Microsoft India (R & D) Private Limited vs Commissioner Of Customs & C.Ex

(Arising out of Order-in-original No.1/2009-Customs dated 20.5.2009 passed by the Commissioner of Customs & Central Excise, Hyderabad IV.)

For approval and signature:

Honble Mr. Justice G. Raghuram, President Honble Mr. B.S.V. Murthy, Member(Technical)

1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordship wish to see the fair copy of the Order?

4. Whether Order is to be circulated to the Departmental authorities?

Microsoft India (R & D) Private Limited ..Appellant(s)

Vs. Commissioner of Customs & C.Ex., Hyderabad IV ..Respondent(s)

Appearance

Mr. Shankar Balu, C.A. for the appellant Mr. A.K. Nigam, A.R. for the respondent

Coram:

Honble Mr. Justice G. Raghuram, President Honble Mr. B.S.V. Murthy, Member(Technical)

Date of Hearing: 25.5.2015 Date of decision:25.5.2015

FINAL ORDER No._______________________

[Order per: G. Raghuram]

The appellant is the assessee and is aggrieved by the impugned order dated 25.5.2009 passed by the Commissioner of Customs & Central Excise, Hyderabad IV. The impugned order confirmed customs duty demand at the appropriate rate on capital goods of the appellant shared with another company, M/s Microsoft Global Services Centre (India) Private Limited (MGSCI). The impugned order held that the rate and valuation of the assets shall be as on the commencement of sharing of capital goods and confirmed the liability in accordance with provisions of Section 28AB of the Customs Act, 1962, payable on the date of commencement of sharing.

2. In 2006, the appellant applied to the Assistant Commissioner of Customs, Hyderabad IV for sharing of common assets etc. with M/S MGSCI, which is a group company, for sharing of its assets in the premises. Vide order dated 24.4.2006, the Assistant Commissioner conveyed the permission granted by the Commissioner with regard to sharing of specified equipment under Circular No.53/2001-Cus. dated 12.10.2001.

3. In course of time, the business of the appellant and of MGSCI expanded. The appellant occupied another premises also. As there was vacant space available in the premises occupied and owned by the appellant along with certain common facilities on 13.6.2008 the appellant again applied for sharing of specified assets with MGSCI, a group company.

3. On 5.6.2008, the appellant and M/s MGSCI entered into a lease agreement whereby the appellant leased a specified extent of space in 2nd and 3rd floor of its premises to M/s MGSCI together with assets on a monthly rent.

4. Proceedings were initiated on the basis that sharing of the assets by the appellant with M/s MGSCI was in violation of the conditions specified in Notification No.52/2003-Cus dated 31.3.2003, in particular, condition No.12 and therefore the appellant is liable to remit customs duty, since it was disentitled to the benefits of Notification No.52/2003-Cus. The proceedings culminated in the impugned order.

4. The impugned order concludes that Microsoft Corporation , USA is not the owner of the appellant or of MGSCI even though these entities may be subsidiaries of Microsoft Corporation USA, as they are distinct legal entities and therefore appellant and MGSCI are separate legal entities. The impugned order proceeds on the basis that while a holding company may have effective control over a subsidiary, such control does not amount to ownership of the holding company over the subsidiaries, which is the condition for sharing of assets.

5. The impugned order suffers from no error in concluding that Microsoft Corporation, USA is not the owner of the appellant or of MGSCI. For reasons alike, the appellant cannot be considered to be the owner of the other group subsidiary of MGSCI either.

6. Confirmation of the duty demand on the appellant is thus unassailable and warrants no appellate interference. The impugned order also holds that appellants liability to customs duty must be calculated from the date of commencement of sharing of the assets between the appellant and MGSCI. Since this sharing of the assets constitutes the contravention of the condition in Notification No.52/2003-Cus, which has triggered the liability to duty, it is appropriate that duty on the valuation should as on the date of commencement of sharing of the assets by the appellant with MGSCI. .

7. For the aforesaid reasons the impugned order suffers from no infirmity. The appeal is without merits and is dismissed. No costs.

( G. RAGHURAM ) PRESIDENT

scd/

(B.S.V. MURTHY) MEMBER (TECHNICAL)

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