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2. (a) 'DEIL' imported software media & documents through Regular Customs Channels. It also imported the Software Media & Documentation through Regular Custom Channels. It also imported the Software licenses, stores on TK-50 cartridges cleared the same by declaring them on the Bill of Entry filed, as blank unrecorded magnetic tape cartridge, falling under Chapter heading 8523 at a nominal value of Us $ 32.40, cleared the same, on duties as applicable assessed. For subsequent period, they obtained these software licenses data from; 'DEC' through ELECTRONIC MAIL NETWORK, directly at their factory.

Moreover, it appears that DEIL were importing as mentioned earlier 'QA' parts of the various software products/package in bulk and when ever they find a customer, they used to place order on DEC and import the 'QL' part i.e. License PAK/License Certificate, which is specific and unique to a customer. These two parts of the software product were being cleared through customs after payment of appropriate customs duty. It appears that DEIL were finding this procedure difficult when a customer cancelled an order after import of a 'QL' part, which is unique and specific to him. Therefore, it appears that in order to avoid such situations, DEIL in understanding with DEC, USA, started importing a 'RIGHT TO USE CERTIFICATE RTUs since 1990 without any customer's name on it, in the name of 'QL' part and cleared the same through customs. Subsequently is appears that when DEIL found a customer they used to send a request to DEC to send the requisite license PAK/License certificate either through FAX or through courier, for which no payment was made and no customs clearance was done and the invoices for 'QL' parts were mad and paid for through the respective connected RTUs; that for some period .....mechanism for DEIl to pay for the value of 'QL' part to and serves no other purpose. It further appears that a customer pays for the access to the software which is provided in this license PAK/License certificate which is construed as 'QL' part by DEC and that when any customer in India orders 'QL' part on DEC, he physically gets license PAK]License certificate. Further, DEIL in their letter DBK/SW/REEX/2/ACC dated 23.2.1992, addressed to the Assistant Collector of Customs, Air Cargo Complex, Bangalore have informed in para 4, that "regarding the subject re-export for some software document. Digital, USA has sent PAK and for some they have sent Right to Use. PAK and Right to use are having the same value and utility". (Ann.53).
Further, it appears that the license PAKs/License certificates printed locally, which were received either through cartridges or through their Electronic network, were supplied to DEIL's customers along with the Media and documents i.e. 'QA' part which were either imported earlier or subsequent. It also appears that one cannot be used without the purchase of other or vice versa. In other words, thee is no use of purchasing only one part i.e., 'QA' part or 'QL' part. Further, 'QL' part is nothing but an authorisation to use the 'QA' part which is the software. Therefore, it appears that each license PAK/License certificate is relatable to a 'QA' part i.e., Media and documents. Therefore, each customer has to necessarily buy both the 'QA' part and the respective 'QL' part, in order to use the software. This is further substantiated by the statement furnished by Mr. O.K. Venkatarmanan, showing the sale of 'QL' parts imported either through the Cartridges or through E.Mail along with a relevant 'QA' part imported through regular customs channel (Ann.). Therefore, it appears that the value in respect of 'QL' part of the software product is paid/payable in the guise of license fee/royalty and the same is relatable to the 'QA' part i.e., Media and documents portion of the software package, which were imported earlier, through regular customs channels and therefore, it appears that it should form part of the value of the imported computer software product in terms of Section 14 of Customs Act 1962 read with Customs Valuation Rules, 1988. The investigation reveals that software license which formed integral part of the imported software product had all along suffered duty when they were imported by DEIL through normal import channel; that after DOE approval, the software licenses i.e. QL part is now also imported from DEC through misdeclared TK 50 cartridges/E. Mail; that therefore there is no reason as to why the software license so imported from DEC through a different rout/channel and which formed part of imported media and documents ie. QA part, should not suffer duty. It further appears that but for DOE approval for duplication of computer software, which was not physically done by DEIL, DEIL would have imported the relevant 'QL' parts of the software products at 35% of the respective USCLP and paid duty. Therefore, it appears that proper value of software so imported from DOE through TK 50 cartridges and E. Mail should be 35% of the respective USCLP and that customs duty is leviable on them as they have not suffered customs duty.
Whereas, from the above, it appears that DEIL has willfully, suppressed the above facts of not physically duplicating the software products to the Government departments including customs department and have mis-represented the facts to DOE in order to get the approvals and have mis-utilised the DOE approvals and the software duplication scheme for evading customs duty. They have paid the DEC the license value in the guise of royalty/license fee. DEIL have neither imported the master copy of the software for the purposes of duplication nor have they duplicated the software products. In view of the above, it appears that they have also flouted the important conditions of the DOE approvals. Even the conditions appearing in the agreements entered into between DEIL and DEHBV have not been completed with as regards supply of Masters of Media, license and documentation till March, 1993 by which time the two approvals of DOE were almost exhausted. It also appears that DEIL have suppressed/misrepresented the actual contents/values of the TK-50 cartridges. It further appears that DEIL has suppressed to customs the fact of import of software license through E.Mail for certain periods. In terms of Section 28(1) of the Customs Act, 1962 read with provisions thereon and read with Rules 5 and rule 9 of Customs Valuation (Determination of Rules, 1988. DEIL is liable to pay duty as applicable on these software licenses aforesaid in as much as they have willfully suppressed the actual facts of import of software licenses through TK-50 Cartridges or E.Mail and misused the software duplication scheme to evade payment of customs duty on the major portion of the software products value without physically duplicating the computer software products as approved by DOE as discussed above. The duty payable by DEIL in respect of the licenses generated and printed and supplied to the customers in respect of the media and documentation imported earlier is as per the work sheets at Annexure 57.