TaxTMI 
TaxTMI 
2026 (2) TMI 1349
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal Order No. 85365-85381/2026<br>Customs<br> And Customs Appeal No. 86706 of 2016, Customs Appeal No. 86834 of 2016 Hon'ble Dr. Suvendu Kumar Pati, Member (Judicial) And Hon'ble Mr. M.M. Parthiban, Member (Technical) For the Appellant : Shri Jhamman Singh, Advocate For the Respondent : Shri Shambhoo Nath, Special Counsel, Authorised Representative ORDER PER: DR. SUVENDU KUMAR PATI: Whether value of the software and value of the hardware can be taken together to determine transaction value of Diamond Cutting and Scanning Machines for the purpose of Section 14 of the Customs Act and whether such redetermination of assessable value can be done after assessment by the proper Officer followed by clearance of goods, are the issues required to be determined in all these appeals, which were heard together as arose from a common investigation by DRI Ahmedabad, much after clearance of goods. 2. Succinctly stated, facts of the case would go to reveal that between 2009 and 2012, Appellants have imported diamond processing / scanning machines for cutting and polishing rough diamonds after importation which were exported by them after such cutting and polishing. All of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ade in respect of 13 diamond scanning machines imported through 10 Bills of Entry during the relevant period. The table submitted in these appeals is reproduced herein below:- Sr. No. Party Name Order-in-Original No. Total Duty Demanded (Only on past consignment) Redemption fine imposed Penalty imposed CESTAT Appeal No. 1 Sheetal Manufacturing Co. Pvt. Ltd. COMMR./AKG/18/ 2016/ADJN.ACC(X) 59352620 36000000 59352620 C/86581/2016 2 Dharmanandan Diamonds Pvt. Ltd. COMMR./AKG/19/ 2016/ADJN.ACC(X) 35520292 22500000 35520292 C/86706/2016 3 Neelam Exports COMMR./AKG/23/ 2016/ADJN.ACC(X) 9104021 5600000 9104021 C/86568/2016 4 Hari Krishna Exports Pvt. Ltd. COMMR./AKG/15/ 2016/ADJN.ACC(X) 17188706 10000000 17188706 C/86714/2016 5 HVK International Pvt. Ltd. COMMR./AKG/14/ 2016/ADJN.ACC(X) 14888284 9000000 14888284 C/86715/2016 6 Kiran Gems Pvt. Ltd. COMMR./AKG/16/ 2016/ADJN.ACC(X) 45560440 29000000 45560440 C/86723/2016 7 Shree Ramkrishna Exports Pvt. Ltd. COMMR./AKG/17/ 2016/ADJN.ACC(X) 13885337 9500000 13885337 C/86756/2016....
X X X X Extracts X X X X
X X X X Extracts X X X X
....herry Vs. ACER India Ltd. as reported in 2004 (172) ELT 289 (SC) that affirmed the decision of PSI Data Systems Ltd. Vs. Collector of Central Excise, reported in 1997 (89) ELT 3 (SC), which matter was taken further to another Constitution Bench constituted in the case of Commissioner of Central Excise, Indore Vs. Grasim Industries Limited, reported in 2018 (360) ELT 769 (SC), in which decision of ACER India Limited was referred and received approval thereby giving finality to the ratio of the judgment laid in PSI Data Systems Limited. Referring all those judgments this Tribunal in the case of Manjit Singh Vs. Commissioner of Customs (Import), Nhava Sheva, as reported in 2015 (323) ELT 377 (Tri. Mum.) has given a clear finding that hardware and software are to be assessed independently whether they were imported together or separately (same finding as in PSI Data Systems Ltd.) and therefore, allegation concerning such splitting of value for software and hardware artificially would be of no consequence since duty is leviable only on the value of hardware and not on software. 3.1 Though issue of classification of software was agitated before the Commissioner by the Appellant claimi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is not equivalent to collusion, mis-declaration, wilful misstatement and suppression of fact otherwise there would be no situation in which ordinary limitation of six months would apply and the said ratio of the judgment is squarely applicable to the Appellants' case, since nothing more was shown to construe that the Act of the Appellants would meet the applicability of the said proviso dealing with invocation of extended period. Further he added during the course of argument that the DGCI had issued show-cause notice to the subsidiary company of Exporter in India and also demanded Service Tax from one of the Importers M/s. Kiran Jems Pvt. Ltd. under the Finance Act, 1994 on reverse charge basis considering suppliers Sarin Technologies, Israel as a foreign supplier and therefore, apart from the fact that it would be a double taxation, impermissible under any circumstances, it would further establish knowledge of the Respondent-Department concerning supply of software by the Importer, that would dispel the allegation of the Department that bills of software were hided from the authority to evade payment of duty/tax. 3.3 Learned Counsel for the Appellant Mr. Singh also has contest....