Full Judgment
1135-1136/98, dated 5-10-98 passed by the Commissioner of Customs (Appeals), Chennai.
2. The respondents have imported ATM on-line pace application software and claimed exemption under Customs Notification No. 11/97-Cus.
However, the department directed them to pay duty. The original authority held that the benefit of Customs Notification 11/97-Cus. is not applicable for imports of application software for ATM. The respondents approached the Commissioner (Appeals). The Commissioner (Appeals) allowed the respondents' appeal holding that the software imported by them would be entitled for the benefit of Notification No.11/97-Cus. (Sl. No. 173). Revenue is aggrieved over this order of the Commissioner (Appeals), has come in appeal before this Tribunal for relief.
3. According to the Revenue, the software is meant for functioning of the ATM and not for data processing. Hence it is to be held as something other than a mere computer software and hence not entitled for exemption.
4. Smt. R. Bhagya Devi, ld. SDR appeared for the Revenue and Shri S.Murugappan, ld. Counsel for the respondents.
5. Ld. DR invited our attention to the Government of India's Circular No. 7/98-Cus., dated 10-2-98 wherein the scope of computer software for the purpose of exemption under Sl. No. 173 of the Notification No.11/97-Cus. has been clarified. She therefore drew our attention to the para 4 of the said circular which is reproduced below : "4. Having regard to the discussion above, it is clarified that for the purposes of the exemption under S. No. 173 of Notification No. 11/97-Cus., dated 1-3-97 'Computer software' is to be taken to mean 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. Thus, the said 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. More specifically, software for telecom, medical or other applications is not eligible for exemption from duty. However, software containing encyclopedia, games books etc., will be eligible for the exemption whenever they satisfy the interactivity criterion." In view of the above she said that the Order-in-Original is to be upheld.6. We have gone through the records of the case carefully. The respondents have made it clear that they had imported five sets of ATM on-line pace application software. The pace application software object code is a user interface software designed, to run on the personal computer of the configuration 166 mhz Pentium Processor, 15" VGA colour monitor, keyboard or mouse, hard disk and floppy disk drives, in the Automated Teller Machines. Pace Application software come in 3.5" floppy disks or CD-ROM, designed in a machine readable form and has to be modified to provide user interactivity through the said personal computer. It is designed to run under IBM OS/2 operating system in the personal computer. The pace application software process commands are initiated at the PC or host. Pace application being written in high level system level language 'C' provides the efficient communication between multiple personal computers. Further, the respondents have made it clear that the pace application software is not designed to perform any machines specific functions or operation of an automatic teller machines. The software is loaded on to a regular industry standard processor (Pentium) place inside the ATM for security reasons.
Therefore, it was contended that there is no truth in the contention of the appellants that made in para 2 of the grounds of the appeal saying that the software is loaded in the ATM machines. On going through the technical literature we are satisfied that the item imported is a computer software providing user interactivity through personal computer to ATM machines. In our view, the finding of the Commissioner (Appeals) appears to be correct. The imported items would not be covered by the Board's Circular cited by ld. SDR. In view of this we reject the Revenue appeal.
(Operative portion of the order was pronounced in open Court on 15-9-2005)