9911796707
TMI Blog2015 (2) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... rce in its letter dated 16/02/1990, subject to the following conditions,- (i) M/s. EPL should achieve overall value addition in exports of not less than 20%; (ii) M/s. EPL could import capital goods of a value of Rs. 15.675 Crores for the said purpose; (iii) The list of capital goods and imported raw materials would be as per the information furnished by EPL in its letter dated 04/09/1989 (revised application) read with its letter dated 28/08/1989; (iv) Not less than 85% of the production by value shall be exported to General Currency Areas. (v) Import of capital goods/raw materials and components would be allowed only where necessary approval of the concerned authorities had been taken and subject to the approval of the phased manufacturing programme being obtained, wherever it was required. (vi) Foreign brand names would not be allowed for use on the products for internal sale, although there was no objection to their use on the products to be exported. 2.2 Investigation was carried out by the officers of the M&P Wing of the Preventive Commissionerate, Mumbai regarding the unit's manufacturing activities for export and sales of computer systems in the Domestic Tariff A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assemblies and in some cases, Tandon Brand Systems. However, scrutiny of DTA related documents indicated that M/s. EPL had effected sale of foreign brand computer systems which were not part of its usual manufacture and export. Except for 943 nos. of systems of f.o.b. value of Rs. 1,42,12,655/-, all other 2535 nos. of foreign brand computer systems of f.o.b. value of Rs. 11,60,74,628/- were found to have been sold under DTA permission by M/s. EPL, in clear violation of the Export-Import Policy. 2.7 In view of the large sale of foreign brand computer systems to various dealers by M/s. EPL against its DTA entitlement, detailed verification was done of the DTA related records maintained by the Tandon Group of Companies. It was found that such foreign brand computers were exclusively meant for domestic sale under DTA sale entitlement to certain select dealers, namely, M/s.Microland Ltd., M/s CMS Computes, M/s. Mini Comp Ltd., M/s. Unicorp Industries Ltd., etc. In view of this, the officers carried out simultaneous searches of the office premises of these dealers, namely, (1) M.s Unicorp Industries Ltd. on 02/12/1994, (2), M/s. Mircoland Ltd. at Fort, Bombay and its corporate office at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective purchase orders. Similarly, against the above said generic description, i.e. casing with cover, Power supply and Mother Board, Speaker, etc. no part no. was found mentioned, whereas in respect of other peripherals like Key Board, Mouse, Monitors, HDD, FDD, respective part nos. were found mentioned. There was no reference to the parts and components and the values were found furnished in terms of total no. of sets. The above position was corroborated supported by the correspondences of M/s. Microland, Bangalore. Most of the correspondences were made by Shri Ashok Radhakrishnan of M/s. Microland and sometime by Shri Anand Sudarshan with M/s. Compaq, Singapore and also with M/s EPL particularly with Shri Raghavendran and Shri Navin Kulkarni. 2.10 On scrutiny of the bills of entry with the respective invoices, it was found that the computer systems covered by the bills of entry and invoices were by and large described in the common configuration of mother Board, Casing, Power Supply, etc. The rest of the items namely, Key Board, Monitors, Mouse etc., were declared in the invoice and bills of entry as components of computer systems. 2.11 In his statement dated 05/05/1995, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be imported into SEEPZ for sale in DTA, the same were imported in dismantled condition to facilitate clearance of these as parts and peripherals of the systems. Shri V. Raghavendran of Tandon Group of Companies who was associated with the import and sales of computer systems under Domestic Tariff Area facility of Ms/ EPL in his statements dated 8/12/94 and 16/12/1994, admitted that the manufacture of computer systems by EPL was limited/confined to fitting of Hard Disc and floppy disk drives into the systems which were subjected to quality & reliability test. Shri M.L. tendon, Chairman of tendon group of Companies, SEEPZ, in his statements dated 29/11/1994 and 05/12/1994, while corroborating the statement of Sri. Raghavendran, averred that earlier they had purchased computer kits of the following brands, namely, Compaq, ACER and a few unknown brands. 