9911796707
TMI Blog1989 (5) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... the presence of the representative of the appellants, it was found that the contents of the said consignment were, in fact, 75 complete units of Eagle IIE computers of models Eagle I, Eagle II and Eagle III in SKD condition 30 units each of Eagle I and Eagle II and 15 units of Eagle III. It was also noticed that instead of 225 diskettes appearing at S.No. 18 of the said invoice 225 pieces (75 sets) of software programmed packs, containing the computer language "Ultra Care", "C/M and C BASIC" and "Spell-binder" along with the matching software manuals, meant for each type of above mentioned models of computers, were also found. During the course of investigations, the said importers submitted the said suppliers printed list effective from April, 1983 showing the retail prices of complete units of computers model Eagle I, Eagle II and Eagle III as US $ 1595.00, US $ 1995.00 and US $ 2995.00, respectively and also a telex dated 25-4-1983 from the above said suppliers communicating a reduction of US $ 150 from US $ 400, said to have been communicated earlier for non-supply of the softwares. In other words, US $ 250.00 was the price per set of software. As per the enquiries conducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the type of computers under import supplied by M/s. Eagle Computers, U.S.A. were for data processing as mentioned in the manuals found in the consignment and could not be used for chemical process controller. In view of this, it appeared that the import licence for the end-use of process control system produced by the said importers for the clearance of the said goods was not valid for the said imports. The Department of Electronics had clarified that the importers' phased manufacturing programme had only been approved for process control system and not for mini computers/microprocessor based system; that the importer's phased manufacturing programme had been approved for Usha Data Loggers DL-1000 and Usha Data Logger DL-2000 and that their phased manufacturing programme for manufacture of mini computers/microprocessor based system had finally been rejected by the competent authority. Furthermore, from the commercial and the publicity brochure of the importers being circulated by them for marketing their products in the country, it was established beyond doubt that the importers had been manufacturing only business computers and not process control systems. The newspaper "Busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been imported without the cover of valid import licence and also in contravention of the provisions contained in para 5(9) read with para 22 of Import Policy AM-83. (iv) The software programmed packs along with the manuals invoiced as diskettes and declared as blank should not be confiscated under Section 111(i) of the Customs Act, 1962 for the reasons that the same were not included in the declaration/entry made under the Act ibid. (v) The computer parts as well as the software programmed parts with manuals should not be confiscated under Section 111(m) of the Customs Act, 1962 as the same did not correspond in respect of value and other material particulars with the entry made under the Act ibid, inasmuch as the goods valued at US $ 85,912.50 were found to be under valued to the tune of US $ 39,562.50. Further the said M/s. Usha Microprocess Control Ltd. were also asked to explain as to why penal action should not be taken against them under Section 112 of the Customs Act, 1962. M/s. Usha Microprocess Control Ltd. vide their letter dated 24-11-1983, in reply to the show cause notice, inter alia, submitted as under : - (a) That the difference in party's invoice and departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the party it was submitted that those were mentioned in the list attached to the Import Licence as (A) and (B) of the parts; that the other items (C) and (H) were basically the hardware required to enclose the floppy drive in a box if it was supplied separately; that the cables etc. required for that hardware were managed locally and were not imported although they were allowed to do so under the import licence and as such there was no contravention of the import licence at all. (e) Regarding the software the party submitted that the software programme packs with manuals had been supplied to them by mistake by the suppliers as they ordered only for blank diskettes and asked for the permission to re-export; that programmed diskettes could be copied out to blank diskettes in only two minutes and as such there would be no benefit in their importing programmed diskettes nor were they trying to import 75 numbers each of similar diskettes since even one diskette would suffice. The party further requested for passing early orders in the case without granting any personal hearing to them. 3. The learned adjudicating authority did not accept the contention of the appellants and the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess control systems. The process control systems are for monitoring controls, chemically and physically variable like temperature, pressure, flow and they were mainly used in chemicals and machinery tool plants, thermal plants. The type of the computer under imports was data processing and as indicated in the manual could not be used for chemical process control or