CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL BANGALORE REGIONAL BENCH - COURT NO. 1 CUSTOMS APPEAL NO. 20295 OF 2025 (Arising out of Order-in-Original Sl. No.543/2024-25 AP & ACC dated 20.12.2024 passed by the Commissioner of Customs, Bengaluru)

M/s. Bharat Electronics Limited ..…Appellant Naval Systems R & FCS Jalahalli Post, Bengaluru - 560 013.

VERSUS Principal Commissioner of Customs ..…Respondent Airport and Air Cargo Complex (AP and ACC), Review Section, Devanahalli, Bengaluru -560 300.

APPEARANCE:

Shri G. Shivadass, Senior Advocate, Shri Rishab. J, Ms. Shradha Rajgiri and Ms.

Sneha Suresh, Advocates for the Appellant Shri M. Sreekanth, Authorized Representative for the Department CORAM:

HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MRS R. BHAGYA DEVI, MEMBER (TECHNICAL)

Date of Hearing: 05.05.2026 Date of Decision: 05.05.2026 FINAL ORDER No. 20607/2026 JUSTICE DILIP GUPTA:

M/s. Bharat Electronics Limited¹ has assailed the order dated

20.12.2024 passed by the Principal Commissioner adjudicating the show cause notice dated 11.01.2024 issued to the appellant. The Principal Commissioner has upheld the demand of Integrated Goods and Service Tax² in respect of Bill of Entry dated 06.02.2021 and has ordered for its recovery from the appellant under section 28(4) of the Customs Act, 1962³. The goods imported have also been confiscated but option has

1. the appellant

2. IGST

3. the Customs Act been given to redeem the same on payment of redemption fine. Penalty has also been imposed upon the appellant under section 114A of the Customs Act.

2. It transpires from the record that the appellant is a Public Sector Undertaking engaged in the manufacture of a wide range of electronic products and systems for the Army, Navy, and the Air Force. The appellant was nominated by Ministry of Defence as a lead integrator for the Long Range Surface-to-Air Missile System⁴ which would be installed on board Navy ships as defence equipment.

3. The appellant imports LRSAM System from Israel Aerospace Industries⁵ for further supply to M/s. Mazagon Docks Ship Builders Ltd., Mumbai and M/s. Garden Research Ship Builders and Engineers, who built ships for Navy, Ministry of Defence. LRSAM System consists of Multi- Function Surveillance and Threat Alert Radar⁶ and Weapon Control System⁷ embedded with the different hardware and operational software. The operational software is called “EMI/EMC Analysis Software” and its main function is to verify the performance integrity and proper co- existence of MFSTAR & LRSAM system with various other systems installed on-board.

4. The appellant issued a Purchase Order to IAI of item with description “EMI & EMC MIL-STD 461F” by Purchase Order dated 19.11.2018. Subsequently, an Invoice No. 396001257 dated 26.01.2021 was raised by IAI on the appellant. The appellant through a Bill of Entry dated 06.02.2021 also imported a customized “Software EMI & EMC MIL- STD 461F,” which is stored in a CD. The appellant sought exemption from

4. LRSAM System

5. IAI

6. MFSTAR

7. WCS payment basic customs duty and IGST on the imported CD, in terms of Serial No. 21 of Notification No. 19/2019-Cus. dated 06.07.2019⁸

5. Upon investigation by the DRI, the Pune Regional Unit, by letter dated 28.10.2022, communicated to the appellant that the benefit of exemption availed by the appellant for import of Software in the CD under the Exemption Notification, is ineligible as the description ‘Software’ is not specified under Serial No. 21 of the said Notification. The appellant, in response to the letter dated 16.11.2022, clarified that the Software imported in the CD forms an integral part of the LRSAM system, which is used for manufacturing of LRSAM System in India. In terms of Serial No. 21 of the Exemption Notification, as amended by Notification No. 03/2020 dated 02.02.2020, the entire LRSAM ‘system’ would qualify for exemption from payment of customs duty and IGST. Accordingly, the said software falling under Chapter 85, being parts of the same, would al