2003 (6) TMI 265 - AT - Customs

Summary

Issues Involved:
1. Classification of Voice Boards and Fax Boards.
2. Classification of CDs/Floppies accompanying the imported package.
3. Confiscation and penalty imposed by the Commissioner.
4. Misdeclaration and extended period of limitation.
5. Reliance on expert opinions and technical clarifications.
6. Use of catalogue not relied upon in the show cause notice.

Detailed Analysis:

1. Classification of Voice Boards and Fax Boards:
The appellants challenged the classification of Voice Boards and Fax Boards under Customs Tariff sub-heading 8517.90 as parts of line telephony instruments. They argued that these should be classified under sub-heading 8524.90 as software, citing various legal precedents and technical opinions. The Tribunal considered the expert opinions and technical clarifications provided by the appellants, which indicated that the Dialogic Boards did not have non-volatile storage devices and required software to be downloaded onto RAM, making them computer software rather than parts of line telephony instruments.

2. Classification of CDs/Floppies Accompanying the Imported Package:
The CDs/floppies accompanying the imported package were classified by the Commissioner under CTH 8524.99 as "Other" recorded media. The appellants contended that these should be classified as computer software under sub-heading 8524.90. The Tribunal agreed with the appellants, noting that the software was not embedded in the hardware and required downloading onto the RAM, thus supporting the classification as computer software.

3. Confiscation and Penalty Imposed by the Commissioner:
The Commissioner ordered the confiscation of the goods under the respective Bills of Entry and imposed a fine and penalty under Section 114A of the Customs Act, 1962. The Tribunal found that the Commissioner had disregarded the expert opinions and technical clarifications provided by the appellants, which clearly supported their classification claims. Consequently, the Tribunal set aside the order of confiscation and penalty, finding it unsustainable.

4. Misdeclaration and Extended Period of Limitation:
The department alleged misdeclaration by the appellants, claiming that they split the value of the hardware and software to evade customs duty. The Tribunal noted that the appellants had provided detailed information and documentation supporting their classification and valuation claims. The Tribunal found no evidence of suppression or misdeclaration and ruled that the extended period of limitation was not invocable, referencing relevant legal precedents.

5. Reliance on Expert Opinions and Technical Clarifications:
The appellants provided expert opinions from the Professor and Head of Department (ECE), Regional Engineering College, Warangal, and the Business Development Manager of Intel, among others. These opinions clarified that the Dialogic Boards did not have embedded software and required downloading onto RAM. The Tribunal emphasized that these expert opinions should have been considered by the Commissioner and found the appellants' classification claims to be valid based on these technical clarifications.

6. Use of Catalogue Not Relied Upon in the Show Cause Notice:
The Commissioner relied on a catalogue that was not mentioned in the show cause notice to support the reclassification and penalty. The Tribunal found this approach inappropriate, noting that the catalogue should not have been used as the basis for the order without being part of the original allegations. The Tribunal set aside the Commissioner's order on this ground as well.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order of the Commissioner. It upheld the appellants' classification of the Voice Boards and Fax Boards as computer software under sub-heading 8524.90 and found no basis for the confiscation and penalty imposed. The Tribunal emphasized the importance of considering expert opinions and technical clarifications in classification disputes and ruled that the extended period of limitation was not applicable in this case.