TaxTMI 
TaxTMI 
2008 (7) TMI 385
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....ana, Managing Director, M/s. Bhagyanagar Metals Ltd. v. CCE, Hydbd-II Commissionerate -do- Penalty: Rs.20,00,000/- 3.C/575/06 Shri S. Balasubramanian, Vice-President (Mktg.), M/s. Bhagyanagar Metals Ltd. v. CCE, Hydbd-II Commissionerate -do- Penalty: Rs.20,00,00/- 4.C/487/06 M/s. Surana Telecom Ltd. v. CCE, Hyderabad-II Commissionerate OIO No. 17/2006-Cus.dt.18-8-2006 by CC& CE, Hyd-II Differential Duty: Rs 70,75,609/- Penalty: Rs.70,75,609/- u/s 114A Interest u/s 28AB RF: Rs.1,20,00,000/- 5.C/488/06 Shri S. Balasubramanian, Vice-President (Mktg.), M/s. Surana Telecom Ltd. v. CCE, Hyd-II Commissionerate -do- Penalty: Rs.2,00,000/- 6.C/489/06 Shri Narneder Surana MD, Surana Telecom Ltd. v. CCE, Hyd-II Commissionerate -do- Penalty: Rs.20,00,000/- 7.C/491/06 M/s. LG Electronics Ltd. v. CCE, Hyd-II Commissionerate OIO No. 17/2006-Cus.dt.18-8-2006 by CC & CE, Hyd-II Penalty: Rs.20,00,000/- 8.C/556/06 -do- OIO No. 19/2006-Cus.dt.19-9-2006 by CC & CE, Hyd-II Penalty: Rs.20,00,000/- 9.C/473/06 M/s. Huawei Technologies Co. Ltd. v. CC, Hyd-II Commissionerate OIO No. 17/2006-Cus.dt.18-8-2006 by CC & CE, Hyd-II Penalty: Rs.1,00,000/- 2. We heard the learned A....
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....o Customs Duty. He held that 'the impugned goods are liable for confiscation under Section 111(d) and (m) of the Customs Act, 1962. However, he imposed redemption fine. In view of the intention to evade payment of duty, mandatory penalties under Customs Act, 1962 were imposed. Penalties under Section 112 were imposed on the various persons concerned. The differential duty was demanded. In all, 9 appeals have been filed challenging the two impugned orders. 6. The learned Counsel Shri V.J. Sankaram, representing M/s. Surana Telecom Ltd. made the following submissions: (a) The CD-Roms imported along with the telephones are very much required for upgradation of infra from 2G to 3G network. The software definitely has a value. The agreement with BSNL is also to provide requisite upgradation. The Commissioner has not understood the submissions of the appellant. Hence, the finding of the learned Commissioner is totally erroneous on facts. (b) If the telephone is carried to another location within the range of another infra, the said phones would have to respond in the new infra. In that situation, the imported CD-Roms would come into play. The fact that the phones contained the requisi....
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....d as amounting to splitting of the value of phones in an artificial so as to evade Customs Duty. The following records which support the case of the appellants have not been examined by the learned Commissioner: (i) e-mail, dated 27-1-04, to LGE, clearly stating that the terminals supplied by them were supplied infrawise, (ii) documents at pages 223, 224 and 226 of File No. 1 recovered from BML's premises, stating that the terminals were ordered Networkwise, (iii) Letter from LGE to the learned Commissioner, at page 256 of File No. 1 recovered from BML's premises, wherein it cearly stated that- (a) the software supplied in the phones matched the present 2G equipments available with BSNL, (b) as and when such equipments were upgraded to the 3G Network, software upgrades would be supplied by LGE and maintained through, inter alia, STL, for a period of 5 years, and (c) the price charged by LGE included current and future software upgradation to be maintained for a period of 5 years, (iv) letter from LGE to DC at page 280 of File No. 1 recovered from BML's premises which, too, clarifies that the price charged was inclusive of software upgrades and maintenance for 5 years, (v) l....
