2015 (6) TMI 188 - AT - Central Excise

Classification of goods - Classification under sub-heading 8524.00 or under sub-heading 8524.90 - Nil Rate of duty or duty @16% - appellant is manufacturing Panasonic MP3 CD-ROM - Held that - MP3 CD-ROMs contain only audio songs which can be played on any MP3 CD player, these discs are neither interactive nor it is possible to manipulate the details in such CDs. In view of the said position, we have no hesitation in holding that the goods cannot be considered as software so as to classify under Heading 8524.20. Invocation of extended period of limitation - It is seen from the ER-1 returns that the appellant has not given the complete description in the ER-1 return. The ER-1 return indicated the description as CD-ROM. On the other hand, in the corresponding invoices, the description is very clear as Panasonic MP3 CD-ROM. There was no reason for the appellant to give different description in the statutory return. In fact, from seeing the statutory return, one would conclude that CD-ROM contains some software and would, therefore, be classifiable under Heading 8524.20. In view of the said fact, we have no hesitation in holding that there was suppression of facts with a wilful intention to evade duty. Therefore, in our view, the extended period of limitation has been correctly invoked - Decided against assessee.

Summary

Issues:
Classification of goods under sub-heading 8524.00 or 8524.90, applicability of nil rate of duty, whether MP3 CD-ROMs qualify as software, invocation of extended period of limitation, imposition of penalty under Section 11AC.

Classification under Sub-Headings 8524.00 and 8524.90:
The dispute revolves around whether MP3 CD-ROMs should be classified under sub-heading 8524.00 (software) or 8524.90 (other recorded media). The appellant argues that the goods are software as they contain audio songs in MP3 format, while the revenue contends that they fall under the residuary sub-heading 8524.90. The Tribunal examines the essential nature of the goods and concludes that the MP3 CD-ROMs do not qualify as software under 8524.20 due to the lack of interactivity or data manipulation, despite being recorded in MP3 format.

Applicability of Nil Rate of Duty and Extended Period of Limitation:
The appellant claims that they believed the goods were chargeable at nil rate of duty under sub-heading 8524.20, justifying their regular filing of returns indicating nil duty. However, the Tribunal finds that the appellant's failure to provide a clear description in their returns, contrasting with the invoices specifying "Panasonic MP3 CD-ROM," indicates suppression of facts with an intent to evade duty. Consequently, the extended period of limitation is upheld.

Qualification of MP3 CD-ROMs as Software:
The appellant's argument that MP3 CD-ROMs should be considered software is based on the broad interpretation of the term "software" to include various types of software, not limited to computer software. They cite case laws emphasizing interactivity and data manipulation as defining features of software. However, the Tribunal determines that MP3 CD-ROMs containing only audio songs lack interactivity and manipulable data, leading to the conclusion that they do not qualify as software under Heading 8524.20.

Imposition of Penalty under Section 11AC:
The Tribunal upholds the penalty imposed under Section 11AC due to the appellant's suppression of facts and intentional evasion of duty, as evidenced by discrepancies between the descriptions in the statutory returns and the actual invoices. The penalty is deemed appropriate in line with the conduct of the appellant, supporting the decision to dismiss the appeal.

In conclusion, the Tribunal rules against the appellant, finding that MP3 CD-ROMs are not classifiable as software under sub-heading 8524.20 and upholds the imposition of duty at 16%. The extended period of limitation is deemed applicable due to the suppression of facts, leading to the validation of the penalty under Section 11AC.