The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has ruled in favour of HCL Technologies Ltd.in a long-running customs dispute, holding that license fees paid for SAP software must not be included in the value of imported compact discs (CDs).
The bench of Justice Dilip Gupta (President) and Hemambika R. Priya (Technical Member) upheld the Commissioner’s decision and observed that the CDs and license fees could not be treated as separate.
The bench stated, “Unless the license fee is paid, the SAP software contained in the CD could not have been accessed and used by the importer.”
The dispute stemmed from the Directorate of Revenue Intelligence (DRI) investigation, which alleged that HCL declared a nominal value of just ₹2,558 for CDs containing SAP software, while simultaneously paying SAP India ₹18.59 crore as license fees. The DRI maintained that this practice undervalued the imports and resulted in evasion of customs duty.
The appellant, HCL had entered into an End-User License Agreement (EULA) with SAP India in 2001. While the software was primarily delivered electronically, physical CDs were shipped from SAP Germany through DHL when requested by customers. Investigators argued that the CDs and license fees were inseparable, as the software on the discs could not be used without the payment of license fees.
In 2014, the Commissioner of Customs (Adjudication), New Delhi, re-determined the transaction value of the CDs to match the license fee payments of ₹18.59 crore. HCL was ordered to pay differential duty with interest, and penalties were imposed under Section 112(a) of the Customs Act, 1962.
The Commissioner described the arrangement as “a larger well-designed plan to evade customs duty.” Deposits of ₹27.17 lakh by HCL and ₹9.61 crore by SAP India were appropriated against the liability.
The CESTAT upheld the Commissioner’s findings and held that neither could the license fee paid by HCL to SAP India be included in the value of CDs under rule 9(1)(c) of the 1988 Valuation Rules nor could penalty have been imposed upon HCL or SAP India under section 112(a) of the Customs Act.
Case Details
Case Title: HCL Technologies Versus Commissioner of Customs (Adjudication)
Case No.: Customs Appeal No. 53102 Of 2014
Date: 29.09.2025
Counsel For Appellant: V. Lakshmikumaran
Counsel For Respondent: Nikhil Mohan Goyal