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.... in abeyance till the disposal of the remand by the Tribunal at Mumbai. (i) As on merits the issue is decided in favour of the appellants in the Mumbai Bench decision, the penalties imposed on Shri S. Balasubramanian, Vice-President of Surana Telecom and Shri Narender Sharma, Managing Director, Surana Telecom and M/s. L.G. Electronics are not justified, (j) M/s. LGE submitted that they were under a bona fide belief that the invoices issued by them reflected the true value of goods supplied by them and there was no intention to collude with the importer to help them in the evasion of duty. Hence, the penalty under Section 112 is not justified. The invoices were issued by the appellants overseas establishment and there was no omission or commission on the part of the issue of invoices. The appellants never mis-declared any facts or suppressed any information from the knowledge of the Indian Customs Department. The appellants were in no way concerned with the clearance of the imported goods through Indian Customs and should not be penalized for any acts of omission or commission on the part of the importer of the goods in India. It does not make any difference to the supplier if the....
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....end to obtain any Customs duty benefit or loss on account of software." 9. Mr. P. Ramu was once again summoned by Hyderabad Customs on 18th August, 2004 and one more statement was recorded. In this statement he, inter alia stated that Huawei agreed to the hardware and software split due to pressure from STL that STL will refuse MTNL's counter offer and STL adduced documentary evidence of invoices of earlier consignments that STL had been importing similar goods/terminals in a similar manner from overseas vendor for the past two years. He further clarified that Huawei did not gain any interest except claiming the CIF price. As Huawei is a new comer to the Indian market for the supply of FWT products and with the pressure to maintain business relationship with STL, Huawei had no choice but to comply with STL's instruction to split the invoices. 10. Our attention was also invited to the e-mail dated 31-5-2004 wherein the appellant pointed out as follows: 'Pl refer to your purchase Orders No. STL/NS/234/04 dated 31-5-2004 and STL/NS/235/04 dated 30-3-2004 and the subsequent PO amendments No. STL/NS/266/04 and STL/NS/265/04 dated 21-5-2004 and Commercial Contract dated 21-5-2004. [Ex....
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....n supplier split up the value in the ratio of 70:30 for hardware and software respectively in order to evade Customs duty. He stated that very detailed investigations were carried out, statements were taken. All these revealed that the value was split up only for the sake of evading Customs duty. Further, he stated that in the Bhagyanagar case decided by Mumbai Bench, such investigation were not before the Tribunal and therefore the ratio of that case cannot be applied. Even the Commissioner has distinguished the facts of Bhagyanagar case. He requested the Bench to confirm the impugned orders. 13. We have gone through the records of the case carefully. There are two importers who imported the Fixed Wireless Telephones in order to supply the same to BSNL and MTNL from time to time. In the present case, the suppliers of the imported goods are M/s. LGE and M/s. Huawei Technologies. We have already explained the issue in para 5 of this order. Therefore, there is no need to repeat the same. The allegation of the Revenue is that the value of the impugned goods have been split up into hardware and software portion with an intention to evade payment of Customs duty. A similar issue was be....
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.... portion separately at US$ 28.50 per pc. as the import invoices in this case purport it to be; * The BSNL's Purchase Order mentions an integral single price and does not make any separate reference to supply of or a value of software as a separate item. In fact their bill of material does not mention software at all; * The split in the ratio of 70:30 is in any case arbitrary inasmuch as it can be seen from the foregoing discussions that it was entirety at the behest of the M/s. ITI (who in fact were initially trying for a 60:40 split) that the LG agreed to invoice as per 70:30 split (it is important to note that the LG is concerned only with the total price and not with the split); * In any case the party, M/s. ITI have accepted that the said split is not sustainable and they have already withdrawn the same unconditionally and have paid the resultant duty; * Separate values claimed for the software are liable to be disregarded and are to be treated as being a part of the value of the hardware only." 14. Further, on going through the records, it is seen that the suppliers do not normally split up the value of the telephones. The software needed for the functioning of the teleph....
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....n fact, penalties have been imposed on the suppliers. It is clear from the submissions of the suppliers which have been outlined in the earlier paragraphs that they had to resort to the splitting up only at the behest of the importers. We have already extracted the submissions and we do not want to repeat the same. If there were no manipulation, the suppliers would have definitely stated that the practice is to charge separate prices for hardware and software. In fact, one of the suppliers Huawei has categorically distanced themselves from the whole thing by stating that they are not interested either in the gain or loss which arises on account of the splitting up of the value into software and hardware. The Commissioner has given very detailed findings with regard to the valuation. We entirely agree with him. He has also distinguished the facts of Bhagyanagar case decided by the Mumbai Bench. In the case before the Mumbai Bench, such detailed investigation was not carried out. Therefore, the said decision cannot be applied blindly when the investigations revealed the artificial splitting of values into hardware portion and software portion. The fact that the suppliers point their ....