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TMI Blog2008 (3) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... loor of Sohrab Hall, 21, Sasoon Road, Pune - 411 001. It was found that they had sold these goods to M/s. Gaia Its for Rs. 42,00,000/- under an agreement dated 4-10-2004 during the currency of the CBWL, without commencing commercial production and without fulfilling the stipulated export obligation, and without intimation to the department as well as to STPI in spite of the fact that the goods were still warehoused under bond. The licensing authority vide its letter dated 31-7-2002, withdrew the STPI status prematurely as Delta has not commenced any export. The officers of the department found certain incriminating documents, viz, agreement between Delta and Gaia Ites for sale of goods and also agreement between Gaia and Four Connect Solutions Pvt. Ltd. and Nanu Software for the use of the capital goods in the warehouse, which showed not only that Delta sold the goods but further the buyer thereof. Gaia, had further received monetary benefit from the clandestine domestic usage as call centres of the duty free goods. 2. On the above basis, the goods were seized and handed over to Shri Anand Srinivas of Gaia Ites, for safe custody. His statement was recorded on 11-10-2005 in which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for export, which condition has neither been observed nor has the non-observance thereof been sanctioned by the proper officer. However, we agree with the appellants that in the face of the admitted position that the period for ones lment of export obligation by Delta has been extended till April, 2008 by STPI, confiscation under Section 111(o) cannot be sustained and it is only in the event of non-fulfilment of the export obligation during the extended period that the provisions of Section 111(o) can be invoked against the goods. We, therefore, set aside the confiscation of the goods. As a onesquence, penalty imposed upon Delta also cannot be sustained and is hence set aside. Penalties imposed in terms of Rule 26 on the other three appellants are also set aside for the reason that the duty and confiscation have been held to be unsustainable and also for the further reason that the show cause notice does not propose penal action against these three appellants. 6. In the result, the impugned order is set aside and the appeals al lowed. (Pronounced in Court on . ) & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing Customs Notification No. 138/91. 140/91 and Excise Notification No. 1/95, against which the goods were imported and indigenously procured duty free. Further it appears that M/s GAIA ITES have also contravene the conditions of the aforesaid notifications in as much as they had bought the goods from M/s Delta during the currency of the Customs Bonded Warehouse licensing period and surreptitiously used it. It also appears that M/s GAIA ITES has contravened the provisions of Section 72 of Customs Act in as much as they had not discharged requisite duty on the goods lying in the bonded warehouse when the license expired on 19-4-05. It also appears that the said goods valued at Rs 2.76 Crores and seized under panchnama dated 12-10-05 are liable for confiscation under the Customs and Central Excise law in as much as both M/s Delta and M/s GAIA have contravened Customs and Central Excise law in respect of these goods." 8. The Commissioner has relied on the following evidence that the goods have been sold: (a) Sale agreement between M/s. Delta and M/s. GAIA dated 4-10-2004; (b) (1) Agreement Between M/s. GAIA and M/s. Four Connect. (ii) Agreement Between M/s. GAIA and M/s. Nanu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the fact that goods are not in possession of M/s. Delta is further strengthened by the letter of STPI dated 14-9-07 addressed to the Deputy Commissioner, Pune in which it is reported that M/s. Delta has NIL export till July, 2007. 14. I have perused the copy of the agreement between M/s. Delta and M/s. GAIA and further agreements between M/s. GAIA and M/s. Nanu Software and M/s. GAIA and M/s. Four Connect. I have also seen the statements of Mr. Anish Patel. Farther of M/s. Delta and Mr. Farhad Bottlewala of M/s. GAIA admitting the sale. I have also seen the invoices raised by M/s. GAIA. 15. In view of the submissions made by both the sides and the evidence produced in the form of unretracted statements, agreements and the invoices raised by M/s GAIA for collecting the Rent/Voice and other charges, I am of the view that goods have been sold by M/s. Delta to M/s. GAIA and those are further rented out to M/s. Nanu Software and M/s. Four Connect by M/s. GAIA for f use obviously for domestic use as alleged in the show cause notice. 16. The learned DR has submitted that as the goods have been sold to M-/s. GAIA, who have further rented out the same to others for the purpose of dome ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion fine in lieu of confiscation. I uphold his order in this regard. Although M/s. GAIA are liable to penal action yet in the absence of invocation of penal provisions against them in the show cause notice, no penalty can be imposed on them. I cannot traverse beyond the show cause notice. Hence the penalty imposed on M/s. GAIA is set aside. However, the penalty imposed on M/s. Delta World Tele Systems is sustainable. The same is upheld. 21. Although penalty is imposable on S/Shri Farhad Bottlewala, Anand Shriniiwas and Anish Patel yet in the absence of invocation of Rule 26 of the Central Excise Rules against them in the show cause notice, the penalty is not sustainable. The order of the Commissioner imposing penalties on the aforesaid three appellants is set aside. 22. Even if M/s. GAIA may not be liable to pay duty in terms Section 72(b) of the Customs Act, 1962 as the bond is still valid, they, being the owner of the goods, are liable to pay duty and interest in terms of Section 28 of the Customs Act, 1962 and proviso to Section 11A of the Central Excise Act, 1944 read with Section 11AB of the Central Excise Act, 1944 and Section 28AB of the Customs Act, 1962. I order accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; (A.K. Srivastava) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before me to resolve the difference of opinion between the Members. 