2001 (11) TMI 458 - AT - Customs

Summary

Issues:
- Entitlement to Customs duty exemption under Notification No. 140/91
- Utilization of imported machinery for training purposes
- Interpretation of circulars issued by the Central Board of Excise and Customs

Entitlement to Customs Duty Exemption:
The case revolved around whether the appellants were entitled to Customs duty exemption under Notification No. 140/91 for importing goods for software development. The appellants imported machinery worth Rs. 5 crores and exported software valued at Rs. 47 crores. The denial of exemption was based on the contention that the appellants used the machinery for training, generating income of Rs. 5 crores. The appellants argued that their exports far exceeded the value of imported goods, meeting the required value addition. The Customs authorities acknowledged a value addition of 90% by the unit.

Utilization of Imported Machinery for Training:
The appellants justified using imported machinery for training, stating it was essential for software development activities. They referred to Circular No. 37/95 and Circular No. 24/97-Cus. by the Central Board of Excise and Customs, indicating that training activities did not violate the exemption notification. The denial of exemption was challenged on the grounds that training, including commercial training, did not breach the terms of the notification.

Interpretation of Circulars by Central Board of Excise and Customs:
The Circulars issued by the Central Board clarified that using imported equipment for training purposes, including commercial training, did not contradict the exemption notification. The Tribunal emphasized that lower authorities must adhere to these circulars and clarifications, as established in the case law of British Machinery Supplies Co. v. U.O.I. The Tribunal allowed the appeals, setting aside the orders that denied the exemption, as the appellants' case aligned with the circulars issued by the Central Board.

In conclusion, the Tribunal ruled in favor of the appellants, emphasizing that the use of imported machinery for training purposes did not disqualify them from the Customs duty exemption under Notification No. 140/91. The judgment highlighted the importance of adhering to circulars and clarifications issued by the Central Board of Excise and Customs, ultimately allowing the appeals and overturning the previous orders denying the exemption.