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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 ..... Schedule to the Customs Tariff Act, 1975 and the Additional Customs duty, if any, leviable under Section 3(1) of the Customs Tariff Act, 1975, the goods listed in the table annexed to this notification, when either imported into India or procured from a private or public boarded warehouse, by a software 100% EOU under Software Technology Park Scheme, for the purpose of - (a) development of software, or (b) data entry and conversion, or (c) data processing, data analysis and control dates management, or (d) call centre services, for export out of India. This exemption is subject to the conditions specified in this notification. One of the main condition is that the goods brought duty free into the unit have to be used within the unit in connection with the above-mentioned activities for export, using data communication link or in form of physical export. As per condition No. 10, the imported duty free goods brought into the unit can be taken out temporarily outside the unit without payment of duty, with the prior approval of the Assistant/Deputy Commissioner, for repairs or display, subject to such conditions as may be imposed. 1.3 During 2001 and 2002, M/s. Converge imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e equipment shall go back to M/s. UTSC through the same route, the cost of which will be borne by M/s. UTSC. 1.3.2 As per the agreement dated 10-7-01 between M/s. Converge and MTNL - (i) Since MTNL wishes to install and operate on trial basis, UTSC's PAS™ wireless local loop system to be supplied and installed by M/s. Converge, M/s. Converge is willing to provide the necessary equipment and services necessary to install and maintain the product during the period of trial at no charge to MTNL; (ii) M/s. Converge shall make available all Technical information, as required by MTNL, to manage and evaluate the product, shall train the MTNL personnel to operate the product, shall provide all technical support for smooth operation of network during trial period and shall use its access to MTNL's facilities solely for the purpose of installation and maintenance of the PAS™ system ; (iii) MTNL shall have right to realize revenue from subscribers that are provided phone connection through UTSC's PAS™ during the trial period; and (iv) MTNL shall have right to purchase the product at a negotiated price and in that event MTNL would in addition to the price, shall be required to pay the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the PAS equipment imported by M/s. Converge belongs to UTSC, that it was imported for being installed in MTNL's premises for trial, that import was made through M/s. Converge as at the time of import, M/s. UTSC, U.S.A. did not have any branch office in India and the liaison office of M/s. UTSC in India was not competent to import, and that it is M/s. Converge who were responsible for installation, commissioning and maintenance of the imported PAS™ wireless loop system in the MTNL's premises. 1.5 Since it appeared that the PAS™ wireless loop system imported by M/s. Converge and found in the premises of MTNL for field trial, had been imported in contravention of the provisions of EOU Scheme and Notification No. 140/91-Cus., the same was placed under seizure. Thereafter show cause notices dated 29-9-03 and dated 25-3-04 were issued to M/s. Converge, Shri Amol Patel, Shri Rajesh Suri, M/s. UTSC and MTNL for confiscation of the goods v/a Rs. 5,65,96,376/- seized from MTNL's premises, denying the benefit of exemption under Notification No. 140/91-Cus. to M/s. Converge in respect of the imported PAS system and demanding duty amounting to Rs. 2,64,36,077/- in respect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter, were to be maintained during the period of trial. Maintenance involves testing of software. The software development includes software testing also. M/s. Converge were providing the service of installation, commission and software testing to MTNL on behalf of their foreign customer UTSC. The imported goods were, therefore, being used for the intended purpose. (3) The imported goods had been taken to the premises of MTNL in accordance with the provisions of Condition No. 10 of the Notification and for removal of the goods the necessary permission of the jurisdictional Assistant Commissioner had been taken. (4) Since the goods have been imported in accordance with the provisions of Notification No. 140/91-Cus. and have been used for development of software for export, and since the same had been moved to MTNL's premises with Assistant Commissioner's approval for demonstration/software testing, neither the same are liable for confiscation, nor any duty is recoverable nor M/s. Converge on Shri Amol Patel and Shri Rajesh Suri are liable for penalty under Sections 112(a) and (b) of the Act. 2.2 Shri Ashok Dhingra, Advocate, the learned Counsel for M/s. UTSC, pleaded that since U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent from test/demonstration. (3) As per agreement between M/s. Converge and MTNL and M/s. Converge and M/s. UTSC, after trial of the imported PAS system by MTNL, the MTNL could purchase the same at a negotiated price. Thus the goods had been removed to MTNL's premises for possible purchase which is not permitted in condition No. 10 of the notification. (4) From the statements of Amol Patel and Shri Rajesh Suri, it is clear that neither these goods were required by M/s. Converge for software development, nor any software had been developed with the help of these goods. The only purpose of import