M/s. Converge Labs Software Technologies Pvt. Ltd. (‘Converge’) is a 100% export oriented unit (‘EOU’) operating under the Software Technology Parks of India (‘STPI’) Scheme and is engaged in the development and export of software. Notification No. 140/91-Cus dated 22nd October 1991 (‘subject Notification’), granted exemption from the Customs Duty to goods imported into India by a 100% EOU under the STPI Scheme subject to certain specified conditions.
Converge imported several consignments of Telecom equipment consisting of Personal Access System, Wireless Local Loop System and telephone handsets (collectively referred to as the ‘equipment’) from M/s. U.T.Starcom Inc (‘UTSC’) in terms of this notification.
The equipment was taken out of the unit with the permission of the jurisdictional Assistant Commissioner Customs and the STP authorities and installed at Mahanagar Telephone Nigam Ltd. (‘MTNL’) site for demonstration and testing.
As per the terms of the Agreements between Converge, MTNL and UTSC it appeared that the purpose of import of the equipment was to provide the same to MTNL on behalf of UTSC for field trial. It was confirmed by the Company’s officials that the said equipment was not used for software development.
Since the equipment appeared to have been imported in contravention of the provisions of the subject Notification and the EOU Scheme, the same was seized and show cause notices were issued to Converge, UTSC and the officials of Converge (collectively ‘Appellants’) demanding duty and penalty and seeking confiscation of the equipment –
Upon confirmation of the demand an appeal was filed to the Customs, Excise and Service Tax Appellate Tribunal (‘CESTAT’).
Contentions of the Appellant
The Appellants put forth the following contentions to substantiate their plea that they were eligible to the exemption under the subject Notification –
