Judgment:
1. Since both the appeals involve the grant of exemption under Notification No. 51/96-Cus dated 23-7-96, a single order is being issued.
2. The first appellant is Mahatma Gandhi Institute of Technology, Hyderabad (hereinafter referred to as the first appellant or 'MGIT' for short). They imported Computer systems on 10-3-2000 and on 7-7-2000 free of duty claiming the benefit of exemption Notification No.51/96-Cus dated 23-7-96 on the basis of Essentiality Certificate issued by Jawaharlal Nehru Technological Institute (JNTU), Hyderabad. The Revenue conducted investigation and came to the conclusion that the appellant was not entitled to the benefit of exemption as the Essentiality Certificate had been obtained fraudulently with intend to evade payment of duty. It was further alleged that the appellant was not registered with the Department of Scientific and Industrial Research (DSIR) and also failed to comply with the conditions of the notification and the criteria laid down in the guidelines communicated under Government of India, Ministry of Science & Technology, DSIR, New Delhi letter No. TU/V/RG-CDE/96 dated 28-10-98. There were also allegations of non-utilisation of imported goods exclusively for research purposes and mis-declaration to the Customs Authority. The Essentiality Certificate issued by JNTU was withdrawn under their letter dated 26-6-2002. The adjudicating authority in her Order-in-Original No. 02/2004-Cus dated 19-1-2004, confiscated the seized goods with a redemption fine of Rs.16,00,000/- A penalty of Rs. 12,00,000/- was imposed under Section 114A of the Customs Act, 1962. A duty demand of Rs. 25,43,605/- was made. Interest under Section 11AB of the Customs Act (sic) was also demanded. The appellants aggrieved over the above order has come before the Tribunal for relief.
3. Shri Gowrisankara Murthy and Shri Anil Kumar, learned Advocate appeared on behalf of the appellants and Shri Raja Ram, learned JDR appeared on behalf of the Revenue.
4. Shri Gowrishankara Murthy, the learned Advocate took us through the various documents to clarify that the appellants have not adopted any fraudulent means to obtain the Essentiality Certificate. Further he drew the attention of the Bench to the guidelines issued by the Government of India under their letter dated 28-10-98. Further it was urged that even though the appellant's institution does not have Ph.D programme, various research projects are undertaken by the faculty and the students. Infact, some of the faculty members have registered for their Ph. D in other Universities. At the time of the import of the Computer system, the Essentiality Certificate was available. Its subsequent cancellation cannot be a reason for denying the benefit of the notification. In the light of the Govt. of India clarification, it is not necessary that the appellant's Institute should be registered with DSIR. It is sufficient that the University which issued the essentiality Certificate is registered with the DSIR. In any case, there is absolutely no justification for invoking the extended period in demanding duty and imposition of fine and penalty. Further it was submitted that the Essentiality Certificate was withdrawn by the Registrar of JNTU in the light of the decision of the JNTU not to issue Essentiality Certificate to Colleges without having Ph. D. programme.
Such a letter has been addressed to Principals of the Colleges. This shows that the JNTU was issuing essentiality certificate to other institutions and therefore, the allegation that the appellant fraudulently approached JNTU to issue Essentiality Certificate is not well founded. In view of these submissions, he prayed for setting aside the Order of the Original Authority.
5. The learned JDR urged that in as much as the appellant does not fulfill the conditions of the notification even from the beginning, they were not entitled for the benefit of the exemption notification.
He said that the appellant's institution is not registered with the DSIR. They did not have research programme as admitted by the Principal of the Institution in his statement before the Customs Authority. Since the Essentiality Certificate was issued on the basis of misrepresentation of the facts, the same was cancelled by JNTU. This cancellation should be given retrospective effect.
6. The second appellant is Gandhi Institute of Technology and Management (herein after referred to as 'second appellant' or 'GITAM' for short). The appeal is against the Order-in-Appeal No. 15/02-Cus dated 24-4-2002 passed by the Commissioner of Customs & Central Excise (Appeals), Hyderabad. In this case, the appellant sought the benefit of notification No. 51/96-Cus dated 23-7-96 for the DS-10 Alpha Server Computer System with accessories of Compaq USA. The Original Authority denied the exemption, even though the Essentiality Certificate issued by the Registrar of Andhra University was produced. The Commissioner (Appeals) also upheld the view of the Original Authority that in order to get the benefit of exemption notification, the institute itself should be registered with the DSIR and it is not sufficient that the University to which the institution is affiliated, is registered with DSIR. The appellant stated that the issue is fully settled in favour of the appellant in as much as the CBEC has clarified vide Circular No.28/2004-Cus dated 6-4-2004 that the benefit of notification No.51/96-Cus dated 23-7-96 is available even if the institution is not registered with the DSIR provided the University is registered with the DSIR and the University issued an Essentiality Certificate to the institution.
