Customs, Excise and Gold Tribunal - Tamil Nadu
Commr. Of Cus. (Airport) vs Skycell Communications Ltd. on 3 January, 2005
Equivalent citations: 2005(181)ELT275(TRI-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. The respondents in this appeal of the Revenue imported telecommunication software from M/s. Nokia Telecommunications Limited, Finland and filed Bill of Entry on 6-2-1998 for clearance of the goods, claiming the goods to be computer software falling under Sl. No. 173 of Exemption Notification No. 11/97-Cus., dated 1-3-1997. The Customs authorities, on examination of the goods, found that the goods had been imported for the purpose of telecommunications. The importer did not dispute the fact that the goods were telecommunication software. However, they claimed that the benefit of exemption for computer software under Sl. No. 173 of the above Notification was available to telecom software also. The Customs authorities contested this claim on the strength of Notification No. 3/98-Cus., dated 11-2-1998 which added an 'explanation' to Sl. No. 173 of Notification No. 11/97-Cus., which defined the term "computer software". They took the view that the amendment was clarificatory and retrospective and hence applicable to the prior import. Accordingly the imported software was held to be other than computer software covered under Sl. No. 173 of Notification No. 11/97-Cus. The Assistant Commissioner of Customs, accordingly, ordered the goods to be assessed to duty on merits. In the assessee's appeal preferred against the decision of the original authority, the Commissioner of Customs (Appeals) held that the amendment to Notification No. 11/97-Cus., brought by Notification No. 3/98-Cus., was not clarificatory and did not impose any additional burden of duty on the importer. He observed that on, 6-2-98 (date on which the Bill of Entry was filed), there was no distinction between ordinary software and software used for a specific purpose as mentioned in the explanation added to Notification No. 11/97-Cus., by the amending Notification No. 3/98-Cus., and therefore the goods in question, which were admittedly software, should get the benefit of exemption in terms of Sl. No. 173 of Notification No. 11/97. Accordingly, ld. Commissioner (Appeals) allowed the assessee's appeal. The Revenue is aggrieved by his decision.
2. Ld. Jt. CDR argued that the explanation defining "computer software", added to Sl. No. 173 of Notification No. 11/97-Cus. by the amending Notification No. 3/98-Cus. was clarificatory and retrospective. According to the explanation "Computer Software" did not include software required for operation of any machine performing specific function other than data processing. The subject goods were admittedly used for telecom purposes and hence they belonged to the excluded category of software, to which the benefit of exemption under Notification No. 11/97-Cus. was not available. In support of his argument that the explanation ibid was clarificatory and retrospective, ld. Jt. CDR relied on the following decisions of the Supreme Court:
(i) CCE, Shillong v. Woodcraft Products Ltd. -1995 (77) E.L.T. 23 (S.C.)
(ii) U.O.I. v. Indian Charge Chrome -1999 (112) E.L.T. 753 (S.C.) Reliance was also placed on Rajasthan High Court's judgment in Shree Cement Ltd. v. UOI [2003 (160) E.L.T. 42 (Raj.)] and the Tribunal's decision in Rochi Ram & Sons v. CCE, Jaipur [2004 (166) E.L.T 203 (Tri-Del). It was also pointed out by ld. Jt. CDR that this Bench had already held in the case of Penta Media Graphics Ltd. v. CCE., Chennai-III [2003 (160) E.L.T. 980] that the explanation added to Notification No. 11/97-Cus. by the amending Notification No. 3/98-Cus. was only a clarification of the existing term "computer software" and was applicable retrospectively. He also relied on the Ministry's Circular No. 7/98-Cus., dated 10-2-98 which clarified that software for telecom, medical or other applications was not exempt from duty in terms of Sl. No. 173 of Notification No. 11/97-Cus.
3. Ld. Counsel for the respondents pointed out that the Tribunal had already held in the cases of BPL Mobile Communications Ltd v. CC, ACC, Mumbai [2000 (126) E.L.T. 986 (T) = 2000 (40) RLT 249 (CEGAT)] and Usha Martin Telekom Limited v. CC, Calcutta [2001 (138) E.L.T. 839 (T) = 2001 (45) RLT 1054 (CEGAT-Kol)] that software intended for purposes of mobile telecom service providers imported prior to 11-2-1998, were eligible for the benefit of exemption in terms of Sl. No. 173 of Notification No. 11/97-Cus. The Counsel pointed out that, in the case of BPL Mobile Communications (supra), the Tribunal did not accept the view taken in Circular No. 7/98-Cus., dated 10-2-98 regarding the scope of the term "computer software".
