2002(02)LCX0253
IN THE CEGAT, SOUTH ZONAL BENCH, BANGALORE
S/Shri G.A. Brahma Deva, Member (J) and S.S. Sekhon, Member (T)
BPL TELECOM LTD.
Versus
COMMISSIONER OF CUSTOMS, COCHIN
Final Order Nos. 157-58/2002, dated 8-2-2002 in Appeal Nos. C/172A and 173A/2001
CASES CITED
BPL Mobile Communication Ltd. v. Commissioner — 2000(04)LCX0270 Eq 2000 (126) ELT 0986 (Tribunal) — Relied on [Para 4(c) ]
Hutchisons Max Telecom Ltd. v. Commissioner — 2000(11)LCX0051 Eq 2001 (132) ELT 0774 (Tribunal) — Relied on [Para 4(c) ]
Advocated By : Shri A.K.J. Nambiar, Advocate, for the Appellant.
Shri Narasimha Murthy, JDR, for the Respondent.
[Order per : S.S. Sekhon, Member (T)]. - The appellants are manufacturers of Push Button Telephones, Electronic Private Automatic Branch Exchanges (EPABX) etc and in connection with the manufacture of these items they have imported various components, parts etc, including voice mail cards computer software which were cleared by classifying them under Heading 8529.90. A show cause notice dated 12-6-98 was issued demanding duty amounting to Rs. 3,87,896/- on the ground that “As per Ministry’s clarification circular the exemption under Serial 173 of Notification No. 11/97 is applicable to software required for operation of a data processing machine falling under Heading 84.71 only. Hence the concession cannot be applied to other softwares”.
2. The lower authorities came to the conclusion that a write up submitted related to ‘computer software’ voice message system and at page 3.3 of the said write up indicated as computer is a power multi application voice processing software, so it would be called an application software for voice mail card which form part of EPABX and since Notification 89/95 clearly states that benefit under that notification was applicable only to computer software, the benefit availed was denied and the department confirmed the order.
3. In appeal, the Commissioner (Appeals) came to the following findings :-
“04.01 I have examined the disputed point and the scope of the expressions computer software used in the Customs Notfn. 11/97 in its common parlance meaning in consultation with experts and ascertaining the practice of assessment following other Air Cargo Complexes.
04.02 It is reported that for the purpose of customs classification/ notification, the word computer is interpreted as an automatic data processing machine under CTH 8471 and therefore computer software refers only to software capable of being processing machine falling under CTH 8471. Thus the expression will not cover other than data processing. Software for telecom, medical and other applications are not generally referred to as computer software for customs purpose.
04.03 In the instant case, the software is basically a telecom software. Most of the EPABX has got facility to save voice mail, but the memory space of EPABX for storing voice mail is minimal and hence VMC and the software is used to store the voice mail in the computer hard disk. The voice mail card and the application software performs a specific function by itself and does not have any data processing involved in its function and therefore the particular software cannot be classified as computer software for assessment purpose.
04.04 As regards the contention of the appellant that the inclusion clause in the explanation relates to software which is installed in a machine other than a data processing machine and as in their case the software installed inside the computer forms a part or accessory of the computer, the item imported is a computer software, it may be noted that as the criteria adopted for categorizing a software as a computer software (for the purpose of Customs Notification) is the specific function of the software and the common parlance meaning and not the place of installation of the same, the contention is not technically correct and legally acceptable.
04.05 Similarly, the other contention that as the software in question processes data and works in conjunction with a data processing machine it is not covered by the expression “computer software” prior to 11-2-98. i.e. the date of insertion of “Explanation” of computer software in the notification or by the legal definition of computer software incorporated in the Notification 11/97 vide Notfn. 3/98-Cus., dated 11-2-98, it may be noted that even telecom software was later separately indicated at Sl. No. 207 of Notfn. 23/98-cus., dated 2-6-98.”
And therefore classified the ‘Voice Mail Card’ under 8524 and concluded that order of denial of benefit under Notification 59/95 was applicable to computer software & herein it was legal and proper. The computer software imports in the present case were required to pay the actual duty under 8524 at the time of import with interest.
4. We have heard both sides and considered the submissions and find :
(a) It is submitted by the appellants that the said software contains instructions to be used to control the operation of PC based on voice mail card which is a hardware inserted into the computer. When an incoming call from EPABX is transferred to an extension line and when the extension is unanswered then the call is redirected to the computer. The voice mail card then operates to convert the redirected call to digital data, by the software therein via hard disk of the computer. When such call data is required to be retrieved subsequently, an extension from the EPABX activates the software, which then converts the digital data stored in the analog form and transmit the same through the voice mail card to the EPABX. The software processes the data entering into a computer and convert it from analog to digital and vice-versa. Since it is used inside the computer in Tandem itself computer software under Heading 8524.90 of the Customs Tariff Act and entitled to the benefit of Notification No. 11/97, dated 1-3-97. The lower authorities’ conclusion about the exclusion clause of Notification No. 11/97 introduced by Notification 3/98 with effect from 11-2-98, which by an explanation which reads as “computer software” means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine in readable form and capable of being manipulated providing interactive 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 incorporation or working in conjunction with an automatic data processing machine” will not be appropriate. The software under import being used in and by the automatic data processing machine, would be eligible to the benefit of Notification 11/97 as amended and not excluded by the above explanation. The findings of the lower authorities that the appellants had imported a software for Telecom and findings and that voice mail card and the application software performed a specific function, not involving data processing and therefore not covered to be classified as computer software was incorrect. Since the software in this case converts sound data from analog to digital and vice-versa it would be covered.
(b) The lower authorities also have failed to note that the amendment by Notification No. 3/98, dated 11-2-98 to Notification 11/97, is thereby effective from 11-2-98. The same could not be applied to imports made earlier to that date. Since earlier the benefits were available to ‘computer software’ a term which was not defined by the notifications, and since in this case, bill of entries were filed before 11-2-98 reading of this amendment was not called for in case of bill of entry Nos. 647 dated 6-2-98 and 692 dated 9-2-98.
(c) The appellant’s reliance in the case of BPL Mobile Communication Ltd. [2000(04)LCX0270 Eq 2000 (126) ELT 0986 (T) = 2000 (040) RLT 0249 (CEGAT)] wherein same Notification 11/97-Cus., dt. 1-3-97, as interpreted by the Tribunal before the amendment would support the case of the appellants. Similarly the decision of the Tribunal in the case of Hutchinson Max Telecom Ltd. [2000(11)LCX0051 Eq 2001 (132) ELT 0774 (T) = 2001 (043) RLT 0967 (CEGAT-MUM)] on software for similar voice mail would help the appellant as in this case, there is no opinion on record from Technical Experts, that the entity herein had ‘any real time interface with telecom machine’. We rely on the findings in para - 4 of the findings in this case and the use of the ‘software data processing’ in the case before us to conclude that the benefit of notification is available even after insertion of the explanation clause to Notification 11/93-Cus. and would cover three BE herein.
5. In view of our findings, the appeal has to be allowed after setting aside the orders. Ordered accordingly.
_______
Equivalent 2002 (142) ELT 258 (Tri. - Bang.)