TaxTMI 
TaxTMI 
2015 (2) TMI 417
X X X X Extracts X X X X
X X X X Extracts X X X X
....e permission granted by the Ministry of Commerce in its letter dated 16/02/1990, subject to the following conditions,- (i) M/s. EPL should achieve overall value addition in exports of not less than 20%; (ii) M/s. EPL could import capital goods of a value of Rs. 15.675 Crores for the said purpose; (iii) The list of capital goods and imported raw materials would be as per the information furnished by EPL in its letter dated 04/09/1989 (revised application) read with its letter dated 28/08/1989; (iv) Not less than 85% of the production by value shall be exported to General Currency Areas. (v) Import of capital goods/raw materials and components would be allowed only where necessary approval of the concerned authorities had been taken and subject to the approval of the phased manufacturing programme being obtained, wherever it was required. (vi) Foreign brand names would not be allowed for use on the products for internal sale, although there was no objection to their use on the products to be exported. 2.2 Investigation was carried out by the officers of the M&P Wing of the Preventive Commissionerate, Mumbai regarding the unit's manufacturing activities for ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies, for unauthorized DTA sale entitlement earlier availed by M/s. EPL. 2.6 Scrutiny of the export documents indicated that M/s. EPL exported Top Assemblies and in some cases, Tandon Brand Systems. However, scrutiny of DTA related documents indicated that M/s. EPL had effected sale of foreign brand computer systems which were not part of its usual manufacture and export. Except for 943 nos. of systems of f.o.b. value of Rs. 1,42,12,655/-, all other 2535 nos. of foreign brand computer systems of f.o.b. value of Rs. 11,60,74,628/- were found to have been sold under DTA permission by M/s. EPL, in clear violation of the Export-Import Policy. 2.7 In view of the large sale of foreign brand computer systems to various dealers by M/s. EPL against its DTA entitlement, detailed verification was done of the DTA related records maintained by the Tandon Group of Companies. It was found that such foreign brand computers were exclusively meant for domestic sale under DTA sale entitlement to certain select dealers, namely, M/s.Microland Ltd., M/s CMS Computes, M/s. Mini Comp Ltd., M/s. Unicorp Industries Ltd., etc. In view of this, the officers carried out simultaneous searches of the office....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntifiable for complete Computer Systems. The description in the invoices was found consisting of similar break-up identical to the description given in the respective purchase orders. Similarly, against the above said generic description, i.e. casing with cover, Power supply and Mother Board, Speaker, etc. no part no. was found mentioned, whereas in respect of other peripherals like Key Board, Mouse, Monitors, HDD, FDD, respective part nos. were found mentioned. There was no reference to the parts and components and the values were found furnished in terms of total no. of sets. The above position was corroborated supported by the correspondences of M/s. Microland, Bangalore. Most of the correspondences were made by Shri Ashok Radhakrishnan of M/s. Microland and sometime by Shri Anand Sudarshan with M/s. Compaq, Singapore and also with M/s EPL particularly with Shri Raghavendran and Shri Navin Kulkarni. 2.10 On scrutiny of the bills of entry with the respective invoices, it was found that the computer systems covered by the bills of entry and invoices were by and large described in the common configuration of mother Board, Casing, Power Supply, etc. The rest of the items namely, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5. On being specifically asked to explain the reason for dismantling the said Compaq systems exported in India, he stated that as fully built up computer systems could not be imported into SEEPZ for sale in DTA, the same were imported in dismantled condition to facilitate clearance of these as parts and peripherals of the systems. Shri V. Raghavendran of Tandon Group of Companies who was associated with the import and sales of computer systems under Domestic Tariff Area facility of Ms/ EPL in his statements dated 8/12/94 and 16/12/1994, admitted that the manufacture of computer systems by EPL was limited/confined to fitting of Hard Disc and floppy disk drives into the systems which were subjected to quality & reliability test. Shri M.L. tendon, Chairman of tendon group of Companies, SEEPZ, in his statements dated 29/11/1994 and 05/12/1994, while corroborating the statement of Sri. Raghavendran, averred that earlier they had purchased computer kits of the following brands, namely, Compaq, ACER and a few unknown brands. 