Full Judgment
Seagate Technology International, Singapore (hereinafter referred to as 'STI')- The matter was adjudicated by the Deputy Collector of Customs, Hyderabad, who observed that the goods imported were new goods and that they did not tally with the description as given in the shipping bills under which the goods were said to have been sent to STI, Singapore, for repairs. He denied the exemption under Notification No. 204/76-Cus.
There were allegations with regard to mis-declaration of value also and the Deputy Collector of Customs had rejected the declared value and had arrived at the correct assessable values and had demanded customs duty based on such revised assessable value. He had imposed the redemption fine of Rs. 3,00,000/- and had demanded appropriate customs duty. On appeal, the Collector of Customs (Appeals), Hyderabad, confirmed the order passed by the Deputy Collector of Customs, in so far his findings that the goods were brand new were concerned. He, however, set aside the order relating to the valuation and remanded the matter back to the Deputy Collector of Customs only for de novo adjudication relating to valuation after giving appropriate notice to the appellants giving the full details for fixing the value. He further observed that as the quantum of redemption fine had direct relevance to the value of the goods, the adjudicating authority should redetermine the redemption fine depending upon the value of the goods determined in remand proceedings.
2. We have heard Shri R. Subramaniam, Consultant for the appellants and Shri S.N. Ojha, JDR, for the respondents/Revenue.
3. Shri R. Subramaniam, Consultant, submitted that the matter with regard to valuation and the re-fixation of redemption fine, if any, is still before the adjudicating authority and that in this appeal the appellants have only pleaded that the goods re-imported by them were covered by the exemption Notification No. 204/76-Cus. It was his submission that after use, the WDDs had become defective and they had sent it to STI, Singapore, for repairs after obtaining necessary clearance from the Directorate General of Technical Development (DGTD).
The goods imported broadly tallied with the goods exported and STI had added some numbers before the actual serial numbers and that such addition was not material. He referred to the documents on record and submitted that the STI had clarified in their communication that the goods supplied by them were the same as sent to them, after necessary repairs. The payment had been made through the letter of credit and there is no allegation that any additional foreign exchange had been sent. He pleaded that the view taken by the adjudicating authority and appellate authority in this regard was not sustainable.
4. In reply, Shri S.N. Ojha, JDR, referred to the party's own admission in their communication to STI that the goods sent by them were new goods. He also referred to the statement of the clearing agent who also admitted that the goods imported were new goods. He referred to the observations of the adjudicating authority and the findings of the appellate authority and submitted that there was no doubt that the goods imported were the new goods. The benefit of exemption notification was available only for repairs and that too repairs of such a nature that the identity of the goods is not lost. He pleaded that the view taken by the lower authorities was correct and there was no merit in this appeal.
5. We have carefully considered the matter. Under Notification No.204/76-Cus., dated 2-8-1976, as amended, articles when re-imported after having been exported for repairs, subject to the conditions as laid down in that notification, were exempted from so much of the duty of customs leviable thereon as was in excess of the duty which would be leviable if the value of such re-imported goods were made up of the fair cost of repairs carried out (whether such cost is actually incurred or not) insurance and freight charges both ways. It was provided in that notification that the Customs officer should be satisfied about the identity of the goods. The Notification No.204/76-Cus. is extracted below : 204/76-Cus., dated 2-8-1976, as amended by 65/77-Cus., dated 28-5-1977, 207/86-Cus., dated 12-3-1986, 366/86-Cus., dated 23-6-1986, 242/88-Cus., dated 1-9-1988 : In exercise of the powers conferred by Sub-section
(1) of Section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts all articles, when re-imported into India after having been exported for repairs, from so much of the duty of customs leviable thereon under the Customs Tariff Act, 1975 (51 of 1975), as is in excess of the duty of customs which would be leviable if the value of such re-imported goods were made up of the fair cost of repairs carried out (whether such cost is actually incurred or not), insurance and freight charges both ways : Provided that the importer furnishes a certificate from the duly authorised officer of (a) the Directorate General of Civil Aviation in the case of aircraft parts, (b) the Coir Board in the case of coir industry equipment, (c) the Jute Commissioner in the case of jute industry equipment, (d) the Textile Commissioner in the case of textile industry equipment, (e) the Ministry of Industry (Directorate General of Technical Development) in respect of any other article, to the effect that the repairs to be done to the goods in respect of which exemption is claimed are such as cannot be carried out within India; and Provided further that no such certificate shall be required to be furnished in the case of Populated Printed Circuit Boards falling under Sub-heading No. 8473.30 of the First Schedule to the said Customs Tariff Act: Provided also that the Assistant Collector of Customs is satisfied :-
(2) that the goods have been re-imported within one year of the date of their exportation abroad for repairs or within such extended time as the Collector of Customs may, having regard to the circumstances of each case, allow;
(3) that there has been no change in their ownership between the time of their export and re-import, and
(4) that no drawback of duty had been paid on the occasion of their export.
