CESTAT: Used Digital Multifunction Printers Imported Before June 2012 Were Freely Importable, Confiscation Unsustainable
CESTAT: Used Digital Multifunction Printers Imported Before June 2012 Were Freely Importable, Confiscation Unsustainable
Introduction
The Customs, Excise and Service Tax Appellate Tribunal (Chennai Bench) has ruled that second-hand digital multifunction print and copying machines imported prior to 5 June 2012 were freely importable and could not be confiscated under the Customs Act. The Bench comprising Judicial Member P. Dinesha and Technical Member Vasa Seshagiri Rao allowed the appeal filed by Jaya Trading Company, setting aside confiscation, redemption fine and penalty imposed by the adjudicating authority.
Factual Background
The appellant imported old and used digital multifunction machines at Chennai Port in September 2009 and declared their value on the basis of the overseas supplier’s invoice. Since the goods were second-hand, the customs authorities ordered a first-check examination, pursuant to which a Chartered Engineer assessed the residual value and enhanced the declared value. To avoid demurrage and further delay, the importer accepted the enhanced valuation and paid the duty, while contesting the licensing objection raised by the Department.
Subsequently, the adjudicating authority confiscated the goods under Section 111(d) of the Customs Act read with the Foreign Trade (Development and Regulation) Act, 1992, imposed redemption fine and penalty, and rejected the declared transaction value.
Procedural Background
Although the importer filed an appeal within time, the Commissioner (Appeals) rejected it solely on the ground of limitation, without examining the merits of the case. Aggrieved by the rejection on limitation as well as the findings on confiscation and valuation, the appellant approached the Tribunal.
Issues
1. Whether the Commissioner (Appeals) was justified in rejecting the appeal as time-barred.
2. Whether second-hand digital multifunction print and copying machines imported prior to 5 June 2012 were restricted goods under the prevailing Foreign Trade Policy.
3. Whether enhancement of value solely on the basis of a Chartered Engineer’s certificate justified confiscation, redemption fine and penalty.
Contentions of the Parties
The appellant contended that the appeal before the Commissioner (Appeals) was wrongly rejected as time-barred since limitation must be computed from the date of communication of the order and not the date of dispatch. On merits, it was argued that under Para 2.17 of the Foreign Trade Policy prevailing in 2009, second-hand capital goods were freely importable and that digital multifunction machines were brought under restriction only with effect from 5 June 2012. It was further submitted that the enhancement of value was based solely on the Chartered Engineer’s opinion without any evidence of extra consideration, forged invoices or suppression of facts.
The Department maintained that the goods were liable to confiscation as restricted items and that the enhanced valuation was justified in view of the Chartered Engineer’s report.
Reasoning and Analysis
The Tribunal first held that the Commissioner (Appeals) erred in rejecting the appeal on limitation. It observed that limitation must be calculated from the date on which the order is communicated to the assessee and not from the date of dispatch, and therefore the appeal could not have been treated as time-barred.
On merits, the Bench examined the Foreign Trade Policy applicable in 2009 and noted that second-hand capital goods were freely importable at the relevant time. It recorded that digital multifunction print and copying machines were classified as restricted goods only with effect from 5 June 2012. Since the import in question took place in September 2009, the goods could not be treated as restricted.
With respect to valuation, the Tribunal observed that the enhancement was made solely on the basis of the Chartered Engineer’s estimation of residual value. It noted that there was no evidence of extra consideration, forged documentation or suppression of facts. The Bench emphasised that valuation of second-hand machinery is peculiar to each consignment and cannot be enhanced mechanically without corroborative evidence. It held that such enhancement by itself could not justify confiscation, redemption fine or penalty.
The Tribunal concluded that the imported machines were freely importable at the relevant time and that enhancement of value based solely on a Chartered Engineer’s opinion did not warrant penal consequences.
Decision
The Tribunal set aside the impugned order, including confiscation, redemption fine and penalty, and allowed the appeal filed by Jaya Trading Company.
