2018 (8) TMI 45 - AT - Customs

Classification of imported software - whether the impugned software is IT software or a software tailor-made to a particular machine and as to whether the software is eligible for exemption under Notification No. 7/2007? Held that - On going through the series of letters in a short span it appears that the appellant s contentions are justified as there are no other justifiable reasons which make the appellants change their stand overnight on the issue of classification. The software is manufactured of functioning independently and can be loaded on any computers. This fulfills the requisite conditions of the Chapter Notes 8523 for software under 8523. The certificates issued by the Radiologists or in-charge of radiologist centres/hospitals also pointed out to this effect that the QPC X software is a image processing software with additional facilities of QPC, the data base of the computer system and the CD can be loaded to any computer - This is not be construed as a customer built software in the instant case. There is no justification for interfering with the opinion expressed by two learned Commissioner (Appeals) in classifying the product under 8523 8020 - the software imported by the appellants is a standalone independent software as given in the form of CD and can be loaded on any ADM. Under these circumstances it is rightly classifiable under CTH 8523 8020. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of imported software under the Customs Tariff Heading (CTH), imposition of redemption fine and penalty without issuing a speaking order, and whether the software is eligible for exemption under Notification No. 7/2007.

Classification of Software:
The case involved the classification of imported software along with medical equipment. The appellant contended that the software should be classified under Information Technology (IT) while the Department classified it under medical equipment. The appellant argued that there was no show-cause notice, speaking order, or personal hearing before the assessment was finalized. They claimed that certain letters sent to the Department were under duress due to urgent business needs. The software, QPC scan software, was described as an image processing software with additional features, not necessarily tied to the imported scanner. The Chapter Notes for heading 8523 define IT software, and the appellant had a strong case based on subsequent imports classified under CTH 8523. The Tribunal found that the software could be loaded on any computer and interacted with various products, leading to its classification under CTH 8523 8020.

Imposition of Redemption Fine and Penalty:
The appellant argued that the redemption fine and penalty were unjustly imposed without a speaking order or adherence to principles of natural justice. They cited various case laws to support their claim. The Tribunal noted that the Department's classification attracted a lower duty rate, and the appellant's submissions regarding the software's capabilities aligned with its classification under CTH 8523. The Tribunal found that the redemption fine and penalty were unlawful due to the lack of a speaking order and principles of natural justice, as supported by the case laws cited by the appellant.

Eligibility for Exemption:
The main issue was whether the imported software was eligible for exemption under Notification No. 7/2007. The Tribunal analyzed the software's characteristics, its compatibility with various systems, and its independent functionality. Based on the evidence presented, including certificates from radiologists and findings from previous appeals, the Tribunal concluded that the software was a standalone product that could be loaded on any Automatic Data Processing Machine (ADM). Consequently, the software was rightly classified under CTH 8523 8020 and deemed ineligible for exemption under Notification No. 7/2007.

Conclusion:
The Tribunal allowed the appeal of the appellant, M/s. Chayagraphics (India) Pvt. Ltd., regarding the classification of the software under CTH 8523 8020. The appeals of the Department were rejected. The Tribunal emphasized the importance of issuing speaking orders, adhering to principles of natural justice, and correctly classifying imported goods based on their characteristics and functionality.