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2015 (2) TMI 417 - AT - CustomsSEEPZ unit - Violation of DTA sale entitlement -non-realisation of export proceeds - use of foreign brand computer systems - Violation of Export-Import Policy - The charge against the appellant is that M/s EPL imported complete computer system by mis-declaring them as parts and components of computers so as to avail ineligible duty exemption under notification 227/79-cus and 133/94-Cus. - Whether the importer appellants violated the provisions of the Export-Import Policy and the terms and conditions of the exemption notifications 227/79-Cus dated 30/11/1979 and 133/94-Cus dated 22/06/1994. Held that - Evidences available on record revealed that M/s Microland Ltd. had placed orders directly on Compaq Asia, Singapore for complete computer systems of various Compaq brand models with instructions to bill and ship the said goods to M/s EPL, SEEPZ; Mumbai. Against the purchase orders of Microland, M/s Compaq, Singapore issued invoices to EPZ units quoting Microland's purchase orders. In the invoices so issued, M/s Compaq, Singapore described the goods supplied as computer parts and peripherals with specific reference to respective model nos. and complete assembly nos. of the computers ordered by M/s Microland Ltd. From the statements of the various officials of the appellant firm, it is clear that M/s. EPL and other Tandon Group of Companies imported complete computer systems without having any licence for the same thereby violation the EXIM policy. They did not have any manufacturing facility for manufacture of computers from the parts and components and the oly activity undertaken by them was insertion of FDD and HDD into the system and conducting certain tests to ensure that the computer systems work properly. From the evidence unearthed by the investigation, it is clear that, as against the requirement of value addition of 20% the value addition actually achieved was only 10.8%, 6.8%, 10.25% and 6.30% during 1990-91, 1991-92, 1992-93 and 1993-94 and these figures have not been disputed at all by the appellant. It is also on record that the value addition norms were required to be fulfilled not only in respect of the exports made by the appellant but also in respect of the DTA sales effected as the permission to sell in DTA was subject to fulfilling the requirement of value addition in terms of para 102(b) of the EXIM Policy 1992-97. From the evidence available on record these requirements of the EXIM Policy were not at all complied with by the appellants. - It is also on record that the appellant sold computers having foreign brand names in the DTA which was also not permissible. It is further seen that the appellant failed to repatriate the export proceeds to the extent of ₹ 15.76 crores, which is yet to be realized as evidenced from RBI's letter dated 10/03/1994. It is absolutely clear that the appellant hatched a conspiracy with the foreign suppliers as well as the domestic purchasers of the goods to import restricted items without having any licence and, therefore, sold the same in the DTA, the sale of which was prohibited, inasmuch as the goods sold bore the brand names of the foreign manufacturers. It is also evident that fully built computer systems were purchased which were dismantled before export of India and brought to India under the guise of parts and components. The action of the appellant is a fraud played on the exchequer. Fully manufactured computer systems were restricted for imports as per the EXIM Policy as applicable at the relevant time and the appellants did not have the requisite licence for import of the same. These are all admitted positions and there are no disputes whatsoever about these facts. If that be so, the appellant was certainly not entitled to claim the benefit of the exemptions under these notifications. Both the customs notifications and the EXIM policy form an integrated code and violation of the exim policy is also a violation of the condition of customs exemption and we hold accordingly. Adjudicating authority has sought to demand duty only in respect of the SKD assemblies/functional units of the computer systems sold in the DTA without achieving the necessary value addition and also for violating the provisions relating to the brand name. Therefore, the duty demand made in this regard is completely justified and cannot be faulted. The adjustment of excise duty paid on the goods sold in the DTA by the adjudicating authority was not really warranted and in our view an error committed by the adjudicating authority. Since the Revenue has not come in appeal against the said order of the adjudicating authority nor agitated the matter before us, we do not go into this issue. However, the balance of duty demanded is clearly sustainable in law inasmuch as the goods have been imported by mis-declaring them as parts/components and the goods needed a licence for importation which the appellant did not have. Thus the goods are liable to confiscation under Sections 111 (d). For non-achievement of the value addition norms and selling the goods in DTA under foreign brand names, the goods become liable to confiscation under 111 (o) of the Customs Act, 1962 and we hold accordingly. Consequently the appellants are liable to penalty. As regards the penalties imposed on the various officials of the appellant-company, their role is clearly evident and they have undertaken all these activities fully knowing that they are contravening the provisions of the EXIM Policy and the Customs Notifications and, therefore, imposition of penalty on the officials of the appellants except Shri Raghavendran, who passed away during the proceedings, deserve to be upheld and we do so. Similarly, the penalty imposed on M/s. Microland Ltd. is also sustainable as it aided and abetted the evasion of Customs duty by the appellants and, therefore penalties imposed under Section 112(a)/(b) of the Customs Act, 1962 is justified and sustainable in law. - Dcided against Appellants.
