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2009 (7) TMI 141 - AT - Customs100% EOU software EOU - Import by STP unit - based company engaged in manufacture of telecom equipment. - Notification No. 140/91-Cus., dated 22-10-91 held that - it is absolutely clear that the purpose of import of this equipment by M/s. Converge was to install the same in the MTNL s premises for trial and thereafter possible sale. It has been pleaded by the appellants that the maintenance of the equipment by M/s. Converge during the period of trial at the MTNL s premises involved software testing and the software development includes software testing. - This plea is absolutely incorrect - since the basic conditions of duty free import under Notification No. 140/91-Cus., that is used of the imported equipment for software development data entry, data processing etc. for export has not been fulfilled, M/s. Converge are not eligible for duty exemption - Since the imported equipment was neither installed in the premises of M/s. Converge in the software technology park nor used for software development for export, the condition Nos. 4 and 7 of para 1 of the notification have also been violated. demand, interest, redemption find and penalty confirmed.
Issues Involved:
1. Legality of duty exemption under Notification No. 140/91-Cus. 2. Compliance with conditions specified in the exemption notification. 3. Validity of the import certificates issued by STP authorities. 4. Role and liability of M/s. Converge, its directors, and M/s. UTSC. 5. Confiscation and penalty imposition under Sections 111 and 112 of the Customs Act, 1962. 6. Request for re-export of the imported goods. Detailed Analysis: 1. Legality of Duty Exemption under Notification No. 140/91-Cus. The exemption Notification No. 140/91-Cus. exempts certain goods from customs duty if imported by a Software Technology Park (STP) unit for software development and export. The tribunal examined whether the imported PASTM wireless loop system with 5000 handsets was used for the intended purpose of software development for export. The tribunal found that the goods were imported for field trials and possible sale to MTNL, not for software development, thus violating the conditions of the exemption notification. 2. Compliance with Conditions Specified in the Exemption Notification The tribunal scrutinized the conditions under Notification No. 140/91-Cus., including the requirement that imported goods must be used within the unit for software development and export. The tribunal concluded that M/s. Converge did not use the imported goods within their unit for software development but instead installed them at MTNL's premises for trial. This violated the conditions of the exemption notification, making the import ineligible for duty exemption. 3. Validity of the Import Certificates Issued by STP Authorities M/s. Converge presented import certificates from the STP authorities certifying that the goods were relevant to their activities and would be installed and used by the unit. However, the tribunal found that these certificates were obtained by misrepresentation, as the actual purpose of the import was to supply the goods to MTNL for trial. The tribunal held that the certificates did not validate the import under the exemption notification. 4. Role and Liability of M/s. Converge, its Directors, and M/s. UTSC The tribunal held that M/s. Converge, its Director Shri Amol Patel, and GM (Finance) Shri Rajesh Suri were liable for penalties under Sections 112(a) and 112(b) of the Customs Act, 1962, for facilitating the import of goods not intended for software development. M/s. UTSC was also penalized under Section 112(b) for abetting the illicit import by routing it through M/s. Converge to take advantage of their EOU status. 5. Confiscation and Penalty Imposition under Sections 111 and 112 of the Customs Act, 1962 The tribunal upheld the confiscation of the PASTM wireless loop system under Section 111(o) of the Customs Act, 1962, and the imposition of penalties on M/s. Converge, Shri Amol Patel, Shri Rajesh Suri, and M/s. UTSC. The tribunal found that the conditions for duty-free import were violated, justifying the confiscation and penalties. 6. Request for Re-export of the Imported Goods M/s. UTSC requested re-export of the imported goods, claiming ownership. The tribunal rejected this request, noting the illicit nature of the import and the use of the goods by MTNL. The tribunal allowed M/s. Converge to redeem the goods on payment of duty, interest, and redemption fine, after which they could re-export the goods. Conclusion The tribunal dismissed the appeals, upholding the confiscation of the goods and the imposition of penalties. The tribunal found that M/s. Converge and M/s. UTSC violated the conditions of the exemption notification, making the import ineligible for duty exemption. The tribunal also rejected the request for re-export without payment of duty.
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