Customs, Excise and Gold Tribunal - Mumbai
Tata Infotech Ltd. vs Commissioner Of Central Excise And ... on 11 December, 2001
Equivalent citations: 2002(81)ECC86, 2002(149)ELT782(TRI-MUMBAI)
JUDGMENT
JH Joglekar, Member (Technical)
1. M/s. Tata Infotech Ltd. (TIL) are engaged in the business of development and export of computer software. One of their units is situated in the Noida Export Processing Zone (NEPZ). Units so situated are entitled to import capital goods and equipment without payment of duty provided the resultant products are exported on required value addition. The following machinery and equipment were so imported by TIL:-
1. 2200 Computer System 2. U6000 UNIX Computer System
3. Micro (A Series) 4. Personal Computer
5. Mapper Software 6. LINC Software
2. Show Cause Notice dated 16.2.93 was issued to TIL alleging failure to comply with the terms of Notification 339/85 dated 21.11.85. It was alleged that the actual software exported was worth only Rs.6.9 crores. It was alleged that their claim of export of expertise in the form of consultancy charges amounting to Rs. 7.44 crores could not be taken as export earnings so as to qualify for the benefit of the said notification. It was alleged that such earnings were not authenticated by the Customs.
3. M/s. TIL filed their reply. It was claimed that consultancy export was also to be taken into account when assessing the value of exports towards fulfilment of export obligation under the said notification.
4. The Commissioner passed Order upholding the charges made in the Show Cause Notice. He ordered confiscation of the machinery and equipment imported free of duty totally valued Rs. 2,08,75,877/- but permitted redemption on payment of fine of Rs. 25 lacs. He confirmed duty amounting to Rs. 2,93,60,904/- but did not impose any penalty on M/s. TIL.
5. The appeal filed by M/s. TIL against this Order was disposed of by the Tribunal vide final Order No.C/357/95/C-II. The Tribunal noticed a later notification 133/94-Cus which not only repealed notification 339/85 but specified that anything done or action taken under the earlier notification would be deemed to have been done under notification No. 133/94. The Tribunal held this to amount to widening the scope of the exemption. The Tribunal ruled that the burden cast upon the importer could be discharged not only by export of software but also by training of personnel, by developing and designing software for exports and also for consultancy for development of software on sites abroad. In the light of this ruling the Tribunal held that the Commissioner's view in the order in adjudication did not sustain. The Tribunal remanded the issue back to the Commissioner with a direction that he should look into the contracts to ascertain the extent of earnings and also to co-relate such earnings with the goods imported and installed at NEPZ. On such reconciliation is being made, the Commissioner was directed to determine the extension of benefit of the said notification.
6. In pursuance of this direction, the Commissioner heard the counsels of M/s. TIL.
7. Reference was made to Public Notice No.22/93 issued by Customs and to the annexures thereto. It was claimed that all the details of the exports made were available to the Customs on periodical basis and therefore there was no necessity to file contracts. Even then 118 contracts were submitted to the Commissioner. A Profile was filed of 90 contracts showing co-relation between services rendered and equipment installed in the unit at NEPZ. It was claimed that the RBI had permitted M/s. TIL to retain abroad 45% of the export earnings. Form-B prescribed vide a Public Notice therefore showed only 55% of the total export earnings which were brought to India. During the period covered by the Show Cause Notice the foreign exchange so earned was Rs. 21.21 crores although the burden cast upon TIL by virtue of this scheme was of Rs. 13.21 crores only. With reference to the contracts it was claimed that these referred to the machinery and equipment installed only in NEPZ and at no other units of M/s. TIL in India. It was claimed that in terms of the notification the accountal was to be made to the Development Commissioner of SEEPZ and not to the Customs. Certificates of the Chartered Accountants certify the export earnings repatriated.
8. The Commissioner observed that in view of the direction of the Tribunal the adjudicating authority had to look into the details of the contracts. He observed that what was required from the noticee was to file contracts and not to show annexure to the public notice. He admitted that the 118 contracts had been filed but he doubted that in other cases the profiles could take place of contracts. On scrutiny of the contracts he observed that none of the contracts showed that they pertained to their NEPZ Unit. He observed that some contracts were signed by the company secretary who was located in Mumbai. He observed that some of the contracts were on letterheads of the units situated in Bombay. He observed that some of the contracts were unsigned.
