2007 (11) TMI 100 - AT - Customs

Questionable methods adopted to split the value of equipment in 30 70 in order to escape custom duty claiming import of wireless telephone includes 30% software which are not dutiable on realizing wrong method of valuation, differential duty paid before SCN interest, penalty not justified

Summary

Issues:
1. Correct valuation of imported Fixed Wireless Telephones.
2. Inclusion of software value in the assessable value for duty calculation.
3. Applicability of penalty and interest in case of duty payment before Show Cause Notice.

Analysis:
1. The appeal involved the correct valuation of 1,05,025 Fixed Wireless Telephones imported by M/s. India Telephone Industries Ltd. The dispute centered around whether 70% represented the hardware portion and 30% the software, with the appellants claiming duty exemption on the software portion. The Revenue contended that duty was payable on the entire value of each equipment without split valuation. The Adjudicating Authority confirmed a differential duty, interest, and imposed a penalty, leading to a strong challenge by the appellants against the order.

2. The learned Advocate for the appellants argued that the value of software should not be included in the assessable value of the telephones, citing precedents and decisions where duty payment before the Show Cause Notice negated the imposition of penalty and interest. The Departmental Representative, however, pointed out the appellant's withdrawal of the claim for splitting the equipment value into hardware and software components. The Tribunal analyzed the evidence and the Adjudication Order, concluding that the splitting was arbitrary and not supported by facts. The investigation revealed that the software was embedded in the telephones, and the foreign suppliers were reluctant to split the value as claimed by the appellants.

3. The Tribunal noted that the appellants had voluntarily withdrawn their claim for split valuation much before the adjudication order, indicating questionable methods to evade duty. Despite confirming the differential duty, the Tribunal set aside the interest and penalty, considering the early duty payment and withdrawal of the split valuation claim. The decision highlighted the importance of proper valuation methods and the consequences of attempting to manipulate duty calculations.