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TMI Blog1995 (9) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... plied to the Development Commissioner of the said Zone for permission to set up a unit in the said zone to manufacture computer software for the overseas market. The appellants M/s. Tata Unisys Ltd. were authorised by the Ministry of Commerce vide their letter of approval No. B-29/87 NEPZ, dated 16-10-1987 to set up an industrial unit in NOIDA Export Processing Zone for manufacture of computer consultancy and computer software development for export subject to certain conditions. Accordingly they set up their unit at SDFA - 5 6, NEPZ, Noida and imported goods worth Rs. 2,08,75,877/- upto December, 1991 into the Zone availing exemption from duty under M.F. (DR) Notification No. 339/85-Cus., dated 21-11-1985. The total amount of duties foregone on the goods imported by them upto December, 1991 comes to Rs. 2,93,68,904/-. On their request, the Ministry of Commerce vide their letter No. 8/29/87-NEPZ, dated 1-8-1991 increased the limit of import of capital goods from 130 lakhs to 175 lakhs to enable them to bring additional equipment for manufacture of computer software subject to the condition that the prescribed value addition of 60% is maintained by them. It appears that du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not utilise the goods imported duty free under this notification in the manner prescribed in the said notification and the Letter of Approval and had also failed to comply with the condition of their import licence namely OGL No. 20 of 1990, dated 30-3-1990 in as much as they had failed to achieve minimum value addition prescribed in their Letter of Approval and did not maintain separate account in respect of their NEPZ Unit as required therein. The show cause notice alleged that after the appellants had set up a unit they had only exported software worth Rs. 6.9 lakhs against their unauthenticated export of Rs. 744 lakhs claimed by them as consultancy exports and that they had not complied with the condition of using the imported capital goods to produce or promote the export of goods; that the export earnings from consultancy services were not authenticated by Customs Officer and that the appellants had failed to achieve the value addition stipulated in the Letter of Approval. Show Cause Notice was duly answered by the appellants by giving a detailed reply denying the charges levelled against them in the Show Cause Notice and submitted that they had applied to the Govt. for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided on site abroad and do not involve the actual production of goods in the Zone, that the fact that some sample print-outs of the professional profiles had been exported under Shipping Bills is neither indicative nor conclusive evidence of the nature or scope of their export activities and does not substantiate the allegation that no specific work of consultancy in the shape of development of Software and its export from NEPZ is being done in the unit; that the allegation that no export documentation for export of software showing earnings in foreign exchange were submitted to customs contradicts the statement that software worth Rs. 6.9 lakhs had been exported; that the authentication of exports or documents thereof through customs and indeed, the failure to do any of these, does not detract from the fact that software exports and software consultancy export on site had indeed been effected and foreign exchange realised as is the intent and purpose of their activities in NEPZ and as is permitted and authorised by the Government; that they deny that their unit in NEPZ is primarily engaged in the training of consultants for rendering services abroad; that in any event ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not engaged in the manufacture of goods for export is not correct; that the ample foreign exchange earned bears testimony to this; that the average net value addition as per their own reckoning is adequate; that the SCN does not spell out the formula, factors, criteria or components thereof, to substantiate the allegation that they have failed to achieve value addition of 60% as prescribed. The Collector who adjudicated the proceedings after considering the reply to the show cause notice and submissions made during the course of personal hearing observed that the appellants had failed to achieve value addition of 60% as can be seen from para 10 of the impugned order and with reference to the contraventions relating to post-importation licensing conditions. He observed in para 20 of the order that since adequate provisions exist to deal with the cases of licensing contraventions in the Import Export (Control) Act, 1947, the contraventions relating to post-importation licensing conditions may be dealt with by the Additional Chief Controller of Import and Export or any other authority authorised to take action in this behalf under the said Act. (The Asstt. Collector of Customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On careful consideration of their contentions in the aforesaid customs notification, I find that consultancy services provided at site abroad cannot be termed as production of goods in the zone