2002 (9) TMI 621 - AT - Customs

Summary

Issues Involved:
1. Mis-declaration of value and evasion of duty.
2. Clubbing of the value of the machine and software.
3. Admissibility of a 15% discount on the imported goods.
4. Confiscation of goods under Section 111(m) of the Customs Act, 1962.
5. Imposition of penalty under Section 112 of the Customs Act, 1962.

Detailed Analysis:

1. Mis-declaration of value and evasion of duty:
The appellants filed a Bill of Entry for the clearance of an Image Setting System, declaring the value of the machine and software separately. The authorities issued a show cause notice alleging that the declared value was much lower than that of identical goods imported by another importer, suggesting mis-declaration to evade duty. The Commissioner rejected the transaction value declared by the importers and directed that the value of the imported goods be taken as US$ 58,890/- FOB, based on Rule 5 of the Customs (Valuation) Rules, 1988. This decision was based on the identical goods imported by another party at a higher value.

2. Clubbing of the value of the machine and software:
The Commissioner held that the software and hardware should be clubbed and assessed under a single tariff heading. This decision was based on the judgment of the Karnataka High Court in the case of M/s. Wipro Infotech Ltd., where it was held that showing the value of software separately in the invoice constituted mis-declaration for evasion of duty. However, the appellants argued that the software should be classified under Heading 85.24 and assessed separately from the machine, relying on the Supreme Court's judgment in PSI Data System Ltd. The Tribunal agreed with the appellants, stating that the machine and software are distinct and should be classified and assessed separately.

3. Admissibility of a 15% discount on the imported goods:
The appellants claimed a 15% discount on the imported goods as they were meant for demonstration in an exhibition. The Commissioner and the SDR opposed this discount, arguing that it was not shown to be a universal commercial practice and that it affected the value of the goods. The Tribunal held that the discount was not admissible as the appellants could not demonstrate that it was an acceptable discount in international commercial transactions. The Tribunal found that this discount fell foul of Rule 4(2) of the Customs (Valuation) Rules, 1988.

4. Confiscation of goods under Section 111(m) of the Customs Act, 1962:
The Commissioner ordered the confiscation of the imported goods under Section 111(m) but allowed the appellants to redeem the goods on payment of a fine. The Tribunal found no suppression or mis-declaration by the appellants that would lead to confiscation under Section 111(m). Consequently, the Tribunal set aside the confiscation order.

5. Imposition of penalty under Section 112 of the Customs Act, 1962:
The Commissioner imposed a penalty on the appellants under Section 112. The Tribunal, however, found no grounds for such a penalty as there was no suppression or mis-declaration by the appellants. The Tribunal set aside the penalty imposed on the appellants.

Conclusion:
The Tribunal concluded that the transaction value declared by the appellants should not be rejected, and the machine and software should be classified and assessed separately. The 15% discount claimed by the appellants was not admissible. The Tribunal set aside the orders of confiscation and penalty, directing that the duty be charged separately on the values of the machine and software. The appeal was disposed of in these terms.