Microsoft India penalised for customs duty evasion

VARINDIA- INDIA'S FRONTLINE IT MAGAZINE

Customs and Central Excise Settlement Commission has imposed a fine of Rs. 2 crore on Microsoft India and Rs. 10,000 on its former chairman Ravi Venkatesan in a case of customs duty evasion involving sale of its software in India. The commission has collected customs duty, fine and interest of Rs. 255 crore from nine information technology companies which imported the software. Directorate of Revenue Intelligence (DRI) had issued showcause notices to the companies in 2008-09. The companies approached the commission and settled the cases so that no criminal prosecution could be initiated.

DRI said, MS India split the sale transactions into two parts but paid customs duty only on one component where the rates were nominal. The first transaction related to the import of software and the second pertained to licence, granting customers the right to use the software. DRI said the importers had under-declared the prices of software to customs and submitted invoices with suppressed prices. For the purpose of actual transactions and remittance to Microsoft, another set of invoices was prepared, which accompanies separate shipments of documents termed as software licences.

The commission said that the resellers, the technology companies are responsible for all legal formalities of customs clearance. They earn a commission on the sales made. The commission scrutinized the emails among the Microsoft Companies and the resellers and said they worked out a scheme around April 2007 to evade payment of duty on the full value of the software.


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