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Indusind Media & Communications Ltd. v. Commissioner of Customs, New Delhi

Civil Appeal · 2019 INSC 1097Decided 27 Sept 2019
Civil Appeal No. 2498 of 2018
Justice Uday Umesh Lalit · Justice Vineet Saran

Background

The appellant imported cable-TV "Head End" equipment (multiplexer satellite receivers, test equipment, etc.) at Delhi and Mumbai, declaring the various components separately under different customs tariff headings and at a lower aggregate value. A later investigation revealed that the equipment, taken together, formed a single functional unit, that embedded software and foreign technical/installation services had not been declared, and that the purchase order had been altered from an FOB to a CIF basis, all of which understated the customs value. The Department issued a show-cause notice alleging suppression of value and proposed re-determining the value upward (from about Rs. 1.03 crore to about Rs. 1.72 crore); the resulting demand was upheld by the Customs Excise and Service Tax Appellate Tribunal, leading to this statutory appeal under Section 130E of the Customs Act.

Decision Breakdown

The Supreme Court held that where multiple imported components together constitute one apparatus performing a single defined function (per Note 4 to Section XVI of the Customs Tariff), they must be classified and valued as that single unit rather than as separately declared items. It found that embedded software, loaded into the equipment before shipment, was part of the imported goods itself (not a "post-importation activity" like the technical-know-how fees in the precedents the appellant relied on), so its value was rightly included in the assessable value under the applicable Customs Valuation Rules. Finding no infirmity in the Tribunal's reasoning or in the Department's invocation of Note 4, the Court dismissed the appeal and affirmed the Tribunal's order, with no order as to costs.

Lesson Learnt

Importers cannot avoid customs duty by artificially splitting a single integrated product into separately invoiced components or by hiding the value of embedded software/pre-shipment services: if the components function together as one device, customs authorities are entitled to value and tax it as a single unit.

Official source (sci.gov.in)View Judgment (PDF)

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