3. After completion of necessary investigation, a show cause notice dated 27/03/1997 was issued to M/s. EPL and others under Section 124 read with Section 28 of the Customs Act, 1962 by the Commissioner of Customs (Preventive), Mumbai answerable to the Commissioner of Customs, Sahar Airport, Mumbai, alleging contravention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entitlement should not be confiscated under Section 111(d), (o) and (m) of the Customs Act, 1962 and why penal action should not be taken against them under Section 112(a) & (b) of the said Act. 4. The above notice was adjudicated upon by the Commissioner of Customs, Sahar Airport, Mumbai vide his Order-in-Original NO. COMMR/MCT/ADJN/05/05 dated 25/02/2005. In the said order, the Commissioner held that- (1) duty is recoverable on the CIF value of the goods of Rs. 10,87,84,034/- which was exempted from duty at the time of import and not on the value at which the goods were sold to DTA; (2) the foreign brand computer systems of an aggregate value of Rs. 9,68,81,852/- at the time of import and subsequently sold in DTA and local/Tandon brand computer systems of an aggregate CIF Value of Rs. 1,19,02,183/- at the time of import and subsequently sold in DTA were liable to confiscation under Section 111(d) & (o) of the Customs Act, 1962. (3) confiscated 21 nos. of foreign brand computer systems valued at Rs. 13,25,197/- seized from the SEEPZ premises under Section 111(d) & (o) of the Customs Act with an option to redeem the same on payment of a fine of Rs. 50,000/- (4) confirmed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned Order is only on the imported goods used for production & DTA sales. In other words, on the account of alleged non-fulfillment of value addition, no demand has been raised on capital goods or imported components used for export. In view of para (1A) of Notification No. 227/79-Cus dated 13/11/1979, for alleged non-fulfillment of value addition, no customs demand of duty in respect of imported inputs can be raised to the extent used in DTA production and sales. If at all, customs duty can be demanded on imported capital goods and imported inputs used in export production & sales. If at all, excise duty on finished product at full rate can be demanded under Notification NO. 97/91-CE dated 07/10/1991. 5(b) Prior to 1982, the FTZ Scheme formulated by the Ministry of Commerce required the units to export 100% of its production. The scheme did not permit any DTA sales at all. There was amendment in Export-Import Policy in 1982-83 which permitted units in FTZ to self 25% of their total production in DTA subject to the sale being made to persons holding valid import licence and subject to obtaining the requisite permission from the Development Commissioner. Consequential amendments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eviable on the like goods imported from abroad, a proviso has already been inserted in Section 3 of the Central Excise and Salt Act, 1944 vide Section 46 of the Finance Act, 1982 (14 of 1982). In view of the provisions of this proviso, basic excise duty leviable on the goods produced outside the free trade zone in India at the rates set forth in the First Schedule to the Act, is not leviable on the goods produced in a free trade zone and cleared to the domestic tariff area. The basic excise duty leviable under Section 3 on the goods produced in a free trade zone and brought to any place outside the zone in India will be equal to the duties of customs (i.e. basic customs duty, auxiliary customs duty, cess, additional (customs) duty and any other customs duty as and when imposed) leviable on like goods produced or manufactured outside India if imported into India. The valuation of such goods will also be done with reference to the valuation provisions under the Customs law and not under Section 4 of the Central Excises and Salt Act, 1944." Having collected Customs duties on the finished goods in the garb and name of excise duties, it would be inequitable and unfair to levy Customs d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of the permissions given by the Development Commissioner and on payment of applicable excise duty. Any contrary interpretation would result in collection of the duty twice in by way of Customs duty on inputs at the time of import and the Customs duty on finished goods at the time of clearance in DTA. Such a situation is not contemplated by the amendment made by Finance Act, 1982, 5(d) The expression "under and in accordance with the Export-Import Policy 1983-84" used in Para 1A does not refer to achieving any value addition. It refers to obtaining of licence by the DTA customer, obtaining of DTA permission by the FTZ unit, tendering the same for debit by Development Commissioner for payment of excise duty as assessed by the proper officer. This is clear from para 2 & 3 of the Circular dated 17/02/1983 and Rule 100D & Rule 100E of the erstwhile Central Excise Rules, 1944. In April, 1982, when amendments were made to permit DTA sales, full custom duties was payable on finished goods sold to DTA albeit in the name of the excise duty. If value addition is not achieved and if