Customs, Excise and Gold Tribunal - Bangalore
Dsl Software India Ltd. vs Commissioner Of Customs on 29 November, 2004
Equivalent citations: 2005(181)ELT250(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. All the appellants are 100% E.O.U. engaged in the development and export of software. The issue involved in these 04 (four) appeals is one and the same and hence they are taken up together for hearing and disposal.
2. Notification No. 140/91-Cus., dated 22-10-1991 enables a 100% E.O.U. to import various goods on fulfilment of certain conditions. The description of the goods allowed to be imported free of duty under the above notification is given in the Table annexed to the Notification. In Sl. No 10 of the Table annexed to the Notification, Modular Furniture is mentioned. Therefore the appellants took steps to import Modular Furniture also known as Modular Workstations free of duty. Before importing any item under the Notification, the importer should produce a Certificate to the Assistant Commissioner of Customs from the concerned Chief Executive of the Software Technology Society set up by the Government of India to the effect that the goods imported are to be installed or used in the unit and that the import of such goods has been authorized by the Standing Committee. In other words, without the authorization of the Standing Committee, the importer cannot enjoy nil rate of duty for the items imported. In the case of the first three appellants, there is no allegation that they had not obtained the authorization for import of Modular Furniture. In the case of the fourth appellant, the concerned Notifications are No. 53/97-Cus. and 1/95-CE enabling them to import Modular Furniture free of duty. Under these Notifications, a Certificate is required from the Development Commissioner. It is seen that the appellant has obtained the necessary Certificate. After fulfilling the necessary requirements of the exemption Notifications, the appellants bonded the goods in their units under the Customs supervisions. All the 100% EOUs have been licensed as Private Bonded Warehouses under the Customs Act. The goods have been examined by the Customs authorities accepting the claim of the appellants for entitlement to the relevant exemption Notifications. The goods have been assembled into Modular Furniture in the premises of the appellants. This fact is not under dispute. Certain components of the Modular Furniture have been procured locally free of duty under Notification No. 1/95-CE by the fourth appellant. After several months from the date of importation and installation of the Modular Furniture, the appellants received show cause notices from the Department alleging that the items imported are not Modular Furniture but only assemblies and sub assemblies of Modular Furniture and hence they are not entitled for the benefit of relevant exemption Notifications. The Commissioner took the view that the goods imported are not Modular Furniture as they were not imported in one consignment. In fact, they were imported in different consignments under different Bills of Entry but on installation they formed the Modular Workstation. The adjudicating authority apart from confirming the duty demand under Section 28 of the Customs Act also under Section 11A of the Central Excise Act, 1944 in case of the fourth appellant for the Central Excise duty has invoked the longer period and also imposed penalties on all of them. The impugned goods have been held liable to confiscation under Section 111 (o) of the Customs Act, 1962. The orders of the adjudicating authority are under challenge before this Tribunal.
3. Shri G. Shivadass, learned Advocate appeared for the appellant No. 1, M/s. DSL Software Ltd. Shri B. Venugopal, learned Advocate appeared for the appellants No. 2 & 3, M/s. Digital Global Soft Ltd., and M/s Trigent Software (P) Ltd., and Shri V. Raghuraman, learned Advocate appeared for the appellant No. 4, M/s. G.E. India Technology Centre (P) Ltd. Shri L. Narasimha Murthy, learned SDR and Shri A. Jayachandran, learned JDR appeared for the Department.
4. Shri G. Shivadass, learned Advocate appearing for the appellant No. 1, M/s. DSL Software Ltd. urged the following points -
(i) The appellants placed orders only for Modular Furniture and the items imported are Modular Furniture only covered by Notification No. 140/91-Cus.
(ii) Even if the items imported are not considered as furniture but only as components, the benefit of notification would be available in view of the Sl. No. 3 in the Table annexed to the Notification. Sl. No. 3 covers components.
(iii) Alternatively, the item in question can be treated as capital goods and the benefit of Notification under Sl. No. 1 of the Table annexed to the Notification.
(iv) Once the goods have been certified as Modular Furniture by Software Technology Parks of India (STPI), the Customs authorities are bound by that Certificate. In support of this contention, the reliance is placed on the following decisions -
(i) Tansukh Shah v. CC - 1996 (64) ECR 651.
(ii) Jay Engineering Works Ltd. v. CC - 2003 (162) E.L.T. 680.
(iii) TISCO v. CCE - Final Order No. 950/2004, dated 21-5-2004 [2004 (177) E.L.T. 1004 (T)].
(v) Once the Notification is not applicable, the demand of duty can be made only under Section 28 of the Customs Act. The show cause notice has not invoked Section 28 at all.
