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4. The Ld. SDR appearing for the Revenue countered the arguments of the Ld. Counsel and contended that the software imported was indeed not custom designed software. He put forth an example of chapattis in an attempt to classify the software. The chapattis, which are normally made, are standard chapattis. If in case someone demands chapattis in diamond shape, the standard chapattis are cut into diamond shape and served, which would be customized chapattis (still maintaining the qualities of standard chapattis). In case, chapattis are made for a heart patient keeping in mind his specific requirements, right from the start of making of the dough, care would be taken to add a bit of Soya bean powder, add less salt and less oil. The chapattis thus made would be custom made chapattis. He stated that, in a similar manner, software can be standard or canned software; standard software, which can be customized by modifying the existing software; and custom made or custom designed software, where the software is designed right from the beginning keeping in mind the exact requirements of the client.

"9. ..In other words, when the software package is imported, it remains a packed software or canned software. Only after further modification, it acquires the characteristic of custom designed software. Alternatively, what is supplied to the customer is customized software, but what is imported is packaged software. "

The Ld. Counsel submitted that the judgment means that it does not matter whether the software is just modified from standard software or is virgin developed software, what really matters is whether at the time of import, the software was packaged software or customized software. He contended that in the present case, the software was customized in Germany as per the needs of BHEL, after due consultation with BHEL and NTPC, and hence at the time of import, the software was customized and hence as per the decision cited above, the benefit of the notification should be extended to them.

c) He also submitted that as per the minutes of the meeting referred to above, Para 3.c reads as Terms of delivery of licenses for Vindhyachal I &II , Kahalgaon I , II & III , Sipat I & II and Talcher III and IV shall be FOR BHEL EDN basis. The customization of the software shall be in BHEL scope.

The Ld. SDR submitted that if the software is custom designed for the specific plant as per its specific parameters after getting all necessary data, the question of customizing by BHEL does not arise at all. In reply to a specific query from the Bench, the Ld. Counsel of the appellant has in his written synopsis submitted that this was applicable only to Vindhyachal, Kahalgaon, Sipat and Talcher and not to other locations. The entire customization of the software to the design conditions including the dimension and material specifications of the boiler in particular will be done by Steag in Germany. Thereafter, the software is installed at site. BHEL will be responsible for further fine tuning to suit the local ambient conditions of temperature, pressure, humidity etc. 6.10. Taking into consideration all aspects as discussed above, we find that the impugned software / its constituent modules did exist prior to importation and have been installed and employed in many coal based power plants in many parts of the world including India. We also find that the licensing angle and the withholding of the proprietary rights by the software developer also point strongly towards a packaged software. This is further strengthened by the small latent period from the order to the delivery of the software and the fact of regular upgrades / releases / improvements promised to the client. On the clause, which mentions that customization shall be in BHEL scope also, we find adequate force in the Ld. SDRs submission. Further, the decision of the CEA, which specifies PADO and BPOS software as standard specifications to optimize operations in the coal based power plants comes as a clincher in this case.

7.1. The description of the entry at Sl. No 27 of the said Notification reads thus:

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.
Explanation.- For the purposes of this entry, packaged software or canned software means a software developed to meet the needs of variety of users, and which is intended for sale or capable of being sold, off the shelf Thus, it is clear that only customized software merits exemption under the notification. The issue to be decided here is whether software needs to be developed from scratch or whether modification of pre existing software is sufficient enough to merit it being called customized software.