monitoring control. The present hardware imported by the appellants could, in no way, be used with a process control without elaborate changes in the hardware itself which would obviously make the equipment more expensive and not proportion with the prices paid or to be used for selling these equipments. List II of the said licence permits the import of parts or floppy disks drive and there are 8 parts mentioned in the licence, whereas the appellants had imported floppy disk drive in two parts. The appellants had also imported floppy disks drive deck and floppy logic board and disk drive shield which were not covered under the import licence. The value of such goods which were not covered by the import licence (excluding software) was US $ 67,162.50. Instead of graphic terminals, it was observed, data terminals had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icence was amended subsequently which appears on page 64 of the paper book. Vide letter dated 19th March, 1985 the Ministry of Industry and Company Affairs had amended the industrial licence with retrospective effect viz. 15th December, 1981 i.e. the date of issue of the licence and the item Mini/Micro computer and Microprocessor based systems were included in the licence No. CIL 374(81) dated 15th December, 1981 which appears on page 1 of the paper book. Shri Sridharan, the learned advocate, has referred to the Import Policy and argued that over and above OGL, a supplementary licence was there. He has referred to para 35(1) of AM Policy 1982-83 page 8. Para 5(3) on page 1 relates to actual user industrial licence. Shri Sridharan has argued that end-use is not the condition of the licence. If at all, there is any violation, it is post import violation and there is no violation of any law under the Customs Act. Directorate General of Technical Development had duly written to the Joint Chief Controller of Imports and Exports vide their letter dated 31st July. 1985, 1st August, 1985 intimating the amendment in the end-use of the import licence as per para 91(3) of ITC Policy 1985-86 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex which appears on pages 9 and 13 of the paper book. The revenue has not filed any evidence as to the contemporary price. The appellants did not require software. The redemption fine imposed by the learned adjudicating authority at Rs. 10,00,000/- is consolidated. No levy of redemption fine is called for. Alternatively, he pleaded that if any redemption fine had to be levied, the same should have been levied separately on hardware as well as software and there is also no entry in the import control order for software. 10. For the importation of floppy disk drive, the learned Advocate has referred to the observations of the adjudicating authority in the order-in-original internal page 2 where the Collector himself has admitted that the appellants are entitled to the import of parts of the floppy disk drive. He has further argued that the appellants are entitled to the benefits of notifications 117/80-Cus. and 172/77-Cus. The benefits of these notifications have not been extended to the appellants. Shri Sridharan, the learned advocate, states that importation of the graphic terminals is also in order. He has pleaded for the setting aside of the redemption fine and penalty. 11. Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e criticism of an import policy. Obviously, Courts do not possess the expertise and are consequently incompetent to pass judgment on the appropriateness or the adequacy of a particular import policy. But we may venture to assert with some degree of accuracy that our present import policy is export oriented. Incentives by way of import licences are given to promote exports. Paragraph 173 of Chap. 18 of the 'Import Policy' for April 81 to March 82 published by the Government of India, Ministry of Commerce - in the first week of April every year, an annual 'Import and Export Policy' to be in force during the financial year is published - expressly states "the objective of the scheme of registration of Export Houses and the grant of special facilities to them is to strengthen their negotiating capacity in foreign trade and to build up a more enduring relationship between them and their supporting manufacturers". Paragraphs 183 and 184 enumerate the various import facilities available to Export Houses. Paragraph 185(1) allows Export Houses to import OGL (Open General Licence) items against REP (Replenishment) Licences issued in their own names or transferred to them by others. The facil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of imported detailed information in the prescribed forms." Shri Sundar Rajan has argued that the licence is for process control system. He has referred to the Encyclopedia by David page 253. The computers imported by the appellants are general purposes and they have got nothing to do with the process control. Shri Sundar Rajan has argued that the adjudicating authority has not passed any order as to the grant of benefit of the notification. He has referred to Section 23(2) of the Customs Act, 1962. He has pleaded for the dismissal of the appeal and has further pleaded that the fine and penalty imposed by the lower authority may be upheld. 12. Shri Sridharan, the learned advocate, has pleaded that the goods imported are parts of computers. If at all, there is any offence, the same is not in respect of the entire consignment. He has pleaded for the acceptance of the appeal. 