TaxTMI 
TaxTMI 
2026 (5) TMI 932
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....ne. Penalty has also been imposed upon the appellant under section 114A of the Customs Act. 2. It transpires from the record that the appellant is a Public Sector Undertaking engaged in the manufacture of a wide range of electronic products and systems for the Army, Navy, and the Air Force. The appellant was nominated by Ministry of Defence as a lead integrator for the Long Range Surface-to-Air Missile System [LRSAM System] which would be installed on board Navy ships as defence equipment. 3. The appellant imports LRSAM System from Israel Aerospace Industries [IAI] for further supply to M/s. Mazagon Docks Ship Builders Ltd., Mumbai and M/s. Garden Research Ship Builders and Engineers, who built ships for Navy, Ministry of Defence. LRSAM System consists of Multi-Function Surveillance and Threat Alert Radar [MFSTAR] and Weapon Control System [WCS] embedded with the different hardware and operational software. The operational software is called "EMI/EMC Analysis Software" and its main function is to verify the performance integrity and proper co-existence of MFSTAR & LRSAM system with various other systems installed on-board. 4. The appellant issued a Purchase Order to IAI of....
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....ption Notification, as it satisfies both the classification and description specified therein. Further, the imported software is an integral part of the LRSAM System which is imported for defence purposes and as per Serial No. 38 of the Certificate issued by the Joint Secretary of Ministry of Defense dated 28.10.2010, the said software is certified to have been imported exclusively for defence purposes. The appellant also contended that the extended period of limitation could not have been invoked. 8. The Principal Commissioner did not accept the submissions made by the appellant and passed an order dated 18.12.2024 confirming the demand proposed in the show cause notice with interest under section 28AA and penalty under section 112 of the Customs Act by invoking the longer period of limitation under section 28(4) of the Customs Act on the following grounds: (i) Exemption given in the Exemption Notification is restricted only to goods of the description specified in the same and not to goods of description "Software" imported by the appellant since the same do not find place in the Entry 21(II) and (III) of the Notification; (ii) Further, since the EMI/EMC soft....
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....in the show cause notice that deals with the invocation of the extended period of limitation. This is contained in paragraph 10.3 of the show cause notice. It mentions that the "Software" was embedded into the LRSAM System. Subsequently, the appellant imported the CD purportedly as an integral part of LRSAM System. In terms of Military Equipment Requirement Procedure the Joint Secretary, Ministry of Defence issued the Certificate for customs duty and IGST exemption for "Analysis Report/Compliance Report" and not for procurement of "Software" and there is no specific entry or description of goods "Software" in Serial No. 21(II) of the Exemption Notification. Thus, in order to avail the benefit of the Exemption Notification, the appellant purposefully mis-declared the product as an integral part of the LRSAM System. It, therefore, appeared that appellant had wilfully mis-declared the facts regarding the usage and description of the imported goods and claimed the benefit of the Exemption Notification. Thus, as the appellant mis-represented facts with the sole intention of evading duty, the extended period of limitation under section 28(4) of the Customs Act would be applicable. 14.....
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....) (3) 21. 84, 85, 90 or 9306 (I) The following goods, namely, - xxx (II) Long range Surface to Air Missile System (LRSAM) (III) xxx 20. It is not in dispute that earlier also, the appellant had imported parts and department had granted exemption from payment of duty under the Exemption Notification. It is also not in dispute that the LRSAM System was already embedded with the "Software" when it was initially imported by the appellant. The dispute is with regard to the subsequent CD imported by the appellant. According to the appellant, the said CD has to be retained by the appellant for providing support services. Thus, merely because the appellant had retained the CD and had not supplied it to the Ministry of Defence cannot be made a ground to deny exemption from payment of duty under the Exemption Notification. 21. A perusal of the relevant Bill of Entry at page 122 of the Appeal Memo shows that the appellant had given the Customs Tariff Item Number of the product and also stated that it would be "Software EMI & EMC MIL STD 461F". The invoice number is relatable to the purchase order. It cannot, therefore, be doubted that the appellant had indicated that t....