Customs, Excise and Gold Tribunal - Bangalore
The Commissioner Of Customs vs Champion Computers Pvt. Ltd. on 28 February, 2007
Equivalent citations: 2007(118)ECC411, 2007ECR411(TRI.-BANGALORE), 2007(214)ELT513(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. The Revenue has come in an appeal against the Order-in-Original No. 69/2003 Cus. Adjn. dated 20.9.2003 passed by the Commissioner of Customs, Bangalore.
2. The Respondents imported and cleared old and used Laptop computers/hard disk drives totally valued at Rs. 21,44,798/-. The Revenue proceeded against the Respondents by issue of show cause notice for contravention of provisions of Exim Policy relating to import of second hand goods. In terms of Para 2.17 of the Exim Policy 2002-2007 all second hand goods shall be restricted for imports and may be imported only in accordance with the provisions of the said policy, requiring a licence. Moreover as per Para 2.33 of the Handbook of Procedures, import of second hand capital goods which are not more than 10 years old shall be allowed freely. The Adjudicating Authority held that the Laptop computers squarely fall within the meaning of capital goods as defined in the Exim Policy. Further he held that the old and used Hard Disk Drives, Mother Boards, Network Cards, Connection Cables, Key Boards etc. can be considered as capital goods. He gave a finding that since the impugned goods are capital goods which are not more than 10 years old, they can be imported freely without licence. Hence he dropped the proceedings against the Respondents. The Revenue has come in an appeal on the following grounds:
(i) The Adjudicating authority has erred in allowing the import of used Laptop Computers, Hard Disc Drives, P-II Mother Boards of different makes and 1 brands, Hard Disc Drives, Network Cards, Keyboard, Connection Cables, Mother Boards as "capital goods" and are eligible for importation without any specific licence to this effect.
(ii) Ministry of Commerce & Industry vide policy Circular No. 16 (RE-2003/2002-07) dated 29.09.2003, has clarified that -
second hand personal computers (PCs) / Laptops are covered under definition of second hand goods and their import is governed by the provisions of Para 2.17 of Exim Policy 2002-2007 and not covered under the definition of capital goods as defined under Para 9.10 of Exim Policy and Para 2.33 of Hand book of procedures (Vol I).
Para 2.17 of the Exim Policy stipulates that:
All second hand goods shall be restricted for imports and may be imported only in accordance with the provisions of this policy. ITC (HS), handbook (Vol. V, Public Notice or a licence / certificate / permission issued in this behalf.
(iii) Since the importer did not procure the licence for import of goods concerned under para 2.17, the order in allowing imports without Licence is not correct.
(iv) Since the impugned goods are not available for confiscation & for imposing of redemption fine under Section 125 of the Customs Act, 1962, the order of the Commissioner needs to be reviewed only for the purpose of imposing of penalty under Section 112 (b) (i) of the Customs Act, 1962. This view is also supported by the following. It has been held in the case of Macneill and Magor Ltd., Calcutta v. Collector of Customs that -
confiscation under Section 111 (m) on account of misdeclaration attract penalty under Section 112 (a) irrespective of mens-rea In the case of International Computers India manufacturer v. Collector of Customs , it has been held that -
the goods imported in contravention of ITC regulations, being prohibited goods attract penalty under Section 111 2 (b) (i) of the Customs Act, 1962.
In view of the above facts and circumstances the Board is of the view that the OIO No. 69/2003 dated 19.09.2003 / 20.09.2003 passed by the Commissioner of Customs, Bangalore is not legal and proper.
3. The learned JDR invited our attention to Para 2.17 of the policy wherein it is stated "all second hand goods shall be restricted for imports and may be imported only in accordance with the provisions of this policy, ITC (HS), Handbook (Volume I), Public Notice or a licence/certificate/permission issued in this behalf." Further he referred to Policy Circular No 16/RE 2003) 202-07 dated 29.9.2003 and also Government of India, DGFT letter dated 15.10.2003 addressed specifically to the Respondents clarifying that second hand PCs/Laptops are covered under the definition of second hand goods and shall not be treated as capital goods.
4. The learned Advocate appearing for the Respondents vehemently argued that the Order-in-Original is dated 20.9.2003 prior to the Policy Circular dated 20.9.2003 and also the clarification dated 15.10.2003 and therefore it will have only prospective effect and not retrospective effect. He relied on the following case law:
(a) DAB Exports v. CC, Trichy
(b) U.I.O. v. Ganesh Das Bhojraj
(c) H.M. Bogo Manufacturer v. C.C.E.
(d) Joint Chief Collector of I & E., Madras v. Aminchand Mutha 1999 (110) ELT 273 (S.C.)
