2006 (6) TMI 400 - AT - Central Excise

Summary

Issues:
1. Import of second-hand Photocopier assembly without specific license.
2. Confiscation of goods under Section 111(d) of the Customs Act.
3. Imposition of penalty under Section 112(a) of the Act.
4. Classification of imported machines as 'capital goods' or 'consumer goods'.
5. Quantum of redemption fine and penalty.

Analysis:

1. The appellants imported second-hand Photocopier assembly without a specific license, leading to a proposal for confiscation of the goods under Section 111(d) of the Customs Act and imposition of penalty under Section 112(a) of the Act. The original authority confiscated the goods valued at Rs. 4.5 lakhs with an option for redemption on payment of a fine of Rs. 1,00,000/- and appropriate duty. Additionally, a penalty of Rs. 4.5 lakhs was imposed on the importer.

2. In the appeal filed against the original authority's decision, the learned Commissioner (Appeals) reduced the penalty to Rs. 60,000/- but upheld the confiscation and redemption fine. The main issue was whether the imported second-hand photocopying machines should be classified as 'capital goods' or 'consumer goods' requiring a specific import license.

3. The judgment referred to a decision by the Hon'ble High Court of Kerala which held that such machines should be considered 'consumer goods' based on Policy Circulars issued by the Directorate-General of Foreign Trade. The tribunal's Larger Bench decision was set aside in favor of treating the machines as 'consumer goods'. The appellate authority, after considering arguments from both sides, reduced the redemption fine to Rs. 65,000/- and the penalty to Rs. 6,500/-, citing that these amounts were more reasonable.

4. The reduction in the quantum of fine and penalty was based on the view that the original amounts were unconscionably high compared to the value of the goods. The judgment also took into account the prevailing legal understanding at the time of import, which was later clarified by the Kerala High Court's decision. The final decision sustained the impugned order with modifications to the fine and penalty amounts, ultimately disposing of the appeal.

5. The judgment highlighted the need for proportionality in determining fines and penalties, considering industry practices and legal interpretations. By reducing the financial burden on the appellants, the appellate authority aimed to align the consequences of the import with the updated classification of the imported goods as 'consumer goods'.