customs duty in demanded on imported inputs used for DTA sales, there would be an anomaly. Maybe, cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Commissioner which is reproduced below: "(4) the importer agrees to execute a bond in such form and for such sum as has been prescribed by the Development Commissioner of the Zone building himself to fulfil the export obligations, and to fulfil, inter alia, the conditions stipulated in this notification and in or under the Import & Export Policy for April 1985 - March 1988, notified by the Government of India in the Ministry of Commerce Public Notice No. 1-ITC(PN)/85-88, dated 12 th April, 1985 (hereinafter in this notification referred to as the said import & Export Policy), as amended from time to time." Thus condition (4) requires the importer to execute a bond and execution of bond is fulfilment of condition 4. So long as the appellants execute the bond, the condition is fulfilled. Subsequent, alleged non-achieving of export obligation etc. is not non-fulfillment or breach of condition 4. 5(f) In Union of India vs. Rai Bahadur Shreeram Durga Prasad - 1969 (1) SCC 91, the Supreme Court held that furnishing of a declaration is compliance with Section 12(1) of the Foreign Exchange Regulation Act, 1947 and incorrectness of the declaration does not amount non-fulfillment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned herein shall also apply to the said goods which on importation into India are used for the purposes of production, manufacture, processing or packaging of articles in a unit in the Zone and such articles (including rejects, waste and scrap material arising in the course of production, manufacture, processing or packaging of such articles) even if not exported out of India, are allowed to be cleared outside the Zone under and in accordance with the Export-Import Policy and subject to such other limitations and conditions as may be specified in this behalf by the Development Commissioner of the Zone, on payment of duty of excise leviable thereon under section 3 of the Central Excises and Salt Act, 1944 (1 of 1944) or where such articles (including rejects, waste and scrap material) are not excisable, on payment of customs duty on the said goods used for the purpose of production, manufacture, processing or packaging of such articles in an amount equal to the customs duty leviable on such articles as if imported as such :" After the aforesaid amendment to condition (3), it has been provided that the FTZ unit is required to execute a bond binding to fulfil the conditions stipulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant period, the requirement of achieving value addition was not stipulated. This view is supported by the Form of LUT executed under FTP. The form does not prescribe for achievement of value addition. The only requirement mentioned in such form is that units must export 100% of the production. Relevant portion of Form of LUT read as: "AND WHEREAS a condition of the licence granted to the Unit, the Government has stipulated that the Unit must earn foreign exchange by exporting 100% of the production of the export product, namely, ______________ for a period of ______________ years beginning from the first day after completion of gestation period allowed by the Government (hereinafter referred to as the prescribed date) after allowing rejects upto __________ percentage" The format of LUT executed under FTP remained same till March 1995. Relevant portion of Form of LUT reads as: "AND WHEREAS a condition of the licence granted to the Unit, the Government has stipulated that the Unit must earn Foreign Exchange by exporting 100% of the production of the export product, namely, ______________ for a period of ______________ years beginning from the first day after completion of gestatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise department demanded duty from the assessee in respect of DTA clearances effected on the ground that DTA entitlement granted by the Development Commissioner was not proper since it had taken into account "deemed exports" also and hence to that extent, there has been DTA clearances without the permission from the Development Commissioner. The Tribunal held that the permission given by the Development Commissioner to clear the goods in DTA was final and the same was binding. The departmental filed before the Supreme Court was dismissed as reported in 2007 (215) ELT A 102 (SC). 