TaxTMI 
TaxTMI 
2025 (8) TMI 1011
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....dated 06.04.2010 and 20,000 numbers of paper software licences against Bill of Entry No.227446 dated 12.04.2010. The receipt of 150 numbers of navigation systems/hardware free of cost was not declared to the Customs Department. On the basis of intelligence that the appellant had undervalued the imported products, investigation was initiated by DRI and incriminating documents viz. supplier invoices, bank statements etc. were retrieved; also 19,768 numbers of GPS navigation devices and 20 sheets of Software Licence found in the premises of the appellant were seized during the course of investigation; the seized goods were provisionally released on execution of Bond and bank guarantee for Rs.5.00 lakhs pending adjudication. On completion of investigation, a show-cause notice was issued to the appellant on 02.03.2011 alleging undervaluation of imported GPS navigation systems by splitting the total value of the devices into value of hardware portion and documents titled software licence i.e. conveying right to use for the said item, availing exemption under Sl.No.157 of the Notification No.21/2002-Cus dated 01.03.2002 thereby short-payment of customs duty of Rs.62,89,752/-. It is propos....
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....of Notification No.29/2010 if the same were intended for retail sale. In support, he has referred to the judgment of the Hon'ble Supreme Court in the case of PSI Data Systems Pvt. Ltd. Vs. CCE [1997(89) ELT 3 (SC)]; Acer India Pvt. Ltd. Vs. CC [2004(172) ELT 289 (SC)] and the decision of Tribunal in the case of Vodafone Essar Gujarat Ltd. Vs. CC(Imports) [2009(237) ELT 458 (Tri. Mum.), wherein it has been held that the value of software is not includable in the value of the hardware; therefore, under bona fide belief, the value of paper licence was not included in the value of the portable navigation device. He has further submitted that there was no misdeclaration of extra units supplied by the foreign supplier since no price was charged for these units which were merely a quantity discount given in kind instead of in cash. In support, they referred to the judgment on the Hon'ble Supreme Court in the case of CCE Vs. Hindustan Lever Ltd. [2002(142) ELT 513 (SC)]. 3.3. Learned advocate has further submitted that the Department's investigation was only on the basis of change of opinion and has no factual or legal basis for alleging undervaluation or misdeclaration of the imported ....
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....d and that there was undervaluation to the extent to save payment of customs duty as stated by Shri Durlabh Chand Jain in his statement dated 21.07.2010. Further Shri Durlabh Chand Jain in his statement dated 03.12.2010 furnishing explanation as to how they had changed / prepared different invoices and used to present to the Customs so that the value of 150 numbers of Portable Navigational Device received free of cost was included in the value declared vide Bill of Entry No.227023 dated 06.04.2010. In the same statement, it is explained that preparation of a second invoice with regard to software import indicating the words 'right to use' was to classify it under CTH 4907. The learned AR further submitted that none of the statements have been retracted by any of the appellants; therefore, it is evident that they have willfully and deliberately evaded customs duty by falsifying the import documents submitted to the Department. Further, he has submitted that the software which is etched / preloaded in the imported goods i.e. Portable Navigational Device and to operate, the respective licence key numbers were already printed on the same. Sl.No.157 of Notification No.21/2002 dated 01.0....
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....rt on the subject held that the value of the software licence is to be includable in the value of the hardware. Further, he has submitted that since the appellant knowingly misdeclared the quantity of import and suppressed the value of the goods seized are rightly confiscated and penalty imposed. 5. Heard both sides and perused the records. 6. The short question involved in the present appeals for consideration is whether the value of software preloaded/ etched into the imported navigation systems, be included in the assessable value of the said navigation systems and confiscation of goods and imposition of penalties sustainable. 7. Undisputed facts of the case are that the appellant had declared import quantity as 20,000 numbers (in fact 20150 numbers) of touch media device, its classification under CTH 85437099 and total assessable value as Rs.3,71,58,148/- in the Bill of Entry No.227023 dated 06.04.2010. Later imported paper software licence against Bill of Entry No.227446 dated 12.04.2010 declaring its value as Rs. 1,89,13,883/- without payment of duty availing exemption under Notification No.21/2002-Cus. dated 01.03.2002. In the impugned order, the learned Commissione....
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....d M/s. Huawai Technologies Co. Ltd., China. Along with these phones, the assessee imported CD-ROMs and filed separate Bills of Entry for phones and CD-ROMs claiming phones as hardware portion and of FWT and CD-ROMs as software portion of FWT. The dispute referred to the Larger Bench was to decide the issue of inclusion / adding of value of software portion of FWT for assessment purpose, as Customs duty was payable on phones; however, exempted on imported software. The Larger Bench taking note of the difference of opinion in the case, where the Mumbai Bench of the Tribunal held that the inclusion of value of the software in the value of the telephones imported cannot be sustained but Bangalore Bench on the same circumstances held that software necessary for functioning of the telephones is already embedded in it; hence no separate assessment and valuation for software required to be adopted for the purpose of the determination of value of said imported telephones. The Larger Bench of the Tribunal extensively referring to the precedent on the subject, particularly the judgment of the Hon'ble Supreme Court in the case of Anjaleem Enterprises Pvt. Ltd. (supra) held that Fixed Wireless ....
