the overlap between the levy of Excise duty on S. Tax ITSS, the Government has issued several Notifications i.e. 22/2009 dt. 07.072009; 17/2010 dt. 27.022010; 14/2011 dt. 01.03.2011 and 11/2016 dt. 01.03.2016. After perusing the amendments carried out to the Schedule to the Central Excise Tariff act (W.e.f. 01.03.2006), the introduction of ITSS w.e.f. 16.02.2008 as well as the various notifications, it is seen that the Central Excise Tariff heading 8523 80 20 specifically covers the Finacle software sold by the appellant. This heading, which covers Information Technology Software covers the Finacle software especially in the light of the Supplementary Note to Chapter 85 which reads as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om payment of Excise duty, the value attributable to the transfer of right to use such software for certain activities such as commercial exploitation including right to represent and sell. In the case of the appellant the software licence only allows the purchaser of the software to use the Finacle software. Since the transfer of licence is not for the purposes cited in the notification, the appellant will not be eligible for the benefit of the notification. 25. On perusal of the successor notifications i.e. 17/2010; 14/2011; and 11/2016, we note that the exemption granted for the value of software licence has been extended unconditionally, unlike the Notification No. 22/2009, Hence, the benefit of exemption through the successor notification will be available to the appellant and hence no excise duty will need to be paid. 26, The appellant has also submitted that the demand is hit by time bar inasmuch as the Department ware aware of the fact that since 16.05.2008 service tax is being paid by the appellant. We find that the adjudicating authority has discussed these arguments in para 29 to 34. After considering the same, we uphold the findings and dismiss this ground rai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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