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TMI Blog2009 (1) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... cation 22/2003-C.E. and also Para 6.2(h) of the Foreign Trade Policy. It has been stated that a 100% EOU can procure and export spares and consumables only up to 1.5% of the FOB value of the manufactured exported goods in the previous year and for that, the duty exemption on such import or procurement will be applicable only when the following conditions are satisfied: (i) There should be a specific stipulation in the export contract for supply of spares and consumables for after sales service. (ii) The spares and consumables should be sent along with the export articles. (iii) The value of the spares/consumables should not be counted towards NFE calculation for concessional rate DTA sales or for income-tax exemption. (iv) In the instant case, GE BE have imported the aforementioned goods duty free under the governing Notification and exported certain quantity of them, 'as such', to their overseas Companies. For the said export, there was no specific export contract, and the said goods were not supplied for any after-sales-service purpose. 4. It has also been mentioned that the conditions stipulated at Para 10/10A of Notification No. 52/2003-Cus., dated 31-3-2003 and 22/2003-C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure" has a separate definition. A very broad view has been taken and therefore, their main contention is they had not violated any notification. In fact, it was insisted that what they had exported are actually the parts, which are necessary by their global associates and they would be entitled for the benefit of the exemption. The following issues are involved in the present appeals. (i) Whether export of components/parts imported duty free/procured from the DTA, without payment of duty by the appellant-company would amount to violation of the conditions mentioned in Para 10 of Notification No. 52/2003-Cus., dtd. 31-3-2003 and Para 10A of Notification No. 22/2003-C.E., dtd. 31-3-2003, particularly when: * Such exports were made in terms of the Letter of Permission granted by the Secretariat of Industrial Approvals, in the Ministry of Industry and permission was given by the Dev'. Commr., CSEZ, for export of such components/parts; and * Such parts/components were subjected to inspection, functional testing and after they were found to be functional, were re-packed and re-labelled before they were exported. (ii) Whether the ld. Commr. was correct in holding that the said compone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers on commercial basis, since transactions would bring in additional Foreign Exchange. It was further mentioned that though the licences issued to GEBE cover parts and accessories along with finished products for export, they still sought for a 'No Objection Certificate' to carry out the export of the imported/procured parts specifically, so that there is no ambiguity in the matter. In response to their letter, the Development Commissioner issued a letter with the following remarks. "Your Licence covers parts and accessories". We have no objection at all in your exporting the bought out parts and earning Foreign Exchange. This issues with the approval of the Dev. Commr., Cochin Special Economic Zone, Cochin." A copy of this letter has been endorsed to the Deputy Commissioner of Customs, Customs Division, Bangalore. The specific permission was obtained from the SIA, Ministry of Industry, and Development Commissioner, CSEZ, Cochin, for export of duty free imported as well as bought out parts and accessories. Under the circumstances, it was urged that the Customs Authorities have no jurisdiction to proceed in the matter, nor question such permission. It was felt that the appellants h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Development Commissioner had granted the permission. The Commissioner in the impugned order has referred to CBEC Circular No. 4/2005-Cus. dated 31-1-2005. It was pointed out that this circular does not overruled CBEC Circular No.122/1995-Cus. dated 28-11-1995, inasmuch as cases involving divergence of practice or change in the practice or existing system of assessment shall be referred to the Board Demi officially. In the instant case, the Exports of the said parts and components were being done over a period of time and the Department never objected for such exports, since they had necessary permission from the SIA as well as the Development Commissioner. Since, the exports of 'parts' were being done after obtaining specific permission from the SIA/Development Commissioner and if the Department wanted to question such permission, they ought to have referred the matter to the CBEC, even in terms of CBEC Circular No. 4/2005-Cus., dated 31-1-2005. By the impugned order, the learned Commissioner is hampering exports and earning of additional foreign exchange, in terms of added value. The learned Commissioner was bound by the earlier Circular No. 21/1995, dated 10-3-1995. The following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok of Procedures that an EOU/EHTP/STP/BTP unit is restricted to export the imported parts. 