3. After completion of necessary investigation, a show cause notice dated 27/03/1997 was issued to M/s. EPL and others under Section 124 read with Section 28 of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to why the Computer systems and peripherals of an aggregate ex-SEEPZ FOB value of Rs. 8,47,03,735/- against aggregate CIF value of Rs. 7,04,80,653/- cleared under DTA sale entitlement should not be confiscated under Section 111(d), (o) and (m) of the Customs Act, 1962 and why penal action should not be taken against them under Section 112(a) & (b) of the said Act. 4. The above notice was adjudicated upon by the Commissioner of Customs, Sahar Airport, Mumbai vide his Order-in-Original NO. COMMR/MCT/ADJN/05/05 dated 25/02/2005. In the said order, the Commissioner held that- (1) duty is recoverable on the CIF value of the goods of Rs. 10,87,84,034/- which was exempted from duty at the time of import and not on the value at which the goods were sold to DTA; (2) the foreign brand computer systems of an aggregate value of Rs. 9,68,81,852/- at the time of import and subsequently sold in DTA and local/Tandon brand computer systems of an aggregate CIF Value of Rs. 1,19,02,183/- at the time of import and subsequently sold in DTA were liable to confiscation under Section 111(d) & (o) of the Customs Act, 1962. (3) confiscated 21 nos. of foreign brand computer systems valued at Rs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 5(a) There is no demand of duty on capital goods and imported parts, components etc., to the extent used in manufacturing of goods exported from SEEPZ. The duty demand as per the SCN and the impugned Order is only on the imported goods used for production & DTA sales. In other words, on the account of alleged non-fulfillment of value addition, no demand has been raised on capital goods or imported components used for export. In view of para (1A) of Notification No. 227/79-Cus dated 13/11/1979, for alleged non-fulfillment of value addition, no customs demand of duty in respect of imported inputs can be raised to the extent used in DTA production and sales. If at all, customs duty can be demanded on imported capital goods and imported inputs used in export production & sales. If at all, excise duty on finished product at full rate can be demanded under Notification NO. 97/91-CE dated 07/10/1991. 5(b) Prior to 1982, the FTZ Scheme formulated by the Ministry of Commerce required the units to export 100% of its production. The scheme did not permit any DTA sales at all. There was amendment in Export-Import Policy in 1982-83 which permitted units in FTZ to self 25% of their total....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of the goods cleared to the domestic tariff area before granting such permission in the light of the guidelines laid down in this regard. 4. In order to levy excise duty equal to the duties of customs leviable on the like goods imported from abroad, a proviso has already been inserted in Section 3 of the Central Excise and Salt Act, 1944 vide Section 46 of the Finance Act, 1982 (14 of 1982). In view of the provisions of this proviso, basic excise duty leviable on the goods produced outside the free trade zone in India at the rates set forth in the First Schedule to the Act, is not leviable on the goods produced in a free trade zone and cleared to the domestic tariff area. The basic excise duty leviable under Section 3 on the goods produced in a free trade zone and brought to any place outside the zone in India will be equal to the duties of customs (i.e. basic customs duty, auxiliary customs duty, cess, additional (customs) duty and any other customs duty as and when imposed) leviable on like goods produced or manufactured outside India if imported into India. The valuation of such goods will also be done with reference to the valuation provisions under the Customs law and not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sed for DTA clearance on payments of appropriate excise duty. The exemption availed on the imported inputs cannot be denied or recovered on the inputs used in the manufacture of resultant product cleared in the DTA in terms of the permissions given by the Development Commissioner and on payment of applicable excise duty. Any contrary interpretation would result in collection of the duty twice in by way of Customs duty on inputs at the time of import and the Customs duty on finished goods at the time of clearance in DTA. Such a situation is not contemplated by the amendment made by Finance Act, 1982, 5(d) The expression "under and in accordance with the Export-Import Policy 1983-84" used in Para 1A does not refer to achieving any value addition. It refers to obtaining of licence by the DTA customer, obtaining of DTA permission by the FTZ unit, tendering the same for debit by Development Commissioner for payment of excise duty as assessed by the proper officer. This is clear from para 2 & 3 of the Circular dated 17/02/1983 and Rule 100D & Rule 100E of the erstwhile Central Excise Rules, 1944. In April, 1982, when amendments were made to permit DTA sales, full custom duties was pay....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... respect of goods imported for export by SEEPZ unit. The exemption under this notification is subject to the certain conditions. One of the conditions namely condition (4) is to execute bond as prescribed by the Development Commissioner which is reproduced below: "(4) the importer agrees to execute a bond in such form and for such sum as has been prescribed by the Development Commissioner of the Zone building himself to fulfil the export obligations, and to fulfil, inter alia, the conditions stipulated in this notification and in or under the Import & Export Policy for April 1985 - March 1988, notified by the Government of India in the Ministry of Commerce Public Notice No. 1-ITC(PN)/85-88, dated 12 th April, 1985 (hereinafter in this notification referred to as the said import & Export Policy), as amended from time to time." Thus condition (4) requires the importer to execute a bond and execution of bond is fulfilment of condition 4. So long as the appellants execute the bond, the condition is fulfilled. Subsequent, alleged non-achieving of export obligation etc. is not non-fulfillment or breach of condition 4. 