Judgment:
S.S. Kang
Heard both sides.
2. The applicants filed these applications for waiver of pre-deposit of duty of Rs.68,86,990/-, interest and penalty of equal amount. The demand is for the period March 2006 to December 2006 in respect of software licence key. The contention of the applicant is that prior to 1.3.2006 the software was exempted from payment of central excise duty. It is only with effect from 1.3.2006 the software is liable to central excise duty. The applicant is engaged in the manufacture of software and got themselves registered with the Revenue authorities on 29.3.2006. The applicant had already supplied software to various customers prior to 1.3.2006, regarding which they supplied software licence key subsequent to 1.3.2006 for additional use of the software by the customers. The applicant took a specific plea before the adjudicating authority that the applicant had only supplied the key which permits the right to use the information technology software and the document which permits the right to use is classifiable under Chapter Heading 4907 of the Central Excise Tariff subject to nil rate of duty. However, this contention was not accepted by the adjudicating authority.
3. The contention is that after passing the adjudication order, the Board vide Circular No.15/2011-Customs, dated 18.3.2011 clarified that the paper licences which are essentially the documents conveying the right to use of software merit classification under Chapter Heading 49 of the Customs Tariff. The contention is that the Central Excise Tariff is aligned with the Customs Tariff, therefore the circular is applicable to the Central Excise Tariff also. In view of the above circular, the contention of the applicant is that the software licence key is classifiable under Chapter Heading 49 of the Central Excise Tariff, therefore the demand is not sustainable.
4. The Revenue reiterates the findings of the lower authority to submit that the circular now relied upon by the applicant is in respect of Customs Tariff.
5. We find that the dispute is in respect of classification of software licence key which, according to the applicant, permits the right to use the software which was already supplied prior to 1.3.2006. We find that the Board vide circular dated 18.3.2011 in respect of the Customs Tariff has clarified that such keys which only permit the right to use the software are classifiable under Chapter Heading 49 of the Customs Tariff. In view of the Board’s circular, the matter requires reconsideration by the adjudicating authority. The impugned order is set aside, after waiving the pre-deposit of the dues, and the matter is remanded to the adjudicating authority for de novo adjudication. The adjudicating authority will decide afresh after affording an opportunity of hearing to the appellant. The appeals are disposed of by way of remand.