Full Judgment
Officers of the customs department raided the premises of the importer.
One of the documents seized was a proforma invoice dated 27.12.1994. It showed a total price of US $ 82,500.00 and discount of US $ 39,325.00.
The breakup value of hardware and software was not separately given.
Commissioner of Customs by his order dated 31.5.1995 rejected the discount of US $ 39,325.00 and enhanced the value of the imported goods to US $ 1,21,825.00. He confiscated the goods under Section 111(m) of the Customs Act, 1962 and gave an option to redeem them on a fine of Rs. 15 lakhs. Penalties of Rs. 5 lakhs and Rs. 3 lakhs were imposed on M/s. Kailash Ribbon Factory Ltd. and Shri Anil Jain of M/s. Beta Woven Labels Pvt. Ltd. who had forwarded the suppliers invoice to the importer. That order of the Commissioner was challenged before this Tribunal in appeal Nos. C/480-481/95-A. Those appeals were disposed of by a common order dated 4.4.1996. This Tribunal determined the value of the imported goods as US $ 1,21,825.00. Regarding the assessment to duty, the Tribunal found that duty on software should be at the rate applicable to software and that should be applicable to hardware. For that purpose the matter was remitted back to the Commissioner. For a proper understanding of the direction we read that part of the order where this aspect was dealt with: If it is to be held that the software items imported in this case are to be assessed to duty qua software items the value thereof would require to be determined. Appellant has to be given an opportunity to place appropriate materials before the Collector in this regard. This matter also did not receive the specific attention of the Collector. In short, we find the Collector's order except in regard to discount is not self-explanatory or satisfactory.
3. It is common case that the imported good consisted of hardware as well as software. In PSI Data System Ltd. v. Collector of Central Excise software sold along with the computer cannot be included in the assessable value of the computer for the purpose of excise duty because what is subject to excise duty under the relevant tariff entry is the computer and not the computer system. It is admitted case that hardware and software are assessable to duty at different rates. Note 6 to Chapter 85 of Customs Tariff specifically provides that records, types and other media of heading No. 85.23 or 85.24 remain classified in those headings, whether or not they are presented with the apparatus for which they are intended. In disregard to the specific direction given by this Tribunal in the earlier decision referred to, the decision of the Supreme Court cited and the note 67 of Chapter 85, Commissioner in the impugned order states : "the entire goods require to be assessed at the highest rate of duty i.e. the rate of duty applicable to hardware". We are at a loss to understand how the Commissioner came to such a finding. It appears that the Commissioner has not only not understood the provisions of law but also refused to accept the binding decisions of the CEGAT and the Supreme Court.
4. In the last paragraph preceding his "order", the Commissioner observed "I find that in the absence of separate values available for software in the proforma invoice, which now forms the basis for assessment, there is no other alternative but to take recourse to Section 19 of the Customs Act, 1962, and assess' the goods at the highest rate of duty applicable." We are to see whether the Commissioner has complied with the provisions of Section 19 of the Act either. Proviso (b) to Section 19 reads: (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.
There is sufficient material in the records of this case to show the separate value of hardware and software imported. Commissioner in the impugned order has not discussed any of those materials. Nor has he cared to assess the value of hardware and software separately. Thus, the Commissioner has violated the mandate of Section 19 as well.
5. The goods imported by M/s Kailash Ribbon Factory Ltd. were confiscated and the importer has been granted right to redeem them on payment of fine of Rs. 15 lakhs under Section 125 of the Customs Act, 1962. It is conceded before us that the goods imported had already been sold to strangers at a price of Rs. 3,19,429.00. This circumstance clearly goes to show that the provisions of the Customs Act have been clearly violated by the authorities who are enjoined to uphold those provisions.
6. Proceedings have been initiated against the appellants on the ground of misdeclaration of the value of the goods imported. The total value shown in the commercial invoice on the basis of which the goods were imported was US $ 82,500.00. In the proforma invoice which the customs authorities got on search of the premises of M/s Kailash Ribbon Factory Ltd. showed the same amount as the value. But there that value was arrived at by showing a discount of US $ 39,325.00. In commercial transactions discount to purchasers is not uncommon. On account of that discount it cannot be said that the amount shown in the invoice is not the actual value of the goods imported. Viewed in that light, there was no reason for ordering confiscation of the goods. The authorities could have loaded the value to the extent of the discount and assessed accordingly. Now the question is purely academic, because the Tribunal in the earlier order found that discount has also to be added.
7. In view of what has been stated above, we do not find any ground to uphold the order passed by the Commissioner which is under challenge in these appeals. That order is set aside and the appeals are allowed.