5(j) The impugned Order-in-Original has confirmed the differential duty demand by invoking bond executed by the Appellants. The show cause notice, however, proposed to demand differential duty by denying the exemption under Notification No. 227/79-Cus dated 13/11/1979 & 133/94-Cus dated 22/06/1994 in terms of the proviso to Section 28 of the Customs Act, 1962. The Show Cause Notice does not invoke the bond executed by the Appellants for demanding the duty. Therefore, the Commissioner of Customs in his impugned Order-in-Original has travelled beyond the show cause notice. It is settled that the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62. Reliance is placed on the decision of Orissa High Court in India Metals Ferro Alloys Vs. CCE - 2000 (123) ELT 337 (Ori), wherein the High Court held the demand raised by the department to be barred by limitation. In that case, the contention of the department was that the carbon paste imported by the EOU was not raw material required for the manufacture of the resultant product. In that case, the department sought to sustain the demand in terms of B-17 Bond executed by the assessee-EOU. This decision has been affirmed by the Supreme Court in CC Vs. Indian Metals & Ferro Alloys - 2002 (144) ELT A 105 (SC). 5 (l) It is submitted that Rule 2(a) applies for determination of classification. It does not apply for deciding the applicability of an exemption Notification. Therefore, denial of exemption by impugned order is by applicability of Rule 2(a) incorrect. These notifications apply to raw materials, components etc., falling under any chapter of the Customs tariff. Even if the imported goods are classified as computer system for the purpose of tariff, what was imported in fact was heap of components, these are duly covered by the exemption notifications. Reliance is also placed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot fitted together as an assembly, but separately in the same consignment, the benefit of Notification No. 21/2002-Cus., dated 1.3.2002, (vide S.No. 276) can be denied by applying rule 2(a) of the General Rules for the Interpretation of the First Schedule (GIR). ....... 5. The Board had accepted the decision of the Conference. Accordingly, it is clarified that the goods have to be classified in the form as presented and rule 2 (a) of the GIR cannot be applied for the sake of allowing/disallowing the benefit of a notification, unless the exemption notification is based on classification of the item under a particular heading of the Customs Tariff. For the purpose of classification, Rule 2(a) of the General Rules of Interpretation could be applied." Assembly of Computer from parts / sub-assembling amounts to manufacture even if parts /sub-assembling are treated as complete goods by virtue of Rule 2(a). The goods imported since goods imported in SKD condition are complete computer system in itself, is incorrect. The SCN as well as impugned Order alleges that the Appellants have imported complete computer system by virtue of Rule 2(a). According to the department, therefore, the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms (Preventive) as Collector or Commissioner or any Central Excise Officer under Central Excise Act. Notification No. 36/97-CE(NT) dated 19/08/1997 amended Notification No. 11/83-CE dated 11/02/1983. The amending notification appoints Commissioner of Customs in FTZ as Commissioner of Central Excise of FTZ. In view of above, during the period under consideration, Collector Customs (Preventive) was not appointed as Collector or Commissioner or any Central Excise Officer under Central Excise Act. Therefore, the Order is without jurisdiction & bad in law. 5(o) Decisions relied upon by the Revenue at time of hearing is not applicable to the facts of the present case. In those decisions, demand of customs for non-achievement of value additions where on imported inputs used for export and not on inputs used for DTA production & Sales. However, in the instant case, demand is on imported inputs used in DTA production & sales. 5(p) On behalf of Microland and its officials, the following submissions were made. During the period of dispute, Microland Ltd. was acting as an authorized distributor of Compaq brand computers in India. The others are officials/employees of Microland Ltd. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import were subjected to a process of assembly and manufacture and thereafter sold to the appellants under valid DTA sale invoices. Therefore, it cannot be said that the imported goods have been sold as such and the appellants purchased the imported goods. Similarly, Section 111 (m) is applicable for mis-declaration of description or value of the imported goods. None of the appellants are concerned with the import and cannot comment upon the so called mis-declaration. The appellants further submit that the provisions of Section 111 (o) are not attracted in this case as the imported goods have been taken into the EPZ unit and cleared thereafter, only after subjecting the goods to certain processes. As far as the appellants are concerned, it is not their business to know whether the goods in question were correctly imported by the EPZ Units, as long as the appellants can show that they have received the goods under the cover of valid duty documents from the EPZ units. The department has also not shown as to how the provisions of Section 111(o) have been contravened by the appellants. No specific allegations have been made against the appellants for contravention of Section 111(o). Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or manufacture of finished goods for export. This notification was also subject to various other conditions to be fulfilled after import. Similarly the Notification No. 133/94-Cus dated 22/6/1994 exempted raw materials, components, consumables etc. from Customs duties when imported by EPZ Units for manufacture of finished goods for export. This notification was also subject to various other conditions to be fulfilled by the importer after importation. However, M/s. EPL had failed to fulfil the conditions of the notifications. 6(4) In the present case, undisputedly M/s. EPL had imported full Computer Systems in the guise of parts & components after detaching or dismantling of floppy disk drive and hard disk drive from the Systems and in this endeavour, M/s. EPL was duly assisted by M/s. Microland and M/s. Compaq Asia Pte. Ltd., Singapore. Therefore, at the threshold, M/s. EPL was not eligible for duty free import under the notifications. 6(5) Even otherwise, M/s. EPL was not eligible for duty free import under the notifications inasmuch as it had neither fulfilled its export obligation nor it had achieved the minimum value addition in respect of export of the Computer Systems in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EPL. Consequently, the benefit of the notifications was not available to it. 6(8) Full Computer Systems of foreign brand of an aggregate CIF value of Rs. 9,68,81,852/- were imported by mis-declaration and the same were sold in the domestic market unauthorisedly claiming the DTA sale facility by paying concessional rate of duty as per Notification No. 97/91-CE dated 07/10/1991 and Notification No. 101/93-CE dated 27/12/1993. The notification 101/93-CE exempts excisable goods produced or manufactured in EPZ from so much of duty of excise leviable thereon under Section 3 of the Central Excise Act, 1944 as in excess of the amount calculated at 50% of each of the duties of Customs which would be leviable under Section12 of the Customs Act, 1962. Thus the exemption under Notification 101/93-CE is applicable only if the goods are manufactured in the SEEPZ. Since these complete Computer Systems were not manufactured in SEEPZ, this notification will not be applicable. Since the goods were cleared without fulfilling the value addition norms as laid down in the Import Policy, normal Customs duty would be leviable n these goods as if they had been imported outside the SEEPZ. 6(9) It was cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of import of the goods. It is submitted that a declaration is just a statement. It cannot be compared with the bond executed by M/s. EPL binding itself to fulfil the export obligation, and to fulfil, inter-alia, the conditions stipulated in the notification and in the Import-Export Policy. Admittedly, the appellant M/s. EPL failed to do so. Consequently, the benefit of exemptions under the notifications was not available to it. 6(12) At the relevant time, Computer System was a restricted item of import which required an Import Licence. Since the full Computer Systems, though in dismantled condition, were imported in violation of the licensing restrictions, the same became liable for confiscation under Section 111(d) of the Customs Act, 1962. This apart, M/s. EPL failed to fulfill the post importation conditions, namely, to achieve the minimum value addition in export and failed to fulfil its export obligation, thereby attracting the provisions of Section 111 (o) of the said Act. Further, full Computer Systems were improted in dismantled condition by mis-declaring the same as parts and components of Computer Systems. Consequently, the goods became also liable for confiscat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had no jurisdiction to do the same at the relevant time. However, he did not pursue this submission any further, presumably on account of the fact that Section 28 has been retrospectively amended by inserting sub-section (11) whereby the Commissioner of Customs (Prev.), amongst others, are retrospectively recognized as proper officers for the purpose of Sections 17 & 28 of the Customs Act, 1962. This has also been clarified by the Board vide its Circular No. 44/2011-Cus dated 23/9/2011. 6(19) In view of the foregoing, the appeals filed by the appellants have no merit. The same deserve to be dismissed and it is prayed accordingly. 7. We have carefully considered the rival submissions. Our findings and conclusions are discussed in the ensuing paragraphs. 7.1 One of the appellants, Sri. V. Raghavendran, passed away during the pendency of the proceedings. Therefore, the penal proceeding against him abates. 