Separate clearance of customised software supported waiver of pre-deposit and stay of recovery pending appeal.

Separate clearance of customised software on CDs and its installation in customers' computers supported a prima facie view that the software was distinct from the appellant's manufactured electronic security and safety equipment. On that basis, the demand could not at this interim stage be tested as though the software necessarily fell under the same tariff heading as the equipment. The Tribunal also noted that duty at 8% had already been paid and did not decide, at this stage, whether exemption under Serial No. 27 of Notification No. 6/06-C.E. applied. Waiver of pre-deposit of differential duty, interest and penalty was granted and recovery stayed pending appeal.

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Issues: Whether the appellant made out a prima facie case for waiver of pre-deposit of differential duty, interest and penalty in view of the separate clearance and installation of customized software, and whether recovery should be stayed during the pendency of the appeal.

Analysis: The software was found to be cleared separately in CDs and installed in customers' computers, distinct from the electronic security and safety equipments manufactured by the appellant. On that prima facie basis, the demand could not at this stage be tested on the footing that the software was classifiable with the equipment under the heading applicable to the goods manufactured by the appellant. The Tribunal also noted that the duty at 8% had already been paid and, at this stage, did not enter into the question whether exemption could be claimed under Serial No. 27 of Notification No. 6/06-C.E. dated 1-3-2006.

Conclusion: The appellant was entitled to waiver of pre-deposit of the differential duty, interest and penalty, and recovery was stayed during pendency of the appeal.

Final Conclusion: Interim relief was granted on a prima facie assessment in favour of the appellant, leaving the merits of the classification and exemption issues for determination in the appeal.

Ratio Decidendi: Where software is separately cleared and installed, and a prima facie case is made out, pre-deposit of the disputed demand may be waived and recovery stayed pending appeal.

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