Issues Involved:
1. Violation of Industrial Licence terms and DTA sale entitlement. 2. Non-fulfillment of value addition requirements. 3. Mis-declaration and unauthorized import of foreign brand computers. 4. Non-realization of export proceeds. 5. Jurisdiction of the Commissioner of Customs (Preventive) to issue the show cause notice. 6. Imposition of penalties on various entities and individuals. Detailed Analysis: 1. Violation of Industrial Licence Terms and DTA Sale Entitlement: The appellants were found to have grossly violated the terms and conditions of their Industrial Licence and DTA sale entitlement. Foreign brand computers were imported under the guise of components and parts and sold under DTA sale entitlement. The investigation revealed that M/s. EPL imported complete computer systems in the guise of parts and components to avail duty exemptions and circumvent import restrictions. The Commissioner held that the foreign brand computer systems sold in the DTA were liable to confiscation under Section 111(d) & (o) of the Customs Act, 1962. 2. Non-fulfillment of Value Addition Requirements: The appellants failed to achieve the required value addition of 20% as stipulated in the Export-Import Policy. The value addition achieved during 1990-91, 1991-92, 1992-93, and 1993-94 was only 10.85%, 6.88%, 10.25%, and 6.30%, respectively. The Commissioner confirmed the duty demand of Rs. 11,48,66,320/- payable on the goods of CIF Value of Rs. 10,87,84,034/- and imposed penalties on various entities and individuals for non-fulfillment of value addition requirements. 3. Mis-declaration and Unauthorized Import of Foreign Brand Computers: M/s. EPL imported complete computer systems by mis-declaring them as parts and components, thereby availing ineligible duty exemptions. The goods were imported without the necessary import licenses, violating the Export-Import Policy. The Commissioner held that the goods were liable to confiscation under Section 111(d), 111(m), and 111(o) of the Customs Act, 1962. The appellants' contention that they had imported parts and components was rejected based on evidence that they imported fully manufactured computer systems, which were dismantled before importation. 4. Non-realization of Export Proceeds: The appellants failed to repatriate export proceeds amounting to Rs. 15.76 crores, as confirmed by the RBI. This non-realization of export proceeds was a violation of the conditions governing the DTA sale entitlement and the Export-Import Policy. The Commissioner deducted the DTA sale entitlement earlier issued to M/s. EPL from the DTA sale entitlement of another EPZ unit belonging to the Tandon Group of Companies. 5. Jurisdiction of the Commissioner of Customs (Preventive) to Issue the Show Cause Notice: The appellants contended that the Commissioner of Customs (Preventive) did not have jurisdiction to issue the show cause notice. However, this argument was rejected based on the retrospective amendment to Section 28 of the Customs Act, 1962, which conferred the power of assessment under Sections 17 and 28 on all officers appointed as officers of Customs. The Bombay High Court upheld the jurisdiction of the Customs Officers for issuing show cause notices. 6. Imposition of Penalties on Various Entities and Individuals: The Commissioner imposed penalties on various entities and individuals for their active role in the import and sale of foreign brand computer systems in violation of the Export-Import Policy and Customs Notifications. Penalties were imposed under Section 112(a) & (b) of the Customs Act, 1962, on M/s. EPL, M/s. Golden Computers Pvt. Ltd., M/s. Memory Electronics Ltd., M/s. Microland Ltd., and their respective officials. The Tribunal upheld these penalties, noting the active involvement of these entities and individuals in the fraudulent activities. Conclusion: The Tribunal dismissed the appeals, upholding the findings of the Commissioner that the appellants had violated the terms and conditions of the Industrial Licence, DTA sale entitlement, and Export-Import Policy. The duty demands and penalties imposed were found to be justified and sustainable in law. The Tribunal emphasized that fraud nullifies everything and that statutory benefits cannot be extended when a fraud is committed.
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