7.2 The ld. counsel for the appellant has raised a preliminary objection that since Collector of Customs (Preventive) has not been appointed as a Central Excise Officer, the impugned order is bad in law. We do not find any merit in this argument for the reason that the show caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chieve a minimum value addition of 20% subject to certain exceptions. (c) As per para 98, the unit was required to execute a bond/legal undertaking with the Development Commissioner concerned and in the event of failure to fulfill the obligations stipulated in the letter of approval/intent, it was liable to penalty in terms of the bond/legal undertaking or under any other law for the time being in force. (d) Para 102 governed DTA sales and sub-para (b) provided that 25% of the production in value terms may be sold in the DTA. DTA sale shall be subject to fulfilment of minimum value addition. (e) Para 119 governed value addition and the formula, prescribed for computing value addition was - VA = [(A-B)/A x 100 where VA is value addition, A is the fob value of exports realised by the unit, B is the sum total of the CIF value of all imported inputs, the value of all payments made in foreign exchange by way of commission, royalty, fees or any other charges and the value of all indigenous inputs purchased by the unit. Inputs mean raw materials, intermediates, components, consumables, parts and packing materials. (f) Para 94 governing importability permitted import of all types of go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in accordance with the provisions of section 142 of the Customs Act, 1962/Section 11 of the Central Excise & Salt Act, 1944 and rules made thereunder and/or from any other payment due to the unit from the Government." 7.4 From the policy provisions enumerated above, the following picture emerges. A unit in EPZ could undertake manufacturing activity in respect of permitted products subject to 100% export of the goods manufactured subject to achieving a minimum value addition of 20% in terms of para 97 of the Exim policy 1992-97. The said EPZ unit could also undertake DTA sales upto 25% of its production in value terms subject to fulfilment of minimum value addition (of 20%) in terms of para 102(b) of the said EXIM policy. Para 162 and 163 of the Handbook of Procedures also provided that the LOP/LOI shall specify the items of manufacture, annual capacity, percentage of value addition to be achieved, limitation regarding sale of finished goods etc and also subject to such conditions as may be required. In terms of para 98, the unit was required to execute bond/undertaking with the Development Commissioner concerned for fulfilment of the export obligation, failing which the unit w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n collaboration for the manufacture of mini and micro computer systems along with their accessories and spares subject to acceptance/adherence of the conditions stipulated in the annexure to the said letter. In the said annexure to foreign collaboration, it was stipulated in para 4 that for undertaking the export obligation specified in the approval letter, the requisite guarantee, i.e., legal undertaking/bank guarantee should be furnished as may be required. In para 12 of the said annexure, it was further stipulated that "foreign brand names will not be allowed for use on the products for internal sales although there is no objection to their use on products to be exported." 7.6. The appellant EPL applied for DTA sales permission vide letter No. YBS:EPL:368:91 dated 1991 for April, 1990 to March 1991, based on their production and exports during 01/04/1990 to 31/03/1991 and vide letter No. DTA:Sale: 20:85/7864 dated 10/12-9-91, permission was inter alia granted for DTA sale of 7237 nos. of computer systems for a value of Rs. 8,28,20,228/- by the office of the Development Commissioner. There was a condition stipulated in the said permission letter that "Actual sale will be permitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It will be useful at this juncture to see what were the conditions stipulated in the relevant customs notifications which operationalised the EPZ scheme. The relevant notifications are 227/79-Cus dated 30-11-79 as amended for the period prior to 22-6-94 and 133/94-Cus dated 22-6-94 as amended with effect from 22-694. Both these notifications provided exemption to goods specified in the annexure thereto and the coverage is more or less identical except that 133/94 - Cus included captive power plants also within the scope of exemption. Otherwise, as far as the present appeals are concerned, the goods exempted included, machinery, raw materials, components, spare parts of machinery and consumables. The exemption under notification 227/79-cus was subject to the condition that the importer had been authorised to establish a manufacturing unit in the EPZ, had the necessary licence for the import of the goods and the goods imported will be used in connection with the manufacture or packaging of electronic goods for export out of India or with the promotion of such exports of electronic goods. The notification also stipulated an additional condition which read as follows:- "4. The importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 3 without any substantial change in the 1994 notification. 