Legal principle

In a bona fide interpretational valuation dispute where the assessee has disclosed the relevant facts, there is no wilful misstatement or suppression, so the extended period of limitation, penalty and confiscation cannot be imposed.

Court decision

Largely in favour of OIPL: the Tribunal held the extended period of limitation was not invokable, no customs duty is chargeable on electronic download of software via the internet, and notional licence fee is not includible where no licence fee was actually paid or required to be paid. Differential duty was sustained only to the extent of adding 56% of licence fee actually charged from customers to the assessable value of the seized goods (out of the 49 consignments), to be computed by the assessing officer after hearing OIPL; all other demands, redemption fines and penalties were set aside. On merits the Tribunal found licence fee actually remitted to Oracle USA includible, but the demands failed on limitation and the absence of suppression.

Facts

Oracle India Pvt. Ltd. (OIPL) imported packaged software media packs from its related group company Oracle EMEA, Dublin (Oracle Ireland), cleared through DHL, and sold them to Indian customers after adding licence fee, 56% of which was remitted to Oracle Corp., USA; on import OIPL declared only the media pack invoice value without the licence fee. Customs seized 49 consignments (panchnama dated 15.01.2006, valued about Rs.17.79 crore) and, by Order-in-Original dated 12.01.2011, confiscated them under Section 111(m) for mis-declaration of value with an equal redemption fine. The adjudicating authority also confirmed differential duty of Rs.1,27,35,26,395 under Section 28 with interest under Section 28AB, imposed a penalty of Rs.1,28,23,31,779 on OIPL under Sections 112/114AA and Rs.10 lakh each on two employees under Section 112, holding that the licence fee was a condition of sale includible in assessable value under Rules 9(1)(c)/10(1)(c) of the Customs Valuation Rules and that OIPL had wilfully mis-stated/suppressed facts.

Key provisions

• Section 3, Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 14, Customs Act, 1962 — Valuation of goods
• Section 3, Customs Act, 1962 — Classes of officers of customs
• Section 28AB, Customs Act, 1962 — [Omitted] ****
• Rule 9(1)(c), Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Residual method
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Rule 12, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Rejection of declared value
• Section 8C, Customs Tariff Act, 1975 — Omitted [****]
• Section 2(22), Customs Act, 1962 — Definitions
• Rule 4, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Transaction value of identical goods