Whether DGFT has authority to restrict import of second hand photocopiers by issuing a circular?

PJ/Case Law/2014-15/2372

Case: OFFICE DEVICES V/S COMMISSIONER OF CUSTOMS, COCHIN

Citation: 2013 (295) E.L.T. 545 (Tri.-Bang.)

Brief Facts: - The appellant imported 21 used photocopiers of various models on 29-9-2004. During the course of assessment, the value was found to the lower than contemporary import price and, accordingly, the value was revised and worked out to Rs. 1232066/- which was accepted by the appellant. Further a view was also taken that second photocopiers import by the appellant was in contravention of Foreign Trade Policy and the photocopiers were restricted for import under paragraph 2.17 of the policy as per clarification issued by DGFT vide Circular No. 19 dated 11-11-2003. The original authority confiscated the goods under Section 111(d) of the Customs Act, 1962 and allowed to be redeemed on payment of a fine of Rs. 225000/- and also a penalty of Rs. 100000/- under Section 112 of the Act. Hence, the appellant filed the present appeal.

Appellant’s Contention: -The appellant contended that the issue as regards importability of second hand photocopiers is settled by the decision of the Hon’ble Supreme Court in the case of Atul Commodities Pvt. Ltd. V. Commissioner of Customs, Cochin [2009 (235) E.L.T. 385 (S.C.)] wherein, it has been held that the photocopiers are capital goods and DGFT could not have issued a circular clarifying that import of the photocopiers are restricted. Therefore, he submits that the decision of the lower authorities confiscating the goods and imposing fine and penalty is required to be set aside.

Respondent’s Contention: -The Respondent contended that even though the goods are not liable to confiscation in view of the decision of the Hon’ble Supreme Court, the confiscation is sustainable and the penalty is imposable in view of the fact that the goods were undervalued. The undervaluation has not been challenged by the appellant at all and, therefore, penalty was imposable and goods are liable to confiscation.

Reasoning of Judgment: - The Hon’ble Tribunal held that as submitted by the appellant, the Hon’ble Supreme Court in the case of Atul Commodities Pvt. Ltd. has held that the DGFT has no authority to issue clarification that the import of photocopiers is restricted and such action could be taken only by the Central Government by issuing a notification and this was done on 19.10.2005. Therefore, in 2004, when the photocopiers were imported by the appellant, the same cannot be considered as restricted being capital goods. Therefore, photocopiers imported by the appellant have to be held as freely importable at the relevant time of import and the decision of the lower authorities in this regard cannot be sustained. Further, they held that by coming to the submission of the respondent that confiscation of the goods and imposition of penalty and fine are valid in view of the undervaluation and on going through the order-in-original, they find that goods have been confiscated under section 111(d) of the Customs Act, 1962. The said section would be applicable only in respect of the goods which are imported or attempted to be imported, contrary to any prohibition imposed by or under Customs Act or any other Act. For undervaluation, the goods are liable to confiscation under Section 111(m) of the Act which provides for confiscation of goods which do not correspondent in respect of value or any other particular with entry made in the Act. In this case, no doubt, the goods are liable to confiscation under Section 111(m) of the Act in view of acceptance of undervaluation by the appellant at the time of original adjudication proceedings. However, unfortunately, the original adjudication authority nowhere in the order-in-Original has considered this aspect for taking a view that the goods are liable to confiscation. Neither in the findings nor in the order, have the provisions relating to undervaluation and consequence thereof been considered. In these circumstances, the only conclusion can be reached is that the original authority did not contemplate confiscation of goods or imposition of penalty as far as undervaluation is concerned. In these circumstances, the submission of the respondent has to be rejected.
In view of the above findings, the appeal was allowed.

Decision: - The appeal was allowed.

Comment:- The Tribunal has decided that the DGFT has no authority to issue circular that import of photocopiers is restricted. Such action can only be taken by Central Government by issuing a notification. Hence, in the present case, since the notification was issued in year 2004 and the assessee has imported second hand photocopiers in the year 2003, thus, the said notification shall not apply to him. Consequently, confiscation of goods under section 111(d) was not sustainable. One important aspect to be noted here is that although there was undervaluation, but still no confiscation or penalty was found to be legal because the provisions of section 111(m) pertaining to confiscation for under valuation of goods were not invoked. This implies that non-invocation of certain provisions may prove to be advantage to the assessee.

Prepared by: Kavita Thanvi

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PJ/Case Law/2014-15/2372

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