B.S.V. Murthy, Member (T)

1. M/s. Magarpatta Township Development & Construction Co. Ltd. (MTDCC for short) indigenously procured capital goods in terms of Notification No. 22/03-C.E., dated 31-3-2003 on the strength of the CT-3 certificate issued by Superintendent of Central Excise. MTDCC are infrastructure providers to STP units located at Magarpatta City and are not involved in manufacture, processing, packaging and export of software, hardware or services. On this ground, the Revenue entertained a view that MTDCC is not entitled to procure duty free capital goods/parts in terms of Notification No. 22/03-C.E., dated 31-3-03 and initiated proceedings by issue of show-cause notice which culminated in the impugned order whereby, the demand for duty amounting to Rs. 1,85,23,320/- with interest has been confirmed. Further, penalty equal to the duty demanded has been imposed on MTDCC under Sec. 11 AC of the Central Excise Act, 1944.

2. In this case, show-cause notice was issued on 8-11-06 for the duty foregone during the period October 2003 to March, 2005. Therefore, the whole period of demand is beyond the normal limit and demand has been confirmed by invoking the extended period. Therefore, there are two issues to be decided by us. The first issue is whether MTDCC is eligible for the benefit of Notification No. 22/03 and the second, if not, duty demand invoking the extended period can be sustained or not.

3. The Id. counsel for MTDCC submitted that the appellants have obtained the approval of the Government for setting up an infrastructure facility for STP units under STP scheme at Magarpatta City. Subsequently, an agreement was entered into by MTDCC with Director, STPI, Pune. According to this agreement, the appellants were required to comply with all the terms and conditions contained in the approval letter dated 10-10-2000 cited above. Further, the agreement also specifically provided "since your Unit is not a Software exporting unit & you are only an infrastructure provider to Software exporters, the export obligation applicable to you is NIL." The Id. advocate also took us through the Notification No. 22/03. He submitted that the exemption under Notification No. 22/03 is to the goods and, therefore, it is not relevant as to who is the person who obtained the goods but what is to be seen is whether the goods are eligible for exemption. He submits that according to para (a)(ii) of the Notification, "all goods specified in Annexure I to this notification, when brought in connection with manufacture or development of software......... into Software Technology Park Unit or a unit in Software Technology Park Complex under the hundred percent export oriented scheme are eligible for exemption. He submits that in this case, even though the goods were obtained by MTDCC under CT 3 certificate, they were brought to a STP Unit in connection with manufacture or development of software etc. Therefore, he submits that the goods are eligible for exemption. Further, he drew our attention to para 9 of the Notification wherein, it has been provided that the units may be allowed the capital goods obtained by them duty free to be utilized by other units belonging to the owner of procuring unit and located in the same compound or nearby premises for the purpose of development of software and export thereof. Further, he also drew our attention to Annexure to show that the goods obtained were covered by the Annexure. The condition in sub-para 4 of para 1(d)(iii) is also not applicable in view of the agreement with the Director of STPI. The Id. D.R. on the other hand submits that the exemption is available only when the goods are brought in a unit in STP or a 100% EOU. He submits that no other interpretation is possible. Further, he also submits that the permission was granted by the Asstt. Commissioner on 6-10-03 to MTDCC for procurement of indigenous capital goods subject to conditions in the Notification and the appellant did not fulfill the conditions since they were not engaged in any manufacture, processing, packaging and export of software.

4. We have considered the submissions made by both sides on merits. We find that if the interpretation given by the Id counsel to the notification No. 22/03 dated 31-3-03 is accepted, it will result in a situation where the goods can be imported by an infrastructure provider and installed in a unit in STP, but the other conditions especially one relating to net foreign exchange earning, would not be applicable. It has to be noted that contrary to the submissions made by the Id. counsel, the net foreign exchange earning has to be achieved by the unit or the manufacturer. Therefore, if the counsels submissions are accepted, the goods and the procurer get segregated. The goods will be installed in a unit and the unit concerned can say that since the unit is not the procurer, they need have not fulfill any of the conditions under Notification No. 22/03 dated 31-3-03. On the other hand, the procurer who happens to be infrastructure provider in this case would be under no obligation to fulfill any of the conditions of the Notification No. 22/03 since it is the unit in whose premises the capital goods are installed and the infrastructure provider not being the owner of the unit nor having any power over the unit would not be able to ensure that the conditions are fulfilled. The bond executed by the procurer will remain only a paper. This would result in a situation where a procurer of capital goods can procure the goods without payment of duty and without being obliged to fulfill any condition. This is virtually rendering the Notification No. 22/03 otiose. Further, we also find that the submission of the Id. counsel that para 9 of the Notification permits utilization by other units, is also not correct since it specifically provides that "belonging to the owner of procuring unit". In this case, it is not the case of the appellants that any of the units utilizing the capital goods are owned by them. Several decisions were cited by both sides but we are not going into those decisions since the facts in this case are unique and none of the cases are having similar facts.

