2003 (1) TMI 399 - 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 the advance licence.
3. Allegations of misrepresentation and misdeclaration to the DGFT.
4. Applicability of the Supreme Court's decision in the Titan Medical Systems case.
5. Liability for penalties under the Customs Act.

Detailed Analysis:

1. Use of Imported Goods in Manufacture:
The dispute centers around whether the imported ventilator components were used in the manufacture of a new product in India as required by the DEEC scheme. The Commissioner found that no tangible manufacturing process occurred, asserting that the imported goods were exported in their original packing with only minor additions of locally purchased items. This contradicted the appellants' claim that they undertook significant assembly, testing, and calibration processes.

2. Value Addition:
The Commissioner concluded that the value addition claimed by the appellants was illusory and only on paper. The appellants declared a value addition of 68.71%, primarily attributed to software loaded onto the ventilators. However, it was found that the software was pre-loaded by the supplier, and no significant value addition occurred in India. The actual value addition was calculated to be only 5.18%, far below the required 33%.

3. Misrepresentation and Misdeclaration:
The show cause notice alleged that the appellants misrepresented facts to obtain the advance licence, specifically by falsely declaring M/s. Ardent Mechatronics as the supporting manufacturer and inflating the value of software. The Commissioner found that the supporting manufacturer had no role in the manufacturing process and that the appellants intentionally misrepresented facts to avail benefits under the DEEC scheme.

4. Applicability of Titan Medical Systems Case:
The appellants relied on the Supreme Court's decision in Titan Medical Systems, where similar allegations of misrepresentation were dismissed. The Tribunal found that the facts in the present case were not distinguishable from the Titan case. Therefore, following the Supreme Court's precedent, the Tribunal set aside the order and the show cause notice, allowing the appeal with consequential benefits.

5. Liability for Penalties:
Given that the Tribunal did not uphold the duty demands and show cause notice, there was no basis for imposing penalties on the appellants. The Commissioner had initially found the appellants liable for penalties under Section 114A and Section 112(a) of the Customs Act, but these findings were overturned by the Tribunal.

Conclusion:
The Tribunal concluded that the facts of the case aligned with the Supreme Court's decision in Titan Medical Systems and found no basis for the duty demands or penalties. Consequently, the appeal was allowed with consequential benefits to all appellants.