Customs valuation excludes accessory software value when imported with complete telephones, unless it is an integral part of the product.

Imported CD-ROM software supplied with CDMA telephones was treated as an accessory because the telephones were complete instruments and the software was not necessary for their essential voice communication function. On that basis, the value of the software could not be added to the assessable value of the telephones for customs duty valuation. The departmental addition was therefore unsustainable. The stated principle is that the value of software or another accessory imported with a complete product is not includible in the main product's assessable value unless it forms an integral part of the complete instrument.

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Issues: Whether the value of CD-ROM software imported along with CDMA telephones was includible in the assessable value of the telephones for customs duty purposes.

Analysis: The imported telephones were found to be complete telephones and not parts thereof. The software on the CD-ROM was required only for supporting additional functions and upgradation and was not necessary for the essential voice communication function of the telephone. Once the goods were treated as complete telephones, the software could only be regarded as an accessory. The settled legal position is that the value of an accessory cannot be added to the value of a complete instrument for duty valuation.

Conclusion: The value of the software was not includible in the assessable value of the imported telephones and the addition made by the department was unsustainable.

Ratio Decidendi: The value of software or an accessory imported with a complete product is not includible in the assessable value of the main product unless the software forms an integral part of the complete instrument.

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