5(f) In Union of India vs. Rai Bahadur Shreeram Durga Prasad ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was similar to condition (4) of Notification No. 227/79-Cus. Relevant portion of un-amended condition (3) of this Notification read as follows:- "3. Notwithstanding anything contained in this notification the exemption contained herein shall also apply to the said goods which on importation into India are used for the purposes of production, manufacture, processing or packaging of articles in a unit in the Zone and such articles (including rejects, waste and scrap material arising in the course of production, manufacture, processing or packaging of such articles) even if not exported out of India, are allowed to be cleared outside the Zone under and in accordance with the Export-Import Policy and subject to such other limitations and conditions as may be specified in this behalf by the Development Commissioner of the Zone, on payment of duty of excise leviable thereon under section 3 of the Central Excises and Salt Act, 1944 (1 of 1944) or where such articles (including rejects, waste and scrap material) are not excisable, on payment of customs duty on the said goods used for the purpose of production, manufacture, processing or packaging of such articles in an amount equal to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nit does not achieve value addition. Between 1999-2003, the Scheme stipulated payment of duty on the raw materials, components, in case the unit does not achieve value addition. Post 2003, such duty is on pro-rata basis. 5(h) During the relevant period, the requirement of achieving value addition was not stipulated. This view is supported by the Form of LUT executed under FTP. The form does not prescribe for achievement of value addition. The only requirement mentioned in such form is that units must export 100% of the production. Relevant portion of Form of LUT read as: "AND WHEREAS a condition of the licence granted to the Unit, the Government has stipulated that the Unit must earn foreign exchange by exporting 100% of the production of the export product, namely, ______________ for a period of ______________ years beginning from the first day after completion of gestation period allowed by the Government (hereinafter referred to as the prescribed date) after allowing rejects upto __________ percentage" The format of LUT executed under FTP remained same till March 1995. Relevant portion of Form of LUT reads as: "AND WHEREAS a condition of the licence granted to the Un....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... permission granted by the Development Commissioner and contend that DTA permission could not have been granted to the appellants. Reliance is placed on the decision of Hon'ble Tribunal in Ginni International Vs. CCE - 2002 (139) ELT 172 (T), wherein the Central Excise department demanded duty from the assessee in respect of DTA clearances effected on the ground that DTA entitlement granted by the Development Commissioner was not proper since it had taken into account "deemed exports" also and hence to that extent, there has been DTA clearances without the permission from the Development Commissioner. The Tribunal held that the permission given by the Development Commissioner to clear the goods in DTA was final and the same was binding. The departmental filed before the Supreme Court was dismissed as reported in 2007 (215) ELT A 102 (SC). 5(j) The impugned Order-in-Original has confirmed the differential duty demand by invoking bond executed by the Appellants. The show cause notice, however, proposed to demand differential duty by denying the exemption under Notification No. 227/79-Cus dated 13/11/1979 & 133/94-Cus dated 22/06/1994 in terms of the proviso to Section 28 of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the goods imported were complete computers in SKD condition and to be treated as computer in terms of Rule 2(a), it is not on account of suppression. It is based on change of opinion. Such cases are not governed by the proviso to Section 28(1) of the Customs Act, 1962. Reliance is placed on the decision of Orissa High Court in India Metals Ferro Alloys Vs. CCE - 2000 (123) ELT 337 (Ori), wherein the High Court held the demand raised by the department to be barred by limitation. In that case, the contention of the department was that the carbon paste imported by the EOU was not raw material required for the manufacture of the resultant product. In that case, the department sought to sustain the demand in terms of B-17 Bond executed by the assessee-EOU. This decision has been affirmed by the Supreme Court in CC Vs. Indian Metals & Ferro Alloys - 2002 (144) ELT A 105 (SC). 5 (l) It is submitted that Rule 2(a) applies for determination of classification. It does not apply for deciding the applicability of an exemption Notification. Therefore, denial of exemption by impugned order is by applicability of Rule 2(a) incorrect. These notifications apply to raw materials, components et....
