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TMI Blog2009 (1) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... -2009 - S/Shri T.K. Jayaraman, Member (T) and M.V. Ravindran, Member (J) Shri B.V. Kumar, Advocate, for the Appellant. Ms. Sudha Koka, SDR, for the Respondent. [Order per : T.K. Jayaraman, Member (T)].- These appeals have been filed against the Order-in-Original No. 22/2007-Commr. dated 17-8-2007 passed by the Commissioner of Customs, Bangalore. 2. We heard both sides. 3. The appellants are a 100% EOU working in terms of Notification No. 52/2003-Cus., dated 31-3-2003 and 22/2003-C.E., dated 31-3-2003. They have been granted In-bond Manufacturing Sanction Order and also a Private Bonded Warehouse License to manufacture and export "Tubes, Parts and Accessories for Medical Diagnostic Imaging Equipments and High-voltage Tanks for X-ray Generators." Revenue proceeded against the appellants by way of issue of a show cause notice dated 13-2-2006. The allegations are that the appellants had violated the conditions of Notification No. 52/2003-Cus. and Notification 22/2003-C.E. and also Para 6.2(h) of the Foreign Trade Policy. It has been stated that a 100% EOU can procure and export spares and consumables only up to 1.5% of the FOB value of the manufactured exported g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, amounts to manufacture as defined under Foreign Trade Policy, and therefore, they are entitled for the duty free import. In other words, their main point is they had not violated the conditions of notification. Our attention was invited to para 9.37 of the Foreign Trade Policy, wherein the definition of "manufacture" is given as follows: "Manufacture means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, re-packing, polishing, labelling, re-conditioning repair, remarking, refurbishing, testing, calibration, re-engineering." 5. The learned advocate stated that the Commissioner has taken a very narrow definition of the "manufacture" from the Central Excise and has applied it here. According to him, over a period of time, the Government of India has liberalized the norms and as far as the Foreign Policy is concerned, "manufacture" has a separate definition. A very broad view has been taken and therefore, their main contention is they had not violated any notification. In fact, it was insisted that what they had exported are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufactured and exported: Tubes, Parts and Accessories for Medical Diagnostics Imaging Equipment. 7. It was stated that GE Medical Systems being a Global Conglomerate, depending upon the requirement of the appellant-company's affiliates in other countries, they have to supply parts and accessories on commercial basis, which bring additional Foreign Exchange. These parts may consist of either manufactured or bought out parts. GEBE approached the Development Commissioner, CSEZ, vide theft letter dated 5-3-2001 for broadbanding the products that can be manufactured by them. Accordingly, they were granted permission to broad band the items of manufacture vide the letter of the Development Commissioner dated 14-3-2001, in which they specifically mentioned items of manufacture CT Detectors, parts and accessories. Subsequently, the appellant approached the Development Commissioner vide their letter dated 11-9-2003 and sought permission for export of bought out parts, to their affiliates and customers on commercial basis, since transactions would bring in additional Foreign Exchange. It was further mentioned that though the licences issued to GEBE cover parts and accessories along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s production prematurely or fails to commence production or export within the stipulates period. In case the Dev. Commr. initiates action against the unit for non-fulfillment of export obligation etc., simultaneously the Customs authorities should issue show cause notice for failure to comply with conditions of Notification 13/81-Cus., dtd. 9-2-1981. The demand of duty should be confirmed only after a definite conclusion has been arrived at by the Dev. Commr." 10. In the instant case, the Development Commissioner, CSEZ, Cochin has initiated no such action. On the contrary, taking into consideration the letter dated 3-6-1999 of the appellant, the Development Commissioner, CSEZ, has granted specific permission for quality testing and export of certain parts. Similarly, the appellants approached the Development Commissioner for export of "Parts" as required by their affiliates and customers on commercial basis, saying that these transactions would bring in additional foreign exchange. In response to that, the Development Commissioner had granted the permission. The Commissioner in the impugned order has referred to CBEC Circular No. 4/2005-Cus. dated 31-1-2005. It was pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia and the Development Commissioner, CSEZ, Cochin, for export of imported bought out parts and accessories, under the circumstances of the case, the Customs Authorities have no jurisdiction to proceed in the matter. The following case-laws were relied on: (a) DSL Software India Ltd. v. CC, Bangalore - 2005 (181) E.L.T. 250 (T) (b) Converge Labs Software Tech. P. Ltd. v. CCE, Gurgaon - 2005 (192) E.L.T. 995 (T) (c) Dolphin Drugs Ltd. v. CC, Mumbai -2000 (115) E.L.T. 552(T) (d) Jaysynth Dychem Ltd. v. CC, Mumbai - 2001 (136) E.L.T. 1429 (T) (e) Tata Iron Steel Co. Ltd. v. CC - 2004 (177) E.L.T. 1004 (T) (f) Titan Medical Systems Pvt. Ltd. v. Collector - 2003 (151) E.L.T. 254 (S.C.) [cited supra] (g) Bombay Chemicals Pvt. Ltd. v. Appellate Collector - 1990 (49) E.L.T. 190 (Bom.) (h) Overseas Cycle Co. v. CC - 1992 (58) E.L.T. 248 (T). 13. In terms of Para 6.2(a) of the Exim Policy 2002-2007 and 2004-2009, an EOU/EHTP/STP/BTP unit may export all kinds of goods and services except items, which are prohibited in the ITC (HS). There is no restriction in the Handbook of Procedures that an EOU/EHTP/STP/BTP unit is restricted to expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty free goods and exported them as such without subjecting them to any manufacturing process. Therefore, in respect of these items, which have been exported, there is a violation of the conditions of the Customs as well as the Central Excise Notification. Hence, duty has been demanded and the goods have been held to be liable for confiscation and further consequential action of imposing penalties had been taken. This is under challenge in this appeal. In this connection, we would like to record that before exporting the goods, which have been imported duty free and procured duty free locally, the appellants had sought permission of the Development Commissioner. In the said letter, it has been stated that "GE Medical Systems being a global conglomerate, in the course of our business, as per the requirement of our affiliates and customers, we need to cater to their requirement of parts and accessories. We wish to export the parts as required by our affiliates and customers on commercial basis. These transaction will bring in additional foreign exchange. There parts may consist of either manufactured or/and bought out parts. Although our license covers parts and accessories along wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic case where one wing of Government of India has permitted the appellants to export bought out parts, whereas, another wing has stated that this is not permitted in terms of the Customs Notification and proceedings have been initiated with them with penal consequences. We are firmly of the view that the Board's Circulars of 1995, which we would like to reproduce below are clearly applicable here and the Commissioner ought to have made a reference to the Board. "Circular No. 21/95-Cus. dated 10-3-95 F. No. 307/2/91-FTT Government of India Ministry of Finance Department of Revenue, New Delhi Subject : Issue of show cause notice for recovery of customs duty on goods imported by 100% EOU - Regarding A number of instances have come to the notice of the Board where 100% EOUs had imported capital goods, raw materials and other permissible items under Notification No.13/81-Cus. Dated 9-2-81 but have failed to export any goods or have closed down after exporting a few consignments. A question has been raised as to the stage at which the customs authorities should proceed to recover duties on imported goods and other goods lying in the factory premises of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme on matters involving interpretations of provisions and scope of exemption notification, eligibility of duty free imports etc. without referring the issue to the Board for examination and clarification. This has led to complaints of harassment of exporters and adverse publicity. Board desires that in view of circular No. 21/95-Cus. (F.No. 307/2/91-FTT) dated 10-3-1995, prompt action should be taken for issue of SCNs against units indulging in gross violations of law like illicit removal/non-accountal/disappearance of goods and the like. On issues like the not-fulfillment of export obligations actions has to be initiated in consultation with the Development Commissioners or the Commerce Ministry. But in matters involving interpretations of statutory provisions or the policy provisions or the scope of notifications, the issues may be referred to the Board demi officially, (giving the details properly and enclosing copies of documents on which doubts have arisen) for detailed examination in the Board's Officer. In such cases, show cause notices should be issued only after the issues are examined and the legal position settled. This would avoid situations wherein the allegations i ..... 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