6. The WDDs involved in these proceedings had been imported over a period of time by the appellants from M/s. Imprimis of U.S.A. After use, as per the version of the importer, they had become defective.
Over a period of time, they got accumulated. The STI, Singapore, who had taken over the manufacturing activities of M/s. Imprimis had announced some scheme and it was in pursuance of such a scheme that these 45 WDDs were sent to Singapore. When the Bill of Entry for clearance of the WDDs in dispute were filed, it was found that the marks and numbers as appearing in the shipping bills under which they were said to have been exported did not tally with the marks and numbers of the goods imported. The examination report was referred to in the show cause notice. The contents as found on the examination are summarised at pages 4 to 16. The examination of the consignments had shown that the particulars of the WDDs imported did not tally with the particulars of the WDDs exported in respect of part numbers and models.
7. The clearing agent in his statement dated 13-2-1992, the statement enclosed with the Show Cause Notice, had admitted that the identification numbers as mentioned in the relevant shipping bills were not appearing on the WDDs and what had been imported appeared to be brand new goods.
8. When the examination of the goods revealed that the goods imported were not the same as had been supplied to the STI, Singapore, the appellants had written to the Indian representative of the suppliers as under : "The above drives were examined by Customs at Hyderabad and it has come to our notice that all the drives (34 Nos. X 94155-86 and 11 Nos. X 94171-350) are fresh ones and not the ones we sent for repair.
The serial nos./model nos. of the drives received do not tally with those of the ones received back." 9. From the order-in-original, it is seen that apart from the electronics PCB, the outer metal casings /coverings have also been changed. The adjudicating authority had observed that a sticker indicating the metal and serial number is only pasted on the metal frame and if the same metal frame is returned back, then there should not be any discrepancy in the serial number. The adjudicating authority was not satisfied about the identity of the goods. The DR had referred to the discussion at pages 5 & 6 of the adjudication order.
10. The supplier under his communication dated 21-2-1992 had clarified that for older drive models those introduced before 2 to 3 years components are replaced when such components are beyond repair and also due to change in technology, the repaired drives were made to undergo all the tests similar to the ones undertaken during the manufacturing process and that the same carried also a warranty of three months from the date of repair. This communication dated 21-2-1992 is in response to the telephonic conversation with one Shri M. Subramaniam of ORG Systems, Baroda. In reply to the show cause notice, the appellants had stated that the manufacturing activities of M/s. Imprimis from whom the WDDs had been imported originally had been taken over by STI, Singapore.
11. The adjudicating authority had also referred to the payment terms which has prescribed as "UNKNOWN PAY TERMS". He had also referred to the statement made by the appellants in paras 17 & 18 of the reply to the show cause notice, where they have agreed that the labels on the drives did not tally.
12. Under Notification No. 204/76-Cus. the benefit of exemption was available only when the Customs officers were satisfied of the identity of the goods.
