2011 (8) TMI 1064 - AT - Customs

Enhancement of Redemption fine and penalty - import of restricted goods without valid import licence repeatedly - Digital Multifunctional print and copier machines - Held that - On careful reading of the explanatory notes under the HSN, we find that the photocopiers are specifically arranged under the head of copying machines and the said head does not include the machines which are capable to perform two or more functions of printing copying or facsimile, etc. There is a clear cut identification and separate head for combination of printers, copying machines or facsimile machines in the HSN explanatory notes. In view of this, it is very clear that photocopier machines are understood as copying machines, while the imported goods fall separately under the category of combinations of printers, copying machines of facsimile machines. It is not in dispute in this case that the imported goods are combination of printers, copying machines and/or facsimile machines. Hence, the digital multifunction print & copier machines cannot be termed as photocopiers to attract the bar of Para 2.17 of the FTP. As the adjudicating authority has found that the machines in question are capable of additional functions, such as printing, etc., when connected to a computer, although confiscation and penalty is to be sustained in the absence of any appeal by the importers against confiscation and penalty, no justification exists for enhancement in the quantum of fine in lieu of confiscation and penalty - Further, there is no finding that the importers had made any payment over and above the invoice value and the value arrived at by the Chartered Engineer is only an estimated value and in his report in the case of imports made by M/s. Digitech Systems, M/s. S.S. Enterprises, M/s. Indicon Copier Services, it is stated that the subject goods are required to be modified/reconditioned for further use. He also stated that the estimated margin of profit varies between 20-25%, that the price of the second-hand goods varies depending upon the market conditions, demand, availability of spares, etc. All these are conditional factors to be kept in view while fixing quantum of fine and penalty and would justify reduction as done by the lower appellate authority. Also, respondents are first time importers and not repeated offenders so as to justify the enhancement in fine and penalty. Eenhancement in the quantum of fine and penalty not justified - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Reduction in the quantum of fine imposed in lieu of confiscation of imported old/used photocopiers/digital multifunction machines.
2. Reduction of penalty by the adjudicating authority.

Issue-wise Detailed Analysis:

1. Reduction in the Quantum of Fine Imposed in Lieu of Confiscation:

The Revenue appealed against the reduction in fine imposed for the confiscation of imported old/used photocopiers and digital multifunction machines. The lower appellate authority had reduced the fine based on precedents such as the Hon'ble Madras High Court's decision in Commissioner of Customs, Tuticorin v. Sai Copiers and various Tribunal orders. The Revenue argued that restoring the original fine was necessary because importers repeatedly imported restricted goods without a valid import license. They contended that reducing the fine to a standard percentage would encourage continued contravention of the import policy.

The Tribunal, however, referred to a recent decision in the case of M/s. Shivam International and M/s. Sree Maa Enterprises, which held that digital multifunctional print and copier machines are not classified as photocopiers and thus are not restricted for import under Para 2.17 of the Foreign Trade Policy (FTP). The Tribunal noted that the Chartered Engineer's inspection report confirmed that the imported goods were digital multifunctional machines, not merely photocopiers. The Tribunal emphasized that the FTP restricts only photocopier machines and not multifunctional machines capable of performing additional functions like printing, scanning, faxing, and emailing.

The Tribunal also referenced the Hon'ble Supreme Court's judgment in Xerox India Ltd., which classified multifunctional machines based on their predominant function, supporting the view that these machines should not be considered photocopiers. Consequently, the Tribunal concluded that the confiscation and penalties related to 'old & used digital multifunctional print and copier machines' were incorrect and set aside the impugned orders to that extent.

2. Reduction of Penalty by the Adjudicating Authority:

The Revenue's appeal also challenged the reduction of penalties imposed by the adjudicating authority. The Tribunal noted that in similar cases, penalties had been consistently reduced to 5% of the value of the goods. The Tribunal found no justification for enhancing the penalties, especially since the adjudicating authority had determined that the imported machines had multifunctional capabilities and were not merely photocopiers.

The Tribunal distinguished the present case from others cited by the Revenue, such as the judgment of the Hon'ble Bombay High Court in Commissioner of Customs, Mumbai v. Vaibhav Exports, which involved different goods and circumstances. The Tribunal also noted that no market enquiry was conducted by the department to ascertain the market price, and the estimated value provided by the Chartered Engineer was not definitive.

Furthermore, the Tribunal observed that the respondents in some appeals were first-time importers and not repeated offenders, which did not justify an enhancement in penalties. The Tribunal highlighted that even in cases involving repeated offenders, such as Sai Copiers, the penalties were pegged at 5%.

Conclusion:

In conclusion, the Tribunal upheld the lower appellate authority's decision to reduce the fine and penalty, rejecting the Revenue's appeal for enhancement. The Tribunal emphasized that the imported goods were digital multifunctional machines, not restricted photocopiers, and that the penalties imposed were consistent with precedents and justified by the specific circumstances of the case. The appeals were dismissed, and the impugned orders were upheld.