IMPORTANT POINT
Compliance with local content requirements as specified in the notifications is crucial for products offered on the GeM portal.

JUDGMENT (Oral)

1. Petitioner has approached this Court challenging an Order dated 09.02.2023 passed by Respondent No.1 debarring the Petitioner for a period of two years from participating in the procurements of Department of Telecommunications (DoT) and its attached/subordinate offices, autonomous bodies, Central Public Sector Undertaking etc. on the ground of false declarations of local content by the Petitioner, which according to the Respondent is a breach of Code of Integrity under Rule 175(1)(i)(h) of the General Financial Rules and in terms of Para 9(f) of the DPIIT PPP-MII Order dated 19.09.2020.

2. Shorn of details, the facts leading to the instant writ petition are that the Petitioner is engaged in software development and hardware design in the domain of unified communication. It is stated that the Petitioner hosted three products on the Government Electronic Marketplace (GeM) portal which are Core IP UMGW-128S/H Gateway, Core IP UMGW_48s Analog VoIP Gateway and Core IP T58 W SIP phone.

3. A show cause notice was issued to the Petitioner on 23.01.2023 stating that a complaint has been received by the Respondent against the Petitioner/company regarding mis-labeling Chinese products as Indian branded products. It is stated in the show cause notice that the local content in the three products named above are 49.36%, 59.30% and 15.6% is below the local content requirement as per the DoT PPP-MII notification dated 29.08.2018. The Petitioner was directed to show cause as to why the Petitioner should not be debarred from participating in the procurement of Core IP UMGW-128S/H Gateway, Core IP UMGW_ 48s Analog VolP Gateway and Core IP T58 W SIP phone. Replies have been filed by the Petitioner on 30.01.2023 and 01.02.2023. A personal hearing was afforded to the Petitioner.

4. Material on record discloses that the Expert Committee had meetings on various dates and a decision was taken that there was indeed a mis- branding on the part of the Petitioner. Paragraph 4 and 5 of the said order dated 09.02.2023, reads as under:

"4, M/s Core IP submitted to the committee that it has listed only three products on GeM portal namely Core IP UMGW-128S/1 Gateway, Core IP UMGW_48s Analog VoIP Gateway and Core IP T58 W SIP phone. M's CoreIP had provided the details of local and imported contents of these three products only. Therefore, the committee was constrained to verify the Local content for these three items only.

4.1 Calculation of Local content in T58 W SIP Phone:

M/s CoreIP had claimed 20% LC for T58W SIP Phone on GeM portal. The total cost of the product is shown as Rs 34,378 of which Rs 21, 667 is given as the cost of imported T58W SIP phone. The imported T58W SIP Phone has same model number i.e., T58W SIP phone shown in catalogue of M/s Yealink (Xiamen) Network Technology Co. Ltd. China. The cost break up of SIP Phone submitted by M/s CoreIP shows LC as 36.97%.

The local content is claimed against inward freight, power adapter, packaging material, printing of labels, cost of software designed and developed by M/s CoreIP, installation cost at client location and outward freight, insurance and handling. However, the committee found out that inward fright cost should not be part of local content but should be part of import cost. Further, installation cost at client locations and outward fright, insurance and handling are not admissible towards local contents as per DPIIT OM dt. 04.03.2021. The cost of software design claimed by M/s CoreIP is 21.82% of the total cost wherein the admissible limit for design cost including hardware and software as per Table-C of the DoT Gazette Notification, dated 29.08.2018, is 15% for IP Phone category. The power adapter is purchased from M/s Adapter point. Committee after examination and deliberation found out that the admissible component of local content from the break-up of the cost provided which could be allowed without any doubt are cost of power adapter, packaging material and printing of lables.