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2019 (3) TMI 1532 - CESTAT BANGALOREValuation - Import of software - mode of import of software - inclusion of value in the assessable value - Held that:- The appellants have imported equipment wherein the software was preloaded. There was no separate mode in which software was imported. Therefore, as held by the Tribunal in Bhagyanagar Metals Ltd. [2016 (2) TMI 614 - CESTAT HYDERABAD], the Customs authorities have included the value of the same in the assessable value and the appellants have paid duty on the same and have availed credit of CVD on the same. As per the process undertaken by the appellant, it is seen that they are not making any changes in the chip that is imported. As per the submission of Shri. B. Sreenivasappa, the basic software was along with complete hardware on a separate CD. However, the facts of the case also indicate that no separate CD‟s/media were supplied and the software was loaded on the flash memory of the chip and IC. No other mode function software was imported and no other mode is being supplied to their customer that is BSNL separately. Therefore, whatever software that has been imported is remained in the system and is not separated before delivery of the equipment to M/s. BSNL. Therefore, the transaction is inclusive of the software that is loaded by ZTE Corporation prior to supply of goods to the appellants for import. The appellants have contested the use of words firmware by the learned Commissioner. Whatever be the connotation of the software the important point to be seen is whether or not the same is preloaded, embedded etc in the equipment. Such a system with preloaded software has certainly more intrinsic value then a system which is not loaded with the same. Therefore, the essentiality test is to see the condition in which the system or equipment is cleared from the factory - In the instant case, the equipment were preloaded with the software and CVD was paid on the value which included the value of software. Therefore, such software irrespective of its nomenclature has become integral part of the system or equipment and has enhanced the intrinsic value of the system or equipment. The appellants are under a contract with the Government company i.e., BSNL. They have claimed that in terms of the contract, they were billing the hardware and software separately. The Customs authorities have rightly held that the splitting up of value between hardware and software was not correct and the goods must be valued as per the transaction value - BSNL being a Government Company, which cannot be alleged that they have colluded with the appellant in erroneously splitting the value of the hardware and software component. Time limitation - Held that:- The impugned show-cause notice was issued to the appellant on 01.12.2005 after a lapse of long time. In view of this we find that the appellants‟ submissions on limitation are valid. Penalty - Held that:- No suppression or intent to evade duty can be inferred from the case records and circumstances - Consequently, the penalty imposed under Section 11AC is not maintainable. Appeal allowed in part.
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