( 1 ) THESE appeals are against the order dated 14. 3. 1995 passed by the Customs, excise and Gold (Control) Appellate Tribunal (for short, CEGAT ). Briefly stated, the facts are as follows:-

( 2 ) THE appellant in civil appeal no. 5653 of 1995 i. e. M/s. Nicotian Brothers applied for an advance licence which was granted to them on 27. 12. 1988. The advance licence was for import of certain components for manufacture of ultrasound scanners (ten numbers of combison-320-5 spec. no. 1 and thirty five numbers of combison-320-5 spec. no. 2) which were then to be exported. The appellants in civil appeal no. 4693 of 1995 i. e. M/s. Titan Medical Systems pvt. Ltd. were shown as supporting manufacturer.

( 3 ) BY exemption notification no. 116 of 1988, certain goods, which were imported into India against an advance licence for the purpose of manufacture, in execution of an export order, were exempted from duty of customs. M/s. Nicolian Brothers imported certain components into India vide bill of entry dated 25th March, 1989. They then exported, out of India, forty five ultrasound scanners (ten of which were of specification no. 1 and thirty five of the specification no. 2 ). The customs authorities (respondents) permitted them to export the said scanners, allowed the benefit of exemption notification and cancelled the bond which had been executed by M/s. Nicolian Brothers.

( 4 ) ON 6th November, 1990, a common show cause notice came to be issued to the appellants In both the matters. By this notice, the appellants were called upon to show cause as to why duty and penalty be not levied on them for not having complied with the conditions of the exemption notification. The appellants filed their reply to the show cause notice. The collector of customs, by his order dated 18. 2. 1993 levied duty and penalty on M/s. Nicolian brothers and penalty on M/s. Titan Medical Systems pvt. Ltd. The appellants filed separate appeals before CEGAT. The CEGAT has, by the impugned order, dismissed these appeals but reduced the penalty imposed on M/s. Nicolian Brothers to Rs. five lakhs and that imposed on M/s. Titan Medical systems Pvt. Ltd. to Rs. two lakhs.

( 5 ) THE collector as well as CEGAT have held that the appellant - M/s. Nicolian Brothers had made a misrepresentation to the licensing authority and that licence had been obtained on the basis of such misrepresentation. The misrepresentation alleged is that in their application they had indicated that they would use indigenous components of the value of Rs. 2,32,69,200/- and that labour, packing and other charges would be to an extent of Rs. 2,07,89,447/-, whereas in actual facts they used components only to the extent of Rs. 8 lakhs and paid approximately only Rs. 5 lakhs towards labour charges. It is also held that neither M/s. Nicolian Brothers nor m/s. Titan Medical Systems Pvt. Ltd. had undertaken any manufacturing activity at all.

( 6 ) WE have heard the parties at great length. We have perused the exemption notification, the duty exemption scheme and the relevant portions of the import policy. We have also perused the application for licence and the licence which had been granted to the parties.

( 7 ) THE relevant portion of paragraph 219 of the duty exemption scheme reads as follows:-"219 (1) The objective of the scheme is to make available to the registered exporters the necessary inputs for export production at international prices without payment of customs duty so as to make the exports competitive in the international market. The scheme covers three categories of licences - (1) Advance Licences, (2) Intermediate advance Licences and (3) Special Imprest licences. The basis and conditions on which these three categories of licences are issued under this scheme vary and licences issued under one category, therefore, cannot be mixed up with the other. Imports made against a licence granted under this scheme will be eligible for customs duty exemption as per the relevant customs notification