Customs, Excise and Gold Tribunal - Delhi
Cc (Acu) vs Magnum Solution P. Ltd. on 21 May, 2002
Equivalent citations: 2002(104)ECR421(TRI.-DELHI), 2002(150)ELT107(TRI-DEL)
ORDER V.K. Agrawal, Member (T)
1. In this appeal, preferred by Revenue, the issue involved is whether the software for the knitting, weaving and designing imported by M/s. Magnum Solutions Pvt. Ltd. is eligible for the exemption from payment of duty under notification No. 11/97-Cus, dated 1.3.1997.
2. Shri R.D. Negi, learned SDR, submitted that the Assistant Commissioner, under Adjudication Order No. 14/98 dated 9.11.1998 denied the benefit of the Notification No. 11/97-Cus on the ground that the Notification (Srl. No. 173) excludes software required for operation of any machine working in conjunction with an automatic data processing machine and that as per Note 5(e) to Chapter 84, machines performing specific function other than data processing machine are to be classified in the Heading appropriate to their function; that Commissioner (Appeals), however, under the impugned Order, allowed the appeal filed by the Respondents following the decision in the case of BPL Mobile Communications Ltd. v. CC 2000 (40) RLT 249 (CEGAT) and observing that the impugned Software was imported before the amendment of Notification No. 11/97 by Notification No. 3/98-Cus dated 11.2.1998 by which an Explanation defining computer software eligible for benefit of exemption was inserted. He, further, submitted that Sl. No. 173 of Notification No. 11/97-Cus exempts only Computer Software; that for the purpose of Customs duty, the word "Computer" has to be interpreted as an automatic data processing machine falling under Heading No. 84.71 of the first Schedule to the Customs Tariff Act; that Computer Software is to be taken to mean any representation of instructions, data, sound or image recorded in a machine readable form and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine falling under Heading 84.71; that accordingly the exemption will not cover software required for operation of any machine performing a specific function other than data processing and incorporating or working in conjunction with an automatic data processing machine; that the impugned software is capable of import of designs, motifs and instructions from scanners and export to manufacturing environment i.e. machine for manufacture.
3. On the other hand Ms. Reena Khair, learned Advocate, submitted that for determining the eligibility to Notification 11/97-Cus, Serial No. 173 as it existed on the date of filing of Bill of Entry is to be considered; that at the relevant time computer software without any exclusion there from was fully exempted and denial of the benefit of Notification on the basis of any subsequent amendment is illegal; that before amendment, term computer software covered both systems software including source code and object code as well as the application software which is to be used for specific function; that software has been defined as a totality of programmers usable on a particular kind of computer, together with the documentation associated with a computer programme such as manuals, diagrams and operating instructions (Jaico Illustrated Encyclopedia of Technical Terms, Vol.II). She, further, submitted that the software imported by Respondents is for use by the National Institute of Fashion Technology which is being used by the students for designing on the computer; that in the catalogue, it is clearly mentioned that this is CAD/CAM new software which has been put into easy to use Windows-95 NT Based modules; that the main feature offered by the impugned software include:
(i) Spot Colour Separation & Cleaning;
(ii) Design and Repeat;
(iii) Easy Colouring;
(iv) Easy Weave;
(v) Easy Jacquard;
(vi) Virtual Merchandising;
(vii) Storyboard & Cataloguing
4. The learned Advocate, thus, contended that it is apparent from the Catalogue that the software is for use by designers for creating design of garments, furnishing, etc.; that nowhere it is mentioned that this software can be used for the operation of any machine which manufacture textiles, garments, woollens etc.; that the Chairperson of National Institute of Fashion Technology, in Certificate data 4.12.1998, has certified that 'it is purely a design tool with no interface possibilities with any manufacturing machines." She also mentioned that they had produced before the Adjudicating Authority a clarification from the Department of Electronics to the effect that the contents of the CD.-Rom entitled Fashion Studio Version 1.03 produced by M/s. Info Design qualify under the category of computer software. The learned Advocate finally relied upon the decision in the case of Usha Martin Telekon Ltd. v. CC, Calcutta 2001 (45) RLT 1054 (CEGAT) wherein it has been held that the software for expansion of Mobile Switching Center for telecom purposes and imported prior to 11.2.1998 is entitled to benefit of the Notification 11/97 before its amendment by Notification No. 3/98-Cus; that the appeal filed by the Revenue has been dismissed by the Supreme Court as reported in 2002 (49) RLT.
5. We have considered the submissions of both the sides. Serial No. 173 of Notification No. 11/97-Cus dated 1.3.1997 exempts from payment of Customs duty "Computer Software falling under Chapter 49 or Heading 85.24 of the Tariff. The impugned software was imported from INFO Design and Bills of Entry were filed on 20.6.1997 and 18.11.1997; that at the material time there was no condition specified in the Notification which exempted "Computer Software." Explanation as under was only inserted by Notification No. 3/98-Cus dated 11.2.1998:
Explanation-'Computer Software' means any representation of instructions, data sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine falling under Heading 84.71, but does not include software required for operation of any machine performing a specific function other than data processing and incorporating or working in conjunction with an automatic data processing machine.
6.1. It is thus apparent that only after insertion of the Explanation 'software required for operation of any machine performing a specific function other than data processing and incorporating or working in conjunction with an automatic data processing machine' was excluded from the purview of the Notification. This Explanation cannot be given a retrospective effect. These were the views expressed by the Appellate Tribunal in the case of Usha Martin Telekom Ltd. wherein the Tribunal quoted the following observations in BPL Mobile Communications Ltd., supra:
...this explanation was not present when the software in question was imported. The software in question was entitled to exemption under notification.
6.2. Similar views have been expressed by the Tribunal in the case of BPL Telecom Ltd. v. CC, Cochin wherein it has been held that "the amendment by Notification No. 3/98, dated 11.2.1998 to Notification 11/97, is thereby effective from 11.2.1998. The same could not be applied to imports made earlier to that date."
7. In the present matter, it has been mentioned by the Adjudicating Authority in the adjudication Order that the different modules of software imported "are for computer aided design and manufacturing". Even it is mentioned in the Memorandum of Appeal that design software includes features providing analysis of the data collected from machine used for manufacturing. The benefit of Notification is sought to be denied by Revenue on the basis that software in question also interact with special machine/instrument. But, such a condition has only been introduced by inserting Explanation to the Notification which is effective only from 11.2.1998 and as such the benefit of Notification 11/97-Cus cannot be denied to the impugned software. We, therefore, reject the appeal filed by the Revenue.