13. In the present proceedings, we are not concerned with the valuation and we are only concerned with the fact whether the satisfaction of the customs authorities with regard to the identity of the goods was based on valid and justifiable grounds. The observations of the adjudicating authority in this regard are extracted below : "It is observed from the documents submitted by the importer that the Winchester Disk Drives are as old as 1986 and the importers have not given any authentic document to show the warranty period prevailed. They have stated that they have forwarded these drives abroad to carry out repair work by M/s. Seagate Technology, Singapore on a special repair programme. In their reply to show cause notice issued by this Department, they have stated that all the drives exported by them are under warranty except for 2 drives for which the overseas suppliers have charged more, since their warranty period was expired. However, the letter dated 25-2-1991 of the importers to their overseas suppliers is clearly indicating that out of the 26 drives they intend to export there are only 3 Winchester Disk Drives which are under warranty. This list clearly shows that most of the drives which are re-imported now are out of warranty. Hence the statement of the importers that only 2 drives are out of warranty is a clear out mis-declaration. Moreover it is a well known fact in the International Trade the supplier normally will not charge for repair work for the goods supplied by him and returned to him within the warranty period. In this case the importers have paid repair charges under warranty period as claimed by them. The Physical appearance of the goods apart from the discrepancy of the Model and Serial Nos. is indicating that the goods are 'Brand New'. Normally repair work means either electronic PCB or the Motor inside will only be repaired but not the outer metal frame in which the electronics parts are encased. In this case apart from the electronics PCB the outer metal casing/coverings are also appearing 'Brand New'. A sticker indicating the Model & Sl. No. is only pasted on this metal frame. If the same metal frame is returned back there should not be any discrepancy in the Sl. No. If they changed the sticker after repairs there should be some sign of pasting some other sticker. There are no signs anywhere on the drive. Since the importers have claimed that they have originally purchased the subject drives from M/s. CMC Ltd. (A Govt. of India undertaking), in order to have a Technical expertise opinion the same organisation has been approached and they have certified that the goods under consideration are all 'Brand New'. Similarly M/s.
BCIL, another Govt. of India undertaking who are dealing in computers, have also certified after examination of the goods that the drives are 'Brand New'. The Department has approached for technical expertise opinion only after having prima facie evidences that the goods under consideration are 'Brand New'. The opinion is restricted only to nature of the goods. Hence in the light of the above facts it is proved that the goods are imported by misdeclaring and thus violating Section 11 and 111(m) of the Customs Act, 1962." Para 6 from the order-in-appeal passed by the Collector of Customs (Appeals), 6. I have considered all the above submissions and the records of the case. The primary issue for decision in this appeal is whether the imported WDDs are the ones exported by the appellant under the shipping bills and whether the same have been returned after repairs. The next question is the valuation of the imported WDDs.
Insofar as the first issue is concerned, the appellant's claim is that they purchased the WDDs from CMC and since they required repairs, they were exported to Seagate for repairs and return after getting permission from CMC and DGTD. According to the appellant, the WDDs were exported vide shipping bills 167808, dated 26-9-1991 and 168306, dated 27-9-1991 via Bombay. The details of WDDs exported under these Shipping Bills giving model nos. and sl. nos. are also available in the respective shipping bills. The appellant had exported 34 WDDs under shipping bill 168306, dated 27-9-1991 and another 11 WDDs vide shipping bill No. 167808, dated 27-9- 1991. The details of the 11 WDDs i.e., sl. no. and model no. exported under shipping bill dated 26-9-1991 is given in the shipping bill itself.
The SCN gives the discrepancies noticed. This clearly indicates that the sl. nos. and model nos. of the imported WDDs do not tally with the ones shown in the corresponding export documents. No doubt the appellant has given a tabular statement in the appeal memorandum and have argued that the details tally in respect of 16 WDDs and in respect of 12 WDDs there is difference only in respect of prefix and in respect of the remaining WDDs the details tally partially.
However, on perusal of the documents concerned, I find that the appellant's claim is wrong. For example in respect of the 16 WDDs on which according to the appellant the appellant there is no discrepancy at all, If find that they do not tally with the nos.
shown in the export documents. The 16 WDDs in question are claimed to have been exported vide shipping bill 168306, dated 27-9-1991.
The list attached to the said shipping bill gives the details of the 34 WDDs exported under the said shipping bill. The list contains the 16 WDDs in question. Sl. No. 17 of the list attached to the shipping bill, gives the model no. and sl. No. of the WDD as 94155 and 04045936 respectively whereas on examination of the imported WDD, it is found to contain the model No. as 94155-86 and sl. No. as WA 045936. In the model no. there is suffix namely "86" and in respect of sl. no. there is a prefix "WA" in place of 04. Thus they do not tally with the model no. and sl. no. shown in the shipping bill.
