2010 (8) TMI 426 - HC - Customs

EPCG scheme - Circular prohibits import of second hand goods second hand computer Held that - it is clear that the goods imported, that is, personal computers (PCs/Laptops) are the items, which are covered under Annexure- E, the Circular. Therefore, the Tribunal was justified in holding that the Circular do not apply to the servers of me description, which is involved In this case. - no doubt, servers are also computers but servers are computers, which are meant for specific application in a network. They are entirely different from the personal computers and laptop computers, which are actually stand-alone equipments - there is no reason to exclude them from the scope of Capital Goods.

Summary

Issues:
1. Interpretation of Circular prohibiting import of second-hand personal computers/laptops under EPCG scheme.
2. Classification of a server as a computer and its implications under the Exim Policy.
3. Determination of whether servers fall within the scope of 'Capital Goods' and are exempt from the Circular.

Analysis:
1. The judgment revolves around the interpretation of a Circular prohibiting the import of second-hand personal computers/laptops under the EPCG scheme. The Tribunal held that servers, though computers, do not fall within the ambit of the Circular as they are distinct from personal computers and laptops. The Tribunal emphasized that servers are specialized for network applications, larger in size, lack keyboards and monitors, and have high memory and processing speed. Therefore, the Tribunal dismissed the appeal by the revenue challenging the classification of the server.

2. The case also delves into the classification of a server as a computer under the Exim Policy. The adjudicating authority treated the imported server as a computer, leading to a violation of the Exim Policy. However, the Commissioner of Customs (Appeals) opined that the server, despite being a computer, did not fall under the Circular's prohibition. The Commissioner reduced the fine imposed due to misdeclaration by the importer. Ultimately, the High Court upheld the Tribunal's decision, stating that the Circular did not apply to the specific type of server imported in this case.

3. Furthermore, the judgment addresses the issue of whether servers should be considered 'Capital Goods' exempt from the Circular. The High Court concurred with the Tribunal's reasoning that servers, due to their specialized nature and distinct characteristics from personal computers and laptops, should not be classified as stand-alone computers. As a result, the High Court dismissed the appeal by the revenue, affirming that the Circular did not cover the server imported for testing purposes. The judgment highlights the importance of precise classification and interpretation of trade policies to avoid misinterpretations and legal violations.