X X X X Extracts X X X X
X X X X Extracts X X X X
....units in the same consignment. These units were meant to be fitted together after the clearance thereof, but in the form as presented, these were not assembled. The point of dispute is whether in cases where computer casing/chassis and power supply unit were imported in a form not fitted together as an assembly, but separately in the same consignment, the benefit of Notification No. 21/2002-Cus., dated 1.3.2002, (vide S.No. 276) can be denied by applying rule 2(a) of the General Rules for the Interpretation of the First Schedule (GIR). ....... 5. The Board had accepted the decision of the Conference. Accordingly, it is clarified that the goods have to be classified in the form as presented and rule 2 (a) of the GIR cannot be applied for the sake of allowing/disallowing the benefit of a notification, unless the exemption notification is based on classification of the item under a particular heading of the Customs Tariff. For the purpose of classification, Rule 2(a) of the General Rules of Interpretation could be applied." Assembly of Computer from parts / sub-assembling amounts to manufacture even if parts /sub-assembling are treated as complete goods by virtue of Rule 2(a)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntive) under Central Excise Act. Notification No. 11/83-CE dated 11/02/1983 provides for appointment of officers of the Customs in a free trade zone as Central Excise officers within the jurisdiction of the free trade zone. Significantly, this notification does not appoint Collector of Customs (Preventive) as Collector or Commissioner or any Central Excise Officer under Central Excise Act. Notification No. 36/97-CE(NT) dated 19/08/1997 amended Notification No. 11/83-CE dated 11/02/1983. The amending notification appoints Commissioner of Customs in FTZ as Commissioner of Central Excise of FTZ. In view of above, during the period under consideration, Collector Customs (Preventive) was not appointed as Collector or Commissioner or any Central Excise Officer under Central Excise Act. Therefore, the Order is without jurisdiction & bad in law. 5(o) Decisions relied upon by the Revenue at time of hearing is not applicable to the facts of the present case. In those decisions, demand of customs for non-achievement of value additions where on imported inputs used for export and not on inputs used for DTA production & Sales. However, in the instant case, demand is on imported inputs used i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(d), 111 (m) and 111 (o) of the Customs Act, 1962 which have been invoked against the appellants. All these clauses of Section 111 will apply to importer and not to the appellants. The goods in question have been imported by the EPZ Unit and not by the appellants. The goods in question after import were subjected to a process of assembly and manufacture and thereafter sold to the appellants under valid DTA sale invoices. Therefore, it cannot be said that the imported goods have been sold as such and the appellants purchased the imported goods. Similarly, Section 111 (m) is applicable for mis-declaration of description or value of the imported goods. None of the appellants are concerned with the import and cannot comment upon the so called mis-declaration. The appellants further submit that the provisions of Section 111 (o) are not attracted in this case as the imported goods have been taken into the EPZ unit and cleared thereafter, only after subjecting the goods to certain processes. As far as the appellants are concerned, it is not their business to know whether the goods in question were correctly imported by the EPZ Units, as long as the appellants can show that they have recei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the guise of parts and components without any license and then clear the same free of Customs duties under Notification No. 227/79-Cus and 133/94-Cus. 6(3) Notification No. 227/79-Cus date d30/11/1979, inter-alia, exempted raw materials & components from Customs duties when imported by EPZ Units for manufacture of finished goods for export. This notification was also subject to various other conditions to be fulfilled after import. Similarly the Notification No. 133/94-Cus dated 22/6/1994 exempted raw materials, components, consumables etc. from Customs duties when imported by EPZ Units for manufacture of finished goods for export. This notification was also subject to various other conditions to be fulfilled by the importer after importation. However, M/s. EPL had failed to fulfil the conditions of the notifications. 