9. He referred to the affidavit filed by the Vice President of M/s. TIL to the effect that the imported equipment and machinery were installed in NEPZ only. He held that the affidavit was not supported by any evidence. He did not accept the contentions affirmed in the affidavit. He observed that M/s. TIL has failed to establish a clear co-relation between the contracts and the systems installed. As regards the quantum of earnings also the Commissioner observed that he was not convinced. He observed that in spite of advice M/s. TIL had not kept separate account for the NEPZ units. ON the failure of M/s. TIL to satisfy him, he passed orders confirming the duty but refrained from confiscation of machinery or imposing penalty.
10. The present appeal has been filed against this Order. The arguments made before us were the same as were made before the Commissioner. We have examined the documents and considered the submissions.
11. The Tribunal in the remand order had directed the Commissioner "To look into the details of Contracts to ascertain the extent of earnings by way of consultancy service and whether they can be corelated with the goods and instaled at NEPZ....." In pursuance of this direction, the assesses submitted a number of contracts. Where the contracts were not available they submitted project profiles.
12. From the findings recorded by the Commissioner, it is obvious that he interpreted the term "look into the details of the contracts" too literally.
Therefore, instead of concentrating upon finding the relevant details on perusal of the Contracts, he looked for deficiencies in the documents. In this he doubted the contract signed by the Company Secretary who was situated in Mumbai and not in NEPZ. He opined that the proper official for signing the Contracts should be an officer posted at NEPZ. He also remarked that some of the contracts were recorded on the letter-head of the Mumbai Unit.
13. We have examined the copies of the contracts on record. Counsel at the time of hearing emphasized that almost all the contracts were with M/s. Unisys Corporation or their other companies such as Nihon Unisys Ltd., Unisys China Ltd., etc. It is true that some of the copies of the contracts are not signed by either of the Parties. The Learned Counsel drew our attention to the plea being old some documents were lost and what were submitted were copies of drafts.
14. It is, therefore, likely that when the copies of the draft agreement were submitted before the Commissioner; where the contracts were not available, assessee has supplied "Software Project Requisitions," From the content of the document it is clear that it is not a formal agreement.
The contract number, however, is referred to in this document and suggests that the Requisitions/Agreement is a part of an umbrella agreement.
15. Where the contracts were not available, Project Profiles have been filed. The profile itself refers to the contract number and also gives a brief outline of the project detailing the equipment used in the processing. This has been signed by the Vice-President. An Affidavit of the Vice-President is also on record. In the Affidavit, the components parts of the systems which are installed in the NEPZ are listed; namely,
1. 2200 Computer System,2. U6000 UNIX Computer Sytem,
3. Micro (A Series), 4. Personal Computer,
5. Mapper Software, 6. LINC Software.
16. It is averred that these are installed only in NEPZ and nowhere else. It is averred that in 85 contracts systems were utilized in the production of software, etc.
17. The Commissioner has dismissed the affidavit stating that no supporting evidence has been adduced. An affidavit is a statement or a declaration by a person where he stands by the truth of the contents of the declaration. and which the deponent is able to of his own knowledge to prove. In a number of circumstances, affidavits become evidence in the eyes of law. In fact, the statements made in affidavit can be used as admissions made by the deponent in subsequent or other proceedings also. An affidavit becomes evidence in certain situations.
Whether an affidavit in acceptable or not as an evidence has to be judged by the court having regard to the attendant facts and circumstances
18. It is not that the said affidavit is made in lieu of any evidence, but that it seeks to bolster the gaps in the evidence presented by the Assesses.
19. The value of affidavits as evidence has come for scrutiny in a number of judgments.
20. The Delhi High Court in the case of Haji Jaffer Versus U.O.I. [(1986) (24) ELT 15] was examining the validity of an affidavit filed by an official of the Jail. The court did not rely thereupon on the observation that the contentions were not supported by the jail record but that the averment was made from the personal knowledge of the deponent.
