| SooperKanoon Citation | sooperkanoon.com/41492 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Calcutta |
| Decided On | Jan-13-2006 |
| Judge | J T V.K., M Ravindran |
| Reported in | (2006)(106)ECC357 |
| Appellant | Contessa Commercial Co. (P) Ltd., |
| Respondent | Commr. of Customs, Faridabad |
2. The relevant facts that arise for consideration are that the appellant Company M/s Contessa Commercial Co. (P) Ltd. imported CD ROMs and declared them to be falling under Chapter Heading No. 8524.31 of Customs Tariff and claimed benefit as envisaged at Sl.No. 173 of Notification No. 11/97-Cus dated 1.3.97 as amended by Notification No.3/98-Cus dated 11th Feb., 1998. The authorities initiated investigations and statements of officials of the Company and others were recorded and a show-cause notice was issued proposing the recovery of short paid of duty, confiscation of the goods and penalties on all appellants on the ground that the importer had misdeclared the goods and other appellants also admitted the misdeclaration. All the appellants contested the show-cause notice. The adjudicating authority did not accept any of the contentions of the appellants and confirmed the duty and confiscated the goods with an option to redeem the goods on payment of redemption fine and imposed penalties on the appellants.
3.1 Ld. Senior Advocate, Shri M. Chandrasekhran along with ld.Advocate, Shri S.K. Mehta, appeared for the appellants, M/s Contessa Commercial Co. (P) Ltd. and its Chief Executive Officer, Mr. S.Kishorepuria. He submits that the goods are declared as CD ROMs and the said CD ROMs were having software recorded on them. These CD ROMs contained games, entertainment programmes. He submits that the benefit of Notification No. 11/97-Cus has been correctly claimed as the Notification exempts the Computer Software from Customs duty. He also further submits that the explanation of the word "Computer Software" as given the Notification squarely covers the goods imported by the appellants. It was also submitted that an identical import of the same goods was also a subject matter of an investigation by the Revenue authorities and that case was adjudicated by the Commissioner of Customs, Bangalore and granted the importer's in that case benefit of Notification No. 11/97-Cus. He also submits that the authorities have sought the opinion about the CD ROMs imported by the appellants from Department of Electronics, Govt. of India and Electronics and Computer Software Expert Promotion Council (sponsored by Ministry of Commerce, Govt. of India) and both the authorities after examining the CD ROMs have opined that they are interactive in functionality and qualify under the category of Computer Software. It was also further submitted that the whole SCN is bad as time barred as the goods were imported and allowed to be cleared after reports from Government authorities and the statements etc. were recorded and completed in 1998 itself and the SCN was issued in 2001. It was also further submitted that, the decision of the Commissioner of Customs, Bangalore, in an identical case involving the identical products allowing the benefit of Notification No.11/97-Cus is not challenged by the Department and hence the said interpretation would be binding upon the authorities, more so when the assessee in that case preferred an appeal to the Tribunal against the same order on the point aggrieved and Tribunal has allowed his appeal.
3.2 Ld.Advocate, Shri V.S. Nankani, appeared for the appellant, Shri Rajesh S. Adani, Managing Director of M/s Adani Exports Ltd. He submits that the penalty imposed on the appellant in this case under Section 112 of the Customs Act is not correct, legal and unwarranted. He submits that the imposition of penalty under Section 112 as the appellant is for opening letter of credit in the name of M/s Contessa Commercial Co. (P) Ltd. He submits that the appellant herein is a Managing Director of a Star Exports House and the said Adani Exports Ltd is permitted to open a letter of credit under Export and Import Policy. The payments against the letter of credit were made and the Adani Exports Ltd. got a commission for facilitating the opening of the letter of credit. He submits that M/s Adani Export Ltd. is a facilitator and cannot be categorized as an abettor. He further submits that an identical case of penalty under Section 112 of Customs Act was imposed as the same appellant, which was set aside by the Tribunal in the case of M/s Saudagar Exports v. Commr. of Customs, Kandla .
3.3 Ld.Advocate, Shri Hari Shankar, appeared for the appellant, Shri Vivek Nagpal, Chairman-Cum-Managing Director of M/s Padmini Polymer Ltd. He submits that the penalty is imposed on the appellant under Section 112 of the Customs Act is for giving a loan to M/s Brisk Plastics & Chemicals Pvt. Ltd. for purchasing the CD ROMs from M/s Contessa Commercial Co. (P) Ltd. He submits that M/s Padmini Polymer Ltd. has commercial/business transaction with M/s Brisk Plastics & Chemicals Pvt. Ltd. and on a specific request made by M/s Brisk Plastic advanced the amount for business purposes. This act of accommodating can never be covered under the provisions of Section 112 of Customs Act, warranting penalty.
3.4 Ld.Advocate, Shri V.A. Mehta, appeared for the appellants, M/s Brisk Plastics & Chemicals Pvt. Ltd and the Director of the Company.
