[Order per : M.V. Ravindran, Member (J)]. - This stay application is directed against the confirmation of demand of Rs. 9.73 crores and equivalent amount of penalty besides the confiscation of the equipment imported with an option to redeem the same on payment of redemption fine of Rs. 1.00 crore.
2. The relevant facts that arise for consideration are the applicants imported mobile telephone equipment viz. Base Transreceiver Station (BTS), Base Station Controller (BSC) and Mobile Switching Centre (MSC) falling under Chapter Heading 85.17 of the Custom Tariff Act. It was noticed by the revenue authorities that the applicants suppressed the fact that these equipments contained software essential for these equipments, in order to avoid duty on the value component of the software. Search and investigation was conducted at the applicants premises. Based upon the investigation and statements recorded, applicant was issued a show cause notice asking to show cause as to why the value of the software be not included in the value of the Hardware and duty be demanded, after enhancement of the value and the goods which were seized during the investigation be not confiscated and why the penalty be not imposed. The applicants contested show cause notice on various grounds. The adjudicating authority after considering the contentions raised by the applicant held against the application and enhanced the value of the imported consignment by adding the corresponding value of the software and confirmed the demand as indicated in para-1.
3. The ld. Counsel appearing on behalf of the applicant submits that the applicants had imported BTS, BSC and MSC along with the essential software required for these equipment to function. He submits that the applicant had also imported back up of the same software, which was embedded in the equipment and declared the same to the authorities. It is his submission that when their goods to be sought to be cleared, the appellant/applicant had clearly indicated receiving of software as back up on Compact Discs. It is his submission that the enhancement of the value as sought by the revenue is incorrect as the value declared of the BTS, BSC and MSC was inclusive of the software essential for the equipment to function. He submits that this proposition of law is settled by the Hon’ble Supreme Court in the case of Acer India Ltd. as reported at (S.C.). He also submits that on point of limitation, the revenue has no case as the applicants has clearly declared the contents of the goods imported by them to the authorities. He submits that it was for the authorities to check and recheck the consignment before clearing the same. He also submits that they had not suppressed anything from the revenue as they have filed all the available documents with them.
4. Ld. Jt. CDR on the other hands would submit that the software recorded on Compact Discs are nothing but a modus operandi to reduce assessable value of the mobile telephone equipment. He reads Chapter note 6 of the Chapter Heading No. 85.24 and submits that the software loaded on the machine does not make them operational and the software on the Compact Discs will only make them operational. It is his submission that the software, which was loaded in the machine make them as specialized data processing machine and are Customer specific. It is his submission that there is difference between the operational software and application software and no evidence is brought that how the software was recorded on the media in the hard disc of mobile telephone equipment. It is his submission that these arguments were never taken before the Hon’ble Supreme Court and, hence, he submits that the applicants should be put to condition for hearing the appeal. He also relies upon the decision of the Supreme Court in the case of CC v. Hewlett Packard India Sales Pvt. Ltd., (S.C.) to submit that the software loaded on to the hardware is liable to be included in the value.
5. We considered the submissions made at length and perused the records.
6. It is undisputed that the mobile telephone equipment, which were imported by the applicants were along with essential software required for functioning of these equipment. It is also undisputed that the applicants had imported software on compact discs separately. The arguments of the applicant’s counsel that these compact discs were required as back up in case of the failure of entire system seems to be on a stronger footing. Further, we find that the constitution Bench of the Supreme Court in the case of Acer India Ltd., (supra) was considering an identical issue. The issue in that case was in respect of the payment of excise duty on the computer loaded with the operational software. Reliance placed by the revenue on the decision of the Supreme Court in the case of Hewlett Packard India Sales Pvt. Ltd., (supra), seems to be misplaced. Further, we notice that the arguments, which was put forth by the ld. Jt. CDR was not alleged in the show cause notice. As such, we find that the applicants have made out a prima facie case for waiver of the amount involved in this case. Accordingly, the application for waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed till disposal of the appeal.
7. We find from the record that the amount involved in this case being huge, we direct the registry to list the appeal for out of turn hearing in July 2008.
(Pronounced in Court on 23-4-2008)