2006 (1) TMI 341 - AT - Customs

Air-conditioners - Accessories thereof - Import of goods for use in research and development activities

Summary

Issues:
1. Classification of imported goods as building materials or capital goods for duty free clearance.
2. Interpretation of Notification No. 53/97-Cus. for exemption eligibility.
3. Authority of Customs in questioning post facto approvals for import by EOUs.
4. Determination of necessity of imported goods for rendering specific services.
5. Compliance with value restrictions on imported capital goods.

Analysis:
1. The case involved the classification of imported Armaduct Sheet and Insulation tape as building materials or capital goods for duty free clearance under Notification No. 53/97-Cus. The Deputy Commissioner classified the goods as building materials, leading to a demand for duty. The Commissioner (Appeals) upheld this classification, stating that while the goods were not building materials, they were not necessary for aircraft designing services, which the appellants contested.

2. The appellant argued that the imported goods were accessories to air-conditioners and necessary for air-conditioning ductwork, qualifying for exemption under the Notification. They highlighted phrases in the Notification indicating a broad scope for exemption, citing judicial decisions supporting the necessity of goods for technical purposes. The appellant also relied on precedents emphasizing the authority of Development Commissioner and Board of Approvals in approving imports for EOUs.

3. The issue of post facto approval by the Board of Approvals was raised, with the appellant asserting that once such approval is granted, Customs authorities cannot question it. Precedents were cited to support this argument, emphasizing the need for consistency in decisions between different government departments to avoid confusion in trade practices.

4. The Tribunal considered the necessity of the imported goods for rendering the appellants' research and development services. While the Commissioner (A) accepted the goods as accessories to air-conditioners, he questioned their direct necessity for the services provided. However, the Tribunal held that indirect use of the goods, as approved by competent authorities, was sufficient to qualify for the Notification's exemption.

5. The Revenue pointed out the absence of Board of Approvals' approval at the time of import and highlighted value restrictions on imported capital goods. However, the Tribunal focused on the approval granted later and deemed the value limit issue irrelevant to the current proceedings. Ultimately, the Tribunal allowed the appeal, emphasizing the authority of competent bodies in approving imports for EOUs and rejecting the Revenue's classification of the goods as building materials.

This detailed analysis highlights the key legal arguments, interpretations of relevant notifications, and precedents considered by the Tribunal in reaching its decision to allow the appeal and provide consequential relief to the appellant.