Cus - License fee paid by importer of software and which was repatriated to foreign supplier needs to be included in AV: CESTAT
By TIOL News Service
NEW DELHI, AUG, 29, 2017: THE appellant imported SAP Software during 2006 by entering into End Users License Agreement (EULA) with SAP India Private Limited, which is a subsidiary of SAP AG Germany.
SAP India raised an invoice dated 30.06.2006 for Rs. 2,14,75,660/- for the supply of SAP Software and its usage and such amount was paid by the appellant.
The software was imported by the appellant from SAP Germany through DHL Courier. The parcel was customs cleared by DHL by filing courier bill of entry and was delivered to the appellant.
A nominal value of Rs.5987/- was declared for import of SAP software, the custom duty was paid on this value by DHL and the same was recovered from the appellant.
Directorate of Revenue Intelligence investigated import of SAP software from SAP Germany through DHL Express India under courier mode during the period March, 2006 to September, 2006 and concluded that the appellant has mis-declared the value of software imported by them.
In their statements, the Director (Information Technology) of the appellant as well as the CEO of SAP India admitted in their statements that the nominal assessable value of Rs. 5987/- declared to customs was not the actual transaction value of the software, but the actual license fee paid by the appellant amounting to Rs. 2,14,75,660/- to SAP India should be considered as the actual value.
SCN was issued on 10.06.2011 and in adjudication –
i. The declared assessable value was rejected and differential custom duty of Rs. 17,89,155/- was demanded along with interest.
ii. Penalties were imposed under Section 112 (a) on the appellant to the extent of Rs. 4,47,289/-.
iii. Penalty of Rs. 17,89,155/- was imposed on SAP India under Section 112 (a) of the Custom Act.
The appellant is in appeal before the CESTAT.
It is submitted that they cannot be considered as the importer for demanding Customs duty; that SAP India should be treated as importer and they had not authorized DHL to file such bill of entry in terms of Regulation 13 of the Courier Imports and Exports (Clearance Regulations), 1998; that demand is barred by limitation.
The AR supported the order and also relied upon the decision of the Tribunal in the case of Oracle India Vs CCE, New Delhi - 2015-TIOL-1766-CESTAT-DEL (upheld by the Supreme Court). In that case, the Tribunal had categorically held that the license fee paid by the importer in India to the foreign supplier of software through the Indian subsidiary is to be included in the assessable value of goods (software). And for engineering the under valuation of the software imports, the appellant and SAP India are liable for penalties.
The Bench considered the submissions and observed –
+ It is evident that the software was directly supplied by SAP Germany to the appellant and DHL has filed the bill of entry on behalf of the appellant. Though no authorization was given by the appellant to DHL, it is an undisputed position that the software has, in fact, been ordered by the appellant and have been delivered to them by DHL. These actions clearly establish that the appellant is to be considered as the importer under Customs Act and, therefore, liable to the payment of customs duty.
+ The appellant was very much aware that such software was to be supplied by SAP Germany and is an import transaction. But for the detailed investigations carried out by DRI, the evasion of custom duty would have gone unnoticed. Hence, no merit in the argument that there was no willful suppression of facts by the appellant.
+ We find that SAP has paid some custom duty during the course of investigation undertaken by DRI. It is also seen that most of the amounts paid by SAP India have also been claimed back by them by filing refund claims. Further, we note that the appellant has also paid customs duty amounting to Rs. 17,86,775/- during the course of investigation which stands appropriated by the adjudicating authority.
Concluding that, in view of the Tribunal decision in Oracle India Private Limited (supra) holding - thatthe portion of the license fee which was paid by the importer of software and which was repatriated to the foreign supplier of software needs to be included in the assessable value of imported goods, the impugned order needs no interference, the same was upheld and the appeal dismissed.
(See 2017-TIOL-3128-CESTAT-DEL)
