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2015 (9) TMI 714 - CESTAT MUMBAI

2015 (9) TMI 714 - CESTAT MUMBAI - 2016 (332) E.L.T. 849 (Tri. - Mumbai) - Import of designs and drawings - import in printed form as well as in CD - Benefit of exemption under serial number 271 of notification number 12/2012-CUS - Held that:- Appellants had in fact ordered for designs and drawings in hardcopy. Purchase orders placed clearly indicate for the supply of designs and drawings in hardcopy. When the goods were examined it was noticed that in addition to hardcopy, CD was found in the p .....

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d to the clients and also for arriving at the conclusion as to how the ship or vessel will appear to a purchaser.

The facts and circumstances of that case clearly indicate that what was brought in by the appellant therein was "CD ROM", is an indicator that the CD containing the designs and drawings of engineering goods was on a "read only memory"; in computer language ROM, that is to say the information on the CD Can only be read and is non-manipulatable. The judgment and the ratio o .....

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re satisfied. Since designs and drawings in paper form as well as in the CD form attract nil rate of duty, the finding of the Commissioner about the applicability of section 19 of the Customs Act, 1962 becomes irrelevant since the rate of duty applicable to both goods even assuming them to be constituting a set, is 'nil' in view of the classification determined by us. The question whether a separate value could be attributed to the CD also becomes irrelevant in view of the classification under H .....

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relevant facts that arise for consideration are the appellant herein filed a bill of entry number 752 0979 dated 28/07/2012 for the clearance of goods declared as "designs and drying (sic) is for Hull number 398 and 397" through the CHA. The said bill of entry was facilitated by the risk management Sistine (RMS) where no assessment and examination was prescribed. The "appellant importer had declared the said goods as classifiable under CTH49060000 claiming benefit of exemption und .....

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ed the departmental authorities that they had placed an order for supply of designs and drawings for construction of ship and had not placed any order for supplying designs and drawings on CD. Customs authorities not convinced with the explanation given conducted an investigation and after recording various statements came to a conclusion that appellant had tried to evade duty by mis-declaring the description of the goods imported. A show cause notice was issued for classification of the CD unde .....

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ogy software", there was no intention to misdeclare the goods as the purchase orders were placed specifically for the designs and drawings in printed form only and that they be allowed to re-export the CD back to the supplier. The adjudicating authority after following the principles of natural Justice, did not agree with the contentions raised by the appellant, holding against the appellant confirmed the demand of Customs duty interest thereof and also imposed penalties. Aggrieved by such .....

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ious clauses of the purchase orders and submit that the orders which were placed were for the supply of the designs and drawings in hardcopy only. He would submit that the appellant was not aware that supplier and had also despatched the designs and drawings in CD form. It is his submission that the designs and drawings which are received in printed form are correctly classifiable under heading number 4911 9920 and eligible for nil rate of duty, a finding as recorded by the adjudicating authorit .....

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to the supplementary note to chapter 85 he would submit that the expression information technology is correctly answered by the CD which is found in the consignment. He would then submit, the statement of Shri Vipul Shrivastava very clearly brings on record that the CD can be manipulated provides interactivity to the user in an automatic data processing machine. He would also demonstrate before us the manipulation that can be resorted to the data on the CD by using software "AutoCAD". .....

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fore us that the dimension in the drawings can be measure, increased or decreased either for length and or breadth, machineries can be rotated, moved, mirrored and trimmed for redesigning the vessel if required. It is also submission that the entire drawings could be transmitted in a soft copy interdepartmentally is in itself an example of the data being manipulatable. He would submit that the adjudicating authority has erred in relying upon the ratio of the case of LML Ltd. - 2010 (258) ELT 321 .....

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215) ELT 397 is directly on the same issue. 4. Learned Special Counsel appearing on behalf of the would draw our attention to the impugned order. He would submit that the entire case of the Department is that appellant had imported designs and drawings in paper form as well as in CD and the duty liability arises as the appellant are ineligible to avail benefit of the exemption notification as the product cannot be construed as information technology software. He would submit that the valuation a .....

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t the data on the CD is nothing but the drawings of the vessel. He would submit that the judgement of the Apex Court in the case of LML Ltd (supra) will directly apply and read the ratio of the judgement more specifically paragraph number 16, 20 and 28. 5. Learned Advocate in rejoinder would submit that the valuation as adopted by the adjudicating authority is erroneous. It is his submission that attributing the entire value to the CD is incorrect as appellant had in fact placed an order for des .....

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so sent by the supplier in CD is liable to Customs duty or otherwise. 7.2 Undisputed facts are that appellants had in fact ordered for designs and drawings in hardcopy. Purchase orders placed clearly indicate for the supply of designs and drawings in hardcopy. When the goods were examined it was noticed that in addition to hardcopy, CD was found in the package. The said CD was opened on a laptop before the Customs authorities and it contained the designs and drawing in machine readable format. 7 .....

