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TMI Blog2009 (7) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 and 7 of para 1 of the notification have also been violated. – demand, interest, redemption find and penalty confirmed. - C/707-709 and 732/2005 - C/318-321/2009(PB) - Dated:- 27-7-2009 - S/Shri D.N. Panda, Member (J) and Rakesh Kumar, Member (T) REPRESENTED BY : S/Shri B.L. Narsimhan, Ashok Dhingra and Smita Singh, Advocates, for the Appellant. Shri Vijai Kumar, SDR, for the Respondent. [Order per : Rakesh Kumar, Member (T)]. - The facts giving rise to these four appeals are, in brief, as under. 1.1 M/s. Converge Labs Software Technology Pvt. Ltd., Signature Tower B, South City - I, Gurgaon, Haryana (hereinafter referred to as M/s. Converge) is a software 100% EOU under STPI Scheme to develop and export software, with Shri Amol Patel as its Director and Shri Rajesh Suri as its GM (Finance). M/s. U.T. Star com INC, 805, Signature Tower, South City, Gurgaon (hereinafter referred to as M/s. UTSC) is a U.S.A. based company engaged in manufacture of telecom equipment. 1.2 Exemption Notification No. 140/91-Cus., dated 22-10-91, as amended, exempts from whole of the basic customs duty leviable under 1st Schedule to the Customs Tariff Act, 1975 and the Additional C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement dated 10-7-01 between M/s. Converge and M/s. UTSC - (i) since MTNL wishes to install and operate on a trial basis, UTSC's PAS™ wireless local loop system to be supplied and installed by M/s. Converge in certain areas, UTSC is willing to provide the necessary equipment and licence to operate it through M/s. Converge for a limited period, at no charge to MTNL; (ii) M/s. Converge is licensed by UTSC to offer PAS equipment for deployment in MTNL's network; (iii) M/s. UTSC is loaning the PAS™ to M/s. Converge for the duration of the trial period, on free of cost basis; (iv) M/s. Converge shall install, commission and maintain the equipment at MTNL's premises during the trial period for which they will be paid U.S. $ 45000 by M/s. UTSC; (v) MTNL shall have right to realize any revenue from subscribers who are provided phone connections through the PAS™ given to MTNL through M/s. Converge for trial and MTNL shall also have right to acquire the ownership of the PAS upon full payment at a negotiated price and also payment of customs duty; and (vi) In the event of MTNL refusing to buy the equipment from M/s. Converge, the equipment shall go back to M/s. UTSC through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that M/s. Converge export services of wireless network and conduct research and development work for their clients, that the PAS™ wireless loop system has been imported from M/s. UTSC on loan basis for trial by MTNL and M/s. Converge would be installing the equipment in MTNL's premises and maintain the same during the period of trial for which they will get U.S. $ 45000 from M/s. UTSC and that he is not aware as to whether any work was done on PAS System before sending it to MTNL's site for trial. Statement of Shri Shailendra Joshi, an engineer, working with M/s. Converge, was recorded on 23-5-03 wherein he stated that he was involved, along with Shri M.C. Jain and Shri Rajeev Lal in installation, commissioning and maintenance of the PAS equipment in MTNL's premises, that the work of installation/commissioning took nearly one and half years and that as regards maintenance, the fault in the system is detected by redlight in the cards installed in E-10B Switch room and after locating the fault, the same is rectified. Inquiry was made with Shri Yogesh Bijlani, Vice-President M/s. UTSC in India and he in his statement dated 3-4-03 stated that the PAS equipment imported by M/s. Converg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvocate, the learned Counsel for M/s. Converge, Shri Amol Patel and Shri Rajesh Suri, made the following submissions - (1) The goods imported - PAS™ wireless loop system with 5000 handsets, being capital goods are covered by S. No. 1 of the table annexed to exemption Notification No. 140/91-Cus. The goods had been imported under eight Bills of entry and each import was backed by "Import Certificate" issued by the STPI, Noida certifying that the goods imported are relevant to the activity of M/s. Converge and are to be installed and used by the unit. Once the clearance of the goods has been allowed by the concerned customs authorities and the import was backed by the certificate issued by the STP authorities, the eligibility of M/s. Converge to imports these goods free of duty under Notification No. 140/91-Cus. cannot be challenged. In this regard, reliance is placed on Tribunal's judgment in case of DSL Software India Ltd. v. CCE, Bangalore reported in 2005 (181) E.L.T. 250. (2) The goods imported are part of telephone exchange which were to be installed and commissioned in the MTNL's premises by M/s. Converge for trial and thereafter, were to be maintained during the period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge with M/s. UTSC and of M/s. Converge with MTNL and also from the statements of Shri Amol Patel, Shri Rajesh Suri and Shri S. Joshi, it is clear that the PAS™ wireless local loop system with 5000 telephone handsets had been supplied by M/s. UTSC to MTNL through M/s. Converge for trial by MTNL with purchase option. The role of M/s. Converge was to import the equipment dispatched by M/s. UTSC on loan basis, install and commission the same in MTNL's premises and carry out maintenance during the period of trial. Neither any software had been developed with the help of imported equipment