Computer software exemption upheld for ATM user-interface software used through an automatic data processing machine.

Imported ATM on-line pace application software was treated as eligible "computer software" for exemption under Notification No. 11/97-Cus. The circular-based test drew a distinction between machine-readable, interactive software used through an automatic data processing machine and software meant to operate a machine performing a specific non-data-processing function. On the technical facts, the item was described as a user-interface program loaded on a personal computer within the ATM, running under an operating system and providing interactivity. It was not shown to be software for a machine-specific function, so the exemption applied and the Revenue challenge failed.

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Issues: Whether ATM on-line pace application software imported for use in automated teller machines was classifiable as computer software eligible for exemption under Notification No. 11/97-Cus., or whether it was software for operation of a specific machine and therefore excluded from the exemption.

Analysis: The relevant circular clarified that "computer software" for the exemption meant machine-readable instructions capable of being manipulated or providing interactivity through an automatic data processing machine, and that software required for operation of a machine performing a specific function other than data processing was outside the exemption. On the technical material, the imported item was a user-interface software loaded on a personal computer within the ATM, designed to run under an operating system and to provide interactivity, and it was not shown to be software for performing a machine-specific function or for operating the ATM as a specific-function machine.

Conclusion: The imported software was eligible for the exemption under Notification No. 11/97-Cus., and the Revenue's challenge failed.

Final Conclusion: The assessment adopted by the appellate authority was sustained and the Revenue appeal was rejected.

Ratio Decidendi: Software that functions as a machine-readable, interactive computer application through an automatic data processing machine is eligible for a computer-software exemption, but software meant to operate a machine performing a specific non-data-processing function is not.

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