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TMI Blog1995 (9) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... omplied with by the importer viz. M/s. Concord International Pvt. Ltd., since, these goods are found not to be in conformity with the conditions of import licence and the conditions of Customs Exemption Notification have not been complied with by the importer, I find the goods liable to confiscation under Sections 111(d) and (o) of the Customs Act, 1962 and M/s. Concord International Pvt. Ltd., who by their acts of commission/omission have rendered the goods liable to confiscation under the aforesaid Section have also rendered themselves liable to penalty under Section 112 of the Act ibid. I also find that the goods are not covered by exemption Notification No. 339/85 and that the show cause notice was issued to the party in accordance with the Customs Law and it is well within the jurisdiction of Customs to take appropriate action in the matter including adjudication. In view of the forgoing facts, circumstances and evidences and my findings, I pass the following order. ORDER I order that goods are liable to confiscation, however, since, the goods are not available for confiscation, an effective order to confiscate the same cannot be passed. I therefore, taking into conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed that the afore-mentioned goods were in the nature of complete systems for hotel projects/roads/ construction/ institution and did not require any systems engineering. It was therefore alleged that the appellants did not undertake any manufacturing operations in the Noida Export Porcessing Zone on the aforesaid goods for production of goods for export as required under the approved project. It was also alleged that the appellants import/export was in the nature of switch deal rather than an activity being undertaken on goods for production of export goods. Accordingly, a show notice was issued to the appellants on 1-9-1987. 3. On the date of hearing, Shri Rakesh Tikku, learned Advocate along with Shri J.L. Kotru, Director of the appellant company appeared for the appellants and submitted that the impugned goods invoiced under computerised automatisation systems have been procured as parts and components of the computer systems; that the definition of computer systems is given in the Import Policy 1985-88; that the imported goods are covered under Appendix 15 of the Policy 1985-88 read with OGL No. 18/85, dated 12-4-1985; that the revised proposal dated 11-2-1987 clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even packaging is one of the functions allowed in free trade zone; that even simple entre-pot trade is an important means of earning foreign exchange and import into and export from bond after sorting and packaging or even mere re-export have been traditionally allowed; that the value has been added by high technology inputs of selection of items, testing and physical additions; that reading Notification No. 339/85-Cus., it would be found that conditions of Clauses (i), (ii), (iii) and (vii)(b)(i) are applicable in their case. According to the revised proposal dated 11-2-1987, NPEZ Board approved addition of necessary capital goods in the second and third year of manufacture; that the impugned items are estimated material requirements in the form of discrete components of the assembled computer systems as envisaged in the Ist year of the phased programme; that the approved proposal clearly envisages import of discrete components in an assembled form initially; that in the first phase of the manufacturing programme required absorption of the technical know-how of such high technical products; that computer technology was a relatively new concept; that the company had necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a process or treatment with a view to its development or preparation for the market , it would amount to processing of the commodity within the meaning of Section 8(3)(b) and Rule 13. The nature and extent of processing may vary from case to case. Wherever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. The nature and extent of the change is not material. The question is not whether there is manual application of energy or there is application of mechnaical force. Whatever be the means employed for the purpose of carryinq out the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes processing . This Court speaking through one of us (Pathak, J.) pointed out : `Commonly manufacture is the end-result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange is not material. It may be that camphor powder may just be compressed into camphor cubes by application of mechanical force or pressure without addition or admixture of any other material and yet the operation would amount to processing of camphor powder as held by the Calcutta High Court. What is necessary in order to characterise an operation as processing is that the commodity must, as a result of the operation, experience some change". 7. That in the case of Venkatrao Narayanrao Ambedkar v. The Atma Sugar Mills and Another reported in AIR 1979 Bombay 38, the Hon ble Bombay High Court held - The word `process has got several meanings and in fact may mean different things in different context. But looking to the context in which it is used and gathering the natural meaning of the word `process must be held to mean to subject a particular product or a commodity with the object of making it finer or improving its quality. It may mean to treat a particular commodity by any method but not in such a way that the commodity itself is completely transformed into a new commodity. 8. The learned counsel therefore, submitted that having regard to the ratio of the decisions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the Additional Collector has exceeded his jurisdiction by issue of show cause notice at the point of import as the Customs Authorities come into picture only when the goods are not exported; that in letter dated 11-8-1987, the Collector of Customs desired that it is worthwhile to await certificate from the Joint Development Commissioner. Referring to the letter dated 6-6-1989 of the Ministry of Commerce, the learned counsel submitted that that was not the final decision of the licensing authority. The learned counsel submitted that this view was taken by the Development Commissioner not independently and therefore, cannot be termed as a final order of the Development Commissioner. 