2017 (11) TMI 1343 - AT - Customs

Tribunal decision on imported goods classification and valuation

Brigadier R Deshpande, M/s. Indusind Media & Communication. Ltd. Versus Commissioner of Customs, New Delhi

The Tribunal classified the imported goods under Customs Tariff Heading (CTH) 8525 instead of CTH 8543, as they functioned as a 'Head End' for cable TV ... Classification of imported equipments - Head End - whether 8543 as ordered by the adjudicated authority or 8525 as claimed by the appellant? - Held that: - similar equipments were held to be classified under 8525 in the case of Set India Pvt. Ltd. vs. CC [2002 (11) TMI 421 - CEGAT, MUMBAI] - Similar views have also been held in the case of Commissioner Customs vs. Multi Screen Media Pvt. Ltd. [2015 (8) TMI 241 - SUPREME COURT] - the imported goods are rightly classifiable under 8525 - The differential duty payable is required to be requantified and for this purpose the case is required to be remanded. Valuation - whether the value of software already embedded in the equipment as well as service charges are required to be included in the assessable value? - Held that: - Since the software is already incorporated in the imported goods the value of same is required to be added to the transaction value. Likewise the purchase order also includes the process of installation of equipment after importation. The Explanation as above provides for addition of the charges towards this service also - addition of the above changes paid by appellant to supplier, to the declared value for purpose of charging duty is upheld. Decided partly against appellant - part matter on remand. Issues Involved:1. Classification of the imported goods.2. Valuation of the imported goods, including the embedded software and service charges.Detailed Analysis of the Judgment:1. Classification of the Imported Goods:The primary issue was whether the imported goods should be classified under Customs Tariff Heading (CTH) 8543, as determined by the adjudicating authority, or under CTH 8525, as claimed by the appellant.- Appellant's Argument: The appellant contended that the imported equipment, referred to as 'Head End' for cable TV operations, comprised multiple components each with its own electronic function, meriting individual classification. They argued that the classification under Chapter 85 as 'Head End' was incorrect.- Department's Stand: The department argued that the complete set of equipment, when interconnected, performed a common function and should be classified under CTH 8543 as per Section Note 4 to Section XVI, which states that a combination of machines intended to contribute to a clearly defined function should be classified under the heading appropriate to that function.- Tribunal's Finding: The Tribunal noted that the imported goods, when interconnected, functioned as a 'Head End' for cable TV operations, which involves the transmission of TV channels over cable TV. They cited similar cases (Set India Pvt. Ltd. and Multi Screen Media Pvt. Ltd.) where such equipment was classified under CTH 8525, which covers transmission apparatus for television. The Tribunal concluded that the imported goods should be classified under CTH 8525, not 8543.2. Valuation of the Imported Goods:The second issue was whether the value of embedded software and service charges should be included in the assessable value of the imported goods.- Appellant's Argument: The appellant argued that there was no undervaluation and that the department incorrectly included the amounts towards software and post-import services, ignoring the revised offer and purchase orders.- Department's Stand: The department justified including the value of the embedded software and service charges in the assessable value, citing the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, particularly Rule 10, which allows for the addition of certain costs and services to the transaction value.- Tribunal's Finding: The Tribunal agreed with the department, noting that the purchase order included the supply of equipment with embedded software and post-import installation services. According to Rule 10 of the Customs Valuation Rules, these costs should be added to the transaction value. The Tribunal upheld the addition of these values for the purpose of charging customs duty.Conclusion:- Classification: The Tribunal ordered that the imported goods should be classified under CTH 8525, not 8543.- Valuation: The Tribunal upheld the inclusion of the value of embedded software and service charges in the assessable value.- Remand for Requantification: The case was remanded to the adjudicating authority for recomputing the differential duty based on the revised classification and valuation. The authority was also directed to decide the penalties after hearing the appellants.The Tribunal modified the impugned order and remanded it for requantification, with the final order pronounced in the open court on 09.11.2017.