Separate software value cannot be added to telecom equipment valuation when invoiced independently and assessed separately.
Where software is imported and invoiced separately from telecom equipment, its value cannot be added to the assessable value of the hardware merely because it is used with the equipment. The tribunal treated separate invoicing and separate presentation of the software as legally relevant, and rejected the Revenue's attempt to treat the software as an integral component of the hardware. On that basis, the consequential demand of duty could not survive, and the related interest and penalty also failed because they were founded on the same inclusion of software value.
Issues: Whether the value of separately imported software CDs was includible in the assessable value of the imported telecom equipment, and whether the consequential demand of duty, interest and penalty could be sustained.
Analysis: The imported goods were cleared on bills of entry showing separate values for hardware and software, and the software was claimed to be classifiable under Chapter Heading 8524 with exemption under Notification No. 21/2002-Cus. The dispute turned on whether the software was an integral component of the hardware or a separately identifiable software product. The earlier tribunal decisions relied upon had already held that software imported separately, even where related to telecommunication equipment, does not get added to the value of the hardware merely because it may be used with or alongside the equipment. The distinction suggested by the Revenue between integrated software and separately presented software was rejected, and the separate invoicing of hardware and software was treated as legally relevant. Since the demand itself was founded on inclusion of the software value, the penalty and interest, being consequential, could not survive. The Revenue's penalty appeal also failed once the demand was set aside on merits.
Conclusion: The value of the software was not includible in the assessable value of the imported equipment, and the demand of duty, interest and penalty was unsustainable. The assessee's appeal succeeded and the Revenue's appeal failed.
Final Conclusion: The adjudication of customs valuation was resolved in favour of the importer on merits, and all consequential monetary liabilities were set aside.
Ratio Decidendi: Where software is imported and invoiced separately from telecom equipment, its value cannot be added to the assessable value of the hardware merely because it is used with the equipment; consequential duty, interest and penalty founded on such inclusion cannot stand.
TaxTMI 
AI Drafter ✕
TaxTMI 