(vi) Larger period under Section 28 of the Customs Act is not invokable as all the facts were known to the Department officials.
(vii) Confiscation under Section 111(o) is not tenable as the appellants have not violated any of the post importation conditions laid down in the Notification.
(viii) As the goods imported are not liable to confiscation, the penalty under Section 11A is not imposable.
The Learned Advocate further quoted from the literature on Modular Furniture published by the University of North Dakato wherein it is mentioned that "Modular Furniture" is defined as furniture made up of independent works, surface and storage unit with panels used as end panels or space dividers. It includes all Modular Furniture, components collectively required to complete a Workstation. He urged in view of the above,, the components of Modular Furniture are also be considered as Modular Furniture.
5. Shri B. Venugopal, learned Advocate appearing for the second appellant, M/s Digital Global Soft Ltd. submitted that the appellants imported 330 Workstations which were cleared under two Bills of Entry. A demand of duty alleging that the goods imported are not Modular Furniture is pre-mature in the light of the decision of the Hon'ble Tribunal in case of Commissioner of Customs, Bnagalore v. Infosys Technologies Ltd., reported in [2003 (159) E.L.T. 863 (T) = 2003 (56) RLT 307 (CEGAT - Ban.)]. In the above case, it has been held that -
"In the case of imported system warehoused and used in the bonded warehouse premises, demand on the basis of non-availability of the exemption can be raised at the time of de-bonding only".
He submitted that the impugned goods are only Modular Workstations in unassembled form (SKD condition) consisting of-
(1) Top Trim (2) Top Rail (3) Mid Rail (5) Bottom Rail (6) Slide Rail (7) Stop End (8) Connecting Pole (9) Levellers The Modular Workstation is shifted in SKD condition for the simple reason that the same cannot be shifted in assembled form. The duty can be demanded in terms of Notification No. 140/91-Cus., dated 22-10-1991 only in the circumstances enumerated in condition 7 of the Notification. In the present case, there is no allegation that the condition 7 of the Notification has been violated. The demand under Section 28 cannot be sustained as the show cause notice has been issued nearly 3 years after the date of importation. In terms of the Board Circular No. 120/95-Cus., dated 28-11-95, if the Department had doubt regarding the entitlement of the items imported under Notification No. 140/91-Cus., then they should have obtained prior clarification from the Board before issuing the show cause notice, but the same has not been done. In support of this contention, the following case laws were relied on -
(i) Ranadey Micronutrients v. Collector -1996 (87) E.L.T. 19 (S.C.).
(ii) Paper Products Ltd. v. Commissioner of Central Excise, 1999 (112) E.L.T. 765 (S.C.).
The facts and circumstances of the case do not warrant imposition of penalty. More or less the same arguments were urged in respect of the third appellant, M/s Trigent Software (P) Ltd.
6. Shri V. Raghuraman, learned Advocate appearing for the fourth appellant, M/s GE India Technology Centre (P) Ltd. submitted that the appellants imported Aluminium extrusions cut to size and procured table top locally which were modules of Modular Furniture claiming exemption under Notification No. 53/95-Cus. and 1/95-C.E.. The goods were procured with the full knowledge and consent of the Department. The learned Advocate urged that the Board has granted the approval to procure/import Workstations/Modular Furniture. It has also been clarified that they can also import Workstations in CKD condition and assemble the same for use in the premises. As all the goods were lying in private bonded warehouse, the duty demand on such goods is not justified. He relied on the decision of the Tribunal in case of Commissioner of Customs, Bangalore v. Info-sys Technologies Ltd. reported in [2003 (159) E.L.T. 863 (T) = 2003 {56) RLT 307 (CEGAT - Ban.)]. He submitted that though the Commissioner admits that the items are imported as sub assemblies of Modular Furniture and cannot be brought in one part, he has denied the benefit of exemption. The Commissioner has not alleged the mis-use of Modular Furniture and the only allegation is that they are not presented as one consignment. There is no dispute that the Modular Furniture came in disassembled form. The letter of the Board of approval allows this. The Commissioner has not noticed that the Notification allows import of capital goods and components are needed to manufacture of capital goods. The EXIM Policy clarifies that the Modular Furniture are capital goods. Alternatively the goods imported can be considered as raw material for making capital goods and exemption could have been allowed. The subject goods are Modular Furniture in CKD/SKD condition and should be considered as Modular Furniture in view of the simple assembly process.
The demand of customs duty is barred by limitation under Section 28 of the Customs Act and demand of the Excise duty is barred by limitation under Section 11A of the Central Excise Act, 1944 as the Department knew all the facts at the time of the importation/procurement of goods.