for export and as such these consultancy services especially when these cannot be co-related with the goods imported in the zone are not covered by the provision of the aforesaid customs notification. I also find that the term `goods appearing in the abovementioned customs notification never includes consultancy services and execution of orders outside the Zone at the site abroad. The said M/s. T.U.L. in none of their communication including their reply to the SCN, have stated that the goods imported duty free by them are in fact being used for production of goods for export within the zone. Since execution of orders at site abroad cannot be termed as goods produced in the zone, I find that they have not used the goods imported duty free into the Zone for production etc. of goods for export within the Zone as required under the aforesaid customs notification. In view of the above findings, he ordered for confiscation of the goods valued at Rs. 2,08,75,877 imported upto December, 1991 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tober, 1987 in which the applicant stated against the column `items to be manufactured in NEPZ and annual capacity with FOB value exports (yearwise for 5 years) as follows :- Computer consultancy for the overseas market and Computer Software Development. Annual capacity will be based on contracts received and export man-power availability. This application was approved by the Govt. of India in the Ministry of Commerce vide its letter dated 16th December, 1987 indicating the items of manufacture and the annual capacity as follows :- Year Items of manufacture Annual capacity (Rs. in lakhs) Ist Computer consultancy and computer software development 195 2nd -do- 228 3rd -do- 262 4th -do- 315 5th -do- 341 The said approval also required the appellants to effect exports of a value specified therein and the said obligation was, however, later varied as under : Year F.O.B. Value of Exports Ist Rs. 13 lakhs 2nd Rs. 251 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : The legal position may be summarized thus : - The maxim contemporanea expositio as laid down by Coke was applied to construing ancient statutes, but not to interpreting Acts which are comparatively modern. There is a good reason for this change in the mode of interpretation. The fundamental rule of construction is the same whether the Court is asked to construe a provision of an ancient statute or that of a modern one, namely, what is the expressed intention of the Legislature. It is perhaps difficult to attribute to a legislative body functioning in a static society that its intention was couched in terms of considerable breadth so as to take within its sweep the future developments comprehended by the phraseology used. It is more reasonable to confine its intention only to the circumstances obtaining at the time the law was made. But in a modern progressive society it would be unreasonable to confine the intention of a Legislature to the meaning attributable to the word used at the time the law was made, for a modern Legislature making laws to govern a society which is fast moving must be presumed to be aware of an enlarged meaning the same concept might attract with the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the decision of the Supreme Court in the case of State of Bihar v. S.K. Roy, AIR 1966 SC 1995 as per observation in para 8 of that judgment and the relevant portion therein is as under : In our opinion, the change in the language of Section 2(b) of the earlier Act brought about by the amending Act (Act 45 of 1955) was not meant to bring about a change of law in this respect but was meant to fix a proper interpretation upon the earlier Act. It is a well recognised principle in dealing with matters of construction that subsequent legislation may be looked at in order to see what is the proper interpretation to be put upon the earlier Act where the earlier Act is obscure or ambiguous or readily capable of more than one interpretation (see Ormound Investment Co. Ltd. v. Belts, 1028 AC 143 at p. l56). He also referred to the Circular No. 694, dated 22-11-1994 issued under Income Tax Act, 1961 with reference to tax holiday under Section 10A in which it was stated that an explanation of the term produce was inserted to state that produce includes production of computer programme by Finance Act, 1993 was clarificatory in nature and was to be applied for earlier years. He contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was submitted that party should not be penalised for not providing procedure with reference to export earnings and appellants cannot be denied the benefits of Notification merely because it is difficult to establish certain things relying upon the decision in the case of Tata Oil Mills, 1989 (43) E.L.T. 183 (SC) = AIR 1990 SC 27 and prior to the .publication of Public Notice 10/93 no procedure had been prescribed requiring persons who rendered consultancy service abroad to inform the customs authorities and the amounts in fact earned from such services must be regarded as export earnings. 