7.8 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. This was also done to circumvent ITC restrictions as import of computer systems required an import licence. This charge is based on the evidence that M/s Microland Ltd., Bnagalore were dealers/distributors of M/s Compaq Computer Asia Pte. Ltd., Singapore and Compaq brand computers marketed by them were found to have been imported by EPZ units, mostly by M/s EPL, who in turn sold these computer systems under its DTA sales entitlement. 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 sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween Tandon and Microland held on 12 May 1992 Sl.No. Item Status Action to be taken By who By when 1 Tandon's meeting with Compaq Went off well To confirm details of SKDs, commercial and legal details of MOU. (Tandon's personnel may have to go to Singapore for finalisation) Compaq 12-Jun-92 3 Training for Tandon Required for assembly and quality control. Tandon willing to sign non-disclosure agreement Tandon's technical personnel will need to go to Compaq for technical certification training, preferable along with Microland team Compaq 02 Jun 92 4 Conversion of assembled systems to SKDs Tandon has indicated likely companies in Singapore. These companies are likely to charge 10% for their services. To tie up with one company To ensure that certificate of origin can be obtained from the Chamber of Commerce, Singapore Compaq 12-Jun-92 12-Jun-92 5 Costing Premium will be 50% for all configurations. Value addition may come down to 15% Free of cost 2% has to be supplied To negotiate with Tandon To wait To take into account for costing Compaq All Compaq 27-Jun-92 02-Jun-92 7 Ordering procedure Stage-I - Microland to release P.O. along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts in one corrugated box. ......." (D) The next document is RUD 67 (iii) which is a letter dated 16 th July, 1992 from N.B. Durka of M/s EPL to M/s Microland, Bangalore. The relevant portion from the said letter are extracted below:- "Sub:- Your purchase order for Compaq Systems Thank you for your above mentioned letter for your requirement of Compaq systems and spared by Mid August ....... We would like to have the following information from you. 1) The number of models with configuration 2) Model wise CIF cost of SKD parts. Please note that we need to configure the systems along with peripherals like monitors, keyboards and add-on cards as a computer systems. No spares will be allowed to be cleared from SEEPZ; therefore, you are requested to configure the systems for all the parts in SKD form ordered as complete computer systems in different models. We require all the above information at the earliest so as to enable us to raise purchase order on Compaq Asia Pte. Ltd., Singapore and give you quote on behalf of M/s Sonal Electronics for your purchase order." (E) The next document is RUD 68 (i) which is a fax dated 17 th July, 1992, from Tan Kok Hin, Regional Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant that the Prolinea prices indicated do not take into consideration the discounts agreed to between Compaq and Microland (8.5%) Request you to kindly resend proforma invoices taking into account the above points (including the 8.5% discount for Prolinea Systems). We await your fax today in order to enable us to send you the purchase orders. Please note that in order to meet Microland's delivery requirements, we would need shipments from Compaq by this week end." 7.9 It would be useful at this juncture to peruse some of the statements recorded as part of the investigation. (a) Sri. Anand Sudarshan, Vice-President of M/s Microland Ltd., Bangalore, in his statement dated 05/05/1995 recorded under section 108 of the Customs Act, admitted that order for complete computer systems were placed by them on M/s Compaq, Singapore and the purchase orders consisted of the list of various models, quantities and respective unit prices with an instruction to bill and ship them to Tandon Group of Companies such as Golden Computers, Ultra Tek Devices and Eastern Peripherals, M/s Compaq undertook conversion of the full computer systems into SKD forms and sent the proforma invoice to Tandon Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd., Singapore; M/s Acer Sales and Distribution, Taiwan; M/s Golden Systems Inc., USA; and other computer manufacturers and what they were getting was full computers and their documents. These were shown as parts and peripherals and in the invoices/purchase orders raised for computers they were described