was to supply the same to MTNL, install and commission the same in MTNL's premises for commercial trial and thereafter possible sale. The use of the goods for software development for export was non-intended. (5) In view of above, not only the import of goods is not permitted, the same are not eligible for duty exemption. (6) M/s. UTSC being abettor, are also liable for penalty under Section 112(a) of Customs Act, 1962. (7) The goods were supplied by M/s. UTSC to MTNL through M/s. Converge only to take advantage of their STP unit status eligible for duty free import of capital goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Customs from the concerned Chief Executive of the Software Technology Park (STP) to the effect that the goods imported are to be installed and used in the unit and that the import of such goods has been authorized by the Standing Committee. (5) The unit executes a bond in the prescribed format binding himself to pay on demand an amount equal to the duty leviable on the goods along with interest if- (a) in case of capital goods, such goods are not proved to the satisfaction of Assistant/Deputy Commissioner to have been installed or otherwise used within the bonded premises or re-exported within the period of one year from the date of importation or procurement thereof; and (b) in case of goods other than capital goods, such goods, which are not proved to the satisfaction of the Assistant/Deputy Commissioner to have been used in connection with the production or packaging of goods for export out of India. (6) The Assistant Commissioner may, subject to the conditions as prescribed by him, permit the goods imported into India free of duty by STP unit to be taken out temporarily without payment of duty for repairs or display, as the case may be, and importer shall be boun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroborated the statement of Shri Amol Patel and stated that while M/s. Converge conduct research and development work for their clients, the PAS™ wireless local loop system had been imported from M/s. UTSC on loan basis only for trial by MTNL and the job of M/s. Converge was installing the equipment MTNL's premises and its maintenance during the period of trial and that he is not aware as to whether any work for software development was done on the PAS™ system before sending it to MTNL's site for trial. Shri Shailendra Joshi, Engineer working with M/s. Converge in his statement dated 23-5-03 also confirms that the imported equipment after its import had been installed in the MTNL's premises for trial, that the installation had been completed in about one and half year and that as regards maintenance, the fault, in the system as detected automatically and after locating the same, they are rectified and that, as such, no software testing work or software development work was done on the software system. Thus from the statements of Shri Amol Patel, Shri Rajesh Suri and Shri Shailendra Joshi, it is clear that on import of this equipment, the same had not been put to any use in the unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate from the STP authorities certifying that the goods being imported are to be installed and used by the unit had been produced. Though, we find that such certificates had, indeed, been issued, but it is clear that the same have been obtained by M/s. Converge by misrepresentation without telling the STP authorities about actual purpose of the import of this equipment. M/s. Converge have not produced their application to the STP authorities in spite of being asked to do so at the time of hearing. On perusal of the certificates, it is seen that each of these certificate certifies that the items for import are relevant to the activity and are to be installed and used by the unit and are covered by the exemption under Notification No. 140/91-Cus. But as discussed above, these items were never installed by M/s. Converge in their unit and neither any software was developed with the help of imported goods, nor was there any intention to do so. The sole purpose of this import was to supply the same to MTNL was field trial and possible purchase and M/s. Converge allowed their 100% EOU status to be used for duty free import of PAS local loop system for supply to MTNL for trial. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erge, for the purpose of duty free import of this equipment, which was to be supplied to MTNL for free trial and possible purchase and was not meant for any software development, hoodwinked the customs into at various stages into believing that the equipment is required for software development while the facts were totally different. In view of this, we hold that M/s. Converge were not eligible for import of this equipment and were not eligible for duty exemption under Notification No. 140/91-Cus. Since, as discussed above, the conditions subject to which the duty free import of the goods was permitted have been violated, the goods have rightly confiscated under Section 111(o) of the Customs and penalty has been rightly imposed on M/s. Converge under Section 112(a). Accordingly, the confiscation of the goods under Section 111(o) and imposition of penalty on M/s. Converge under Section 112(a) of Customs Act is upheld. As regards imposition of penalty on Shri Amol Patel, Director of M/s. Converge and Shri Rajesh Suri, GM (Finance) of M/s. Converge under Section 112 of Customs Act, 1962 since both of them have dealt with the goods knowing very well that the conditions subject to which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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