5. The second issue we have to consider is whether extended period has been correctly invoked by the Revenue and can be sustained. The Id. counsel submitted that there was no suppression or misdeclaration at all. CT 3 certificate was issued by the concerned officer who had issued the Customs bonded warehousing license and also under whom MTDCC was working. The Id. Jt. CDR submitted that in their letter dated 1-10-03, MTDCC had written to the Asstt. Commissioner while seeking issue of CT 3 certificate for procurement of capital goods that they have been granted the status of 100% EOU. The second para of the letter starts with the sentence "we are recognized as Infrastructure provider for ST. Units and have been granted the status of 100% EOU". He submits that the statement that MTDCC has been granted the status of 100% EOU is also false. He also further draws our attention to the agreement entered into with the Director of STPI, Pune. In the agreement, in the very first para, the following sentence is found :-

An agreement made on this 10th day of March Two thousand & Three between M/s. Magarpatta Township Development and Construction Company Ltd., a 100% export oriented unit.

This shows that even before the Director STPI, the appellants projected themselves as 100% EOU. The Id. counsel has submitted that this was only a casual mention and the Asstt. Commissioner in-charge of the Division was the one who had the MOU and all other relevant documents, and therefore, it is not possible that he could not have been aware that the appellant was not a 100% EOU. We are unable to accept this view. According to the provisions of Sec. 11A, what is required to be seen is whether the assessee or the manufacturer has submitted declaration or furnished information correctly as required under the law. The question as to whether the officers of the department could have been aware or could have found out the information by going through other records available with them does not help the assessee or the manufacturer. Therefore, the question to be examined is whether there was a misdeclaration on the part of the appellant. In this case, obviously, the appellant was not at all a 100% EOU. The Notification No. 22/03, as already observed above, does not provide any exemption for capital goods procured by STPI infrastructure provider but only to a 100% EOU or STP unit. That being the situation, the conclusion that emerges is that the appellant deliberately made a declaration in their letter that they were a 100% EOU. Further, we cannot forget the fact or ignore the fact that the Asstt. Commissioner could have believed that the appellant is a 100% EOU since besides being the infrastructure provider, the appellant can also have a 100% EOU in the STP unit themselves. That being the position, it is quite possible that MTDCC besides being a STP unit infrastructure provider can also have a 100% EOU and, therefore, may be seeking to procure capital goods. In such an event, there is nothing wrong in believing that the declaration made by MTDCC is for getting capital goods. This is the basic principle enshrined in the Central Excise law that the declaration or information furnished by the appellant has to be accepted. This is because if an assessee makes misdeclaration or suppression of facts which are required to be given by him, the consequences are invocation of extended period of limitation and mandatory penalty under Sec. 11AC. Another submission that was made by the Id. counsel was that there was no proper allegation in the show-cause notice. However, we find that in para 6, 7, and 8 of the show-cause notice, there are clear allegations of suppression and how the suppression by misdeclaration has occurred. For convenience, para 6, 7 & 8 of the show-cause notice are reproduced :-

6. Whereas it appears that M/s. MTDCC, though registered as an infrastructure providers for STP units had procured indigenous capital goods/parts under the Notification No. 22/2003 dtd. 31-3-2003 by misdeclaring and misrepresenting in as much as :

(1) Entered into an Agreement dtd. 10-3-2003 with the Director and Chief Executive, Software Technology Park of India, Hinjawadi, Pune-411 027, by projecting themselves as an 100% E.O.U, -STP unit under software export scheme and further stated that permission has been granted to them for setting up of the STP unit vide letter No. 15(72)/2000-IPC dated 10-10-2000, whereas on verification of the aforesaid letter of the Govt. of India, Ministry of I.T., it is observed that the permission/approval was accorded for setting up infrastructure facility for STP units under STP scheme at Magarpatta City, Hadapsar and not a STPI status.

7. Whereas it appears that the permission was granted by the Assistant Commissioner vide F. No. VII/CUS/STP/26/03 dated 6-10-03 to M/s. MTDCC for procurement of indigenous Capital goods/parts subject to fulfillment of conditions stipulated vide Notification No. 22/2003-C.E., dated 31-3-2003, but it was observed that they did not fulfill the condition as stipulated vide Notification 22/03 dated 31-3-2003 in as much as they were not engaged in any manufacture, processing, packaging and export of software/hardware or service.

8. Whereas it further appears that M/s. MTDCC have contravened the provision of Section 11A of the Central Excise Act, 1944 read with conditions under Notification No. 22/03 dated 31-3-2003 in as much as they had obtained/procured indigenous capital goods even when they were not eligible for the said procurement since they were only infrastructure providers for STP units situated at Magarpatta city.

6. In view of the above discussions, we find that MTDCC has failed to make out a case either on merits regarding eligibility for Exemption nor against invocation of extended time limit.

7. We also take note of the submission made by the learned JCDR that there is no time limit when demand is raised for non fulfillment of conditions accepted in the bond executed. We find that the decision of the Tribunal in the case of Endress + Hauser Flowtec (1) Pvt. Ltd. - 2009 (237) E.L.T. 598 (Tri.-Mumbai) is applicable as far as this aspect is considered.

8. In the result we do not find any merit in the appeal and accordingly reject the same.

(Pronounced in court on 19-5-2011)