By TIOL News Service

MUMBAI, MAR 21, 2018: THE appellant, a telecom operator, entered into an agreement with M/s Inter Voice Brite, UK for supply of equipment and technology in three phases to implement pre-paid services over its telecom network. A purchase order for goods and services valued at USD 1,500,000, with some optionals at additional cost was issued on 18th January 2001 for import of 'multi-application platform comprising voice mail system hardware and voice mail system software'. Five bills of entry were filed between May 2001 and June 2003 for clearance of various components declared as 'multi-application computer systems hardware', 'multi-application software', 'software for voice-mail service', 'voice mail service hardware' and 'voice mail service software'.

The Commissioner of Customs (Imports), ACC, Mumbai confiscated the goods, hardware and software u/s 111 (m) of Customs Act, 1962. Fines were imposed in lieu under section 125 of Customs Act, 1962. The declared value of the goods imported against these bills was ordered to be added to that of 'multi-application computer system hardware' by taking recourse to rule 9 of Customs Valuation (Determination of Price of imported goods) Rules, 1988 read with section 19 of Customs Act, 1962 besides imposing penalties on the importer and some employees of the importer.

Aggrieved by these detriments, the appellant and its employees are in appeal.

After considering the detailed submissions made by both sides, the Bench inter alia observed -

++ Rule 9(1)(e) pertains to valuation and derives its existence from section 14 of Customs Act, 1962 without the need for any other prop. Once the rate of duty, if ad valorem , is ascertained in consequence of the authority vested by section 12 of Customs Act, 1962, section 14 and its attendant rules suffice to complete the assessment. A perusal of the impugned order does not indicate such a flow. On the contrary, reliance has been placed on section 19 of Customs Act, 1962 as the authority to invoke the rule referred to; undoubtedly, section 19 is not without utility in such a situation. However, it is imperative that section 19 be utilized in the manner and sequence that was intended in the legislative enactment. We hold that the adjudicating authority was incorrect in presuming that section 19 conferred the authority to value goods in the manner undertaken.

++ Section 19 empowers the ascertainment of rate of duty when goods are presented as a set of articles for clearance. That it is not a provision for valuation should be apparent from the reference within it to specific and ad valorem as the two mutually exclusive possibilities. It empowers the application of the highest rate of duty that would be leviable on the various articles in the set to all the articles. Impliedly, this is to be resorted to when a single value is declared for the set as a whole and it is merely the most appropriate rate of duty that is to be determined from among the varied rates for each article in the set. The proviso in section 19 does not justify the conclusion that it is a valuation provision but is intended to permit separate assessment for such article in the set for which distinct is evidenced by the importer. Contrary to that belief of the adjudicating authority, the converse is not the empowerment by the proviso.

++ That section 19 is an empowerment for classification, and not valuation, is also apparent from the decision of the Hon'ble Supreme Court in Commissioner of Customs v. Acer India Pvt Ltd [Appeal (Civil) 2321 of 2007] - 2007-TIOL-192-SC-CUS which dealt with the attempt of Revenue to bring 'computer notebooks' within the ambit of section 19 of Customs Act, 1962 for levy of additional duty of customs of 7% envisaged on 'CPU with monitor, mouse and keyboard imported as a set' in Computers (Additional Duty) Rules, 2004.

++ The impugned order has referred to proviso in section 19 of Customs Act, 1962 as the authority to club the values of the various goods. There is no finding as to the applicability of section 19 of Customs Act, 1962 to the facts pertinent to the dispute. Such finding should necessarily decide if the goods are presented as a set of articles with a unified, non-separable value, enumerate the various articles that comprise the set, ascertain the rate of duty applicable to each and then compute the duty liability of the unified value by applying that identified rate of duty. Without such an exercise, invoking of section 19 of Customs Act, 1962 is not consummated.

The impugned order was set aside and the matter was remanded to the adjudicating authority for a fresh decision.

(See 2018-TIOL-893-CESTAT-MUM)