69. In view of the above discussion and findings, I pass, the

following order.

After allowing the benefit of Cum duty price, I confirm the

demand of Central Excise Duty amounting to Rs.35,40,853/-

(Rupees Thirty Five Lakhs Forty Thousand Eight Hundred Fifty

Three only), Education Cess amounting to Rs.70,817/- (Rupees

Seventy Thousand Eight Hundred Seventeen), and Higher

Secondary Education Cess amounting to Rs.26.915/- (Rupees

Twenty Six Thousand Nine Hundred Fifteen only) payable by

them being Central Excise Duty, not paid on goods, as detailed

in Annexure 'A' to the Show Cause Cum Demand Notice, the

packaged software, internet download sales, as classifiable under

tariff item 8524 31 11 (as amended) manufactured and cleared

by them during the period April - 2006 to November, 2008,

under proviso to Section 11 A (1) of Central Excise Act, 1944,

and order for recovery of the amount from M/s. Microworld

Software Services Pvt. Ltd., Mumbai - 400 093.

I confirm and order recovery of interest at appropriate rate, from

M/s. Microworld Software Services Pvt. Ltd., Mumbai - 400 093,

under Section 11 AB of Central Excise Act - 1944.

I impose penalty of Rs.36,38,585/- (Rupees Thirty Six Lakhs

Thirty Eight Thousand Five Hundred Eighty Five only) on M/s.

Microworld Software Services Pvt. Ltd., Mumbai - 400 093,

under provisions of Section 11 AC of the Central Excise Act

1944.

Further, I impose a penalty of Rs.1,00,000/- (Rupees_One lakh

only) on Shri Govind Rammurthy, Managing Director of M/s.

Microworld Software Services Pvt. Ltd., Mumbai - 93, under Rule

26 of the Central Excise Rules-2002.”

3

2.1

The appellants are engaged in the manufacture and sale of

packaged information technology software on media like CD-

ROM or Disc. Till 1.3.2006, information technology software

recorded on media was exempted from Central Excise duty. With

effect from 1.3.2006, such information technology software

recorded on CD-ROM or disc or any other media was classifiable

under Tariff Item 8524 91 12 of the First Schedule to the Central

Excise Tariff Act, 1985 (Central Excise Tariff for short) and basic

excise duty @ 8% adv. was levied. With effect from 01.01.2007,

the aforesaid Tariff Item No. was changed to 8523 80 20 which

covered information technology software recorded on any media

and attracted central excise duty @ 8% adv.

2.2

Appellants paid Central excise duty at applicable rate on

packaged software sold in CD-ROM or disc after availing small

scale exemption in terms of Notification No. 8/2003-CE dated

1.3.2003, as amended by Notification No. 8/2006-CE dated

1.3.2006.

2.3 Revenue authorities were of the view that the software

sales made electronically through internet download were also

goods since sales tax on software sold through internet

download was discharged by the appellants. It was alleged that

the software sold through internet was packaged software and

not customized software and therefore, benefit in terms of

Notification No.6/2006-CE dated 1.3.2006 was not available. A

show cause notice dated 17.11.2009 was issued to the appellant

2.4

The show cause notice was adjudicated by the original

authority as per the order in original referred in para 1.2 above.

Appeal

filed

by

appellants

was

dismissed

by

Commissioner (Appeal) as per the impugned order hence this

appeal.

3.1

We have heard Shri Rajesh Ostwal with Shri Saurabh

Bhise, Advocates for the Appellants and Shri Amrendra Kumar

Jha Deputy Commissioner, authorized representative for the

revenue.

3.2

Arguing for the appellants learned counsel submits:

The software downloads are not excisable goods covered under

Section 2(d) of the Central Excise Act, 1944 and hence are not

4

liable to levy of Central Excise duty under Section 3 of the

Central Excise Act.

The Finance Minister's speeches while introducing Budget 2006-

07 and Budget 2008-09 support the above submissions.

When software is downloaded from / through internet, there is

general consensus that none of the provisions of Customs