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wings need to be dispatched in hard copy by Air Cargo mode only and relevant Airway Bill to be presented for negotiations." The description of goods as per the LC as well as the supplier's invoice also clearly state that designs and drawings covered by these documents are those as per appellant's order dated 18.6.2012 which, as mentioned above, specifically states that the drawings are to be hard copies. As such, the claim of the appellant that they had not ordered for a CD and that .....

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ation technology software" falling under Heading 85239010, which attracts 'nil' rate of duty as per the tariff itself. This takes us to the issue of classification and the duty liability on the CD which came along with the consignment. It is a case of the revenue that the designs and drawings which has come in the form of CD will fall under the Chapter heading number 8523 8090 and benefit of supplementary note of chapter heading 8523 is not applicable. It is also the finding of the .....

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erusal of the records it is noticed that the findings recorded by the adjudicating authority for the confirmation of the Customs duty interest thereof and imposition of penalty is incorrect for more than one reason. 7.5 Firstly, in order to appreciate whether the claim of the appellant that the information on the CD is nothing but information technology software or otherwise, we have to consider the supplementary note to chapter heading number 8523 which is as under. Supplementary Note: For the .....

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ine readable form. It is not the case of the revenue that the data on the CD is not machine readable. The date on the CD if is read in an automatic data processing machine would mean that the data on the CD is machine readable. The CD containing the designs and drawings is definitely satisfying the first limb of the definition of information technology software. The term "information" has been defined in section 2(1)(v) of the information technology act, 2000 to include data, message, .....

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the data in such a CD is also capable of being manipulated. The printed literature pertaining to AUTOCAD software, as extracted in the synopsis filed by the Appellant, shows that a user can change a drawing i.e manipulate it by giving different commands. These commands are extracted below: It was also demonstrated that the feature of 'zooming' is not merely a feature of magnifying an image as one usually understands, but includes features like displaying only all the graphics in a drawin .....

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clear from the feature of viewing of cross section as appearing in the printed literature pertaining to AUTOCAD, as extracted in the synopsis filed by the appellant, which is as under: It is an admitted position in the Commissioner's order that the data contained in the CD is "soft" and it was possible to even view a cross section area. The relevant finding of the Commissioner in this regard is in para 47.4 which reads thus: "Also admittedly the CD has been supplied by the sup .....

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ore find that the features of AUTOCAD software, as demonstrated before us, are consistent with the evidence on record. We find considerable substance in the argument that a drawing in a "soft" form which enables a user to view cross section when used to in conjunction with AUTOCAD software is information technology software, providing interactivity to the user as well as being capable of manipulation. 7.7 We find that the data on the CD imported is capable of manipulation as was demons .....

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mages on the CD are capable of being manipulated by an automatic data processing machine, by a software known as "AutoCAD". The manipulation to data on CD that could be undertaken as was demonstrated to us indicates that after the manipulations, the automatic data processing machine culls out immense information with respect to so many aspects of the vessel. The drawings and the designs on the CD is in a software form as stated above and can be manipulated to suit to the requirements o .....

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; and relied upon the definition of word manipulation. We find that these findings of the adjudicating authority are without any basis. The definition of information technology service talks about including of source code and object code; which we find is not required in the case in hand, inasmuch that when the CD is capable of being manipulated without having a source code or and object code would in itself mean that the said codes are built in the designs and drawings as found in the CD. The d .....

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automatic data processing machine. 7.8 We find that the judgment of the Apex Court in the case of Pentamedia Graphics Ltd. (supra) is directly on the point. Their Lordships the said judgment in paragraph number 14 and 15 held as under: "14. Random House Compact Unabridged Dictionary refers to "software" as anything that is not hardware and is used with hardware. Encyclopedia Britannica refers to "software" to designate non- hardware items, namely internal programmes or r .....

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s stated above, the goods under import are computer software recorded in a machine readable form and capable of being manipulated by means of an automatic data processing machine. We do not find any infirmity in the impugned order of the Tribunal." We find that the above ratio has been followed by this bench in the case of Gayatri Impex Ltd. (supra). 7.9 The adjudicating authority as well as the special Counsel for the revenue has heavily relied on the judgment of the Apex Court in the case .....

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ces of the case of LML Ltd - 3764 of 2003 and in paragraph number 20 and 21 held as under: "20. In the light of the aforesaid background, the question that arises for our consideration is whether the data in a compact disk falls within the meaning of the term software. It is needless to reiterate that data at issue in this case are images of drawings and designs intended to be used for engineering projects, therefore, the core issue to decide is whether such drawings, designs intended to be .....

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nnot be placed in the category of the term "software". It is therefore held that the engineering drawings and designs contained in a CD ROM will not be covered Heading 85.24 of the Tariff." 7.10 The facts and circumstances of that case clearly indicate that what was brought in by the appellant therein was "CD ROM", is an indicator that the CD containing the designs and drawings of engineering goods was on a "read only memory"; in computer language ROM, that is .....

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