2003 (1) TMI 327 - AT - Customs

Summary

Issues Involved:
1. Whether the imported goods were used in the manufacture of Indian goods to qualify for the DEEC scheme and related customs exemption.
2. Whether the value addition by the importers was sufficient to make them eligible for an advance licence.
3. Whether there was misrepresentation or fraudulent declaration to the DGFT.
4. Whether penalties and duty demands imposed by the Commissioner were justified.

Detailed Analysis:

1. Use of Imported Goods in Manufacture:
The Commissioner found that no tangible manufacturing process was carried out on the imported goods. The goods were imported, subjected to minimal assembly, and exported in their original packing with locally purchased items added separately. This did not meet the EXIM Policy's definition of "manufacture," which requires a new product with a distinctive name, character, or use to emerge from the process. The Commissioner concluded that the appellants did not undertake any manufacturing activity that would enhance the intrinsic value of the imported goods, leading to a loss of foreign exchange and customs duty.

2. Value Addition:
The Commissioner found that the declared value addition of 68.71% was not genuine. The value addition was primarily on paper, with inflated values for software and other components. The actual value addition was minimal, as evidenced by the comparison of import and export values. The Commissioner noted that the software was pre-loaded on the imported components, and no significant value addition occurred in India. This misrepresentation led to the conclusion that the appellants did not meet the value addition requirements under the DEEC Scheme.

3. Misrepresentation to DGFT:
The Commissioner found that the appellants intentionally misrepresented facts to the DGFT to obtain the Advance Licence. The supporting manufacturer, M/s. Ardent Mechatronics, was found to be a residential premises with no machinery or capability to undertake manufacturing. The appellants falsely projected this entity as a supporting manufacturer to avail benefits under the DEEC Scheme. This misrepresentation was considered a violation of the Customs Act and EXIM Policy.

4. Penalties and Duty Demands:
The Commissioner imposed penalties under Section 112A of the Customs Act and demanded duty under Section 28(1) and Section 28AB for non-compliance with the exemption notification. The Commissioner concluded that the appellants were not eligible for the benefits of Notification 51/2000-Cus., as they imported fully manufactured ventilators in CKD condition and exported them without any significant manufacturing activity in India.

Tribunal's Findings:
1. The Tribunal found that the facts in the present case were similar to those in the Titan Medical Systems case, where the Supreme Court had dismissed the show-cause notice and the orders of the Commissioner and CEGAT. Therefore, the Tribunal set aside the present order and the show-cause notice, following the Apex Court's decision.

2. The Tribunal noted that the Central Excise Officers had certified the manufacture of goods in the premises of M/s. GE Medical Systems, and the DRI Officers had permitted exports after verification. This indicated that manufacturing did take place, contrary to the Commissioner's findings.

3. The Tribunal concluded that there was no case for duty demands or penalties, as the show-cause notice was not justified. The appeal was allowed with consequential benefits to all appellants.