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TMI Blog2013 (8) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... udication proceedings and therefore we waived the requirement of predeposit of dues arising from the impugned order and proceeded to hear the appeals itself with a view to record an order as to how we came to the conclusion that natural justice was denied and to provide a few guidelinesto be followed by the adjudicating officer in denovo proceedings in this matter. 3. The appellant-company imported networking appliances which had certain embedded software to enable its use. This embedded software could be used for different functions by making payments for license to use the software for such function which software was already embedded into the system. The importer had also marketed the services of updating the software for various services. 4. Networking equipment is liable to pay customs duty. Software when imported separately was exempted from customs duty during the relevant period. Going by the decisions of the Tribunal and Courts, the legal position is that if equipment is imported along with embedded software without which the equipment cannot function, the value of the equipment for the purpose of assessment of customs duty should be the value of the equipment plus value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records as under in para 35 of the impugned order: The noticees were granted personal hearing on 19.9.2011 which was attended to by Shri Santosh Sankunny and the advocates for the noticees. They made a request to permit cross-examination of the persons who tested the imported products and to cause testing of the seized product. They were asked to make further submissions without prejudice to their application in this regard. Accordingly, they reiterated their written submissions and also relied upon the affidavit of Shri Byju Pillai and Shri Santhosh Sankunny. 7. No separate order was passed on their application. Finally, the impugned order was passed without allowing cross-examination, without giving an opportunity for demonstration of the equipment and without giving a final personal hearing after cross examination and demonstration as the appellant desired. The Commissioner has recorded the reasons for rejecting their application in para 64 and 65 of the order which are reproduced below: 64. I find that the noticee had requested for cross-examination of the technical experts from the Electronics Test and Development Centre (ETDC) who had tested the equipments and given their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for other optional functionalities (except the updations offered from time to time) in dispute are embedded in the equipment when it is imported. The appellants argue that the additional functionalities for which software is already embedded in the equipment, will be activated only when purchaser desires to have such functionality and makes payment for its licence. Since such licensing is not a condition for sale of equipment, they contest that the value of such optional service cannot form part of the value of the equipment. It is for proving the fact that the equipment imported is a plug and play device only for the basic functions and not for additional functions that the appellant wanted to have a demonstration of the equipment. It is also for the purpose of demonstrating that they have collected price from different buyers depending upon the functionalities that the buyers paid for, that the appellants asked for cross-examining other persons whose statements were relied upon. The further contention is that if the right to cross-examination was denied to them without informing them or passing a separate order on that issue. If such order was passed they could have sought reme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 10 (c) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and they are not required to pay duty on any post importation services or post importation licensing of software embedded in the equipment at the time of import so long as such licensing is not a condition for sale but is optional. 11. Opposing the prayer of the learned counsel for the appellant, the learned AR for Revenue submits that though statements of many persons have been relied upon in the show-cause notice, the adjudicating authority has not relied upon such statements for arriving at his finding. He has only relied upon the statements of the employees of the company and also documentary evidences like parallel invoices raised. So according to him, the adjudication proceeding is not vitiated. He also submits that the adjudicating authority has recorded the reason for denial for cross-examination in paragraphs 64 & 65 of the adjudication order (already reproduced in this order). He prays that the Tribunal may consider these facts recorded by the adjudicating authority and the difficulty in arranging the cross-examination of government officers who gave the expert opinion as also various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l example is antivirus software. Even after the initial stage the software has to be updated for newer and newer viruses, spams, spywares etc. that is pumped into the network by criminal and anti-social elements in the society. For this purpose, the software need to be updated continuously and this service has to be paid for. It is argued that the cost of such updation of software cannot form part of assessable value of goods when imported. No effort seems to have been made to make distinction between the post-import services and the software that is embedded. 16. We have perused the submissions of the appellants before the adjudicating authority on 19/09/2011 and we are of the considered view that the reasoning given by the Commissioner that the appellants have not submitted the reasons for requesting for cross-examination is not correct. If the Commissioner was not in agreement with the reasons given, he should have necessarily intimated his stand to the importer so that they could have filed evidence before the Commissioner by way of additional documents to prove their point. When such documents are filed directly before the Tribunal such evidence is legally not admissible but ..... X X X X Extracts X X X X X X X X Extracts X X X X
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