Doubt on Importer Status and Duty Payment: CESTAT remands SAP Software Import Case for Fresh Adjudication [Read Order]

A Two-Member Bench comprising Mr.P. Dinesha (Judicial Member) and Mr. Vasa Seshagiri Rao (Technical Member) passed the common order on January 17, 2025, following the hearing on November 12, 2024. The appeals arose from separate orders issued by the Commissioner of Customs (Appeals), Chennai.

The dispute originated when Rane Holdings Ltd. imported a CD from SAP AG, Germany in August 2006, described as “SET SAP Tutor Release 2.1,” valued at €1.5 (around ₹90). Around the same time, Rane Engine Valves Ltd. entered into an End-User Value License Agreement (EUVLA) with SAP India Pvt. Ltd. to use mySAP ERP and related software, with Rane Holdings being listed as an affiliate entitled to use the software under a tripartite agreement dated April 1, 2006.

Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here

The adjudicating authority found that Rane Holdings had obtained a license for the mySAP ERP software, agreed to pay a fee of ₹31.5 lakh to SAP India, and received the software CD directly from SAP Germany. Consequently, the declared import value was rejected, the value was redetermined at ₹32.17 lakh, and the software was confiscated with consequential duty and penalty.

Appearing for the appellants, Shri S. Murugappan contended that the imported CD contained only a SAP Tutor module, unrelated to the software covered under the EUVLA, and that the alleged invoice of ₹31.5 lakh had been cancelled. It was further argued that duties had already been paid by Rane Engine Valves Ltd. and SAP India Pvt. Ltd., eliminating any separate liability for Rane Holdings.

The Tribunal noted that the SAP Tutor software imported under the courier Bill of Entry differed from the mySAP ERP software under the EUVLA. It further held that the importer for the licensed ERP software was Rane Engine Valves Ltd., not Rane Holdings. The Bench observed that the liability for customs duty lies with the importer and not with an affiliate user.

Want a deeper insight into the Income Tax Bill, 2025? Click here

Importantly, the Tribunal found that the record was unclear on whether Rane Holdings had actually paid the ₹31.5 lakh license fee and whether the duties paid by REV and SAP India had already satisfied the customs obligation. The lower authorities also failed to examine the effect of these payments and whether invoking the extended limitation period and penalties was justified.

Given the uncertainty regarding (i) the identity of the actual importer, (ii) payment of ₹31.5 lakh, and (iii) the effect of duties already paid by REV and SAP India, the Tribunal held that these aspects required detailed factual verification. Consequently, the matter was remanded to the Adjudicating Authority for fresh adjudication on these issues, with the question of limitation and penalty left open for re-determination.

The Tribunal disposed of the appeals by remanding them to the Adjudicating Authority to re-examine all aspects, including importer status, payment verification, and implications of prior duty payments, before redetermining any duty liability.

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates