2024 (1) TMI 690 - AT - Customs

Classification of imported goods - Software License imported in paper form - to be classified under CTH 49070030 or under CTH 85238020? - HELD THAT - From the chapter headings it is very clear that documents such as manuals which are meant to be the instructions to activate the software are to be classified under Chapter 49. Therefore, the Commissioner was right in disregarding the fact that only because the value is high cannot be the criteria for classification of the product as software. The only ground on which appeal is filed is that the license has an intellectual value and the software and the license should be considered as a set fails in as much as the classification depends upon the description of the product at the time of import. Moreover, the supplementary notes under Chapter 49 and the description at sl.No.157 of Notification 21/2002 clearly show that the documents which convey the right to use the software are rightly classifiable under CTH 49. There are no reason to interfere with the impugned order and accordingly the appeal is dismissed.

Summary

Issues: Classification of goods imported under Bill of Entry regarding "IT software" and "Software License" under different Customs Tariff Headings.

Summary:
1. The issue involved in the appeal was the classification of goods imported under Bill of Entry, with the Respondent seeking to classify "IT software" under CTH 85238020 and "Software License" under CTH 49070030. The dispute arose when the adjudicating authority rejected the classification sought by the Respondent, leading to an appeal by the Revenue against the order of the Commissioner (Appeals) who held that the software license should be classified under CTH 49070030.

2. The Authorized Representative argued that the value declared for the license should be included in the software's value as per Customs Valuation Rules, 2007. It was contended that the software license has intellectual value and should be considered an integral part of the software itself, thus classifiable under CTH 85238020.

3. The Counsel for the respondent contended that the software and software licenses imported were distinct products, not related to each other, and should be classified separately under different headings as per the Customs Tariff.

4. The Counsel highlighted entry no. 157 in the general exemption notification, emphasizing the distinction between "Information Technology software" and "Document of title conveying the right to use Information Technology software" under different tariff items.

5. Reference was made to the description of tariff items CTH 49070030 and CTH 85238020, along with relevant circulars and tribunal orders to support the classification argument.

6. The Tribunal deliberated on whether the software license imported in paper form should be classified under CTH 4907 or CTH 8523, considering the definitions and supplementary notes under the respective tariff items.

7. The Tribunal concluded that manuals meant to activate software are classified under Chapter 49, as per the description in the notification and supplementary notes, affirming the Commissioner's decision to classify the software license under CTH 49070030.

8. The appeal was dismissed, with the Tribunal finding no reason to interfere with the impugned order based on the classification criteria and descriptions at the time of import.