CESTAT Rules in Favor of Revenue, Holds Software Value Liable to Customs Duty

CESTAT Rules in Favor of Revenue, Holds Software Value Liable to Customs Duty

Introduction

The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that the value of preloaded software should be included in the assessable value of imported navigation devices and is liable to customs duty.

Factual Background

The appellant had imported touch media devices and declared their value in the Bill of Entry. Later, the assessee imported paper software licenses without payment of duty, availing an exemption under a notification. The Commissioner added the value of the software licenses to the assessable value of the imported hardware, enhancing the value and confirming differential customs duty and imposing penalties.

Procedural Background

The assessee challenged the Commissioner's order before the CESTAT, arguing that the value of the software imported separately cannot be added to the value of the touch media device imported earlier. The revenue submitted that the software was preloaded/etched into the device and should be included in the value of the device.

Issues

The main issue before the CESTAT was whether the value of software preloaded into the imported navigation systems should be included in the assessable value of the said navigation systems.

Contentions of the Parties

Appellant: The appellant argued that the value of the software imported separately cannot be added to the value of the touch media device imported earlier.

Revenue: The revenue submitted that the software was preloaded/etched into the device and should be included in the value of the device, as it is a part of the device itself.

Reasoning and Analysis

The bench of Dr. D.M. Misra (Judicial Member) and Pullela Nageswara Rao (Technical Member) observed that the software had been preloaded/etched into the touch media device navigation system, a fact not disputed by the assessee. The bench noted that the licence key number was imprinted on the device, and the software licence keys had already been loaded into the devices when imported. Therefore, the Tribunal found no reason to interfere with the Commissioner's order enhancing the value of the touch media device by including the value of the licence software imported subsequently.

Implications

The judgment highlights the importance of considering the value of software preloaded/etched into imported devices when determining the assessable value for customs duty purposes.

Relief Sought

The appellant sought to set aside the Commissioner's order enhancing the value of the touch media device and confirming differential customs duty and imposing penalties. The CESTAT dismissed the appeal, upholding the Commissioner's order.

In this case the appellant was represented by Mr. B.N. Gururaj, Advocate. Meanwhile the respondent was represented by Mr. Maneesh Akhoury, Assistant Commissioner (AR).