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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 ..... of software for an initial period of three years and based on this approval, a customs bonded warehouse licence (CBWL) was granted on 23-7-2002 valid upto 28-2-2005. in terms of Section 65 of the Customs Act, 1962. Delta procured imported and indigenous goods without payment of duty in terms of Notifications 138/91-Cus. and 140/91-Cus. and 1 /95-C.E. in consonance with the Exim Policy, and installed the goods in the customs bonded premises on the 5th floor 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted duty free from Delta. We, therefore, set aside the duty demand. As regards confiscation, although the Commissioner has not invoked any specific sub-clause of the section either in the show cause notice or in the impugned order, learned SDR would urge that the provisions of Section 111(o) are attracted for the reason that the imported goods were exempt from payment of customs duty subject to the condition that they were used in the manufacture of software 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants have submitted that the sale was not effected and the goods are still in the bonded premises having valid bond. Therefore, the duty can not be demanded till the bonding period is over. They further submitted that the goods are still in the same bonded premises and have not moved out of that premises. 10. The Departmental Representative Shri P.K. Katiyar submitted that apart from the Sale Agreement between M/s. Delta and M/s. GAIA, there are subsequent agreements between M/s. GAIA (i.e. the purchaser of the goods) and M/s. Nanu Software and M/s. Four Connect for utilizing the purchased goods and equipments in the bonded premises i.e. 5th Floor of Sohrab Hall, Pune. On the point of the removal of the goods out of the premises as a result of sale, he submitted that the very nature of the goods is such that these are to be sold/rented on the same physical location. 11. He has drawn our attention to the list of the goods enclosed with the agreement showing that the goods in question are Air Conditioners, Wipro Luminaries, Toilet Accessories, Chairs, Access/Fire/Smoke Alarm System, Sofa sets, Antistatic Floormg for UPS Room Tapestry Cloth Gas Geysers LPG Pipe-line ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the complex and use them within the complex in connection with the development of software for export, using data communication link or in the form of physical export:" (b) Notification 140/91-Cus. condition 4(a) which reads as: "To bring the goods into the complex and use them within the complex in connection with the development of software for export, using data communication link or in the form of physical export:" (c) Notification 1/95-C.E. condition 1(b) which reads as: "The user industry brings the excisable goods directly from the factory of manufacture and uses them for the purpose as specified in the clause (a) to (c) above solely for export:" 17. I find that the appellants have failed to produce any evidence that the goods m question were used in connection with the development of software for export On the other hand, the agreement, invoices and the statements show UTI the goods were used for domestic use and not for the development of the software for export and that is precisely the allegation of the Revenue Therefore the goods became liable to confiscation as soon as the above mentioned conditions of notifications, under which these were exempted, are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Finance Act, 2004 (23 of 2004) by which proviso has been inserted to Section 11 of the Central Excise Act, 1944 and Section 142 of the Customs Act, 1962 respectively which, inter alia , states as under: "Provided that where the person (hereinafter referred to as predecessor) from whom the duty or any other sums of any kind, as specified in this section, is recoverable or due, transfers or otherwise disposes of his business or trade in whole or in part or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all excisable goods, material, preparation, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person succeeding may also be attached and sold by such officer empowered by the Central Board of Excise and Customs." 23. In the result penalties imposed on Mr. Anish Patel, Mr. Anand Shriniwas and Mr. Farhad Bottlewala are set aside and appeals Nos. E/3363, 3366 3367/2006 are allowed. Order confirming duty liability, confiscation and imposition of redemption fine against M/s. GAIA is upheld but penalty imposed on M/s. GAIA is set aside. Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is not passed on to GAIA and the appellants M/s. Delta World Tele Systems are still the owners. It is his further submission that by virtue of extension by STPI for fulfilment of export obligation till April 2008, the current demand is pre-mature. It is his submission that even the Customs authorities had extended the Customs Bonded Warehousing Licence till 31-1-2008 and hence, a show cause notice issued on 7-4-2006 is pre-mature. He relies upon the following judgments of the Tribunal (a) Transparent Technologies Pvt Ltd. v. CCE, Belgaum [2006 (200) E.L.T. 118 (Tri-Bang.)] (b) CEETA Industries Ltd. v. CC, Bangalore [2006 (198) E.L.T. 209 (Tri- Bang)] (c) Natural Stone Exports Ltd. v. CC (Appeals), Bangalore [2006 (198) E.L.T. 440 (Tri.-Bang)] It is his submission that these goods on which demand has been raised and confirmed by the adjudicating authority are still lying in the bonded warehouse i.e. EO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '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 his submission that the question of utilizing the equipment, which were in the name of Delta World Tele Systems does not arise. He submits that the area, which had been rented out to Delta World Tele Systems was in tact and no activities were carried out in that area, but an adjoining area has been rented out by GAIA to other units for conducting their business. He produces records, invoices of purchasers of the equipment of such services. 31. Ld. Jt. CDR would indicate that if that be so, since there is no finding on this issue, the impugned order may be set aside and remanded back to the adjudicating authority. For this proposition, Ld. Counsel would submit that point of differences between the two members have been clearly laid down in the order and, hence, third Member does not have any other option, but to come to a conclusion or opinion, on the question, which has been referred to. 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 order and remand the case to the Commissioner with a direction that he is free to proceed against the appellants subject to the clarification in Circular No. 122/95 dated 28-11-95 wherein it has been clarified that in matters like non-fulfilment of export obligation, action can be initiated by the Customs Department only in consultation with the Development Commissioner or the Commerce Ministry. The authorities shall follow the procedures as laid down in the Board Circular 1995. The stay application and appeal are allowed on the above terms". 35. I also find that the Division Bench of the Tribunal in the case of Ceeta Industries held as under :- "We have gone through the records of the case carefully. The Development Commissioner in his letter dated 29-11-99 has granted permission to the appellants in terms of para 9.18 of Exim Policy to dispose of unutilized indigenous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 agreement with the contention of the appellants that the demand of duty on capital goods at this stage is rather premature. The 100% EOU is a bonded warehouse in terms in the scheme of 100% EOU and also the Customs Act. It is well settled that duty has to be paid on warehouse goods only at the time of clearance from the warehouse. The lower authorities view that duty is payable even when the goods are in the bonded warehouse is not as per law. As regards goods other than capital goods (raw materials, consumables, etc.) the quantity unutilized in the manufacture of articles for export is definitely liable for appropriate duty. Since, the adjudication order has treated both the capital goods and the other goods on the same footing, we have no other option but to remand the case to the original authority for quantification of duty on the goods (other than cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest. 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 show cause notice dated 7-4-06 is totally pre-mature. 40. In view of the above reasoning, I find that the view taken by the Hon'ble Vice-President i.e., the entire impugned order has to be set aside is correct. 41. In the result, difference of opinion is answered as under :- "In the facts and circumstances of the case, the finding as has been reached by the Hon'ble Vice-President is correct and the impugned order is liable to be set aside as being pre-mature". 42. The registry is directed to place the file before the referral Bench for further action. Sd/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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