4. We find that the short question to be addressed, in the first instance, is whether the definition of "computer software" inserted by way of an explanation to Sl. No. 173 of Notification No. 11/97-Cus, dated 1-3-97 by the amending Notification No. 3/98-Cus., dated 11-2-98 is clarificatory. If it is clarificatory, it will have retrospective effect and will necessarily affect the subject import and, if it is not, it will have no retrospective effect and will not affect the import for which Bill of Entry was filed prior to the amendment. In the case of Penta Media Graphics Ltd. (supra), this Bench took the view that Notification No. 3/98-Cus. which amended Notification No. 11/97 by inserting explanation to Sl. No. 173 thereof only clarified an existing term viz. "computer software" vide para 7(b) of the order. On the other hand, in the case of BPL Mobile Communications (supra), the West Zonal Bench of this Tribunal did not consider the explanation as clarificatory and hence did not give retrospective effect to it. The Bench held that the benefit of exemption in terms of Sl. No. 173 of Notification No. 11/97-Cus. would be available to software used by all computers whether or not classifiable under Heading 84.71. Accordingly, the benefit of exemption was given to software in tapes, cartridges and CD ROMs imported by the assessee prior to 11-2-1998 for use in mobile telephone service. This decision of the WZB was followed by the EZB in the case of Usha Martin Telekom Ltd. (supra) wherein the same benefit was extended to software imported by the assessee prior to 11-2-98 for purposes of expansion of their Mobile Switching Centre (Telecom purposes).
5. After studying the judgments cited by ld. Jt. CDR, particularly the Apex Court's judgment in the case of Indian Charge Chrome (supra), we are unable to persuade ourselves to agree with the view taken by WZB and EZB and are inclined to endorse the view noted in para 7(b) of the order passed in Penta Media Graphics (supra).
6. In the case of Indian Charge Chrome (supra) the question arose before the Apex Court as to whether the explanation added to Notification No. 133/85-Cus., dated 19-4-85 by the amending Notification No. 306/86-Cus., dated 1-5-86 was clarificatory or not. The Court extracted the texts of the two Notifications in paragraphs 2 and 3 of its judgment which are reproduced below :-
2. On 19-4-1985 Notification No. 133/85 was issued which reads as under :
"In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods falling under the Heading No. 84.66 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) when imported into India for Power Projects (including gas turbine Power Projects), from the whole of the duty of Customs leviable thereon which is specified in the First Schedule, subject to the condition that the importer produces a certificate from an Officer not below the rank of a Joint Secretary to the Government of India in the Ministry administratively concerned with the said Projects that the goods in question are required for the said projects and recommending grant of the above exemption."
3. On 1-5-1986 came to be issued Notification No. 306/86 which reads as under:
"In exercise of the powers conferred by Sub-section (1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby directs that each of the notifications of the Government of India in the Ministry of Finance (Department of Revenue), specified in column (2) of the Table hereto annexed, shall be further amended in the manner specified in the corresponding entry in column (3) of the said Table.
THE TABLE
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Sl. Notification No. Amendment No. and data
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xxx xxx xxx
3. 133/85-Customs, In the said notification, the following
dated the 19th Explanation shall be inserted at the end,
April, 1985. namely - "Explanation":- For the purpose
of this notification, the expression
"power projects (including gas turbine
power projects)" shall mean such projects
whose output or end product is power, but
shall not include captive power plants set
up by units engaged in activities other than
power generation."
