Customs Duty Evasion - Microsoft Imposed 2 Crores Penalty - Abetted Under-valuation?
THE bad WORD is evasion; OUTLOOK is abetting evasion; Duty, interest and penalty are in EXCEL; POWERPOINT is about under-valuation; ACCESS found resellers and WINDOWS crashed in the Settlement Commission.
In a major jolt to Microsoft and major Indian Computer firms, the Customs won a major fiscal victory. CMC, Dell, HCL, Sonata, Redington, Wipro,TCS – all major names in the Indian Computer scene – among them, they paid a whopping Rs. 257 Crores in Customs Duty with interest, in a duty evasion case in import of Microsoft software. Microsoft and the top computer firms conceded the demand and approached the Settlement Commission for waiver of penalty and prosecution. The Commission imposed a penalty of Rs. Two Cores on Microsoft and a personal penalty of Rs. 10,000 on the Chairman of Microsoft India, apart from a penalty of Rs. 2.81 Crores on the other firms.
Some quotes from the Commission's lengthy order:
++ It, therefore, leaves no doubt in our minds that splitting of the transactions into two and raising two separate invoices, one for the software, which was raised only for the purpose of paying fractional Customs duty, and the other, which is the one that reflects the actual transaction value and not paying Customs duty on this value was nothing but intentional.
++ All this leads us to conclude that the splitting of the invoices and thus evading payment of duty on the full value of the software was intentional.
++ The ground of technological changes put forth by Microsoft is thus nothing but camouflage.
++ It is, therefore, evident that the resellers in collusion with MCIPL, MOPL and MRSC intentionally adopted the aforesaid modus-operandi of splitting the invoices and evading payment of duty on the full value of the software.
++ Microsoft have thus abetted with the main applicants and have rendered themselves liable to penalty as abettor.
++ MCIPL, who are co-noticees in all these cases have rendered themselves liable to penalty under Section 112(a) as abettor. It goes without saying that besides the companies, the individuals are also liable to be held responsible for their acts of commissions and omissions.
++ It is not convincing how the Chairman of the company could still be not aware of anything at all or that the matter was related only to the day-to-day activities with which he was not concerned. To pose ignorance is thus only a camouflage.
++ By their acts of commission and omission they have rendered themselves liable to penalty.
Though the penalties are only about two percent of the duty, the indictment of intentional evasion and abetting evasion, against Microsoft, is damning to the giant world software leader and most probably this case will go the High Court, if not for the amount of penalty, for the amount of strictures. Shut down all WINDOWS and restart again. It may work!
We will bring you this order tomorrow.