2003 (10) TMI 372 - AT - Customs

Summary

Issues Involved:

1. Whether the imported goods were components of an artificial lung ventilator with an integrated anaesthetic unit or a complete machine.
2. Validity of the import licence covering the goods.
3. Entitlement to exemption under Notification 51/2000.
4. Legitimacy of penalties imposed on the importer and its employees.

Issue-wise Detailed Analysis:

1. Whether the imported goods were components of an artificial lung ventilator with an integrated anaesthetic unit or a complete machine:

The central question was whether the imported items were components to be assembled into a complete machine or already a fully assembled machine. The Commissioner initially determined that the goods were complete machines, not components, and thus not covered by the import licence. This decision was based on the examination by departmental officers who found that the goods included the main machine and several detachable parts. They concluded that the goods could not be considered components as the parts could be easily attached to make the machine operational.

Contrarily, Mr. Vaidya's report indicated that the equipment was in a semi-knocked down (SKD) condition and not functional until assembled. The report detailed 24 steps required for assembling the equipment, supporting the claim that the goods were components. The Tribunal found that the processes listed by Mr. Vaidya clearly indicated the assembly of various components into one machine, thereby supporting the appellant's claim.

2. Validity of the import licence covering the goods:

The Commissioner's decision was influenced by the belief that the importer was attempting to circumvent the restriction of paragraph 11.7 of the Import Policy, which he interpreted as prohibiting the import of goods on advance licences for export against rupees payment. However, the Tribunal clarified that paragraph 11.7 allows export against rupees payment if there is a value addition of 33% or more, provided the items are not restricted for import or export. The Tribunal concluded that the import licence was valid for the goods imported.

3. Entitlement to exemption under Notification 51/2000:

The Notification exempts goods imported under an advance licence from duty, provided they are used in the manufacture of goods to be exported. The Tribunal concluded that the imported items were indeed components assembled into a machine for export, thus entitling the importer to the exemption under Notification 51/2000. The Tribunal found no justification for denying the exemption as the processes undertaken by the importer amounted to manufacturing within the scope of the definition provided in the Import Policy.

4. Legitimacy of penalties imposed on the importer and its employees:

Given the Tribunal's conclusion that the imported goods were components and not complete machines, the penalties imposed on the importer and its employees were deemed unjustified. The Tribunal noted that the Commissioner's decision was influenced by an incorrect interpretation of the Import Policy and an unfounded suspicion of the importer's intent. Consequently, the penalties were set aside.

Conclusion:

The Tribunal allowed the appeals, setting aside the impugned order. It determined that the imported goods were components assembled into a machine for export, covered by a valid import licence, and entitled to exemption under Notification 51/2000. The penalties imposed on the importer and its employees were found to be unjustified and were consequently annulled.