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Regarding classification of software
Customs
Circular No. 51 dated 12th August 2002
I
am directed to invite your attention to the subject mentioned above and to say
that a doubt has been raised regarding classification of records, tapes and
other media when presented with the equipment or apparatus for which they are
intended. On account of amendments
carried out in Chapter Note 6 to Chapter 85 of the Customs Tariff consequent to
the amendments in HS Nomenclature, which came into effect from 1.1.2002, a view
has been expressed that software imported along with the equipment or apparatus
would need to be classified along with the equipment/ apparatus and duty charged
at the rate applicable to the equipment/ apparatus.
2.
The matter has been examined. Prior to the amendment, Chapter Note 6 of
Chapter 85 read as under:
"Records, tapes and other
media of heading 85.23 or 85.24 remain classified in those headings, whether or
not they are presented with the apparatus for which they are intended".
After the amendment, the revised
Chapter Note 6 reads as under.
"Records, tapes and other
media of heading 85.23 or 85.24 remain classified in those headings when
presented with the apparatus for which they are intended.
This Note does not apply to such media when they are presented with
articles other than the apparatus for which they are intended."
3. It appears that the doubt has been
raised on account of the words, "those headings" mentioned in Chapter
Note 6 to Chapter 85 of the Customs Tariff.
A plain reading of Note 6 as it stands, makes it amply clear that the
reference to "those headings" in this Chapter Note refers to headings
"85.23 or 85.24" and not to the headings of the equipment/ apparatus.
Therefore, the question of software being classified under headings/
sub-headings applicable to equipment/ apparatus for which it is intended does
not arise. A comparison of the
revised Chapter Note 6 with the Chapter Note 6 as it stood prior to the
amendment would reveal that the objective of the amendment was to restrict the
coverage of software contained in media under CTH 85.23 or 85.24 only to such of
those software which is presented along with the apparatus for which it is
intended. Prior to the amendment,
regardless of whether or not such software was intended for the apparatus along
with which it was presented, the classification remained under CTH 85.23 or
85.24.
4. This aspect is clear from the remarks
column of the Correlation Table, which compares the changes between the HS-1996
and HS-2002 version. It states that
"Records, tapes, etc.,
presented with articles other than the apparatus for which they are intended can
be classified with these articles if they constitute a set".
Hence it is evidently clear that
the revision in the above Chapter Note was effected keeping in view the
situations where recorded media (audio cassette, video cassette, software on
floppy/ CD, etc.) was imported along with merchandise for which it is not
intended, for e.g., a book, which as a set would form educational material for
retail sale. The earlier Chapter Note posed difficulty in classifying such
goods. The amendment has been
effected to solve this difficulty.
5. It is hereby clarified that in cases
where the software presented along with the main equipment or apparatus is not
intended for use with such equipment or apparatus, the classification would
still remain under heading 85.24 except in situations where the software
accompanying the imported article or articles make up a set put up for retail
sale. In such cases, the set taken
as a whole will be classified by application of GIR 3(b).
Where the software accompanying the imported article does not constitute
a set put up for retail sale under GIR 3(b), they will have to be necessarily
classified separately under their own appropriate heading, namely, heading
85.24.
6.
Difficulties if any faced in implementing the above instructions may be
brought to the notice of the Board.
Please
acknowledge receipt of this Circular.
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