BHAYANAGAR METALS LIMITED Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) The brief facts of the case which are relevant for better appreciation of the dispute are that the appellants herein were awarded a contract to supply IFWT (Integrated Fixed Wireless Telephone) and FWT (Fixed Wireless Terminal) phones to Bharat Sanchar Nigam Limited (BSNL) / Mahanagar Telephone Nigam Limited (MTNL). Under the contract the appellants were to supply phones and also to render maintenance service for a period of five years which services include providing infrastructure compatibility wherever the phone is used. They were also required to provide the service of facility for upgradation of the phone's functions from 2g network to 3g network. They imported from M/s. L.G. Electronics, cellular phones, both IFWT and FWT. The phones were operated under the CDMA Technology. For imparting additional functions to the phones and for maintenance thereof, in the manner desired by BSNL / MTNL and in accordance with the terms and conditions of the contract for supply, the appellants could impart such functions as required for maintenance including upgradation by means of a support CD Rom supplied by L.G. Electronics. The software has to be transmitted /installed qua computer into the telephone and in the circumstances it was expedient that for each phone there should be a separate CD -Rom as it might be required to be supplied to the customers for imparting the functions on the telephone as and when such exigency arise. The appellants, therefore, imported CD -Roms as software and filed Bill of Entry for clearance. Prices were negotiated between the supplier and the appellants and the valves were fixed at US 68 and US 29 for telephones and CD -ROMs respectively. The department was of the view that the value of the CD -ROMs should form part of the telephone and accordingly a show cause notice was issued proposing to deny benefits of exemption in terms of serial No. 313 / 427 of table to Notification 21/2002 -Cus as amended on the ground that such benefit was available only to cellular phones while the imported goods were other than cellular phones and proposing addition of value of the CD -ROMs to the value of the telephone. The notice was adjudicated by the Commissioner of Customs, who upheld the denial of the benefit of the exemption and also added the value of CD -ROMs to the value of the telephone. The importers preferred appeal No. C/463 of 2004 before the Tribunal which vide its order No. A -920/WZB/2004/C -II dated 24/08/2004 accepted the contention of the importers that the phones were cellular telephones as they work on cellular technology and also held that the CD -ROM was software and therefore an accessory and the value of the accessory to complete telephone cannot be added for the purpose of levy of duty at the rates applicable to the main telephone instrument.

(2.) THE Tribunal's order was contested in appeal by the Revenue before the apex Court which vide its order dated 13/12/2005 in a batch of Civil Appeals, including Civil Appeal No. 7939 of 2004 where the present appellants was the respondent, inter alia held that the model LSP -340 (the model imported by the appellants herein) was covered by the phrase "cellular telephone" and eligible to the benefit of exemption in terms of the notification. The issue of valuation of goods imported by the respondents was remanded to the Tribunal. This is how the matter came to be heard by us today.

(3.) WE have heard both sides.