Embedded software in telecom equipment may not be separately classifiable for pre-deposit relief when it lacks independent commercial identity.

Embedded proprietary software imported with telecom equipment was treated, on a prima facie basis, as part of an integrated system rather than a distinct commodity for separate classification and valuation under Chapter Note 6 of Chapter 85. The applicants' reliance on cases concerning stand-alone software imported on media was held not to fit the factual setting, and the interim view in Bharti Airtel was followed for waiver purposes. A prima facie limitation plea also failed because the record suggested non-disclosure of the preloaded nature of the software. The result was only partial protection, with the balance pre-deposit directed to be secured within the stipulated time.

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Issues: (i) Whether the applicants had made out a case for complete waiver of pre-deposit on the footing that the imported software, though preloaded or embedded in the telecom equipment, was required to be classified and valued separately under Chapter Note 6 of Chapter 85. (ii) Whether the demand was prima facie time-barred so as to justify waiver of pre-deposit.

Issue (i): Whether the applicants had made out a case for complete waiver of pre-deposit on the footing that the imported software, though preloaded or embedded in the telecom equipment, was required to be classified and valued separately under Chapter Note 6 of Chapter 85.

Analysis: The applicants relied on decisions concerning software sold on tangible media or software imported as a distinct commodity, but the dispute here concerned proprietary software embedded in the hardware at the stage of manufacture and functioning as part of the telecom equipment. The material placed before the Authority indicated that the equipment was sold as an integrated system and that the software did not have a separate identity in the same sense as stand-alone software imported on discs or similar media. On a prima facie view, the authorities cited by the applicants were held not to govern the present factual situation, and the view taken in Bharti Airtel was followed for interim relief purposes.

Conclusion: The applicants did not establish a case for complete waiver of pre-deposit on this issue.

Issue (ii): Whether the demand was prima facie time-barred so as to justify waiver of pre-deposit.

Analysis: The record suggested, prima facie, that the applicants had not disclosed that the software was preloaded in the system and had projected separate imports of software though the software was not independently put to use. In that backdrop, the plea of limitation did not persuade the Authority at the interim stage.

Conclusion: The plea of time-bar was not accepted for the purpose of complete waiver of pre-deposit.

Final Conclusion: The appeals were permitted to proceed only on partial protection, with waiver of the balance duty deposit granted after insistence on deposit of the quantified amounts within the stipulated period.

Ratio Decidendi: Software that is embedded in imported telecom equipment and lacks a separate commercial identity may not, for interim purposes, be treated as a distinct commodity merely because it is separately shown in documentation or imported media.

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