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TMI Blog2005 (5) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants paid an amount in excess of what has been declared by them in the Bill of Entry. Hence there are no grounds to reject the transaction value. We are also not in full agreement with the findings of the adjudicating authority that the appellants imported two systems. There is no proof that they had remitted more money than what was declared in the Bill of Entry for assessment. Under these circumstances, the finding of the adjudicating authority that they had imported two systems is set aside. We are also of the view that there is absolutely no evidence to show that the price of software has been inflated and the hardware under-invoiced. The contention of the learned JCDR that the software in the CD had not been used by RPG is not a very strong point, since the software was already loaded in the equipment. Normally when we purchase computer systems the operating system is sometimes loaded in the system itself. Even then, the licenced software is supplied in a CD for a consideration. There is also no rule that software should cost less than that of Hardware. The cost of software depends on its complexity and utility. Suppose there is a crash in the system, then the licenced s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised in the show cause notice are as follows : (a) The value of the goods declared is not the correct transaction value in terms of Rule 4 of the Customs Valuation Rules, the total value is to be enhanced from UK Pounds to 2,71,615/- to UK Pounds 3,14,000/- as applicable for two systems of Brite VSD platform. (b) The goods are classifiable under CTH 8517 in terms of Section Note 4 to Section XVI as telephone system and customer support system under CTH 8417. The differential duty amounts to Rs. 73,94,052/- along with interest at 24% per annum as per proviso to Section 28(1) of the Customs Act. (c) The goods released provisionally are liable for confiscation under Section 111(m) of the Customs Act, 1962. (d) The appellants are liable for penalty under Section 112(a). (e) S/Shri S.B. Arun Kumar, Product Manager and K.S. Viswanathan, General Manager of M/s. WIPRO Ltd. Bangalore are liable for penalty under Section 112 of the Customs Act, 1962. (f) Bank guarantee executed by the appellant for Rs. 38.00 lakhs are liable to be enforced and amount realized towards short collection of duty. 3. Shri R. Ravindran, learned Advocate appeared for the appellants and Smt. Shobha L. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant whether the goods form one system or two systems. As regards the value of the goods imported the same has been fully declared to the department at UK Pounds 2,71,615/-. However, the Commissioner held that the value was UK Pounds 3,14,000/- as per the proforma invoice of Brite dated 3-5-1997 that is more than one full year prior to importation. The impugned order ignores the actual purchase order dated 15-4-1998 placed by WIPRO on Brite for a total value of UK Pounds 2,71,615/-. It is well settled that proforma invoice and quotations are not relevant evidences for determining the transaction value as held in the case of Swarn Fabrics v. CC - 2004 (170) E.L.T. 380 (T) and in the case of Ramana International v. CC - 2005 (180) E.L.T. 368 (T). (d) The adjudicating authority has classified the imported goods as telephonic system under CTH 8517. As per HSN, at page 1472, which defines electrical apparatus for line telephony or line telegraphy as under : "The term 'electrical apparatus' for line telephony or the telegraphy means "apparatus for the transmission between two points of speech or other sounds (or of symbols representing written messages, images or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdware and it is the hardware which is liable to duty is contrary to the judgment of the Hon'ble Supreme Court in the case of Sprint RPG India Ltd. v. CC, Delhi - 2000 (116) E.L.T. 6 (S.C.). (h) The Bill of Entry was filed on 1-6-1998. On that day Notification No. 11/97 was in force. Under the Notification Entry No. 173, duty on "computer software" is NIL. Notification No. 23/98 came into force from 2-6-98. Only this notification distinguished telecom software from computer software. Assuming without admitting that the software is telecom software, even then as on 1-6-98 no duty was leviable. It is not the case of the department that it is for operation of any machine performing a specific functioning other than data processing and incorporating or working in connection with an automatic data processing machine. No such case was made in the show cause notice nor any finding recorded in the impugned order. The impugned order is not sustainable. (i) The impugned order proceeds to finalize the provisional assessment made on 13-8-98. The provisional assessment was made on the second Bill of Entry, which had the classification and rate of duty as per the directions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evasion of duty. She pointed out that in the instant case, the value of software is much more than the hardware. (iv) She further drew our attention to the investigation conducted to show that the price at which Hutchinson imported the similar software was much less. (v) She reiterated the findings of the Commissioner in the adjudication order and urged the Bench to dismiss the appeals. 6. On a very careful consideration of the entire issue, the following picture emerges. The appellants had an agreement with M/s. RPG. M/s. RPG are cellular operators. They wanted to introduce pre-paid system in Chennai and Indore. Since the appellants had an agreement of distributorship with M/s. Brite Voice Systems, England, they agreed to import the system for RPG. Even though initially RPG wanted two systems, later they decided not to go ahead with the pre-paid system in Indore. In view of these developments, there had been changes in the configuration of the equipment needed by RPG. Finally a purchase order dated 15-4-98 was placed with M/s. Brite. L/C was opened on 27-4-98, which was amended on 2-5-98 and 5-6-98. Bill of Entry was filed on 1-6-1998. The description of the items in the Bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasoning adopted by him is as follows : "The pre-paid system, although, has no independent identity by itself, works in conjunction with the switch and thus becomes a part of the telephony system. The system under import is meant to be a part of main switch equipment for prepaid cellular phone system. Therefore, the item under import is rightly classifiable under CTH 8517. Though the individual components of the system are classifiable under various other headings like 8471, 8473, 8504 and 8517, the system as a whole is rightly classifiable under CTH 8517." We are not in a position to agree with the findings of the adjudicating authority for the following reasons. We have gone through technical write-up on the items imported. They consist of various parts of computer system (hardware) and also software. The packing list also describes the items as given in the Bill of Entry. Prima facie, there does not appear to be any mis-declaration. In our view, the items imported consist of Hardware and Software. The next question is whether the software imported is Telecom software. In this connection the Chairman of Centre for Electronic Design and Technology (CEDT), Indian Inst ..... X X X X Extracts X X X X X X X X Extracts X X X X
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