2007 (2) TMI 369 - AT - Customs

Summary

Issues involved: The valuation of CD-ROMs imported along with cellular phones for the purpose of levy of duty.

Summary:
The case involved the appellants being awarded a contract to supply Integrated Fixed Wireless Telephone (IFWT) and Fixed Wireless Terminal (FWT) phones to Bharat Sanchar Nigam Limited (BSNL)/Mahanagar Telephone Nigam Limited (MTNL), which included providing maintenance services and upgradation of phone functions. The appellants imported CD-ROMs as software along with cellular phones from M/s. L.G. Electronics. The dispute arose when the department proposed to add the value of CD-ROMs to the value of the telephone for levy of duty, denying exemption benefits. The Commissioner of Customs upheld this decision, leading the importers to appeal before the Tribunal.

The Tribunal accepted the contention that the phones were cellular telephones and considered the CD-ROMs as software accessories, ruling that their value cannot be added to the main telephone instrument for duty levy purposes. The Revenue appealed this decision before the Apex Court, which held that the model imported by the appellants fell under the category of "cellular telephone" and remanded the issue of valuation back to the Tribunal for reconsideration.

During the hearing, the appellants explained that the software was necessary only for infrastructure changes or network upgradation from 2g to 3g. The Commissioner acknowledged that the imported items were complete telephones and not parts thereof. Despite noting differences between the imported phones and those of other companies, the Commissioner still insisted on adding the value of the software to the phones. However, the Tribunal emphasized that the value of an accessory, such as software, cannot be included in the assessable value of the complete instrument, citing legal precedents.

Ultimately, the Tribunal set aside the inclusion of the software value in the imported phones' value, ruling in favor of the appellants and allowing the appeal.

*(Pronounced in Court on 22-2-2007)*