6(4) In the present case, undisputedly M/s. EPL had imported full Computer Systems in the guise of parts & components after detaching or dismantling of floppy disk drive and hard disk drive from the Systems and in this endeavour, M/s. EPL was duly assisted by M/s. Microland and M/s. Compaq Asia Pte. Ltd., Singapore. Therefore, at the threshold, M/s. EPL was not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r parts and components of Computer systems. Hence the benefit of the exemption Notifications 227/79-Cus and 133/94-Cus could not be denied to it. This submission overlooks the fact that the benefit of the notifications was subject to fulfilment of export obligations which were not fulfilled by importer M/s. EPL. Consequently, the benefit of the notifications was not available to it. 6(8) Full Computer Systems of foreign brand of an aggregate CIF value of Rs. 9,68,81,852/- were imported by mis-declaration and the same were sold in the domestic market unauthorisedly claiming the DTA sale facility by paying concessional rate of duty as per Notification No. 97/91-CE dated 07/10/1991 and Notification No. 101/93-CE dated 27/12/1993. The notification 101/93-CE exempts excisable goods produced or manufactured in EPZ from so much of duty of excise leviable thereon under Section 3 of the Central Excise Act, 1944 as in excess of the amount calculated at 50% of each of the duties of Customs which would be leviable under Section12 of the Customs Act, 1962. Thus the exemption under Notification 101/93-CE is applicable only if the goods are manufactured in the SEEPZ. Since these complete Compu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....no goods are exported without furnishing a declaration prescribed under Section 12(1) of the Foreign Exchange Regulation Act, 1947. This declaration was sought to be compared with the bond executed by M/s. EPL and it was contended that all that the Customs authorities have to see is whether any bond was executed at the time of import of the goods. It is submitted that a declaration is just a statement. It cannot be compared with the bond executed by M/s. EPL binding itself to fulfil the export obligation, and to fulfil, inter-alia, the conditions stipulated in the notification and in the Import-Export Policy. Admittedly, the appellant M/s. EPL failed to do so. Consequently, the benefit of exemptions under the notifications was not available to it. 6(12) At the relevant time, Computer System was a restricted item of import which required an Import Licence. Since the full Computer Systems, though in dismantled condition, were imported in violation of the licensing restrictions, the same became liable for confiscation under Section 111(d) of the Customs Act, 1962. This apart, M/s. EPL failed to fulfill the post importation conditions, namely, to achieve the minimum value addition i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....were cleared without, payment of duty by mis-declaring the same as parts & components of Computer System. Therefore, in the facts of this case, extended period of limitation has been correctly invoked. 6(18) Learned Sr. Counsel for M/s. EPL submitted that the Commissioner of Customs (Prev.) who had issued the Show cause notice had no jurisdiction to do the same at the relevant time. However, he did not pursue this submission any further, presumably on account of the fact that Section 28 has been retrospectively amended by inserting sub-section (11) whereby the Commissioner of Customs (Prev.), amongst others, are retrospectively recognized as proper officers for the purpose of Sections 17 & 28 of the Customs Act, 1962. This has also been clarified by the Board vide its Circular No. 44/2011-Cus dated 23/9/2011. 6(19) In view of the foregoing, the appeals filed by the appellants have no merit. The same deserve to be dismissed and it is prayed accordingly. 7. We have carefully considered the rival submissions. Our findings and conclusions are discussed in the ensuing paragraphs. 7.1 One of the appellants, Sri. V. Raghavendran, passed away during the pendency of the proceedi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elevant provisions area as below:- (a) Para 93 of the said policy provided that units undertaking to export their entire production of goods (except the sales in the domestic tariff area (DTA)] may be set up under the EOU scheme or the EPX scheme. (b) Para 97 governing value addition and export obligation stipulated that the unit shall achieve a minimum value addition of 20% subject to certain exceptions. (c) As per para 98, the unit was required to execute a bond/legal undertaking with the Development Commissioner concerned and in the event of failure to fulfill the obligations stipulated in the letter of approval/intent, it was liable to penalty in terms of the bond/legal undertaking or under any other law for the time being in force. (d) Para 102 governed DTA sales and sub-para (b) provided that 25% of the production in value terms may be sold in the DTA. DTA sale shall be subject to fulfilment of minimum value addition. (e) Para 119 governed value addition and the formula, prescribed for computing value addition was - VA = [(A-B)/A x 100 where VA is value addition, A is the fob value of exports realised by the unit, B is the sum total of the CIF value of all impo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uipment and raw materials, components and consumables purchased by the unit during the period .................." ....... "7. Any customs duties/excise duties and interest at 18% from the date of import/supply to the date on which the payment is made due to Government under the agreement shall also, without prejudices to any other mode of recovery be recoverable in accordance with the provisions of section 142 of the Customs Act, 1962/Section 11 of the Central Excise & Salt Act, 1944 and rules made thereunder and/or from any other payment due to the unit from the Government." 