(e) DSL Software India Ltd. v. C.C., Bangalore
(f) C.C. v. Shaw Wallace and Co. Ltd. >
(g) Universal Steel Agencies v. C.C., Kandala 2001 (138) ELT 360 (Tri. - Mumbai)
5. The learned JDR countered the same and submitted that the Policy Circular and clarification of the Government have only reiterated the existing legal position and will definitely have retrospective effect. Further the learned JDR relied on the following case laws:
(a) Apex Steels (P) Ltd. v. CCE, Chandigarh
(b) Central Machine Tool Institute v. CC, Bangalore 2000 (124) E.L.T. 231 (Tribunal)
(c) C.C. v. Shaw Wallace & Co. Ltd.
(d) Super Cassettes Industries Ltd. v. C.C.
(e) Cosmos Ferrites Ltd. v. CCE, Chandigarh
(f) Kalpa Ghosh v. C. C. 1994 (70) E.L.T. 533 (Cal.)
(g) Commissioner of Customs (Export), Mumbai v. Blue Chip Impex P. Ltd.
(h) Mehta Trading House Pvt. Ltd. v. CC, Mumbai 2004 (175) E.L.T. 730 (Tri. - Mumbai)
(i) C.C., Hyderabad v. Goel Enterprises
(j) Sri Venkatesh Enterprises v. C.C., Chennai 2005 (192) ELT 818 (Tri.-Chennai)
(k) C.C., Cochin v. Atul Commodities Pvt. Ltd.
6. We have gone through the records of the case carefully. The short point in the present appeal is whether the Adjudicating authority was correct in holding that the impugned goods namely Lapto computers, old and used Hard Disk Drive, Mother Boards, Network Cards, Connecting Cables, Key Boards do not require licence from the DGFT as they have to be considered as capital goods which are not more than 10 years old. The learned Advocate strenuously argued that the Commissioner has passed a very reasonable order and the Policy Circular of DGFT should have only prospective effect and not retrospective effect. Both the sides has cited a large number of case laws to support their contentions. We find that in respect of the assessee's case the DGFT has specifically addressed a letter to them and informed that PCs/Laptops shall not be treated as capital goods. They can be treated only as second hand goods in respect of the imports made by the Respondents. The Policy Circular dated 29.9.2003 is re-produced. However, the Commissioner adjudicated the case and was not having the benefit of the Policy Circular. The Commissioner has given his own reasoning in Para 16 of the order. The same is reproduced herein below:
16. I have carefully considered the above submissions. Though Para 2.17 of the EXIM Policy 02-07 places restriction on the import of second hand, capital goods, Para 2.33 of the Hand Book of Procedures allows free importation of all second hand capital goods which are not more than 10 years old. The definition of 'capital goods' as per Para 9.10 of the said EXIM Policy is very wide and it covers "any plant/machinery/equipment or accessories required for the manufacture or production either directly or indirectly of goods or for rendering services including those required for replacement, modernization, technological up-gradation or expansion". Further, 'Accessory' is defined in Para 9.2 of the said EXIM Policy to mean "a part, sub-assembly or assembly that contributes to the efficiency or effectiveness of a piece of an equipment without changing its basic functions". Lap top computers are automatic data processing machines falling under Ch. Heading 84.71 of the First Schedule to the Central Excise Tariff Act, 1975. Therefore, they squarely fall within the meaning of capital goods are defined in the EXIM Policy. Even in the absence of a pre-loaded software, a laptop computer remains an automatic data processing machine and it is for the user to decide what kind of software he should load on to the computer, depending upon his requirement. Therefore, absence of a pre-loaded software does not make a computer less of a computer and they remain automatic data processing machines and hence eligible to be classified as 'capital goods' under the provisions of Para 9.10 of the EXIM Policy 2002-2007. Merely because the importer is a trader, the benefit of EXIM Policy cannot be denied if the item is otherwise freely importable. In fact, in respect of Capital Goods, the actual user condition for import of second hand capital goods upto 10 years old has been dispensed with, in the EXIM Policy Initiatives announced on the 31st March, 2003 by the Ministry of Commerce. This clearly shows that import second hand capital goods, which are not more than 10 years old, can be imported by any person without satisfying the actual user condition and therefore, trader importers are also eligible for the benefit of free importation of such capital goods. The judicial pronouncements relied upon by the notice also uphold the above view.
Since the issue is capable of different interpretations, imposition of penalty on the appellants is not warranted. Even while holding that the clarificatory Policy Circular of the DGFT reproduced above will have retrospective effect, in the facts and circumstances of the case, we do not want to interfere with the impugned order. Further there is no malafide on the part of the respondent importer requiring imposition of fine and penalty. As at this stage, the imposition of penalty and redemption fine on Laptop computers and parts imported during the year 2003 is not justified. While taking such a decision we have taken into account the rapid obsolescence in the Computer Industry. Hence we dismiss the Revenue's appeal.
(Pronounced in the open court on 28.02.2007)