2001 (3) TMI 160 - AT - Customs

Summary

Issues Involved:
1. Classification of imported goods: Whether the imported items were complete EPABX and Telephone systems in CKD/SKD condition or merely parts and components.
2. Applicability of Rule 2(a) of the Rules for Interpretation of Customs Tariff.
3. Eligibility for exemption under Notification No. 61/95-Cus.
4. Invocation of extended period under Section 28 of the Customs Act for demand of duty.
5. Imposition of penalties on the appellant company and its officials.

Detailed Analysis:

1. Classification of Imported Goods:
The primary issue was whether the appellants imported complete EPABX and Telephone systems in CKD/SKD condition or just parts and components. The Commissioner of Customs concluded that the appellants imported complete sets in SKD form under the guise of parts/components. The imports matched the production and planning chart, indicating that the goods were complete systems disassembled for convenience. The appellants argued that they imported various components over 22 months and assembled them into EPABX systems at their factory, involving complex operations beyond simple assembly.

2. Applicability of Rule 2(a):
The appellants contended that Rule 2(a) was inapplicable as their imports were not presented as unassembled or disassembled complete articles. Rule 2(a) states that complete or finished articles presented unassembled or disassembled are classified as the assembled article. The Explanatory Notes to Rule 2(a) specify that this applies when goods are presented unassembled for packing, handling, or transport convenience. The Tribunal agreed with the appellants, noting that the components were imported over 22 months and not presented as unassembled complete articles. Thus, Rule 2(a) was not applicable.

3. Eligibility for Exemption under Notification No. 61/95-Cus:
The appellants argued that even if Rule 2(a) applied, the exemption under Notification No. 61/95-Cus should not be denied. The Tribunal referenced the Wipro G.E. Medical Systems Ltd. case, which held that Rule 2(a) does not apply to exemption notifications. The Tribunal also cited the Maruti Udyog case, where the benefit of the notification was extended to imported components and parts. The Tribunal concluded that the exemption under Notification No. 61/95-Cus was available to the appellants.

4. Invocation of Extended Period under Section 28 of the Customs Act:
The appellants claimed that the demand was time-barred under Section 28 of the Customs Act, as the relevant bills of entry were beyond the six-month period. They argued that there was no suppression or willful misstatement on their part, as they had informed the Department about assembling EPABX systems and declared Modvat Credit on each bill of entry. The Tribunal did not find sufficient evidence of suppression or intent to evade duty, thus ruling out the invocation of the extended period.

5. Imposition of Penalties:
The Commissioner imposed penalties on the appellant company and its officials. The appellants argued that penalties were unwarranted in the absence of findings about their personal roles. The Tribunal agreed, noting the lack of evidence of deliberate intent to evade duty or personal involvement in any misstatement. Consequently, the penalties were deemed unjustified.

Conclusion:
The Tribunal set aside the impugned order and allowed all three appeals. The key findings were that Rule 2(a) was inapplicable, the exemption under Notification No. 61/95-Cus was available, the demand was time-barred, and penalties on the appellant company and its officials were unjustified.