7. Learned Departmental Representative urged that the appellants imported parts of Modular Furniture which are not exempted under any of the Notifications in question. Even though there is an approval from STPI, it is the duty of the Customs officer to decide as to whether the goods imported conform to the description of the goods even in the Table annexed to the Notification. If the goods imported do not correspond to those mentioned in the Notification, exemption cannot be given notwithstanding the approval of the STPI or the Development Commissioner. Since there is a separate entry for capital goods in the Table and a separate entry for Modular Furniture, the Modular Furniture cannot be considered as capital goods. On the same reasoning, they also cannot be considered as components which appeared in Sl. No. 3 of the Table annexed to the Notification. While interpreting any Notification, it should be done strictly. As the items imported are not Modular Furniture, the benefit of Notification cannot be given. In the present cases, the items imported were received in different times covered by different Bills of Entry. In view of the above, learned DR supported the decision of the adjudicating authority and prayed that the appeals should be dismissed.
8. We have gone through the various submissions made by the learned Advocates and learned Departmental Representatives. As already pointed out, the Notification No. 140/91 enables the E.O.U. to import various goods necessary for setting up of units under Software Technology Park of India (STPI). In fact, the application indicating the requirement of goods is scrutinised by a very High Level Committee appointed by Ministry of Industry in its Notification, dated 22-2-1993. This Committee is chaired by Secretary, Department of Electronic or his nominee and consists of Members from various Ministries including the Chairman of the Central Board of Excise and Customs or his nominee. This Committee in its wisdom has authorised the import of Modular Furniture required by the appellants. Once they have authorized to import of Modular Furniture on the basis of the information furnished by the appellants, it is not for the customs authorities to hold that they are not Modular Furniture after the import and installation of the items in the units under customs provisions. It is also a fact that the authorization issued by STPI has not been cancelled. If at all, the Department had any doubt about the entitlement of goods imported for the benefit of Notification, they should have immediately addressed the CBEC for clarification. From the records, it is seen that the Department has not taken any such steps. All the appellants have followed the proper procedure in importing the goods. It is not the case of the Department that the goods were imported without knowledge of the Department. In fact, the goods were exempted and allowed to be bonded. Under these circumstances, the Commissioner's decision to hold that the goods are not entitled for the benefit of exemption Notification No. 140/91-Cus. cannot be sustained. In other words, the authorization of STPI cannot be questioned without taking steps for the cancellation of the authorization. If the Department holds that the goods are not covered by the exemption Notification, they should have issued the show cause notice within the time limit under Section 28 or Section 11A of the Acts. There are absolutely no ground in any of the four cases to invoke the longer period as all the goods were imported and installed only with the knowledge of the Department. The adjudicating authority has blindly invoked the longer period without any reason. We also find that the goods are held liable for confiscation under Section 111(o) of the Act. This is not correct. Section 111(o) of the Customs Act will come into effect only when the post importation conditions of exemption Notification are not fulfilled. In other words, Section 111(o) is only for exempted goods. When the Department feels that the exemption is not applicable to the impugned goods, Section 111(o) cannot be invoked at all. The demand can be made only under Section 28. It is clearly seen that no ground exists for invoking the longer period. Hence all the demands are clearly time barred.
9. Coming to the merits of the case, it is seen that the Modular Furniture consist of different modules/parts which can be assembled easily in the work place. Normally when furniture are transported, they are disassembled and transported either in CKD or SKD condition for easy transportation. When Modular Furniture are required for installation in large area, the customs authority cannot insist that the entire furniture should come in assembled form or the entire components should come only in one consignment. In our view, the Commissioner of Customs has denied the benefit of exemption, because the Modular Furniture have come in different consignments. The Commissioner of Customs has interpreted the Notification in such a manner as to defeat the objects of the Notification contrary to various judicial pronouncements. There is no rule that the benefit of exemption would be given to the goods only after all the components come in one consignment and not otherwise. Customs Authorities when they are blind to the practical realities of world and adopt a pedantic approach in interpreting laws, no longer act as facilitators of trade but remain as insurmountable obstacles to development. There is absolutely no merit in the Orders-in-Original. Moreover, in view of the Tribunal's decision in case of Commissioner of Customs, Bangalore v. Infosys Technologies Ltd. (supra), even if it is held that the items are not entitled for exemption, the demand is premature as the goods are warehoused and the demand can be made only after de-bonding. All the goods imported are covered by the exemption Notifications in view of the authorization given by STPI and also Development Commissioner in the case of the appellants. Once again we want to make it abundantly clear that Modular Furniture authorized by STPI or appropriate authority imported in different consignments would be entitled for the benefit of exemption Notification No. 140/91-Cus., dated 22-10-1991. Hence all these 04 (four) appeals are allowed with consequential relief.