as parts as instructed by his boss, Mr. Raghavendran. He has also admitted that the description of the computer systems were configured manually in two parts, i.e. major configuration such as cases with motherboards, power supply unit, VGA card and other integrated assemblies which virtually constitute complete computer systems and did not bear any part numbers, whereas in respect of other peripherals such as monitor, keyboard, mouse and other accessories, they were bearing respective part numbers. Shri Kulkarni also admitted that no part number was quoted in respect of major configuration which virtually constitute complete computer systems minus FDD and HDD. He also admitted that they had visited Compaq factory at Singapore to ascertain and confirmed the possibility of dismantling completely manufactured computer systems which could thereafter be imported as SKD. He has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 7.11 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 t 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. 7.12 It is also on record that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he law cannot be interpreted in such a way so as to defeat the objects and purposes of the policy and the terms and conditions of exemption. Therefore, the contentions in this regard made by the appellants in this regard have to be rejected in toto. 7.14 It has also been argued that the show cause notice does not invoke the provisions of the bond executed by the appellants for the demand of duty, while the adjudicating authority has invoked the provisions of the bond for recovery of duty and, therefore, the order-in-original has travelled beyond the show cause notice and reliance has been placed on certain decisions in the case of Toyo Engineering India and Ballarpur Industries (supra). This contention is completely incorrect and bereft of any logic. In paras 336 and 337 of the show cause notice, it has been specifically alleged as follows: "336. Further in terms of the Provisions of para 98 of the Export and Import Policy, 1992-97 read with the conditions of legal undertaking in terms of appendix XXXIII of the Handbook of Procedures, an E.P.Z. unit is required to undertake the compliance and fulfilment of the conditions as stipulated in the Letter of Permission(LOP)/Letter of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hon'ble apex Court held that fraud nullifies everything and when a fraud is committed, statutory benefits cannot be extended. The same position was reiterated in the case of Commissioner of Customs, Kandla vs. Essar Oil Limited [2004 (132) ELT (SC)] wherein the Apex Court was considering a situation where goods were sought to be cleared on payment of duty through cheques despite non-availability of sufficient funds. The hon'ble apex Court while deprecating the action on the part of the respondent therein, held that 'fraud' is a conduct either by letter or words, which induces the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter and suppression of material documents would also amount to fraud. The hon'ble apex Court further noted that 'fraud' and 'collusion' vitiate even the most solemn proceedings in any civilized system of jurisprudence. In the present case, the appellants resorted to complete mis-declaration and suppression of facts, planned and executed evasion of customs duty by importing prohibited goods without having any valid licence and selling the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the required value addition, duty demands were raised. In that case also, the importer therein had executed a bond binding itself to fulfil the export obligations and the condition of value addition stipulated in the EXIM policy and the customs notification. This Tribunal held that on account of failure to fulfil the export obligations, provisions of Section 111(o) of the Customs Act would be attracted and the imported goods would be liable to confiscation. This Tribunal also held that the appellant is liable to pay differential duty liability in terms of the relevant Notifications. 7.18. The hon'ble apex Court had an occasion to examine violation of exemption Notification in respect of raw materials imported under the advance licence scheme wherein the appellant, M/s. Sheshank Sea Foods Pvt. Ltd. failed to fulfill the post importation condition [1996 (88) ELT 626 (SC)]. A challenge was made as to the jurisdiction of the Customs authorities to investigate the matter under the provisions of the Customs Act and the hon'ble apex Court held that there is nothing in the EXIM Policy or in the Handbook of Procedures that even remotely suggest that the Customs authorities' p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also under the provisions of the bond executed by the appellant at the time of the importation of the goods. In the present case, the 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