Similarly the model no. and sl. no. shown in the shipping bill in respect of WDD 04045787 is model No. 94155 and sl. No. 04045787. On the other hand, as per the examination report, the model No. is 94155-86 and sl. No. is WA 045787. Similarly, against sl. No. 6 of the list attached to the shipping bill, the WDD exported is 94155-86 bearing sl. No. 05263008 whereas the model no. and sl. No. found on examination is 94155-86 and WR 263008.1 have given only illustrative examples to show how the model nos. and sl. nos. do not tally when compared with the ones shown in the corresponding shipping bill.
Similar discrepancy exist in respect of the other models as well as per the details given in the examination report and the SCN. Therefore the appellant's claim that the discrepancy is only minor and that in respect of 16 WDDs there is no discrepancy at all, is not at all borne but by facts. Similarly, discrepancies in model nos. and sl. nos. are found in respect of the WDDs said to have been exported vide shipping bill 167808, dated 26-9-1991 vis-a-vis the imported WDDs which are claimed to be the same as have been exported under the above said shipping bill. I am giving only a couple of examples. The appellant had exported WDD model 94171-300 sl. No. 3007140. The corresponding imported WDDs shows the model No. 94171-350 and sl. No. as WE007140. Again, the appellant had exported WDD model No. 94171-307 sl. No. 3031242. The imported WDD shows the model No. as 94171-350 and sl. No. as WE031242. Thus, the difference is quite apparent. The appellant is also unable to explain the discrepancies. Their only explanation is that Seagate had adopted certain prefixes and that they are not aware. Further the invoices, give the terms of payment as "unknown pay terms". They do not quote the LC at all. Therefore, the appellant's argument that they were supposed to make the payment only as per LC for the repair charges alone, is not supported by the documents as mentioned above. In the impugned order the Deputy Collector has also stated that the physical appearance of the goods establish that they are brand new.
The Deputy Collector has also stated that by repair work only electronic PCB or the motor inside the WDDs will be repaired but not the outer model frame in which the electronic parts are encase. In this case apart from the electronic PCB the outer model casing/coverings were also found to be brand new. Only sticker indicating the model and sl. no. is found pasted on the model frame.
The Deputy Collector has observed that if the same model frames sent for repairs have been received back, then there should not be any discrepancy in the sl. no. and if Seagate had changed the sticker after repairs, there should be some sign of paste of some other sticker and whereas no such signs are found on the WDDs. This observation of the Deputy Collector has not been cor- roborated by the appellant. The appellant has questions the adjudicating authority's reliance on the opinion of CMC and ECIL but according to me even without recourse to their opinion, there is no doubt that the WDDs are not the ones sent for repairs but they are brand new.
Further if the repairs have been carried out taking advantage of the warranty period then no charges will be charged. The appellant has not submitted any document showing that these goods are covered by the warranty period. In fact at the time of PH, the learned Advocate has also admitted that these goods were not at all covered by the warranty period. The goods as earlier said have been purchased originally from CMC but the letter given by the CMC to the appellant permitting export of these goods do not give the details of sl. no.
and model no. of the WDDs so as to establish any connection between the ones purchased by the appellant from CMC and the goods now imported. The appellant has placed reliance on the Seagate's letters and have claimed that Seagate have confirmed that these goods are the ones returned after repairs; but a mere confirmation alone will not be sufficient in the face of the evidences as given above being contrary. I, therefore hold that the appellant has imported brand new WDDs and have attempted to clear the same in the guise of the ones sent for repairs and return. I, therefore uphold the impugned order insofar as it relates to holding that the WDDs are brand new ones and not the ones sent for repairs.
14. After going through the facts on record and various submissions made by the appellants, and the correspondence exchanged with the STI, Singapore, by the appellants, we do not find any infirmity in the view taken by the lower authorities.
15. In view of the above discussion, we do not find any merit in this appeal and the same is rejected.