7.4 From the policy provisions enumerated above, the following picture emerges. A unit in EPZ could undertake manufacturing activity in respect of permitted products subject to 100% export of the goods manufactured subject to achieving a minimum value addition of 20% in terms of para 97 of the Exim policy 1992-97. The said EPZ unit could also undertake DTA sales upto 25% of its production in value terms subject to fulfilment of minimum value addition (of 20%) in terms of para 102(b) of the said EXIM policy. Para 162 and 163 of the Handbook of Procedures also provided that the LOP/LOI shall specify the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted that the overall value addition from exports will be not less than 20% . In terms of the Standard Conditions attached to the said letter of intent, it was further stipulated in para 4 f that the use of foreign brand names will not be permitted for the purpose of internal sales. In another letter of even No. dated 16-2-1990, the Ministry also conveyed approval of foreign collaboration for the manufacture of mini and micro computer systems along with their accessories and spares subject to acceptance/adherence of the conditions stipulated in the annexure to the said letter. In the said annexure to foreign collaboration, it was stipulated in para 4 that for undertaking the export obligation specified in the approval letter, the requisite guarantee, i.e., legal undertaking/bank guarantee should be furnished as may be required. In para 12 of the said annexure, it was further stipulated that "foreign brand names will not be allowed for use on the products for internal sales although there is no objection to their use on products to be exported." 7.6. The appellant EPL applied for DTA sales permission vide letter No. YBS:EPL:368:91 dated 1991 for April, 1990 to March 1991, based on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d at Rs. 38,23,156/- again subject to satisfaction of the provisions of para 102 (b) of the Exim Policy, 1992-97. Thus from the above correspondence available in the seized and relied upon records, it is seen that the DTA sale of computer systems was also subject to achieving minimum value addition and non-use of foreign brand names in respect of the goods sold in DTA. 7.7 It will be useful at this juncture to see what were the conditions stipulated in the relevant customs notifications which operationalised the EPZ scheme. The relevant notifications are 227/79-Cus dated 30-11-79 as amended for the period prior to 22-6-94 and 133/94-Cus dated 22-6-94 as amended with effect from 22-694. Both these notifications provided exemption to goods specified in the annexure thereto and the coverage is more or less identical except that 133/94 - Cus included captive power plants also within the scope of exemption. Otherwise, as far as the present appeals are concerned, the goods exempted included, machinery, raw materials, components, spare parts of machinery and consumables. The exemption under notification 227/79-cus was subject to the condition that the importer had been authorised to es....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as may be prescribed in the Export Import Policy and in this notification. (4) ....... (5) The importer satisfies the Development Commissioner of the Zone that the goods so imported have been used for the purposes specified in clauses (a) to (d) or for any other purposes specified in Export-Import Police and in this notification." The provision earlier contained in Para 1A was continued in para 3 without any substantial change in the 1994 notification. 7.8 The charge against the appellant is that M/s EPL imported complete computer system by mis-declaring them as parts and components of computers so as to avail ineligible duty exemption under notification 227/79-cus and 133/94-Cus. This was also done to circumvent ITC restrictions as import of computer systems required an import licence. This charge is based on the evidence that M/s Microland Ltd., Bnagalore were dealers/distributors of M/s Compaq Computer Asia Pte. Ltd., Singapore and Compaq brand computers marketed by them were found to have been imported by EPZ units, mostly by M/s EPL, who in turn sold these computer systems under its DTA sales entitlement. Evidences available on record revealed that M/s Microland L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is a letter dated 13-5-92 from Srikant Rao, Business Manager of Microland Ltd., Bangalore to Shrikant H Joshi, General Manager Business Development, Tandon Group of companies, Bombay. The said letter encloses a statement indicating the gist of discussions between the two companies held on 12-5-1992. Some of the relevant entries from the said statement are reproduced below:- "Date 13-5-92 Gist of discussions between Tandon and Microland held on 12 May 1992 Sl.No. Item Status Action to be taken By who By when 1 Tandon's meeting with Compaq Went off well To confirm details of SKDs, commercial and legal details of MOU. (Tandon's personnel may have to go to Singapore for finalisation) Compaq 12-Jun-92 3 Training for Tandon Required for assembly and quality control. Tandon willing to sign non-disclosure agreement Tandon's technical personnel will need to go to Compaq for technical certification training, preferable along with Microland team Compaq 02 Jun 92 4 Conversion of assembled systems to SKDs Tandon has indicated likely companies in Singapore. These companies are likely to charge 10% for their services. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y way of sticker. No mis-match in the Part Number or description is acceptable to the Customs (India) at the time of clearance. 4) Documentation has to be prepared as per the instructions in Annexure No.1. 5)....... 6) ....... 7) For all the future shipments the same procedure has to followed by the exporter. ....... Annexure No.2 Packing Procedure A) After breaking down the systems in SKD, all the parts/asslys. are to be packed individually in an anti-static bag, by putting a sticker of the description and the P/No. on it. B) Pack up all the packed parts in one corrugated box. ......." (D) The next document is RUD 67 (iii) which is a letter dated 16 th July, 1992 from N.B. Durka of M/s EPL to M/s Microland, Bangalore. The relevant portion from the said letter are extracted below:- "Sub:- Your purchase order for Compaq Systems Thank you for your above mentioned letter for your requirement of Compaq systems and spared by Mid August ....... We would like to have the following information from you. 1) The number of models with configuration 2) Model wise CIF cost of SKD parts. Please note that we need to configure the systems along wi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h September, 92 at our office. 2) You are hereby requested to refer the said fax dated 22 nd August, 92 for model Deskpro 486/33M-M340. ....... 4) Further we would like to mention here that the orders are placed by us, are properly discussed and mutually agreed by M/s Eastern Peripherals Ltd. and M/s Microland." (H) RUD 69(1) is fax message dated 10-2-1993 from Navin S. Kulkarni of EPL to P.S. Raju of Compaq Asia, Singapore regarding proforma invoices for lot No. VII pointing out certain discrepancies. The portion which is relevant to the facts of the case before us is extracted below:- "Also, understand from Srikant that the Prolinea prices indicated do not take into consideration the discounts agreed to between Compaq and Microland (8.5%) Request you to kindly resend proforma invoices taking into account the above points (including the 8.5% discount for Prolinea Systems). We await your fax today in order to enable us to send you the purchase orders. Please note that in order to meet Microland's delivery requirements, we would need shipments from Compaq by this week end." 7.9 It would be useful at this juncture to peruse some of the statements recorded as par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t and machinery and other infrastructure and only certain testing equipments were available. He has further admitted that he was assembling Compaq and Acer and other models of computers from parts imported in SKD condition and it took only 30 minutes to check assemblies such as FDD, HDD, motherboard for physical damage and actual insertions of these cards and components took only about 10-15 minutes. (d) Shri Navin S. Kulkarni, who was working as Executive Manager of Tandon Group of Companies, in his statement recorded under Section 108 of the Customs Act, has admitted that they have been procuring computers from Compaq Computers Asia Pvt. Ltd., Singapore; M/s Acer Sales and Distribution, Taiwan; M/s Golden Systems Inc., USA; and other computer manufacturers and what they were getting was full computers and their documents. These were shown as parts and peripherals and in the invoices/purchase orders raised for computers they were described as parts as instructed by his boss, Mr. Raghavendran. He has also admitted that the description of the computer systems were configured manually in two parts, i.e. major configuration such as cases with motherboards, power supply unit, VGA ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that EPL and UTD were not authorised or appointed as manufacturers/distributors for Compaq brand computers in India. (g) Shri M.L. Tandon, Chairman of the Tandon Group of Companies has also corroborated the above position and has stated that they had imported computer systems where they were required to do the assembly of only Winchester Drive/Floppy Drives into the respective systems which would be subjected to certain minor processes and on such systems they added the required valued addition and paid duty as per the Policy. 7.10 From the statements of the various officials of the appellant firm, it is clear that M/s. EPL and other Tandon Group of Companies imported complete computer systems without having any licence for the same thereby violation the EXIM policy. They did not have any manufacturing facility for manufacture of computers from the parts and components and the oly activity undertaken by them was insertion of FDD and HDD into the system and conducting certain tests to ensure that the computer systems work properly. 