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TMI Blog2005 (2) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... involved is from 1-4-1994 to 1-6-1998. The Adjudicating Authority confirmed a demand of Rs. 3,37,85,494/- being the duty on the clearances of software for DCS under Rule 9(1) of the Central Excise Rules read with Proviso to Section 11A(1) of the Central Excise Act, 1944. Duty was also demanded by including the Factory Acceptance Test charges and Systems Engineering charges. Interest under 11AB was demanded. Penalty under Section 11AC was levied equal to the duty liability with effect from 29-9-1996 i.e. the date of enactment of Section 11AC/11AB. A penalty of Rs. 10 lakhs under Rules 9(2), 173Q and 226 of the Central Excise Rules, 1944 was levied on M/s. ABB Ltd. M/s. ABB has strongly challenged the findings of the Adjudicating Authority. 4. Shri G. Shiva Dass, the learned Advocate appeared for M/s. ABB and Shri N.K. Bajpai, the learned Advocate and Shri L. Narasimha Murthy, the learned SDR appeared for the Revenue. 5. Shri G. Shiva Dass, the learned Advocate made the following submissions : (1) The learned Advocate, at the outset explained the functioning of DCS. The DCS manufactured by M/s. ABB is used in various industries like chemical, paper, petroleum to control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of Circular No. 7/98-Cus., dated 10-2-1998 in connection with exemption granted from customs duty under Notification No. 11/97, dated 1-3-1997 as amended by Notification No. 3/98-Cus. clarifying the scope of expression Computer Software. (4) The application software supplied by the appellants is only Computer Software. The application software is admittedly used only in the computer or the workstation at the customer's site. This software works on the operating software already loaded in the computer and which functions as a platform to enable further operations. The application software cannot be etched as such on EPROM. Thus, the application software supplied by M/s. ABB is to be considered as Computer Software only. (5) Computer software has not been defined in the Central Excise Tariff. The Central Excise Tariff does not make any distinction between Computer Software to be used with computers classifiable under Chapter Heading 84.71 and any other software which is to be used elsewhere. Therefore the distinction sought to be made by the department between Computer Software and other software is totally unwarranted and irrelevant. The term has to be unders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tec Pvt. Ltd. v. CC - 2003 (156) E.L.T. 980. (9) The entire demand is barred by limitation as the appellants filed declaration from time to time declaring both DCS and the software. The functioning of the goods in question has also been fully explained to the authorities. The department has approved the CL/declaration all along. Both the appellants and the department were under the belief that the application software in question was nothing but Computer Software. But for the issue of Board's Circular dated 10-2-98, there would have been no change in the view of the department. Therefore the allegation of suppression with intention to evade payment of duty cannot be substantiated. (10) If duty had been paid on the software, the same would have been taken as Modvat credit by the buyers. Hence the entire exercise is one of revenue neutrality. In this regard, he relied on the following decisions : (i) CCE v. Mahindra Mahindra Ltd. - 2005 (179) E.L.T. 21 (S.C.) (ii) Amco Batteries Ltd. v. CCE - 2003 (153) E.L.T. 7 (S.C.) (iii) BPL Ltd. v. CCE (F.O. No. 761/2004, dated 8-4-2004 (iv) CCE v. BPL Sanyo Utilities Appliances - 2004 (177) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CS, they should form part of the assessable value as rightly concluded by the adjudicating authority. (5) In view of the misdeclaration of the software for DCS as Computer Software, the longer period under proviso to Section 11A(1) is invocable. (6) In view of the retrospective amendment of Section 11A by the Finance Act 2000, a notice under Section 11A for short levy could be validly issued even when the CL had been approved by the proper officer. The Constitutional validity of amendment to Section 11A has been upheld by Supreme Court in ITW Signode India Ltd., v. Collector of Central Excise - 2003 (158) E.L.T. 403 (S.C.). 7. We have heard the rival contentions. The short point in this case is whether the software for DCS manufactured and cleared by M/s. ABB is classifiable as Computer Software for Central Excise purposes. The period of dispute is from 1-4-1994 to 1-6-1998. During the period from 1-4-1994 to 22-7-1996, the term Computer Software was not mentioned in the Tariff at all. However there was an exemption Notification 48/94-C.E., dated 1-4-1994 exempting Computer Software from Central Excise duty. Computer software was classified under 8425.90. With e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, windowing systems, utilities and more. Application software allows a user to accomplish one or more specific tasks. Typical applications include business software, educational software, database and computer games etc. The term software was first used by John W. Tukey in 1957. Colloquially the term is often used to mean Application Software. In computer science and software engineering, Computer Software is all information processed by computer system, programmes and data. We have given the above details only to indicate the popular understanding of what Software is. In all the standard textbooks and encyclopaedias, no distinction has been made between 'Software' and 'Computer Software'. In the instant case, the software developed by M/s. ABB is for the Distributor Control System. This DCS has applications in various process industries for controlling the various parameters like pressure, temperature, flow of liquids etc. From the literature available, it is seen that the software developed by M/s. ABB are supplied in tapes, floppies or disks and are loaded into the workstations which are nothing but computers. Under these circumstances, we fail to understand how the Revenue exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is entitled for the exemption. While filing the classification list, they had given the technical literature to the Department. The Department did not raise any objection at that time because the department was also having the same view. The genesis of the Show Cause Notice itself is on account of the introduction of the definition of Computer Software in the Customs Notification. In such circumstances, a charge of misdeclaration by M/s. ABB has no force. 9. Summing up, we hold that as far as the Central Excise Notification No. 48/94-C.E., dated 1-4-1994 is concerned, all Softwares are eligible for exemption and one cannot import the definition of Computer Software in the Customs Notification to deny the benefit of exemption to DCS software. The charge of misdeclaration also cannot be sustained. As regards non-inclusion of Systems Engineering charges, there is force in the appellants' contention that such activity has been undertaken at site in connection with the layout of the DCS and is in no way connected with the manufacture of the DCS. In view of this, we allow the party's appeal with consequential relief. 10. The Revenue's appeal is with regard to the quantum of penalty i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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