Customs exemption for software and valuation based on contemporaneous imports upheld; suspicion alone cannot justify revaluation or penalties.

Imported CD-ROMs containing software were treated as computer software for exemption purposes, because software does not lose that character merely because it requires another programme or operating system to run. Customs valuation could not be displaced by suspicion where contemporaneous imports, expert opinion and comparable accepted values supported the declared price; the residual method was unavailable on that record. In the absence of suppression or misdeclaration, the extended limitation period did not apply, and confiscation, redemption fine and penalties were not sustainable.

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Issues: (i) Whether the imported CD-ROMs were classifiable as computer software and eligible for exemption under the customs exemption notifications; (ii) whether the declared value of the imports could be rejected and a higher assessable value adopted; (iii) whether the extended period of limitation and the consequential confiscation, redemption fine and penalties were sustainable.

Issue (i): Whether the imported CD-ROMs were classifiable as computer software and eligible for exemption under the customs exemption notifications.

Analysis: The imported media contained software programs and their eligibility had to be tested under the terms of the exemption notification. The governing principle was that software does not cease to be software merely because another programme or operating system is required for it to function. The notification did not impose any condition that the software must operate only in the absence of a preloaded operating system.

Conclusion: The goods were computer software and were entitled to the benefit of the exemption notification.

Issue (ii): Whether the declared value of the imports could be rejected and a higher assessable value adopted.

Analysis: The declared value was supported by contemporaneous imports of similar goods, expert opinion obtained before release of the goods, and evidence showing acceptance of comparable values in other proceedings. Value under section 14 had to reflect the price of like or similar goods at the time and place of importation. The material relied upon by the Revenue created suspicion at best, but suspicion could not replace evidence. The residual method could not be invoked when contemporaneous comparable data was available.

Conclusion: The declared value was accepted and the Revenue's revaluation was rejected.

Issue (iii): Whether the extended period of limitation and the consequential confiscation, redemption fine and penalties were sustainable.

Analysis: The importer had disclosed the relevant documents, the goods had been examined, and inquiries were conducted before release. There was no suppression of facts or material to attract the proviso to section 28(1). Once misdeclaration and undervaluation were not established, the goods were not liable to confiscation, and the penalties on the other noticees also failed. Penalty provisions had to be construed strictly and could not rest on assumptions or conjecture.

Conclusion: The extended period was inapplicable, confiscation was set aside, and all penalties and redemption fine were unsustainable.

Final Conclusion: The appeals succeeded and the impugned order was set aside in entirety, leaving no duty demand, confiscation, fine or penalty in force.

Ratio Decidendi: Software remains software for exemption purposes even if it requires another programme to operate, and customs valuation cannot be displaced by suspicion when contemporaneous imports and other reliable evidence support the declared price; absent suppression, the extended limitation period and confiscation consequences do not arise.

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