Circular No.7/1998-Cus date 10/2/98

Sub: Computer software - Scope of exemption under S.No. 173 of notification No.11/97-Cus., dated 1.3.97 - reg.

I am directed to state that references have been received from the assessees and the field formations regarding the scope of 'Computer software' for the purposes of exemption under S.No. 173of notification No. 11/97-Cus. dated 1.3.97. References have also been received from the field formations whether the benefit of exemption is applicable to software used in telecom equipment or medical equipment.

2. The matter has been carefully examined. The notification uses the expression 'computer software'. For customs purposes, the word 'computer' has to be interpreted as an automatic data processing machine falling under heading No.84.71 of the First Schedule to the Customs Tariff Act.

3. 'Software' means 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. However, it is to be appreciated the exemption under S.No. 173 of notification No. 11/97-Customs is to 'computer software', and not to 'software' in general and is to be interpreted strictly on its own terms.

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 wherever they satisfy the interactivity criterion.

5. The pending assessments may be finalised in the light of the above clarification.

6. Notification No. 11 /97-Customs is being amended suitably to put the matter beyond any doubt. Copy of the amending notification follows.

Sd/-
(P.R. Chandrasekharan)
Director (TRU)

F.N0.341/20/97-TRU

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