14. It was stated that the Policy prevents setting up of a Trading Unit. GEBE is "primarily" a manufacturing unit, which exports Medical Diagnostic Imaging Equipments. Cumulatively, they have exported goods valued at Rs.1659 Crores (Rs. 430 crores during 2004-05 itself) and earned a net Foreign Exchange of Rs. 294 Crores (Rs. 86.56 cities in 2004-05 itself), after abating the Foreign Exchange out flow of Rs.1365 Crores. If the export of the parts per se is taken, the value of such parts exported is equivalent to Rs, 3.37 Crores and the value of such parts when imported was Rs. 2.12 Crores. (This includes the value of parts locally procured). As a result of the export of such parts for which specific permission was obtained from the SIA, Ministry of Industry and the Dev. Commr., CSEZ, Cochin, the Net Foreign Exchange earned is Rs.1.25 Crores. No loss has occurred, by this activity either to the exchequer or to the country. 15. It was also emphasized that what has been exported by the unit are not "spares/consumables" but "parts" which were meant for further manufacture of products in the GE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though our license covers parts and accessories along with the finished products viz. X-Ray tubes, H V Tanks & CT Detectors, we would appreciate a no objection certificate from your good office to carry out the export of bought out parts specifically. This will enable us to clear the ambiguity in the matter." 18. In response to the appellants' letter of 11-9-2003, the Development Commissioner has given a reply in their letter dated 24-9-2003, which is reproduced below: You have explained that in order to cater to the needs of your overseas customers you need to export bought out parts. Your license covers parts and accessories also. We have no objection at all in your exporting the bought out parts and earning foreign exchange. This issues with the approval of the Development Commissioner, Cochin Special Economic Zone, Cochin. 19. Thus, it is seen that the appellants had made their intentions very clear to the Development Commissioner and obtained specific permission from them for the export of bought out parts and this letter has been endorsed to the Deputy Commissioner of Customs, Bangalore. Therefore, the appellants had not indulged in any underhand activity. They had stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory premises of the 100% EOU. 2. The matter has been examined by the Board in the context of an Audit Objection and I am directed to say that the Board has taken a view that liability of customs duties on goods imported by 100% EOUs arises either at stage of the unit being debonded if any of the conditions of the exemption Notification No.13/81 dated 9-2-1981 has been violated or remains unfulfilled. In this regard, it is seen that one of the conditions of the exemption notification is that the importer exports out of India 100% or such other percentage, as may be fixed by the said Board, or articles manufactured wholly or partly from the goods for the period stipulated by the Board or such extended period as may be specified by the said Board. It is, thus, clear that if the competent authority namely the Board of Approval or the Development Commissioner concerned determines that the unit has failed to export the fixed percentage of articles for the specified period, then in such case it may be held that conditions of the exemption notification has been violated. At this stage, it will be open for this Department to issue a show cause notice to the Unit for demanding the due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound unsustainable in terms of EXIM Policy/customs law and may have to be dropped by the department itself. Sd /- (Ranjan Jha) Under Secretary to the Govt. of India" 20. Further, the appellants have contended that even they had not violated the policy provisions and paragraph 10 and 10A of the relevant notifications, which provide for export of spares and consumables. According to them, what they have exported are only parts and these parts which have been procured and brought out have been tested, the packages have been opened, they have been repacked and then they have been exported. According to the appellant, this process of testing and again repacking also amounts to manufacture in the light of the export policy. We had already given the definition of "manufacture" in terms of the Export Policy. In our view, such a broad view has to be taken in this case and it should be held that the appellants had indeed manufactured the parts and exported them. The definition of "manufacture" as per Central Excise Act is not applicable in this case. Otherwise, the very purpose of the scheme would be defeated. 21. In any case, it is not th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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