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TMI Blog2008 (6) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... (P) Ltd. (HTSL) but also on one Shri R. Nandakumar, Chief Financial Officer and Shri V.G.S. Narayanan, Manager (Logistics). Thus, there are 6 appeals against the two Orders-in-Original. 3. The gist of the Orders-in-Original is given in the following tabular column. Sl. No. Orders-in-Original No. Date Details of Duty Demanded Details of Redemption Fine Details of Penalties 1. 26/2006 dated 28-12-2006 (i) Rs. 25,57,889.56 on the goods which were present in the EHTP bonded premises as per table 1 in para 5 of O-I-O (ii) Rs. 52,84, 725.16 being Customs Duty on the goods which were not found in the EHTP premises (iii) Rs. 2,73,052/-Central Excise Duty on goods locally procured duty free by M/s. HTSL but locally found to be diverted out of EHTP premises Rs. 18,00,000/-on the goods which were found physically present in the EHTP premises, but which were used for carrying out activity not permitted in the licence (i) Penalty of Rs. 50,00,000/- on HTSL Under Section 112 (ii) Rs.1,00,000/- on Shri Nandakumar under Section 112 (iii) Penalty of Rs. 5,00,000/- on Shri V.G.S. Narayana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and Ms. Sudha Koka, the learned SDR, for the Revenue. 6. We heard both sides. 7. The Order-in-Original No. 26/2006 relates to the EHTP division of the appellant unit M/s. Honeywell Technology Solutions Lab (P) Ltd. (HTSL). The appellant is a 100% EOU. Initially they obtained Letter of Permission (LOP) for the manufacture of hardware. Under the 100% EOU Scheme, they had procured goods by importing and also indigenously duty free under the relevant Customs and Central Excise Notifications. In respect of the Order-in-Original 26/2006, the main allegation against the appellant is that they used the capital goods procured free of duty for activities other than permitted in the notification 52/2003-Cus. dated 31-3-2003. Another allegation is that the appellants diverted capital goods out of the EHTP Division. 8. The learned Departmental Representative took us through the exemption notifications and stated that the capital goods were imported for the purposes of manufacture and export of electronic hardware. However, when the Departmental Officers visited the unit, the said goods were used for Business Process Outsourcing (BPO). In terms of the LOP and notification, this ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to meet their growth in business, they had started additional new activity of Business process solution for export purposes in the same premises. This was not mentioned in their letter dated 22-2-2005. Further, it was mentioned that some of the STP unit's computer system were moved to the EHTP unit for carrying out the above activities. They requested for condoning the delay in seeking permission. The STPI Director, in his letter dated 30-10-2006, not only condoned the delay but also imposed a penalty of Rs. 3.1 laths on the appellant. While taking such a decision, the Director took into account the following facts: (i) The delay was inadvertent and not deliberate. (ii) Due to space constraint in STP licence and expansion proposals. (iii) STP unit and EHTP unit are of single parent/entity. (iv) Facility was used for export of software activity and has brought FE inflow of Rs. 10.93 crs. (II) In any case, after the visit of the Customs Officer, the irregularities of using the capital goods imported for EHTP unit for STP unit was noticed. Some of the capital goods in the EHTP unit were not available there. Moreover, some of the goods belonging to STP were found in the EHTP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysical verification of the premises and identified the computer system. The Director was requested to depute an officer to verify and confirm that all the computer systems imported by the EHTP unit are either lying within the EHTP units or in one of their STP units. Consequent to the above letter, a physical verification was carried out by STP officials. The verification indicated that the goods were available and the locations were also indicated in detailed statement. (c) It was stated that the Customs Authorities are bound by the decisions of the Licensing Authority and they are not permitted to take a view that STP activity was not permitted to be undertaken in the EHTP premises when the Licensing Authority has regularized the said activity for the same period. The following decisions were relied on: (i) Ginni International Ltd. v. CC - 2002 (139) E.L.T. 172 (Tri.