10. On the question of the exemption under Notification No. 339/85-Cus., dated 21-11-1985, the learned counsel submitted that the benefit was available in respect of production of goods for export out of India or for being used in connection with production/prackaging or for promotion of such exports. The learned Counsel submitted that admittedly, the goods imported by the appellants were used in connection with the production of export goods and therefore, they were fully entitled to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned JDR appearing for the respondents submitted that a careful reading of the Notification will show that the Customs Authorities had a jurisdiction over the matter, that a lot of arguments were adduced by the appellants stating that it is the satisfaction of the Development Commissioner and not the Customs Authorities for invoking Clause (iii) of the Notification. The learned DR submitted that Clause (vii)(b)(i) reads," the importer shall pay on demand an amount equal to duty leviable on the goods other than capital goods as are not proved to the satisfaction of the Collector of Customs to have been used in connection with the production or packaging of goods ( within the Zone) for export out of India or with the promotion of such export of goods or re-exported within a period of one year from the date of importation thereof or within such extended period as the Collector of Customs may, on being satisfied that there is sufficient cause for not using them or for not re-exporting them within the said period allow"; that this clause very clearly says that the Collector of Customs has the authority to demand duty in terms of conditions stipulated in the clause referred to ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Accessories and consumables cage for peripherals Mag. tapes 1.00 - 1.80 - 1.70 - Floppy diskettes 3.65 - 4.90 - 6.30 - Cartridge tapes 1.65 - 2.25 - 2.85 - Others 3.15 0.40 4.30 0.60 6.80 0.80 13. Spares 20.60 0.37 30.20 0.80 42.60 1.00 B. SOFTWARE 25.00 - 30.00 - 30.00 - 334.94 12.77 454.10 24.10 540.67 30.20 The learned DR, therefore, submitted that since they had not imported these raw materials but had imported completely assembled goods, therefore, they had not used these goods for the production or packaging or in connection with the production of the export goods out of India. The learned DR submitted that a close look at the goods imported shown in the show cause notice will clearly show that the items were in fully assembled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of processing amounting to manufacture, the ld. DR submitted that it is well settled in law that every process is not manufcture and only that process amounts to manufacture which brings into existence a new product distinct in name, character and use. The ld. DR submitted that in the present case no new goods were produced and hence the case law cited and relied upon by the appellants does not help them. 16. On the question of duty the ld. DR submitted that the goods should pay duty, however drawback if any admissible to them may be adjusted. 17. On the question of penalty, the ld. DR submitted that the case of imposition of penalty is supported by the decision of the Hon ble Supreme Court in the case of Ratan Exports (supra), the learned DR submitted that the penalty be confirmed. Reiterating the findings of the lower authorities, the learned DR prayed that the appeal may be rejected. 18. Heard the submissions of both sides and considered them. The appellants argued at length that the Collector Customs had no jurisdiction and that jurisdiction vested only in the Development Commissioner. They referred to clause (iii) of the Exemption Notification No. 339/85-Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner but insofar as the applicability of the exemption Notification was concerned, it was the sole responsibility of the Customs and therefore, the appellants were not correct in assuming that the Customs had no jurisdiction. On the question that Customs came into picture only when the goods were not exported. We find that this presumption is not correct inasmuch as the customs for the purpose of admissibility of the exemption under Notification No. 339/85-Cus. had to satisfy that the goods were strictly in accordance with the proposal approved. As the goods were not found in conformity with the list in Annexure V of the application for approval, the Customs Authorities rightly held that the goods were not eligible to exemption under the aforesaid notification. This contention of the department has not been rebutted and no evidence has been brought on record to show that the disputed goods conformed to the goods shown in the approved proposal. We hold that this plea of the appellants was misconceived and hold that the Customs had a jurisdiction to go into the question whether the goods were eligible for duty exemption under Notification No. 339/85-Cus. or not. 19. The seco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was not called for as the goods had been checked and tested by the supplier and were to be checked and tested after installation; that the guarantee for proper operation of the goods was given by the foreign supplier i.e. M/s. Olivetti of Italy. A lot of case law was cited and relied upon by the appellants in regard to the term `processing . 21. We find that the Hon ble Supreme Court in the case of Union of India v. Delhi Cloth and General Mills and Others reported in ECR C 216 (SC) had held- - We are unable to agree with the learned counsel that by inserting this definition of the word manufacture under Section 2(f), the Legislature intended to equate the processing to manufacture and intended to make mere processing as distinct from the manufacture in the sense bringing into existence of a new substance known to the market, liable to duty . The Apex Court further held The sole purpose of inserting this definition is to make it clear that at certain place in fact, the word manufacture has been used to mean a process incidental to the manufacture of the article. Thus in the very item under which the excise duty is claimed in this case, we find the word in or in relation t ..... 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