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TMI Blog2013 (8) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... iety. For this purpose, the software need to be updated continuously and this service has to be paid for. It is argued that the cost of such updation of software cannot form part of assessable value of goods when imported. No effort seems to have been made to make distinction between the post-import services and the software that is embedded. Stay granted - matter remanded back. - C/Misc./377/2012 and C/S/68/2012 and C/90/2012 C/S/66/2012 and C/88/2012 C/S/67/2012 and C/89/2012 - - - Dated:- 11-4-2013 - Shri P.K. Das and Shri Mathew John, JJ. For the Appellant: Shri Rajesh Chandra Kumar, Advocate For the Respondent: Shri Parmod Kumar, Jt. Commr. (AR) JUDGEMENT Per Mathew John In these proceedings, three appeals along with stay petitions for waiver of predeposit of dues arising from the same impugned order and a miscellaneous application for adducing additional evidence are being considered. All the appeals arise from the same impugned order. The first appellant is M/s.Inflow Technologies Pvt. Ltd., the importer of networking appliances and related software. The second appellant is Shri Biju Pillai, who is the CEO of the appellant-company and the third appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, recorded statements of the employees of the appellant-company including the two individual appellants herein and also statements of a few persons who purchased such equipment from the appellant, marketing executives of the equipment manufacturer etc. They have also relied upon a test report from Electronic Test and Development Center, Peenya, Bangalore which reported that the equipment was basically a plug and play device implying that the software necessary to run the equipment is already embedded in the equipment. 6. The importer was given a very detailed show-cause notice and they were asked to furnish reply to the show-cause notice. They furnished a reply dated 19.9.2011, arguing that they should be allowed to cross-examine the persons whose statements are relied upon for proving the case against them. In particular, they had asked for cross-examining the expert from Electronic Test and Development Center, Peenya, Bangalore and they also wanted an opportunity for demonstrating before the adjudicating authority certain basic facts about the equipment by using a sample of the equipment under seizure. Though such request was made the adjudicating authority did not allow any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts had been relied upon in the show cause notice. I observe that investigation had brought on record the statements of a few persons who had bought and used the subject equipments from overseas suppliers through ITPL. Their statements serve to make one understand the manner in which the orders were raised, either as a bundle or as separate items as hardware, software or support, the manner in which the goods were received through ITPL, the type of invoices under which they were received, the general working of the equipments etc. These are all basic facts of the case which had been brought on record through these persons who had bought and used the equipments. Further, the noticee had not stated anything whatsoever as to which part of which statement by which persons is incorrect or disputable but had merely requested to cross-examine all these persons without submitting any reason as to the objectives of such an exercise. I find that such a request to cross-examine all persons who had only given an objective view of the manner in which the subject equipments were ordered, invoiced, imported, cleared, sold, bought and used is not acceptable. Hence, I deny the request of the noticee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appliance, the embedded software in it required to initiate the hardware, preloaded software and warranty, which it has correctly done at the time of import of the appliance. According to the appellants the value of the appliance at the time of import therefore included the following:- (i) The value of the hardware (ii) The value of the software embedded in the hardware to initiate the hardware (iii) The value of the application softwares that are perpetually licensed and are integrated with the appliance and which continue to function the moment the appliance is plugged in without any additional requirement of an activation key/license key. (iv) The value of the application software that are subscription based, but are activated initially for the evaluation period and which perform the complete set of functions upon activation for the specified evaluation period (v) The value of the license key required to activate the subscription based application softwares for the evaluation period and (vi) Charges for default warranty period. 10. The appellants argue that the appliance as such is functionally viable and commercially marketable in the form in which it is initially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for. It is also necessary to demonstrate whether the licensing of all the embedded software was a condition for sale of the goods. It is necessary to come to finding whether each of the buyers opted for all the functionalities and also paid for it since the appellants are contesting to the contrary. Unless clear findings are given on these facts after hearing all the defense arguments it may not be possible to apply the relevant laws. It appears that there is some agreement on both sides that most of the components of the software except those relating to updations are embedded in the equipment. But there are other issues. Without license can the embedded software be used? This is a question of fact to be answered. If the importer asks for licensing additional functionalities after importation is complete and pays for it will such payment be part of the value of the imported goods? This is a legal question to be answered. But the relevant fact whether such licensing and payment were made after importation and whether such payments were made by all the customers and whether such payments were condition for sale are relevant facts to be determined. We find that the adjudicating autho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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