Whether second hand capital goods freely importable as per FTP?

PJ/CASE LAW/2014-15/2443

Case:- PERI (INDIA) P. LTD. Vs COMMISSIONER OF CUSTOMS (I), NHAVA SHEVA

Citation:- 2014 (308) E.L.T. 691 (Tri. –Mumbai)

Brief fact:- The brief facts of the case are that the appellant imported old and used pipes declared them as “old and used Prop Pep 20-300” and classified them under CTH 7308 4000. The said classification was accepted and duty was demanded accordingly. As these pipes were old and used, therefore it was held by the lower authorities that these pipes are not covered as capital goods as defined in para 9.12 of Foreign Trade Policy. Accordingly, they are not freely importable as per para 2.17 of FTP 2004-09. Therefore as appellant could not produce necessary licence for importation of the goods, the same were held liable for confiscation and allowed to be redeemed on payment of Redemption Fine and penalty. The goods were released but the appellant is challenging the imposition of Redemption Fine and penalty.

Appellant’s contention:- The ld. counsel for the appellant submits that these goods are equipments and they have been classified under CTH 7308 4000 which has been accepted by the department. Therefore, as per definition of the capital goods, these are equipments. Accordingly, they are freely importable as per para 2.17 of the FTP. To support this contention, he relied on Cinda Engineering & Constructions P. Ltd.- 2012 (289)E.L.T.509 (Tri.-Bang.).Therefore, he prayed that impugned order be set aside, appeal be allowed with consequential relief.

Respondent’s contention:- Ld. AR strongly opposed the contention on the ground that CTH 7308 deals with structures and structures cannot be the capital goods. Therefore, the appellants have imported old and used goods which are not capital goods. In these circumstances, they are required to obtain necessary licence therefore, goods have rightly been confiscated and redemption fine and penalty been rightly levied on them. Therefore, impugned order is to be upheld.

Reasoning of judgment:- The Hon’ble Tribunal find that the appellant has imported Propping pipes and classified the same under CTH 7308 4000. The CTH 7308 40 deals with equipment for scaffolding, shuttering, propping or pit-propping. As per the definition of ‘capital goods’ in Foreign Trade Policy in para 9.12 deals with “Capital goods means any plant, machinery, equipment or accessories required for manufacture or production either directly or indirectly, of goods for rendering services.” In this case, this propping pipes then imported by the appellant for rendering construction service. Further as per para 2.17 of the Foreign Trade Policy the second-hand capital goods are freely importable. The issue whether these propping are equipment or not came up before this Tribunal in Cinda Engineering & Constructions (supra) wherein this Tribunal observed as under :-
“It is not in dispute that the items imported by the appellant were old and used scaffoldings. I shall immediately address the question whether these scaffoldings could be considered as equipment. These goods were classified by the importer under SH 7308 40 00 of the CTA Schedule and this classification was accepted by the assessing authority for levy of duty. That duty was paid by the importer also. The assessment was final. In this scenario, the description of goods given against the tariff entry is significant and the same reads “equipments for scaffoldings...”. Once the declared classification has been accepted, there can be no dispute whether the scaffolding could be considered as equipments. They were equipments. At this stage, one has to look at the definition of “capital goods” in para 9.12 of the FTP. As per this definition, equipments used for rendering services are also capital goods.”

In this case also these propping pipes are imported by the appellant as equipment for rendering construction service. Therefore, same are held as capital goods. In these circumstances, impugned goods are freely importable as per para 2.17 of the Foreign Trade Policy. Therefore, as no licence is required for importation of the said goods, the confiscation of the impugned goods was not warranted. Accordingly, confiscation is set aside. As confiscation has been set aside, the question of imposing of Redemption Fine and penalty does not arise. In these circumstances, penalty and Redemption Fine is set aside. Consequently, the appeal is allowed with consequential relief.

Decision:- Appeal allowed.

Comment:- The gist of the case is that the import of old and used propping pipes that were used in rendering construction services are to be treated as capital goods. Consequently, the said goods are to be treated as second hand capital goods which are freely importable. Therefore, the confiscation is not warranted and consequently no redemption fine or penalty is payable.

Prepared by:- Monika Tak

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PJ/CASE LAW/2014-15/2443

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