1997 (5) TMI 171 - AT - Customs

Appellate Tribunal Upholds Decision on Valuation of Imported Software and Penalty

The Appellate Tribunal CEGAT, Madras, upheld the lower authority's decision in a case involving the valuation of imported software and penalty for ... Valuation - Deemed value - Confiscation and Penalty Issues:Valuation of imported software, Penalty for mis-declaration of value, Confiscation of goods under Customs Act, 1962, Redemption fine, Assessment under Section 14 of the Customs Act, 1962, Bona fide belief defense for penalty, Recognition of software as a commodity, Splitting the value of software, Inculpatory statements of senior officers, Charge of mis-declaration, Burden of proof on the Department, Appellate Tribunal's decision.The judgment by the Appellate Tribunal CEGAT, Madras, dealt with the appeal concerning the valuation of software imported by the appellants and the penalty imposed for mis-declaration of value. The appellants imported bundled software, initially invoiced at French Franc 4200, but another invoice for the same goods showed no charges, and the order indicated a value of French Franc 320000. The lower authority found evidence of under-valuation to evade duty, leading to a demand of Rs. 18,37,784 and a personal penalty on the appellant company. The goods were also confiscated under Section 111(m) of the Customs Act, 1962, with redemption allowed on payment of a fine of Rs. 2 Lakhs.Regarding the valuation issue, the appellant's advocate argued that the software's commercial value could not be the assessable value under Section 14 of the Customs Act, 1962, as it consisted of a physical carrier and encoded material, with the encoded material being intellectual property not subject to assessment. The advocate contended that duty should only apply to the physical carrier, not the intellectual information. However, the Department's representative asserted that software is a recognized commodity, citing ITC Classification and specific entries for computer software, and argued against splitting the software's value between the carrier and the information. The Department emphasized the mis-declaration and lack of bona fide belief by the appellants.The Tribunal analyzed the arguments and found that the commercial value of the software, representing the intrinsic worth of the goods, should be the transaction value for assessment purposes under Section 14. The Tribunal highlighted that the software, a well-known commodity, is recognized separately in international trade and customs classifications. It rejected the appellant's claim of splitting the value and upheld the Department's position that the mis-declaration was proven, leading to the confiscation of goods, duty demand, and penalty imposition.In conclusion, the Tribunal dismissed the appeal, affirming the charge of mis-declaration, the confiscation of goods, the duty demand, and the penalty imposition. It held that the penalty of Rs. 1 Lakh was not excessive given the circumstances. The Tribunal emphasized that the burden of proof was met by the Department, relying on inculpatory statements, and rejected the appellant's defense of a bona fide belief regarding the value declaration.