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The above amendment was held to be merely clarificatory vide para 15 of the Court's judgment which is extracted below :
"15. We agree with the learned Senior Counsel for the appellants in his submission that the exemption granted by the Notification No. 133/85 related to the goods falling under the Heading No. 84.66 of the First Schedule to the Customs Tariff Act, 1975 imported into India for power projects (including gas turbine power projects) the end product whereof was electricity meant for public distribution and therefore the amendment Notification No. 306/86, dated 1-5-1986 was only clarificatory in nature. It only clarified that the full exemption from payment of customs duty as granted by the Central Government by Notification No. 133/85 was not intended to apply to such power plants which were set up by units engaged in activities other than power generation and which generated power for captive consumption. The words used in the Notification No 133/85 were - "Power Projects (including gas turbine Power Projects)". A power plant is not the same thing as a power project. Chamber's 20th Century Dictionary defines ? Project as "a proposal for undertaking : an undertaking." Plant is defined as "equipment, machinery, apparatus for an industrial activity." The distinction between the two terms is determinable by reference to mass, magnitude or extent of the two. 'Project' suggests something very much more extensive, than a 'plant'. The learned Senior Counsel for the appellants is right in submitting that "power project" could not have meant "power plant" also and the scope for confusion or doubts, if any, was done away with by inserting a clarification. Thus the amendment notification was clarificatory merely."
In the case of Shree Cement Ltd. (supra), the High Court of Rajasthan considered the scope of an explanation added to sub-rule 1 of Rule 57 B of the Central Excise Rules, 1944 by Notification No. 5/98, dated 2-3-1998 and held that the explanation was only intended to explain the words already contained in the existing provisions and was, therefore, clarificatory in nature and had retrospective effect. It was observed by the Court thus : "The consistent view of the courts in India right from the decision of the Privy Council in Abdul Lalit Khan v. Abbaji Beg reported in 1934 Privy Council 188 is that an explanation can be added in a declaratory form retrospectively to clarify a doubtful, point in law and to serve as proviso to the main section." In the case of Woodcraft Products Ltd. (supra), the Hon'ble Supreme Court considered two amendments brought to Chapter Note 5 in Chapter 44 of the CETA Schedule, in the context of deciding the correct classification of "Block board." The Revenue had claimed that the goods was classifiable under Heading 44.08 and, to substantiate this claim, it was argued that the amendments dated 19-3-1990 and 1-3-1992 of Chapter Note 5 in Chapter 44 of the CETA Schedule were clarificatory and retrospective. Accepting this argument, their lordships held that the said amendments of Chapter Note 5 were ex abundante cautela merely to clarify and make explicit that which was implicit earlier in the expression "similar laminated wood". Accordingly, their lordships gave effect to Chapter Note 5 as amended and classified the goods in question under Heading 44.08 for a period prior to the date of amendment.
7. In the instant case, the assessee claimed exemption from payment of duty on the telecom software imported by them prior to 11-2-1998 contending that telecom software was also covered by the expression "computer software." This expression was defined under explanation added to Sl. No. 173 of the table annexed to Notification No. 11/97-Cus. This explanation which was inserted by the amending Notification No. 3/98-Cus., dated 11-2-1998, reads as under :-
"Explanation. - 'Computer software' means any representation of instructions, data, sound or image, including source code and object code, recording 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 No. 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."
According to the above explanation, 'computer software' means only software used by automatic data processing machines classifiable under Heading 84.71, It does not include software required for operation of any machine perfor-forming a specific function other than data processing and incorporating, or working in conjunction with, an automatic data processing machine. Admittedly, the telecom software imported by the respondents was meant for telecom purposes, i.e. it was to be used for operation of machines (performing specific function) other than automatic data processing machines or machines incorporating, or working in conjunction with, automatic data processing machines. The above explanation was only clarifying the term "computer software" which was already in existence. Hence, obviously, it was clarificatory in nature. Having regard to the Apex Court's ruling on an analogous explanation in Indian Charge Chrome (supra), we are unable to take a different view. Therefore, we respectfully disagree with the view taken by WZB and EZB in the cases cited by ld. Counsel.
8. Having disagreed with the view taken by two co-ordinate Benches of this Tribunal, we think, as judicial discipline demands, we should place the matter before a Larger Bench. Accordingly, the Registry is directed to place the records before the Hon'ble President to constitute a Larger Bench to decide on the following issue.
"Whether 'explanation' added by Notification No. 3/98-Cus., dated 11-2-98 to the entry at S. No. 173 of the table annexed to Notification No. 11/97-Cus., dated 1-3-97 is clarificatory of the expression 'computer software' so as to have retrospective effect from 1-3-1997."