7.11 From the evidence unearthed by the investigation, it is clear that, as against the requirement of value addition of 20% the value addition ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mported in terms of the licence granted under the EXIM Policy. Further, the bond also mandated payment of interest @ 18% on the duty payable and provided that recovery of duty along with interest has to be made in terms of Section 142 of the Customs Act, 1962 or Section 11 of the Central Excise Act. Therefore, to equate the bond executed with the declaration is an assault on the common sense and amounts to absurdity. It would also imply that execution of bond was a mere formality and the same is not binding on the importer. Such an interpretation of law would be a mockery of the EXIM policy provisions and the provisions of the Customs Notifications. The law cannot be interpreted in such a way so as to defeat the objects and purposes of the policy and the terms and conditions of exemption. Therefore, the contentions in this regard made by the appellants in this regard have to be rejected in toto. 7.14 It has also been argued that the show cause notice does not invoke the provisions of the bond executed by the appellants for the demand of duty, while the adjudicating authority has invoked the provisions of the bond for recovery of duty and, therefore, the order-in-original has tra....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appellant hatched a conspiracy with the foreign suppliers as well as the domestic purchasers of the goods to import restricted items without having any licence and, therefore, sold the same in the DTA, the sale of which was prohibited, inasmuch as the goods sold bore the brand names of the foreign manufacturers. It is also evident that fully built computer systems were purchased which were dismantled before export of India and brought to India under the guise of parts and components. The action of the appellant is a fraud played on the exchequer. 7.15 In Commissioner of Customs vs. Candid Enterprises [2001 (130) E.L.T. 404 (S.C.)] a three Judges bench of the hon'ble apex Court held that fraud nullifies everything and when a fraud is committed, statutory benefits cannot be extended. The same position was reiterated in the case of Commissioner of Customs, Kandla vs. Essar Oil Limited [2004 (132) ELT (SC)] wherein the Apex Court was considering a situation where goods were sought to be cleared on payment of duty through cheques despite non-availability of sufficient funds. The hon'ble apex Court while deprecating the action on the part of the respondent therein, held that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bout these facts. If that be so, the appellant was certainly not entitled to claim the benefit of the exemptions under these notifications. Both the customs notifications and the EXIM policy form an integrated code and violation of the exim policy is also a violation of the condition of customs exemption and we hold accordingly. 7.17. A similar issue was considered by this Tribunal in the case of Mysore Minerals Ltd. vs. Commissioner of Central Excise, Mysore (supra) wherein the appellant therein, a 100% EoU, imported capital goods and raw materials and consumables by availing customs duty exemption. Since the appellant could not achieve the export obligation and the required value addition, duty demands were raised. In that case also, the importer therein had executed a bond binding itself to fulfil the export obligations and the condition of value addition stipulated in the EXIM policy and the customs notification. This Tribunal held that on account of failure to fulfil the export obligations, provisions of Section 111(o) of the Customs Act would be attracted and the imported goods would be liable to confiscation. This Tribunal also held that the appellant is liable to pay dif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tems such locks, handle and other fittings and upheld the action taken by the department in denying the benefit of duty exemption and holding the goods liable to confiscation and imposing penalties. 7.20. From the aforesaid decisions, the ratio of which, in our view, apply to the facts of the present case, for violation of the terms and conditions of the EXIM Policy and for failure to fulfil the export obligations, which envisages certain value addition norms not only in respect of the goods exported but also in respect of the goods sold in DTA, the Customs authorities can initiate action both in terms of the provisions of the Notification and the Customs Act, 1962 and also under the provisions of the bond executed by the appellant at the time of the importation of the goods. In the present case, the adjudicating authority has sought to demand duty only in respect of the SKD assemblies/functional units of the computer systems sold in the DTA without achieving the necessary value addition and also for violating the provisions relating to the brand name. Therefore, the duty demand made in this regard is completely justified and cannot be faulted. The adjustment of excise duty paid....