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2013 (11) TMI 1479 - AT - CustomsRefund claim u/s 27 - Import of Watchguard Security Products - Duty paid under Customs Tariff Heading 8473.30 - Exemption under Customs Notification No. 17/2001-Cus., dated 1-3-2001 - Classification under Customs Tariff Heading 8473.30 or under 8524 - Held that - software was etched and was not portable to any other hardware and hence has no separate existence. The Counsel has made arguments showing product literature showing capability of the device to alert about software updates and to suggest recommended configuration. According to him this would imply that the software was separate commodity - value under dispute is the value of software etched on hardware when goods were imported - Website of the manufacturer indicates value as single unit price of hardware and value of the software were not available separately. It is also noted that the basic and the main function of the imported goods related to the hardware components and the embedded software used to operate the hardware, an integral part of the same. The goods imported by the appellant has no independent existence at the moment it is etched on the volatile memory of the hardware, it becomes part and parcel of the said system. Thus, the claim of the learned counsel in this case that the software and hardware were separate and distinct cannot be acceptable - Following decision in the case of ACER India Ltd. 2004 (9) TMI 106 - SUPREME COURT OF INDIA - Decided against assessee.
Issues: Classification of imported goods under Customs Tariff Heading, Refund claim under Section 27 of the Customs Act, 1962, Exemption under Customs Notification No. 17/2001-Cus.
Classification of Imported Goods: The appellant imported "Watchguard Security Products" and filed invoices under different descriptions, claiming duty under Customs Tariff Heading 8473.30. They later filed a refund claim under Section 27 of the Customs Act, 1962, arguing that the goods should be classified under 8524 for exemption under Customs Notification No. 17/2001-Cus. The lower authority rejected the claim, stating the goods were correctly classified under 8473.30. The Commissioner (Appeals) upheld this decision, leading to the appeal. Appellant's Argument: The appellant's counsel argued that the imported products were Information Technology Software classifiable under Heading 8524 and eligible for duty exemption. They emphasized the distinction between Watchguard Software and hardware, citing relevant case law to support their position. Revenue's Position: The Revenue representative supported the Commissioner (Appeals)'s findings, asserting that the imported goods constituted a single system where the embedded software was integral to operating the hardware. They referenced a Tribunal decision and Supreme Court cases to strengthen their argument. Judgment and Analysis: After reviewing the facts and documents, the Tribunal observed that the goods were invoiced in various parts, including different software components. The appellant claimed that the software should be classified separately under 8524.40, but the Tribunal disagreed. They noted that the software was embedded into the hardware's non-volatile memory by the manufacturer, making it an integral part of the system. Legal Precedents: The Tribunal referred to previous cases where the courts emphasized that embedded software forms an integral part of the hardware and should be classified accordingly. They highlighted that splitting the value of software from the equipment's value artificially was not justified. Decision and Conclusion: Ultimately, the Tribunal rejected the appellant's appeal, emphasizing that the software and hardware were not separate entities in this case. They concluded that the software's value was not distinct from the hardware, as it was embedded and integral to the system. The order of the Commissioner (Appeals) was upheld, and the appeal was dismissed. This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, the legal reasoning behind the decision, and the final outcome of the case.
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