He submits that penalty has been imposed on these appellants under Section 112 of the Customs Act for purchasing the disputed CD ROMs from M/s Contessa Commercial Co. (P) Ltd. He submits that the appellants had purchased the CD ROMs after the same were cleared by the Customs authorities and after verifying the fact that all the legal obligations have been met with by the importer. In such a case no penalty is imposable on the appellant who has acted in bonafide belief and regarding availing the benefit loan from M/s Padmini Polymers Ltd. He submits that the amount was taken as a loan for business purposes.
4. Ld.DR, Shri A. Hore & ld.DR, Shri I. Mariana on the other hand submit that the appellants, i.e. M/s Contessa Commercial Co.(P) Ltd. had misdeclared the CD ROMs as containing Computer Software. He submits that the CD ROMs cannot be said to have Computer Software as the said CD ROMs can be operated only in a Computer which has operational programme. In the absence of any evidence to show that CD ROMs are operatable in any Computer, they submit that they cannot get benefit of exemption notification. He also submits that the Department of Electronics, Govt. of India and Electronics & Computer Software Expert Promotion Councils' examination report is inconclusive and cannot be relied upon. It was further submitted that all the appellants have acted in a cohesive manner and perpetrated in the misdeclaration in order to deprive the Government of legitimate duty, hence imposition of penalties on the appellant is correct. It was submitted in the light of all the evidences, the appellants should be directed to predeposit all the Government dues.
5. Considered the submissions made by both the sides and perused the records. We find that the confiscation of goods, confirmation of duties and imposition of penalties, are on account of the short levy of duty due to availment of ineligible benefit made in Notification No.11/97-Cus. We find that the said Notification at Sl.No. 173 grants exemption from payment of Customs duty to Computer Software. We find that Sl.No. 173 of Notification No. 11/97-Cus grants exemption to Computer Software if imported into India. The explanation of the said Notification gives what is meant by "Computer Software". The said explanation is reproduced below : Explanation. - 'Computer software' means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine falling under heading No. 84.71, but does not include software required for operation of any machine performing a specific function other than data-processing and incorporating or working in conjunction with an automatic data processing machine.
The Central Board of Excise & Customs (CBEC) issued a Circular No.7/98-Cus dated 10.02.98 wherein the CBEC has clarified as under : It is clarified that for the purposes of the exemption under Sl.No. 173 of Notification No. 11/97-Cus dated 01.03.97 'Computer Software' is to be taken to mean any representation of instructions, data, sound or image including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine falling under Heading 84.71. Thus, the said exemption will not cover software required for operation of any machine performing a specific function other than data processing machine. More specifically, software for telecom, medical or other applications is not eligible for exemption from duty. However, software containing encyclopaedia, games, books etc. will be eligible for this exemption wherever they satisfy the INTERACTIVITY CRITERION.From the above clarification by the Board, it is very clear that the exemption is granted to software containing encyclopaedia, games, books etc. if they satisfy the "INTERACTIVITY CRITERION". In the appellants' case before us, the Department of Electronics, Government of India were sent samples of CD ROMs for examining whether the COD ROMs could be categorized as "Computer Software". The Senior Scientific Officer of Department of Electronics vide letter No. 23 (2)/98-IPC dated 6.7.98 after examining the samples, opined as follows : have been found to be interactive in functionality and qualify under the category of Computer Software.
Further, we also find that Electronics and Computer Software Expert Promotion Council (Sponsored by Ministry of Commerce, Govt. of India) vide their letter dated July 14, 1998, clarified to the Asstt.
Commissioner of Customs, that "having examined the contents of CD ROMs sent by him, are found to be interactive in functionality and qualify under the category of Computer Software". The authorities, vide their letter dated 10.1.2001, requested further clarification from Electronics & Computer Software Expert Promotion Council on the contents of CD ROMs, to which the said Council vide letter dated 15th January, 2001 after reproducing the definitions of "Computer Software" in the Notification, further clarified that "As per this definition of Software, the contents of the CD's merit being called Software". It can be seen that two different Government organizations after examining, have opined that the contents in the CD ROMs imported by M/s Contessa Commercial Co. (P) Ltd. would merit being called as "Computer Software". We also find that an identical issue and in respect of identical products imported were granted benefit of notification by the Commissioner of Customs, which is not challenged by the Department and the said order is upheld by the Tribunal.
7. After considering the evidence brought on record and in view of the situation as explained above, the appellants have made out a strong prima-facie case for full waiver of predeposit of duties and penalties imposed on them. The recovery of duty and penalty imposed on the appellant, M/s Contessa Commercial Co. (P) Ltd. stayed thereof till the disposal of their appeals. As we have come to the conclusion that the main noticee has made out a strong prima-facie case for waiver of predeposit of duty and penalty, the predeposit of penalties imposed on other appellants, i.e Shri Sunil Kishorepuria, Shri Rajesh Adani, Shri Vivek Nagpal, M/s Brisk Plastics & Chemicals Pvt. Ltd. and Shri Virendra Sutaria, are also waived and recovery thereof stayed till the disposal of their appeals.