Computer software exemption for billing software upheld where data processing use, not operation of telecom machinery, was decisive.

Imported billing software used on a general-purpose computer to process subscriber billing data qualified as computer software for exemption under Notification No. 11/93-Customs. The exclusion for software required to operate a machine performing a non-data-processing function did not apply because the software was used for data processing and was not required for the operation of the telecom switching system itself. Mere interaction with specialised telecom equipment was not enough to deny the exemption, and the indirect connection with the switching system was held irrelevant. The duty exemption was therefore available, and the contrary view was rejected.

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Issues: Whether imported billing software used for processing subscriber data in a mobile telephony system was eligible for exemption as computer software under entry 173 of the Table to Notification No. 11/93-Customs, or whether it fell within the exclusion for software required for operation of a machine performing a specific function other than data processing and working in conjunction with an automatic data processing machine.

Analysis: The software was used in a computer to process billing data received from telecom equipment, but the mere fact that it interacted with telecommunication hardware did not take it outside the exemption. The exclusion in the notification applied only where the software was required for the operation of a machine performing a function other than data processing and incorporating, or working in conjunction with, an automatic data processing machine. On the facts, the computer used the software to perform data processing for billing purposes and did not require the software for its own operation. The indirect connection with the switching system was therefore not decisive, and the reasoning that the software was disqualified merely because it was connected with telecom equipment was rejected.

Conclusion: The imported software qualified as computer software under the exemption entry and did not fall within the exclusion. The issue was decided in favour of the assessee.

Final Conclusion: The duty exemption was available and the denial of benefit was unsustainable.

Ratio Decidendi: Software used on a general-purpose computer for data processing does not cease to be exempt computer software merely because the computer receives data from or is connected with specialised equipment, unless the software is required for operating a machine performing a non-data-processing function.

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