21. In the judgment in the case of C.C.E. v. Amal Tara Industries [(1998) (37) ELT 152], the Tribunal held that an affidavit filed by a knowledgeable person could not be disbelieved in the absence of any material in rebuttal.
22. The Tribunal in another judgment (Kulbushan Jain v. C.C.E. Delhi [1991) 111 ELT 906] held that a affidavit could not be dismissed lightly without a proper enquiry and examination of the deponent.
23. We observe that in the present instance the affidavit is of a very senior person. The affidavit is not based upon his personal knowledge but refers to various records such as 85 contracts entered into by the company during 1993 to 1996 and states that these wee fulfilled used the systems installed at NEPZ. Specific details are given of contracts which mentioned either the hardware used or the software used.
24. During the submission, Counsel placed on letter record a compilation showing performance of 118 contracts. The Contract Number, the Examination no the platform used and the revenue earned, both in Foreign Currency and in the Indian currency are the details furnished.
Out of these, 79 contracts involved the use of 2200 Computer System.
13 contracts were performed using Unix system. The Mapper Software was used in 2 cases. LINC software was used in 3 contracts 6 contracts were fulfilled by using the P.C. 5 contracts were done on MICRO-A-SERIES. The inflow in Indian Currency in fulfilment of these contract amounted to Rs. 20.39 Crores. This was against the obligation cast upon the assessee of earning Rs. 13.29 Crores.
25. The contentions of the affidavit are further supported by the certificate of the Charted Accountants. In this certificate the earnings made by M/s TIL during the period 1993-94 to 1998-99 have been shown location wise. During this period the Total Gross Export Income of the NEPZ is Rs. 166 Crores.
26. As regard the Consultancy services rendered also, we find evidence of earnings on this count. On of the contract on record is No. 951018 effective from 04.07.95 and another contract with the same buyer is titled as 95109 dt. 13.08.95. Such agreements are elaborate, spelling out amount of compensation and other details. Under this contract consultancy was provided to M/s. UNISYS Corpn. in USA for a total cost of US$ 41717, This contract has been signed by the Co. Secretary of TUL (as it then was) and also by the official of UNISYS Corpn.
The location of the project is shown as NEPZ India. A number of such contracts are on record as also a number of subsidiary contracts or communications where the initial consultancy charges were later increased. These documents called "change requisition" refer to original contracts and carry the approval of the buyer.
27. It is not that these contracts were only on paper. From time to time remittances were received from the buyer which fact was certified by the receiving banks. On record are a few examples. One advice dt.
13.2.91 shows receipt of US$ 4 Lacs and the break up shows the sum of US$ 1,86,622, there from pertaining to NEPZ. In several other invoices the beneficiary is shown as TUL in NEPZ.
28. Before the Commissioner it was claimed that the details submitted in terms of the public Notice No. 24-93 informed the customs as to the amount earned by consultancy services. The Commissioner in his findings has not commented on this information given from time to time.
29. Thus we find that the conviction of the Commissioner that TIL had failed to establish a clear correlation between the system installed and the export earnings made was based on the failure to appreciate the evidence placed before him.
30. Shri Setalwad brings out the conditions in notification no. 339 of 85 Customs dt. 21.11.85. He states that in terms of the notification the accounting of the export etc. was to be made before the Development Commissioner. The notification vide Clause (VII) enables the customs to make a demand in certain circumstances. These circumstances are:-
1. That the imported Capital Goods are not installed, used or re-exported within the stipulated period from the date of import
2. Not used in the manufacturing process for export.
3. That the resultant goods are not exported within the stipulated period.
31. It is his claim that this notification cannot become the base of demanding the duty on any Capital Goods where the conditions in the notification were not alleged to have been contravened. He however made submissions on merits; which we have discussed above. Since on merits we have found for the appellants, we need not go into the aspect or the interpretation of the notification.
32. On the analysis above we hold that M/s. TIL have discharged the burden of showing performance in discharging the obligation cast upon them for availment of the duty free import of the Hardware and the Software. The Appeal succeeds and is allowed The Impugned Order is set aside.