26. The Hon'ble Vice President has held that the appeal filed by the appellants has to be allowed, while the Hon'ble Member (Technical) has held that the confirmation of demand of duty has to be upheld along with confiscation and interest made liable to be charged and further penalty to be imposed to one of the appellants. 27. Heard both sides and perused the records. 28. It is the submission of the ld. Counsel that the appellants M/s. Delta World Tele Systems were the holders of an Export Oriented Unit (EOU) and they had imported capital goods for setting up of a unit for export and they were granted a licence by M/s. Software Technology Park of India (STPI), which was valid up to 28-2-2005 and the said licence is extended till April, 2008 by STPI. It is his submission that though there was an agreement between M/s. Delta World Tele Systems and M/s. GAIA ITES for the sale of goods, which were imported by M/s. Delta World Tele Systems. Actual transactions had not taken place and no consideration is received from, M/s. GAIA till date. He submits that having received no consideration, the ownership of the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is his submission that extension of Bonded warehousing licence up to January, 2008 under Section 58 of the Customs Act would not an extension of warehousing period under Section 61. He relies upon the correspondence that took place between the department and the appellants. It is also his submission that extension of Bank guarantee and extension of the period under Section 61 of the Customs Act, does not automatically mean that the demand is premature. He also relies upon the letter dated 31-7-2003 wherein STPI has directed the Deputy Commissioner of Central Excise and Customs to initiate proceedings for the recovery of Customs duty as Delta World Tele systems having been registered as 100% EOU has not commenced production. He submits that the CBEC Circular No. 7/05 dated 14-2-2005 will be applicable in this case and demand of duty is correct. It is his submission that findings reached by the Hon'ble Member (Technical) are correct. 30. Ld. Counsel in rejoinder submits that GAIA had purchased independent equipment for giving GAIA Information Technology Enabled Service and has used those independent equipment and hired them out to another cornpany for conducting business. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imported by Delta World Telesystems had been brought in into premises which was indicated in the licence applied for by them to STPI. It is also undisputed that all the equipments on which Customs duty has been foregone had been brought into the premises of Delta World Tele Systems. It is also undisputed that the entire capital goods/equipments are still in the premises as was indicated in the application for licence to STPI as well as to the Customs authorities. I find strong force in the submission made by the ld. Counsel that the issuance of show cause notice on 7-7-2006 for the recovery of the Customs duty foregone by Delta World Telesystems is premature. I find that the Division Bench of the Tribunal in the case of Transparent Technologies Pvt Ltd. (supra) in para 4 held as under: "On a careful consideration we notice from the records that the Licensing period has not yet expired. Furthermore, the capital goods are still under bond and in view of the citations on this issue, the confirmation of demand is premature. Hence they are entitled to seek full waiver of pre-deposit of the amount. As the demands are not sustainable and they are premature, we set aside the impugned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfaction of the Asstt. Collector, Customs to have been used in the manufacture of articles for export". A careful reading of the above paragraph shows that the appellants are under an obligation to pay on demand an amount equal to the duty leviable on the goods as are not proved to the satisfaction of the Asstt. Collector, Customs to have been used in the manufacture of articles for export. In the present case, it is not the case of the Revenue that the appellants had not at all exported any goods in terms of the Notification and the permission given by the Department of Industrial Development, It is on record that the appellants have achieved 64% of NFEP, therefore the conclusion that the appellants have not used the imported the goods/indigenously procured goods in the manufacture of articles for export is not correct in view of the partial fulfilment of the export obligations. Hence, demanding duty on the entire goods imported/indigenously procured goods in terms of the relevant Notification is not at all correct. The view taken by lower authority is not in consonance with the justice and fair play. The fact that the EOU has been allowed to de-bond is not in dispute. We are in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircular at para 4 reads as under "The Notification 52/2003-Cus. and 22/2003-C.E. both dated 31-3-2003, governing duty free import and procurement of goods respectively, by EOU/EHTP/STP provides that in case the capital goods are not utilized or used within a period of one year from the date of import and procurement or within such extended period not exceeding 5 years allowed by the proper officer on being to pay duty and interest. This provision of the notification would remain unaltered. However, while granting extension of capital goods which has not been utilized, the unit may be asked to justify the reason for not utilizing the goods". 39. On a plain reading of the above said para, it can be seen that till the expiry of the period and extended period as allowed by the proper officer, there cannot be any demand for payment of duty and interest. It is undisputed in the case before me, that STPI, the licensing authority had extended the period of fulfilment of export obligation till 30-4-2008 and the officers of the Customs and Central Excise had extended the warehousing period till 31-1-2008. These two instances put together would indicate that the demand of duty by the said s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Member (Judicial) MAJORITY ORDER The impugned order is set aside and the appeals are allowed. Sd/- &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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