2017 (3) TMI 914 - AT - Customs

Valuation of imported goods - Time Bound Software - Beta Software - deductive value or computed value - Held that - the elements required for arriving at Deductive value u/r 7 or for arriving at Computed value u/r 8 of the said Rules are not present for the imported item namely Time Bound Software . Therefore, the valuation is to be decided u/r 9 of CV Rules, 2007 - Rule 9 says that subject to the provisions of Rule 3, where the value of imported goods cannot be determined under the provisions of any of the preceding rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and on the basis of data available in India - matter remanded to the original adjudication authority for deciding the valuation issue afresh under Rule 9 of CVR, 2007 read with provisions of Section 14 (1) of CA, 1962. Valuation of Beta Software - The appellant importer argues that Beta Software is not goods u/s 2(22) of the CA; therefore, no customs duty is liable to be paid on the said item - Held that - The item imported being beta software, one cannot be allowed to state that the said item is not goods in terms of Section 2(22) of the Customs Act. The item is a kind of moveable property which has been put into a media-CD/DVSs and is being transacted/ passed over/ traded as such - matter is remanded to the original adjudicating authority to decide afresh the valuation in the light of the observations made here u/r 9 of CVR, 2007 read with Section 14(1) of CA, 1962. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Valuation of Time Bound Software.
2. Valuation of Beta Software.

Issue-wise Detailed Analysis:

1. Valuation of Time Bound Software:

The appellant, M/s Microsoft Corporation (India) Private Limited, contested the valuation method applied by the Commissioner (Appeals) for Time Bound Software, which was determined under Rule 4 of the Customs Valuation Rules, 2007. The appellant argued that Time Bound Software is imported for demo/trial purposes with a limited operative period (90-180 days) and is also available for free download. They proposed that the valuation should be based on the cost of media (including replication cost) on which the software is loaded, as no royalty is paid for its use, and it is meant for free distribution. The appellant cited the case of Atul Kaushik Vs. Commissioner of Customs, where it was held that non-commercial shipments should be valued at the cost of the media alone.

The Tribunal noted that Time Bound Software is different from fully packaged products (FPP) due to its limited lifespan and non-commercial nature. The Tribunal disagreed with the Commissioner (Appeals) that Time Bound Software and identical software with no time limit are similar, as the former has a limited lifespan. Consequently, the Tribunal held that Rule 4 of the Customs Valuation Rules, 2007, which pertains to the valuation of identical goods, is not applicable. Instead, the Tribunal directed the valuation to be determined under Rule 9 of the Customs Valuation Rules, 2007, which allows for valuation using reasonable means consistent with the principles and general provisions of the rules. The matter was remanded to the original adjudicating authority for fresh valuation under Rule 9.

2. Valuation of Beta Software:

The appellant argued that Beta Software, released for testing and feedback, should be valued based on the cost of media (including replication cost) as it is not meant for sale in the open market and undergoes several changes before the final version is released. They contended that Beta Software is not identical to the final version and should not be valued under Rule 4 of the Customs Valuation Rules, 2007. The Tribunal agreed that Beta Software is not identical to the final version and that the provisional assessment until the final version is released is erroneous. The Tribunal also rejected the appellant's argument that Beta Software is not "goods" under Section 2(22) of the Customs Act, 1962, as it is a movable property imported in the form of media (CD/DVDs).

The Tribunal concluded that the valuation of Beta Software should not be determined under Rule 4 but under Rule 9 of the Customs Valuation Rules, 2007, similar to Time Bound Software. The matter was remanded to the original adjudicating authority for fresh valuation under Rule 9.

Conclusion:

The Tribunal set aside the orders of the lower Revenue authorities and remanded the matters to the original adjudicating authority for fresh valuation of both Time Bound Software and Beta Software under Rule 9 of the Customs Valuation Rules, 2007, read with Section 14(1) of the Customs Act, 1962. The adjudicating authority was directed to decide the matter de novo within four months, considering the Tribunal's observations and allowing the appellants to present evidence as per law.