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....all). 24. An embedded system is a programmed hardware device. Software written for embedded systems, especially those without a disk drive is called Firmware, the name for software embedded in hardware devices e.g. in ROM IC chips. Many embedded systems avoid mechanical moving parts, such as, disk drives, switches or buttons because they are unreliable as compared to ROM or Fast Memory IC chips. It is kept outside the reach of humans. In embedded systems, the software resides in ROM IC chips. Embedded systems are combination of hardware and software like ATMs, Cellular telephones etc. In embedded systems, the software resides in ROM IC Chip (See: www.answers.com). These chips are more than mere carriers. Example of embedded system: microwave ovens, cell phones, calculators etc." 33. The Hon'ble Supreme Court examined and distinguished their earlier findings in PSI Data Systems Ltd. v. CCE (supra) and Sprint R.P.G. India Ltd. v. CC-I, Delhi (supra) and held that in these cases the question of integrated circuit did not arise and interpretation of entry 85.42 was not at all considered. 34. The Apex Court further examined the decision in CCE, Pondicherry v. ....
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....s the condition of the goods at the time they leave the factory. The memory unit/chip is an essential part of PCB inside the telephone and is an integral functional component. Hence, in the present case there are no two items for valuation. The item of import is FWT and as such should be subjected to classification and assessment accordingly. 39. Revenue relied on the decision of the Tribunal in Jabil Circuit India Pvt. Ltd. v. CCE, Pune reported in 2014 (307) E.L.T. 891 (Tri. - Mumbai), where the Tribunal considered inclusion of the cost of software loaded in the Flash memory chip inside the Set Top Boxes (STB). The Tribunal observed : "5.12 The next question for consideration is with regard to the inclusion of cost of software which were downloaded and incorporated in the flash memory chip which was soldered onto the PCB of the STB. As per the literature available, flash memory is EPROM (Erasable Programmable Read Only Memory) and is an integrated chip. Thus, it is a rewriteable memory chip on which programmes are written with an external programming device before being placed on the PCBs. Thus, the flash memory is an integral part of the STB and therefore, its ....
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....are supplied along with system, namely, EPROM, as embedded in the system becomes an integral part and the value of such software is includible in the assessable value of the system supplied. This Tribunal further held that when the software is embedded in the system and becomes an integral part of the equipment, it is not a case of charging duty on software but it is a case of charging duty on the equipment which includes the value of such basic software. In the Hewlett Packard Sales (P) Ltd. case, the Hon'ble Apex Court once again reiterated the above view, wherein it was held that pre-loaded operating systems software in the Hard Disk Drive of the laptop forms an integral part of the laptop and therefore, the cost of such pre-loaded software forms part of the value of the laptop. Accordingly, the Hon'ble Apex Court held that when a laptop is imported with inbuilt preloaded operating system recorded on the hard disk, the said item forms an integral part of the laptop and has to be classified as laptop and not as computer software separately. Applying the ratio of these decisions to the facts of the present case, it becomes abundantly clear that the cost of software which has been ....
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....being interlinked, operate in different fields and what is their real scope and ambit? 3. Whether the concept of "transaction value" makes any material departure from the deemed normal price concept of the erstwhile Section 4(l)(a) of the Act?" After comparing of the development of determination of value under Section 4 by amending the provisions from time to time, their Lordships held as follows:- 20. We find no room whatsoever for any disagreement with the above view taken by this court in Bombay Tyre International Ltd. (supra). It is a view consistent with what was held by the Federal Court and the Privy Council in Central Provinces and Berar (supra) Boddu Paidanna (supra) and Province of Madras (supra) and the decisions that followed thereafter including the decision in Voltas Limited (supra) and Atic Industries Limited v. H.H. Dewa. Asstt. Collector of Central Excise and ors - (1975) 1 SCC 499 = 1978 (2) E.L.T. (J444) (S.C.) the true purport of which was explained in Bombay Tyre International Ltd. (supra). Both the above opinions were clarified to mean that neither of them lay down any proposition to the effect that the excise duty can be levied only on th....
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....ns contained in Section 3 of the Act will have viewed in the context of a situation where an addition of the value of a non-dutiable item was sought to be made to the value of a dutiable item for the purpose of determination of the transaction value of the composite item. This is the limited context in which the subservience of Section 4(3)(d) to Section 3 of the Act was expressed and has to be understood. If so understood, we do not see how the views expressed in paragraph 84 of Acer India Ltd. (supra) can be read to be in conflict with the decision of Bombay Tyre International Ltd. (supra). Finally, their Lordships answering the reference recorded as under:- 23. Accordingly, we answer the reference by holding that the measure of the levy contemplated in Section 4 of the Act will not be controlled by the nature of the levy. So long a reasonable nexus is discernible between the measure and the nature of the levy both Section 3 and 4 would operate in their respective fields as indicated above. The view expressed in Bombay Tyre International Ltd. (supra) is the correct exposition of the law in this regard. Further, we hold that "transaction value" as defined in Section 4(....