1989 (5) TMI 226 - AT - Customs

Summary

Issues:
1. End-use.
2. Valuation of hardware.
3. Valuation of software.
4. Importation of floppy drives.
5. Importation of graphic terminals.
6. Rate of duty.

Detailed Analysis:

1. End-use:
The appellants argued that the customs authorities should not concern themselves with the end-use criteria for customs purposes. They cited the case of Audio Vision Electronics v. Collector of Customs, Madras, to support their argument. The appellants possessed an industrial licence dated 15th December 1981, which was later amended to include mini/microcomputers and microprocessor-based systems. The Tribunal accepted that the importation of hardware was in conformity with the ITC regulations and that customs authorities are not concerned with the end-use of the product, except for the software, which was unauthorized.

2. Valuation of Hardware:
The appellants contended that the adjudicating authority incorrectly deducted the wholesale price of the software from the retail price of the computer system to arrive at the hardware price. Instead, the correct method should be to deduct the retail price of the software from the retail price of the computer system and then apply the discount to arrive at the wholesale price. The Tribunal accepted this method and ordered the valuation of the hardware to be recalculated accordingly.

3. Valuation of Software:
The appellants argued that the software was mistakenly sent by the suppliers and should not be included in the valuation. However, the Tribunal confirmed the adjudicating authority's valuation of the software at US $18,750.00 FOB, stating that the customs authorities are concerned with the value at the time of importation.

4. Importation of Floppy Drives:
The appellants were entitled to import parts of floppy disk drives under their import licence. The Tribunal found that the adjudicating authority had admitted this entitlement but did not extend the benefits of notifications 117/80-Cus. and 172/77-Cus. The Tribunal directed the adjudicating authority to extend these benefits to the appellants.

5. Importation of Graphic Terminals:
The appellants contended that graphic terminals were intelligent terminals capable of processing data, which should be allowed under their import licence. The Tribunal accepted this argument and found that the importation of graphic terminals was in order.

6. Rate of Duty:
The Tribunal directed the adjudicating authority to extend the benefits of notifications No. 172/77-Cus. and No. 117/80-Cus. to the hardware imported by the appellants, but not to the software.

Conclusion:
The Tribunal allowed the appeal partly, reducing the redemption fine to Rs. 4,00,000.00 and quashing the penalty of Rs. 2,50,000.00. The adjudicating authority was directed to give consequential effect to the order and extend the benefits of the relevant notifications to the hardware.