-Del.) (ii) CCE, Hyderabad v. Sanghi Spinners (I) Ltd. - 2007 (209) E.L.T. 43 (d) It was argued that the Commissioner's finding at Para 64 to 72 of the impugned order that since the Customs Licence had not been amended is not tenable since once the Licensing Authority had permitted the activity, the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose 7 demands, 3 demands relate to the duty on the computer allegedly diverted from STP Units to EHTP Unit. Further, 3 demands relate to the goods found in multi level car parking and outside the bonded premises. One demand of Rs. 41,56,289/- is the duty on the goods 112 PCs allegedly sold to M/s. Vimal Computers without de-bonding the same. The learned Advocate vehemently argued that the duty free capital goods have not been diverted out of the STP premises and used for purposes not connected with the specified purposes. As the duty free capital goods are being used in other bonded locations for carrying out export activity, no prejudice is caused to Revenue. For executing the fresh project, more space was needed and the space available in the EHTP premises had to be used. In view of this, certain projects were moved out of STP units to EHTP premises along with the computer systems. There was no mala fide in the movement of computer system. As the goods are lying in the bonded warehouse of the appellant, there can be no demand of duty on these goods until and unless these capital goods are either cleared for home consumption or removed in contravention of Section 71 of the Act. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents the different parts like keyboard, mouse etc. According to the department, the goods cleared to M/s. Vimal Computers are as follows: Sl. No. Gate Pass and Date Description of the goods Quantity 1. 3570/29-7-03 PCs and accessories 112 Nos. 2. 3848/19-9-03 PCs Keyboard Mouse 16 Nos. 10 Nos. 5 Nos. 3. 5302/26-5-04 Non-working junk monitors 70 Nos. 4. 5926/2-9-04 PCs Monitors 10 nos. 68 Nos. 5. 6244/20-10-04 PCs Keyboards Mouse 28 Nos. 28 Nos. 28 Nos. 12.1 The point made by the appellant is that the department has come to the conclusion that in respect of the above invoices, the total computers cleared is 166. According to for Gate Pass No. 3570, the PC cleared is one and 112 represent the various accessories. If that view is taken the number of PCs cleared will be only 55 which is 1+16+10+28=55. In fact, the appellant contended that they had already paid duty on 153 numbers of PCs, which is far in excess of the balance quantity of 55. Therefore, no duty can be demanded on these compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for export purposes. They did not mention this in their letter dated 22-2-2005. However, this lapse was condoned by the STPI Director. The ex-post Facto sanction was given in their letter dated 30-10-2006. Even in October 2004, the activity of Business Process Solution commenced. This activity is also meant for export. In view of the STPI Director's approval dated 30-10-2006, the carrying out of such activity with the help of the imported goods and indigenous goods obtained free of duty does not appear to be such a serious lapse. No doubt, there have been procedural irregularities. The appellants should have kept the Customs informed at every stage. In any case, the STPI Director imposed a penalty of Rs. 3.1 lakhs on the appellant for the delay in informing them and getting approval for their activity of Business Process Solution. While taking such a decision, the STPI Director considered the following facts: (i) The delay was inadvertent and not deliberate. (ii) Due to space constraint in STP licence and expansion proposals. (iii) STP unit and EHTP unit are of single parent/entity. (iv) Facility was used for export of software activity and has brought FE inflow of Rs. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand duty purely for technical violation. The case laws (cited supra) in Para 9(II)(c) are relevant. The fact that Customs Licence had not been amended is a technical violation. In these circumstances, we are not in agreement with the Adjudicating Authority who has held the impugned goods liable to confiscation under the Customs Act. The STPI Authority is also created by the Government of India. They had undertaken verification of the bonded goods and had certified that they are available. In terms of Public Notice 1/93 dated 1-1-1993, the STP Authority is the Bonding Officer. It was not correct to reject their verification report holding that they are interested party. The investigation has not shown how the STPI authorities were an interested party. It is surprising that Show Cause Notice had been issued to STPI also. Proviso to Section 3 is reproduced below: "Provided that for taking out of capital goods from one unit to another unit in a special economic zone or to other export oriented undertaking or Electronic Hardware Technology Park (EHTP) unit or Software Technology Park (STP) unit, as the case may be, no permission of the said officer shall be essential and the capita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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