nor its maintenance involved any software testing by M/s. Converge. The goods imported were, therefore, not meant for software development for export. (2) The condition of the Notification No. 140/91-Cus. were not satis- fied - (i) the use of the imported goods was not within the unit; and (ii) under condition No. 10 of the Notification, the imported goods can be removed by a STP unit for display/repairs and while the AC had given permission for removal for test/ demonstration, in the MTNL's premises the goods were being used for trial, which is totally different from test/demonstration. (3) As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve purposes is subject to certain conditions specified in first para of the notification. Some of the important conditions are as under :- (1) The importer has been granted the necessary licence for the import of the goods for the purposes mentioned in this notification and carries out his activity under customs bond subject to such other conditions as may be specified by the Assistant/Deputy Commissioner of Customs. (2) The STP unit exports out of India 100% or such other percentage, as may be fixed by the Standing Committee, of the software developed, data entry and conversion done, data processed, data analyzed and controlled data management shown or call centre services rendered, wholly or partly from the goods for the period stipulated by the Standing Committee. (3) The importer brings the imported duty free goods into the unit and uses them within the unit in connection with the said activity for exports, using data communication link or in form of physical export and he cannot move the goods from the unit without the approval of the Assistant/Deputy Commissioner of Customs. (4) The unit produces a certificate to the Assistant/Deputy Commissioner of Customs from the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the role of M/s. Converge was to facilitate this import, install and commission the same in the MTNL's premises and thereafter maintain the same during the trial period, arrange the sale in the event of MTNL choosing to buy the same and arrange its re-export to M/s. UTSC if the MTNL were not interested in buying the same. In both the agreements, we do not find any mention, whatsoever, of software development by the use of the imported equipment. In this regard Shri Amol Patel, the Director of M/s. Converge in his statement dated 13-3-03, recorded under Section 14 of the Central Excise Act, 1944, which has not been retracted, has stated that the capital goods required for software development in their unit are computers, laptops and peripherals, that the import of PAS™ wireless local loop system for MTNL's trial was not specific requirement of the company for software development and that the same had been imported only because of their agreement with M/s. UTSC. He also stated that as far as he knows no software has been developed by the use of this equipment. Subsequently Shri Rajesh Suri, G.M. (Finance) of M/s. Converge in his statement dated 13-3-03 corroborated the statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements of Shri Amol Patel, Shri Rajesh Suri and Shri Shailendra Joshi. We, therefore, hold that this equipment had not been imported for any software development whatsoever and the sole purpose of this import was marketing to install the same in the MTNL's premises for trial and, thereafter, possible purchase. This equipment could have been imported by M/s. UTSC or MTNL directly for trial purpose but in that event customs duty would have had to be paid at the time of import and in the event of MTNL refusing to buy after one and half year's trial and re-export of the equipment, in terms of the provision of Section 74 of the Customs Act, read with Notification No. 19-Cus. dated 6-2-05, as amended, only 50% of the duty paid at the time of import could have been refunded as duty drawback obviously it is to avoid this only that the import has been routed through M/s. Converge, who, as discussed above had no use whatsoever of this equipment for development of software for export. 5. It has been pleaded by the appellants that the equipment had been imported in eight consignments covered under eight bills of entry and the time of each import, the required certificate from the STP aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notification have also been violated. It has been pleaded that removal of the imported equipment to MTNL's premises was with the permission of the Jurisdictional/Assistant/Dep-uty Commissioner. Though the Jurisdictional/Assistant/Deputy Commissioner have given permission for removal of the imported equipment for testing/demo-nstration purposes, the permissions have been given under impression that the goods are being sent to MTNL's premises only for testing for display and the same would be returned. From the records it is seen that the concerned Customs officers were not aware that the imported equipment is being sent to MTNL's premises for commercial trial and possible purchase, which is not permitted. 7. From the above discussion, it is clear that the real purpose for the import of this equipment by M/s. Converge was to supply the same to MTNL for trial and possible purchase and not any software development for export and to do this without payment of duty and for this purpose only the supply had been routed by M/s. UTSC through M/s. Converge in order to take advantage of their EOU status and on that basis full exemption from Customs Duty. M/s. Converge, for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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