8. Learned Sr. Counsel submitted that notwithstanding the above points that no duty can be demanded if the goods were not installed or otherwise used within NEPZ and it is not even the case of the department that capital goods were removed from Noida and on the other hand, Collector acknowledges in his order that the goods have been used for imparting training to the personnel of the applicants and in the absence of contravention clause vii(a) and ix(f) of the Notification 339/85, there was no justification for demanding duty apart from the fact that Collector has no jurisdiction to monitor ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e given their plain meaning. In support of his contention that exemption Notification has to be construed strictly, he referred to the following decisions : 1. 1993 (63) E.L.T. 452 2. 1990 (47) E.L.T. 491 3. 1990 (47) E.L.T. 500 Therefore the Notification 339/85 in this case as it was worded at the material time of import, is to be interpreted with reference to the words used therein. Subsequent notifications cannot come to the aid of the party to interpret and to claim benefit of exemption with reference to earlier Notification 339/85. Notification 154/93 is an independent notification, not clarificatory in nature and cannot be given retrospective effect unless it specifically contains such a provision and it is clear from the Customs Notification 154/93 dated 13th August, 1993 that the consultancy fees received by software development units in convertible foreign currencies for consultancy services for development of software on site abroad shall be deemed to be exports for the purposes of fulfilment of export obligation under this notification with effect from 13th August, 1993. He submitted that subsequent Notification 133/94 is also not applicable as the period of im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records. On the issue whether Production of goods as mentioned in the Notification 339/85 includes consultancy services, we are not convinced with the arguments advanced on behalf of the appellants that the term goods includes service and the definition of goods has to be widened in view of development and advanced technology. We concur with the views expressed by learned Departmental Representative in adopting the detailed reasoning given by our learned Brother Shri S.L. Peeran, Member (Judicial) in the Stay Order No. C/39/94-B2, dated 15-9-1994 in holding that goods do not include service either in terms of Notification 339/85 or with reference to definition of goods in Section 2(22) of the Act. The decision referred to by the Departmental Representative in the case of Metal Corporation of India Ltd. (Supra) wherein it was held that `know-how is not a tangible asset capable of being sold further strengthens this view and service is not a new concept as it was very much known at the time of issuing Notification 339/85. Unlike new discoveries wireless transmission and video tapes and recordings were to be included in the definitions telegraph line and cinematograp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1985 4. Notification No. 263/85-Customs, dated 16-8-1985 5. Notification No. 339/85-Customs, dated 25-11-1985 6. Notification No. 340/86-Customs, dated 13-6-1986 7. Notification No. 170/93-Customs, dated 13-9-1993." We are not convinced with the arguments advanced on behalf of the Revenue that the corresponding provisions of the notification mentioned in clause 5(2) of the notification cannot be read as corresponding provisions of this notification and there is ambiguity in it apart from the fact that date of import is not covered by this notification. On going through the Clause 5 of the Notification and in the context we do not find any ambiguity in the Notification 133/94 and it is clear from the notification that Notification 339/85 was not only rescinded but whatever the act was done or action taken under the Notification 339/85 deemed to have been taken under the corresponding provisions of the Notification 133/94. It is not merely a clarificatory in nature but overrides the earlier notification with reference to the acts and actions taken. This Notification 133/94 widens the exemption. Not only it exempts the goods specified in the Annexure to the notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a statute enacts that something shall be deemed to have been done, which in fact and truth was not done, the Court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to and full effect must be given to the statutory fiction and it should be carried to its logical conclusion. (Vide Lord Justice James in Ex parte Walton: In re Levy, [(1881) 17 ch. D. 746 at p. 756 (A)]. If the purpose of the statutory fiction mentioned in s. 15 is kept in view, then it follows that the purpose of that fiction would be completely defeated if the notification was construed in the literal manner in which it has been construed by the High Court. In East End Dwellings Co. Ltd. v. Finsbury Borough Council, (1952) A.C. l09 (B), Lord Asquith while dealing with the provisions of the Town and County Planning Act, 1947, made reference to the same principle and observed as follows : If you are hidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative, state of affairs had in fact existed, must inevitably have flowed from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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