Pre-deposit waiver in telecom equipment imports limited where hardware and software appear supplied as one integrated system.

In appeals against customs duty demand on imported telecom equipment and software, the Tribunal found no prima facie basis for complete waiver of pre-deposit. It noted that the contract appeared to be for supply of the system as a whole, with hardware and software value split only in purchase orders and invoices, and that the separate import of software may have been a sham. Authorities concerning software used with ordinary computers were treated as distinguishable because the present dispute involved telecom equipment supplied with pre-loaded hardware and software. The appellants were therefore required to make a partial pre-deposit for admission of the appeals, while waiver of pre-deposit of interest and penalties and stay of recovery were granted subject to that deposit.

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Issues: Whether, in the appeals against the customs demand on imported telecom equipment and software, a prima facie case existed for full waiver of pre-deposit, and whether the appellants should be required to deposit a part of the disputed duty for admission of the appeals.

Analysis: The available material indicated, at least prima facie, that the contract was for supply of the system as a whole, that the value of hardware and software was split only at the stage of purchase orders and invoices, and that the separate import of software may have been a sham. The authorities cited on software used with ordinary computers were found distinguishable because the present dispute concerned telecom equipment where hardware and software were developed and supplied together in a pre-loaded manner. In the circumstances, the case was treated as closer to the line of decisions supporting the Revenue, and complete waiver was not considered justified at the admission stage.

Conclusion: The appellants were directed to pre-deposit Rs. one crore within eight weeks for admission of the appeals. Subject to that deposit, the requirement of pre-deposit of interest and penalties was waived and recovery was stayed during pendency of the appeals.

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