7. We have heard the rival contentions. The notification No. 51/96-Cus dated 23-7-96 exempts the goods imported for the research purposes from the Customs duty but there are certain conditions to be fulfilled by the institutions which import the goods for research purposes. They should be registered with the Government of India in the Department of Scientific and Industrial Research (DSIR). The exemption is available for Universities. The University includes a College affiliated with the University. In other words, the second appellant, GITAM, is also entitled, prima facie, for import of goods for research purposes free of Customs duty. The Revenue has taken the view that since GITAM itself is not registered with the DSIR, they are not entitled for the exemption. But the view of the Revenue is negatived by the Govt. of India, Ministry of Finance Circular dated 6.4.2004. Para 7 of Ministry's clarification is reproduced below: "7. Therefore, it is hereby clarified that where a claim of benefit under Notification No. 51/96-Cus dated 23.7.1996 is made by a privately funded College or educational institution, that is not a public funded research institution or non-commercial research institution, the benefit of notification can be considered on the basis of essentially certificate issued by the University to which the said college or educational institution is affiliated, on case to case basis, provided that the said University falls under the eligible category of importers under the said Notification." Hence in the first appellant's case, if JNTU, registered with the DSIR, has issued Essentially Certificate, there is no point in denying the benefit of the exemption on the ground that the institute itself is not affiliated with the DSIR. The notification should be implemented in the light of the clarification issued by the Ministry. One should not ignore the clarifications issued by the Government while interpreting a notification and deny the benefit by adopting a literal interpretation.
This is what the Revenue has done in these two cases. As regards the allegations in the show cause notice issued to the first appellant, MGIT, that they have obtained the Essentially Certificate fraudulently, we find that such an allegation is unfounded on the basis of the available records. The first appellant, MGIT, is affiliated to JNTU.Whenever any college or institution is affiliated to the University, an elaborate procedure is followed. In other words, JNTU would not have given the affiliation to the appellant's institution even without knowing the programmes undertaken by the appellants institute. In other words, the fact of Ph.D. level programme in the appellant's institute being conducted or otherwise would definitely be known to JNTU.Therefore, the Revenue's allegation that the appellants misrepresented the facts to the JNTU and got the Essentiality Certificate fraudulently is without any basis. There is nothing on record to show that the appellants got the Essentiality Certificate fraudulently. In fact, from the records, we find JNTU has issued Essentiality Certificate to all the institutions affiliated to them. When it was pointed out to them that they had issued Essentiality Certificate in violation of the guidelines issued by the DSIR, they sent letter to the Principals informing their decision for withdrawing that facilities. In fact, the letter from JNTU Registrar dated 26.6.2002 reads as follows:- Sub: JNT University, Hyderabad - Academic & Planning- Import/Purchase of Equipment under duty free notification 2. Lr.No.SG/Ref/38/2001/Cus.SIIB, dated 24.06.2002 of the Commissioner of Customs & Central Excise, Hyderabad.
You are aware that the University has been issuing the Essentiality Certificates for exemption of Custom duties for the import/purchase of equipment's of the Colleges.
In this connection, it is to inform you that the above facility for issuing the Essentiality Certificate is withdrawn with immediate effect as per the DSIR guidelines under (3) which says that "the college should be recognized as Ph.D. level research center in natural/ applied/ social science or for P.G. level courses in engineering, Computer Science, Agricultural Science by Universities to which it is affiliated" as such no certificates shall be issued by this University in future until further orders.
The form -B, for availing Customs and Excise duty exemption, issued earlier also stands cancelled.
From the above, it is seen that the authority who issued the essentiality Certificate has committed the same mistake in violation of the guidelines. In view of this, the allegation of fraud against the first appellant, MGIT, is not substantiated. Under such circumstances, issuing show cause notice for extended time limit cannot be sustained.
It is also seen that the first appellant has undertaken 39 projects in the Department of Metallurgy and Materials Technology, Department of Computer Science and Engineering and the Department of Mechatronics (Mechanical Engineering). We have seen the list of the projects carried out by them. Therefore, the imported equipments cannot be said to have been misutilised. In fact they have been utilised only for the research purposes. In view of the above findings, the Order-in-Original in respect of the first appellant, MGIT, cannot be sustained and the same is set aside. As regards the second appellant GITAM, in view of the clarification given by the Ministry of Finance which has been quoted earlier, they are also entitled to the benefit of exemption notification since the University which gave the Essentiality Certificate Registered with the DSIR.