Per V.K.Ashtana:

These 2 appeals are on same issue and hence they are heard together and considered by a common order.

2. Appeal No. C/1238/92-B2 is against Order-in-Original No. S8/14/92ICD dated 30.10.92 and Appeal No. C/SB/1242/92-B2 dated 25.11.92, both passed by Collector of Customs.

3. Briefly, the issue involves import of 2 sets of CAT scan system, allegedly in SKD/CKD condition under two Bills of Entry, each involving a declared value of Rs. 70,96,984/- which was reassessed by the impugned order to Rs. 1,54,05,000/ -. Appellants face penalty of Rs. 7 lakhs and Redemption Fine of Rs. 15 lakhs. They claimed exemption under Notfn. No. 66/88-Cus dated 1.3.88 while in its stay order, Hon'ble Tribunal directed deposit of duty @ 40% adv (BED) under Notfn. No. 65/88-Cusdt. 1.3.88.

4. The two issues for consideration are

(i) whether imported goods are a CAT scan system in SKD/CKD condition, or merely parts thereof; and

(ii) whether goods are under-valued and have been correctly reassessed to the higher value in impugned order?

5. Heard Learned Advocate Shri Rajesh Chander Kumar for appellants and Learned SDR Shri R. Victor Thiagaraj for department.

6. Learned Advocate submits that with respect to Appeal No. C/1242/92-B2 covering Bill of Entry No. 594 dated 16.7.92:-

(i) Goods are parts of CAT scanner;

(ii) Hence exemption under 66/88-Cus dt. 1.3.88 is available and

(iii) Goods are wrongly reassessed to higher value.

In support of (i) (ii) above he submits that:

(a) Out of 6 components only 5 are imported and the power phase converter (Transformer etc.) is manufactured by them to suit specific design of the system as such high load of current cannot be drawn in India on a single phase. Without this component, system cannot work;

(b) all imported components are unpacked and systematically assembled and tested at each stage. These operations involve about 30 stages as charted in appeal and are done by trained technical staff in a factory put-up on expenditure of about Rs. 1.2 crores. Hence, this is not a screw-driver technology. Tests include alignment and software integration;

(c) These operations amount to 'manufacture' of a new CAT scan system and Deptt. required them to pay Central Excise Duty on it as manufacturer thereof under sub-heading 9022.00 of CETA'85; and

(d) Technical opinion of Indian Radiological Imaging Association is that without these 30 operations, the system is not workable. Exporters also certify that it is not a complete system.

7. Learned Advocate further argues that in view of following decisions, Interpretative Rule 2A (applied by Ld. Collector in impugned orders) cannot be applied to deny benefits under Notification 66/88 (supra):-

1997 (90) ELT 57 (Tri) Nippon Precision Bearings

1996 (16) RLT 646 (Tri) Maruti Udyog.

8. Learned Advocate further argues that even assuming that the said Rule 2 (a) is applicable, even then the goods imported are not a complete system in view of facts (a) to (d) above.

9. On (iii) above (Valuation), Learned Advocate contests revaluation on following grounds:

(x) While Transaction Value can be set aside only on the basis of contemporary imports of identical goods as per Rule 4 of CVR, impugned order errs in discarding their Transaction Value on the basis of exporter's price list for a fully assembled and working system for sale in Japan and that they had not given any such price list to Custom House;

(y) The difference in Transaction Value and this price list rePresents the value addition for the aforesaid 30 processes as well as the newly manufactured 6th component. Assessable value (per unit) for Central Excise purposes was approved at Rs. 79,89,266; and

(z) they did not agitate the issue of valuation at original stage because they mistook the value in the SCN to be for both systems cumulatively and not per unit.

10. Learned Advocate further submits that as even Central Excise authorities regard their operations as manufacture therefore penalty is not justified by Customs; malafides have no