Separate software supplied with machinery remains independently assessable where it is distinct from embedded operating software.

Customized software supplied separately with computerized equipment was treated as distinct from the machinery for excise purposes and not assessable along with it under Heading 8524. The analysis distinguished embedded or essential operating software, which may form part of the device, from application software supplied separately for loading and specific use, such as monitoring or retrieval, which retains its separate character. On that basis, the software had to be assessed independently, and the duty demand and connected penalties were unsustainable.

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Issues: Whether customized software supplied separately along with computerized equipment was liable to be assessed with the machinery or independently under Heading 8524.

Analysis: The software in question was application software supplied separately for loading and use with the customer's equipment, while the basic operating software already loaded into the machines was distinct. The Tribunal followed its earlier view that the deletion of the chapter note regarding media presented with apparatus did not make separately supplied software an integral part of the apparatus. The reasoning drew a clear distinction between embedded or essential operating software, which may form part of the device, and separately supplied customized software meant for monitoring, retrieval, or specific applications, which retains its separate character for excise purposes.

Conclusion: The customized software was not required to be assessed along with the machinery and had to be assessed separately. The impugned duty demand and connected penalties were unsustainable.

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