Commissioner of Customs (Airport) Vs ITI Ltd. (CESTAT Chennai)
Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Chennai has ruled in favor of ITI Ltd., dismissing an appeal by the Commissioner of Customs (Airport) and finding no misdeclaration in the valuation of software imported as part of telecom equipment. The dispute centered on whether the value of software, preloaded or otherwise, should be excluded and assessed separately, or if it should be integrated into the hardware value for customs duty purposes.
The case originated from investigations by the Directorate of Revenue Intelligence (DRI), Bangalore, concerning imports by ITI Ltd. of parts for Mobile Switching Centres (MSC), Base Station Controllers (BSC), and Base Transceiver Stations (BTS, BTRS) in 2004. These imports were declared under Customs Notification No. 21/2002, which allowed exemption from Basic Customs Duty (BCD) for certain parts, while countervailing duty (CVD) was paid.
The Revenue’s contention was that ITI Ltd. had intentionally split the declared value of hardware and software, claiming exemption for the software component by classifying it as Information Technology Software, which attracted a ‘nil’ rate of duty under Sl. No. 157 of the aforementioned notification. DRI investigations led to ITI Ltd. reportedly agreeing to pay customs duty on the software value by treating it as part of the hardware, an action taken voluntarily under Section 28(2B) of the Customs Act, 1962. It was also stated by ITI Ltd. that non-supply of software by the supplier at the time of shipment led to the computation and payment of duty on the software for clearances effected through ACC, Chennai, along with interest.
