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2014 (4) TMI 465 - AT - CustomsWaiver of pre deposit - valuation - whether separate import of software is a dummy transaction - import of Mobile Switching Centre and other equipments - Revenue contends that value of the equipment should have been assessed by including the value of software and duty on the combination of the software and hardware should have been paid at the rate applicable to hardware - Held that - Prima facie the facts suggest that the applicant had not disclosed that software was pre-loaded in the system. Further there was an attempt to show separate import of software in media when such software was not put to use. So prima facie we see force in the argument of Revenue in this matter. If the import of software was a sham transaction the argument that it had value appears to be prima facie unsustainable - applicants have failed to make out of case for waiver of pre-deposit - Conditional stay granted.
Issues Involved:
1. Classification and valuation of imported telecom equipment and software. 2. Applicability of Chapter Note 6 to Chapter 85. 3. Whether software preloaded in telecom equipment should be classified separately. 4. Allegation of fraudulent declaration by the applicants. 5. Time-barred nature of the demand. Detailed Analysis: Classification and Valuation of Imported Telecom Equipment and Software: The applicants, providers of mobile telecom services, imported equipment and software necessary for their operation. The equipment included Mobile Switching Centre (MSC), Base Station Controller (BSC), and Base Transceiver Station (BTS). They declared separate values for the equipment and software, claiming exemption from customs duty for the software. The Revenue argued that the software was preloaded and integral to the hardware, thus should be included in the hardware's value for duty purposes. Applicability of Chapter Note 6 to Chapter 85: At the relevant time, Chapter Note 6 to Chapter 85 stated that records, tapes, and other media remain classified in their respective headings whether or not presented with the apparatus for which they are intended. The applicants argued that this note required the software to be classified separately under CTH 85.24, even if preloaded. They relied on decisions like PSI Data Systems Ltd. v. CCE and Acer India Ltd. v. CCE, which supported the separate classification of software. Whether Software Preloaded in Telecom Equipment Should Be Classified Separately: The applicants contended that preloaded software should be classified separately and exempted from duty. They cited cases like Vodafone Essar Gujarat Ltd. v. Commissioner of Customs, where the Tribunal held that the value of software should not be included in the hardware's value. However, the Bangalore Bench of the Tribunal in Bharti Airtel Ltd. v. Commissioner of Customs held an opposite view, not referring to a Larger Bench. The applicants argued that Bharti Airtel was per incuriam for not considering the decisions of the Larger Bench and the Supreme Court in Acer India. Allegation of Fraudulent Declaration by the Applicants: The Revenue argued that the applicants misled officials by importing software separately in media, which was not used, to claim exemption. They contended that the software was an integral part of the hardware, forming part of the firmware, and thus should be included in the hardware's value. The Revenue also pointed out that the applicants did not declare that the equipment was preloaded with software, suggesting fraudulent intent. Time-Barred Nature of the Demand: The applicants argued that the demand was time-barred as it was issued invoking the extended period. They claimed that they had declared hardware and software separately in the Bills of Entry, and the Department assessed them as such. However, the Revenue countered that the applicants had not disclosed the preloaded software and that the separate import of software was a sham transaction, making the extended period applicable. Conclusion: The Tribunal, after considering the arguments and evidence, concluded that the applicants failed to make a case for waiver of pre-deposit. The Tribunal adopted the decision in Bharti Airtel and noted that the Supreme Court had directed pre-deposit of the disputed duty amount in that case. Consequently, the Tribunal directed the applicants to pre-deposit the duties demanded for the admission of the appeal. M/s Aircel Cellular Ltd. was directed to deposit Rs. 10,21,25,614/- and M/s Aircel Limited Rs. 24,67,77,929/- within eight weeks. Compliance with this order was to be reported on 15.4.2014.
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