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for Dia Exporter SL System hardware and software, he wanted to justify variance of the same with the price list that was seized during investigation and reproduced by the Commissioner in his order at para 10.1 that runs from page 22 to page 29, so as to establish that the allegation concerning pricing of the product that is hardware at 1/3 of the value and pricing of its software at 2/3 of the value, though was made for the purpose of invoicing, the price list indicates a composite price for both the items, for which duty was appropriately demanded taking into account the value of both hardware and software that got confirmed by the Commissioner through a reasoned order. He further has drawn our attention to the proceedings held before the Settlement Commission before whom the Indian subsidiary of Exporter namely M/s. Sarin Technologies India Pvt. Ltd. had settled its dispute by paying differential Customs duty of Rs.1,30,86,878/- demanded under Section 28 of the Customs Act alongwith its interest that would further go to justify undervaluation of goods imported in a designed manner by the Appellants with the help and assistance of the Importer and therefore, the order passed by C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e a functional machine and for this reason the price of software is inbuilt at the time of invoicing. 8.2.2 It has been clearly brought out in the SCN that the invoicing was done to show hardware and software component separately. The value at the time of negotiations and in the price list was all inclusive one and after discount a lumpsum value was arrived at. This arrived value, at the request of the importer, was artificially bifurcated into hardware (1/3 of total value) and software (2/3 of the total) value for which separate invoices were issued. Only the invoice representing the artificial value of hardware was presented for Customs Assessment. It is such an assessment that is being sought to be taken up for re-assessment and rightly so. I hold that the goods at the time of import were undervalued deliberately to avoid payment of appropriate duties. The case laws relied upon by notices are distinguishable on facts and thus cannot give any relief to the notices." 5.1 From the above observation made by the Commissioner acknowledging the fact that import of software is per se not subjected to Customs duty but when it has formed part and parcel of the value of the mac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ptance of the claim of the Department that such value of software should be included so as to consider the goods as single unit and therefore, there is a requirement of judging the precedent value on the issue only instead of delving into the detail of the intricacies of the issue. To start with, in going through the precedent decision cited on behalf of Appellant mainly passed by the Hon'ble Supreme Court in PSI Data System Ltd. which still holds the field as being reaffirmed subsequently through several decisions of the Hon'ble Apex Court including that of the Constitution Bench finally in 2018 in the case of M/s. Grasim Industries Limited (Respondent), cited supra in which it was clearly held that value of software sold alongwith computer is not includable in the assessable value of computers since there is a distinction between computer and its software. In the said judgment also the claim of the Respondent-Department that computer may not be operatable without a software for which cost of software etched into the computer is to be included, has well been negated by Hon'ble Supreme Court by giving example of typewriting machine and its ribbon in which distinction is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are covered in the erstwhile Central Excise Tariff Act. 5.4 On the contrary, apart from decisions of Division Bench of this Tribunal, learned Special Counsel has placed on record a decision passed by Larger Bench of this Tribunal in the case of Bhagyanagar Metals Ltd., cited supra to justify that when software could not be presented as a separate media and identifiable from the computer, assessment has to be done without any segregation of the value of software considering them as single goods for assessment. He further justified applicability of these decisions, though passed in case of Fixed Wireless Telephone with CDMA FWT Mechanism, into the instant case as the Larger Bench had rightly taken note of the order passed in PSI Data Systems Ltd. as well as ACER India Ltd. that was subsequently approved by the Constitution Bench and had given the findings which is squarely applicable to this case and therefore, inclusion of value of software in the value of diamond scanning machine is the proper way of assessment that was rightly concurred by the Commissioner. 5.5 Before analysing the precedent value of this judgment vis. a. vis. the judgment cited on behalf of Appellant, we ar....