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TMI Blog2017 (12) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... d in lieu under section 125 of Customs Act. 1962. The declared value of the goods imported against these bills was ordered to be added to that of multi-application computer system hardware by taking recourse to rule 9 of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 read with section 19 of Customs Act, 1962 besides imposing penalties on the importer and some employees of the importer. Aggrieved by these detriments, M/s Vodafone Essar Ltd and the employees are in appeal. 2. The telecom operator entered into an agreement with M/s Inter-Voice Brite, UK for supply of equipment and technology in three phases to implement of pre-paid services over its telecom network. A purchase order for goods and services valued at US$ 1,500,000, with some optionals at additional cost, was issued on 18th January 2001 for import of multi-application platform comprising voice mail system hardware and voice mail system software. Five bills of entry were filed between May 2001 and June 2003 for clearance of various components declared as multi-application 'computer systems hardware', multi-application 'software', 'software for voice-mail service', voice m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Warm Standby SPU (b) software and licenses (c) configuration and acceptance testing (d) standard documentation (e) warranty for parts and software (f) set of essential spares and (g) delivery and commissioning. 8. On the financial closure, Learned Counsel explained that pricing methodology, as laid out in the agreement, was in consonance with the segregation of the project as three phases and captioned separately in the agreement. While explaining this aspect, Learned Counsel also drew attention to the contract price mutually agreed upon for the three phases of the project. That certain services were required to implement the project is, admittedly, specified in the purchase document in relation to the hardware and software intended to be procured for the project and also implied in the scope of work detailed for the three phases of the project. It was further contended that clarifications offered vide letter dated 28th September 2001 of the exporter, which though throwing ample light on the entire transaction, was not taken into consideration by adjudicating authority. 9. Contending that there is no allegation of misdeclaration of value in any of the bills of entry, the unsubsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants, in relation to the five bills of entry involved in the adjudication, praying that the same may be considered as part of the arguments. These are: a) impugned order relates to goods imported under five bills of entry as detailed in the annexure; b) goods were imported under an agreement between M/s Vodafone Essar Ltd and M/s Inter-Voice Brite, UK and the Agreement, as well as the technical literature provided by importers, indicate that the goods were collectively known as voice service director platform the principal function of which was the providing of pre-paid telephone services with the additional feature of voice mail which are fully elaborated in paragraph 59 of the impugned order; c) imports effected against bill of entry no. 239236 were described as (i) multi-application computer system hardware with declared value of Rs. 1,69,64,818 and (ii) multi application software with declared value of Rs. 2,34,27,607 but that its actual description of voice service director platform was not included in the bill of entry with intent to mislead and that it was only upon further investigation that exclusion of value of services required for the first phase of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk analysis, remote back-up during migration, project management, documentation, technical consultancy and, as per internal memo dated 29th April 2002, US$ 10,500 was agreed to be paid to supplier for site support during actual migration based on which it was held that Rs. 20,98,218 was not eligible for duty free clearance but includible in the value of hardware in accordance with rule 9(i)(e) of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 and confirmation of differential duty of Rs. 8,12,766. h) voice mail service software valued at Rs. 95,14,200 imported against bill of entry no. 637397 and cleared free of duty appeared to be intended for third phase of implementation which, as per Appendix II of the Agreement between M/s Vodafone Essar Ltd and M/s Inter-Voice Brite envisages, inter alia, supply of application software for prepaid service, voice mail, fax mail and short messaging service but the invoice refers only to voice mail service software as evidenced by admission of Shri Laxmikant Natarajan along with the apparent unwillingness to segregate the values of these several inclusions along with further admission this software was not required fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... okes rule 9(1)(e) of Customs Valuation (Determination of Price of Imported Goods), 1988 read with section 19 of Customs Act, 1962. The notice also seeks to deny eligibility to claim the benefit of exemption available to software and to hardware for voice mail service. 15. The impugned order has dealt with the charge of misdeclaration thus: 66. In view of the foregoing discussions, I hold that the importers misdeclared the description of goods as Multi Application Computer System Hardware in Bill of Entry No. 239236 dated 09.05.2001 and Voice Mail Service Hardware in the Bill of Entry No. 264446 dated 29.06,2001. Node 2 of the Voice Service Director Platform was misdeclared as Voice Mail Service Hardware in bill of entry Nos. 264446 dated 29.06.2001 for the sake of availing the Notification No. 17/01-Cus Sr. No. 239 and 285. The said misdeclaration renders the goods liable for confiscation under Section 111(m) of the Customs Act, 1962 and I hold the goods liable for confiscation under Section 111(m) of the Act, ibid. 16. In leading up to this conclusion, the adjudicating authority has reasoned that appellant 65 (ii) .had not furnished any concrete evidence to refute the alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted to in the statements. Consequently, the finding of misdeclaration in relation to this bill of entry is not backed by a reasonable explanation. Appellant claims that their submissions have not been considered in the impugned order. 19. The second aspect that has been dealt with in the impugned order is, in the words of the adjudicating authority, 77. From the above facts, it was concluded by the department that value of software was manipulated, inflated and declared arbitrarily and the value shown for different software should form the part of the value of the Multi-Application platform in terms of Rule 9 (1)(e) of the Customs Valuation Rules, 1988, read with section 19 of the Customs Act, 1962. This proposal of the department is based on the fact that the Contract and P.O. is for the entire project consisting of hardware, software and services and there existed no value for individual item. Proceeding to render findings on this aspect, the impugned order has assumed that section 19 of Customs Act, 1962 confers authority to value goods and, in conjunction with rule 9(1)(e) of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, empowers clubbing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to value shall, if they are liable to duty at the same rate, be chargeable to duty at that rate, and if they are liable to duty at different rates, be chargeable to duty at the highest of such rates; (c) articles not liable to duty shall be chargeable to duty at the rate at which articles liable to duty with reference to value are liable under clause (b): Provided that, (a) accessories of, and spare parts or maintenance and repairing implements for, any article which satisfy the conditions specified in the rules made in this behalf shall be chargeable at the same rate of duty as that article; (b) if the importer produces evidence to the satisfaction of the proper officer regarding the value of any of the articles liable to different rates of duty, such article shall be chargeable to duty separately at the rate applicable to it. 23. That section 19 is an empowerment for classification, and not valuation, is also apparent from the decision of the Hon'ble Supreme Court in Commissioner of Customs Bangalore v. Acer India Pvt Ltd [Appeal (Civil) 2321 of 2007] which dealt with the attempt of Revenue to bring computer notebooks within the ambit of section 19 of Cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary for me to deal with the said argument. "before holding that Tribunal had correctly decided that the coverage for additional duty of 7% on the articles under heading 8471 of First Schedule to Customs Tariff Act, 1975 specified in the said Rules would not be applicable to notebooks." 24. The impugned order has referred to proviso in section 19 of Customs Act, 1962 as the authority to club the values of the various goods. There is no finding as to the applicability of section 19 of Customs Act, 1962 to the facts pertinent to the dispute. Such finding should necessarily decide if the goods are presented as a set of articles with a unified, non-separable value, enumerate the various articles that comprise the set, ascertain the rate of duty applicable to each and then compute the duty liability of the unified value by applying that identified rate of duty. Without such an exercise, invoking of section 19 of Customs Act, 1962 is not consummated. 25. To enable this to be done, we set aside the impugned order and direct the adjudicating authority to decide the matter afresh after considering the allegations, pleading of appellant and evidence on misdeclaration and by applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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