13. We have heard both the sides and have gone through the facts and circumstances of the case. The first contention of the learned counsel of the appellants was that the importation was not unauthorised and was in conformity with the I.T.C. regulations and the revenue authorities are not concerned with the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he import licence. Relevant extract from the import policy which appears in the reply to the show cause notice at page 35 of the paper book of the appellants is reproduced below: - "Import Policy - page No. 2-Cal. 2(W) "Computer System" means all types of electronic data processing computers, their peripheral equipment, data collection and data preparation equipment, remote terminals, modems, PROCESS AND PLANT CONTROL SYSTEMS, magnetic tapes and dies backs, tools, test equipment and spares relevant thereto; it includes also all systems an application software to work on existing hardware or that process to be imported." A simple reading of the computer system reproduced above will show that process control systems, automatic data processing systems, computer systems are all the same things and the words are used synonymously. The appellants' industrial licence appears at pages 1 to 5 of the paper book and the description of the item of manufacture has been mentioned in the licence as process control system. On pages 62 and 63 of the paper book there appears the endorsement on the industrial licence. The Government of India vide letter dated 7th July, 1984 had intimated that in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned Ministry. We have already discussed above the import policy. The products imported by the appellants are synonymous with the other product of the computer. In any case, except software, the goods imported by the appellants are in conformity with the ITC policy. Relevant para has already been reproduced above. It is a settled law that the customs authorities are not concerned with the end-use. Shri Sridharan, the learned advocate had cited the judgment of the Tribunal in the case of Audio Vision Electronics v. Collector of Customs, Madras reported in 1987 (31) E.L.T. 796. Para 6 from the said judgment is reproduced below: - "6. As regards the third objection of the lower authorities, the appellants have placed drawings of their end-products before us to show that whereas the lower authorities calculated the requirements of RF/IF coils at 7 per gadget, the actual requirement varied from 11 to 21. That apart, we find no restriction in the Open General Licence as to how much quantity of the permitted items should be imported by an Actual User. In the circumstances, the lower authorities were not justified in interpolating a restriction of their own into the import policy. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n additional 10% discount over and above the distributors' discount was also available to the importers for buying computer parts without system warranty. The adjudicating authority in assessing the value has deducted 250 US $ from the retail prices, whereas the appellants' contention is that the value of the software has to be deducted from the retail price less 50% discount equivalent to wholesale price less price of software for coming to the correct price of the hardware stuff. Accordingly, the revenue has arrived at the assessable value after deducting the price of software from the retail price and the figure so arrived has been deducted by 50% for coming to the retail price. We are of the view that for arriving at the correct value the following formula has to be adopted : - Retail price less 50% of the retail price = Wholesale price less value of software = hardware price. In the reply to the show cause notice which appears on page 34 of the paper book the net hardware price of Eagle II model with this formula has been worked out at US $ 747.50. Accordingly, we modify the value of the hardware. The appellants in their reply to the show cause notice which appears on page 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted for the re-exportation of the software and had also placed on record to the effect that the software which was sent with the hardware was not ordered by the appellants and the appellants were keen for sending them back. There is complete absence of the element of mens rea and the valuation of the hardware has been taken at a higher figure due to difference of opinion. The Hon'ble Supreme Court of India in the case of Hindustan Steel Ltd. v. State of Orissa reported in 1978 E.L.T. J-159 held as under: - "No penalty should be imposed for technical or venial breach of legal provisions or where the breach flows from the bona fide belief that the offender is not liable to act in the manner prescribed by the statute." In view of the above judgment of the Hon'ble Supreme Court, we do not find any justification in the imposition of the penalty. The order as to the imposition of penalty of Rs. 2,50,000.00 is hereby quashed. 20. In the foregoing paras we have held that the importation of the hardware computer/parts was in conformity with the import Trade Control Policy. Accordingly, we direct the adjudicating authority to extend the benefit of notification No. 172/77-Cus., dated 8th A ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
