Justice P.V. Reddi, Chairman. - The applicant is a company incorporated under the laws of Japan engaged in the business of providing ‘Products Lifecycle Management’ software solutions, applications and services. The applicant markets the licensed software products mostly through a distribution channel comprising Value Added Resellers (VARs). It is stated that VARs are independent third party resellers who are in the business of selling software to end users. To authorize a VAR to act as the reseller of Products, the applicant enters into a General VAR Agreement (‘GVA’). The applicant states that as per the business model, the Product is sold to VAR for a consideration based on the standard list price less discount. The VAR in turn will sell such product to the end users at a price independently determined by VAR. The end-user will enter into End User License Agreement (‘EULA’) with the applicant and VAR for the product supplied. The reseller (VAR) gets the order from end-user and places a back-to-back order on the applicant. On acceptance of the order by the applicant, it will provide a license key via e-mail so that the customer will directly download the product through the web link.

2. The modus operandi of the transactions has been set out in brief as follows :

-The process starts with the VAR discussing with the end customer details regarding the technical solution i.e., the software and the budget of such end-customer;

-The VAR makes a proposal to end-customer. This proposal includes a copy of the standard tripartite End User License Agreement (EULA).

In a few cases the VAR forwards a Special Bid Offer (SBO) to applicant, typically to decrease their purchasing price. Applicant does not know the price that VAR intends to propose to the end customer in all cases. If applicant agrees, they then propose to VAR a maximum discount. VAR does not share this information with end-customer.

-VAR obtains a Purchase Order (PO) from the end customer. Applicant does not know of this PO, as this is an arrangement between VAR and end customer. The credit control and risk in relation to the end customer lies solely with the VAR.

-Simultaneously, VAR also obtains a signed and sealed End User Order Form from the customer, which describes the software ordered and whereby end customer accepts the licensing terms of the EULA. This EUOF does not bear the end customer price. The EULA is standard and does not bear any price.

-The VAR then places a PO with the applicant with the price obtained from either the SBO request or based on list price minus VAR discount. The End customer has no knowledge of this PO, since this is an arrangement between the applicant and VAR. For an order of a new software product, the Brand Order Form must be accompanied with a request for media, a request for license key and the signed EUOF;

-The applicant is not duty bound to accept the PO;

-If and when the PO is accepted, the applicant provides a license key via e-mail and download link directly to end customer. Simultaneously it invoices the VAR.

2.1 As to the manner of supply of product to the customer, the applicant states :

The product will be hosted on a server located outside India. The end-user in India will electronically download the Product by accessing the web link directly on its computer system/storage media. In case the end user is not equipped with the required network infrastructure (bandwidth) to download the product, such download will be made by the end user at VAR’s location. In such a situation the end user will carry its own portable storage device to VAR’s location for downloading the Product. No copy of the Product will be saved, even on a temporary basis, on the computer system/infrastructure of the VAR. VAR is prohibited from opening or using the product. After the download of the product, the end user will use the license key to activate the software and register the license. Such license key would be generated by the applicant to function only on