2015 (9) TMI 714 - AT - Customs

Import of designs and drawings - import in printed form as well as in CD - Benefit of exemption under serial number 271 of notification number 12/2012-CUS - Held that - Appellants had in fact ordered for designs and drawings in hardcopy. Purchase orders placed clearly indicate for the supply of designs and drawings in hardcopy. When the goods were examined it was noticed that in addition to hardcopy, CD was found in the package. The said CD was opened on a laptop before the Customs authorities and it contained the designs and drawing in machine readable format - data on the CD imported is capable of manipulation as was demonstrated before us. We find that the design and drawings of the vessel on the CD can be manipulated in the computer to change the length and the breadth, repositioning of the machineries like engine, cabin, tank and a conclusion can be reached as to the correct design that needs to be presented to the clients and also for arriving at the conclusion as to how the ship or vessel will appear to a purchaser. The facts and circumstances of that case clearly indicate that what was brought in by the appellant therein was CD ROM , is an indicator that the CD containing the designs and drawings of engineering goods was on a read only memory ; in computer language ROM, that is to say the information on the CD Can only be read and is non-manipulatable. The judgment and the ratio of the Apex Court in the case of LML Ltd. 2010 (9) TMI 12 - Supreme Court of India was considering the peculiar facts of that case; while in the case in hand before us, it is undisputed that the information contained on the CD is manipulatable and interactive with the user. Designs and drawings contained in the CD were correctly classifiable under Heading 85238020 and attracts nil rate of duty as per Customs Tariff. The requirements of supplementary note to Chapter 8523 are therefore satisfied. Since designs and drawings in paper form as well as in the CD form attract nil rate of duty, the finding of the Commissioner about the applicability of section 19 of the Customs Act, 1962 becomes irrelevant since the rate of duty applicable to both goods even assuming them to be constituting a set, is nil in view of the classification determined by us. The question whether a separate value could be attributed to the CD also becomes irrelevant in view of the classification under Heading 85238020 of the Tariff. - mpugned order is unsustainable and is liable to be set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Classification of imported goods.
2. Eligibility for exemption under notification number 12/2012-CUS.
3. Duty liability on designs and drawings in CD form.
4. Applicability of Section 19 of the Customs Act, 1962.
5. Allegation of mis-declaration by the appellant.
6. Relevance of judicial precedents.

Detailed Analysis:

1. Classification of Imported Goods:
The primary issue was whether the designs and drawings imported in printed form and also sent by the supplier in a CD are liable to customs duty. The appellant declared the goods under CTH 49060000, claiming exemption under serial number 271 of notification number 12/2012-CUS. The Customs authorities, however, classified the CD under CTH 8523 8020, which the appellant contested, arguing that the CD should be considered "information technology software" eligible for a nil rate of duty.

2. Eligibility for Exemption under Notification Number 12/2012-CUS:
The appellant argued that the printed designs and drawings are exempt from customs duty. The Customs authorities found a CD in the consignment, which they claimed was mis-declared. The appellant maintained that they had not ordered the CD and were unaware of its inclusion, which was supported by the purchase orders specifying hard copies only.

3. Duty Liability on Designs and Drawings in CD Form:
The Customs authorities argued that the CD containing designs and drawings should be classified under heading 8523 8090, making it liable for duty. The appellant contended that the CD falls under the category of "information technology software" as per the supplementary note to chapter 85, which includes any data recorded in a machine-readable form and capable of being manipulated or providing interactivity to a user by means of an automatic data processing machine. The Tribunal agreed with the appellant, noting that the CD's data could be manipulated using AutoCAD software, thus qualifying as information technology software under heading 85238020 with a nil rate of duty.

4. Applicability of Section 19 of the Customs Act, 1962:
The Customs authorities applied Section 19 of the Customs Act, 1962, considering the entire consignment's value for duty calculation. The Tribunal found this application inappropriate since the printed designs and drawings were exempt from duty, and the CD, even if it had been ordered, would attract a nil rate of duty under the correct classification.

5. Allegation of Mis-declaration by the Appellant:
The Customs authorities accused the appellant of mis-declaring the consignment by not declaring the CD. The Tribunal, after reviewing the purchase orders and other evidence, concluded that the appellant had indeed ordered only hard copies, and the CD was supplied without their knowledge. Therefore, the allegation of mis-declaration was not substantiated.

6. Relevance of Judicial Precedents:
The Customs authorities relied on the judgment in the case of LML Ltd., where the CD-ROM containing images of drawings and designs was not considered software. However, the Tribunal distinguished this case, noting that the CD-ROM in LML Ltd.'s case was read-only and non-manipulatable, unlike the CD in the current case, which was manipulatable and interactive. The Tribunal found the case of Pentamedia Graphics Ltd. more relevant, where data recorded in a machine-readable form and capable of being manipulated was considered information technology software.

Conclusion:
The Tribunal concluded that the designs and drawings in printed form and the CD should be classified under heading 85238020, attracting a nil rate of duty. The Customs authorities' application of Section 19 of the Customs Act was deemed irrelevant, and the allegation of mis-declaration was not supported by evidence. The impugned order was set aside, and the appeal was allowed with consequential relief.