Common parlance classification of bundled CD-ROM software and absence of evasion intent defeat penalty under tariff

CD-ROM documentation bundled with application software was treated, in common parlance, as software rather than other recorded media because the tariff entry did not define software and the product could be used only with accompanying software and hardware. The analysis further notes that penalty is unsustainable where the record does not show intent to evade duty, particularly when the goods were cleared on nil duty after classification declarations and the later tariff position also supported nil duty. The classification issue was therefore resolved in favour of software treatment for the relevant period, and the penalty was deleted.

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Issues: Whether the product described as CD-ROM documentation with software was classifiable under the software heading or under the heading for other recorded media, and whether penalty was sustainable in the absence of any intention to evade duty.

Analysis: The disputed goods were CD-ROMs supplied with documentation database and bundled application software, capable of being read only with the accompanying software and hardware. In the absence of any tariff definition of software, the expression was understood in its popular or common parlance sense. On that basis, a CD-ROM containing software was treated as falling under the software entry for the relevant period, and as under the residual heading before the introduction of the specific software sub-heading. Since the appellants had cleared the goods on nil duty after filing classification declarations, and the classification position for the later period supported nil duty in any event, the record did not disclose any intention to evade duty.

Conclusion: The goods were held classifiable as software under the relevant tariff entry, and the penalty was set aside.

Final Conclusion: The appeals succeeded only to the extent of deleting the penalty, while the classification issue was resolved in the assessee's favour for the relevant periods.

Ratio Decidendi: Where a tariff entry is undefined, classification must follow the common parlance understanding of the goods, and penalty cannot be sustained in the absence of material showing intent to evade duty.

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