2008 (6) TMI 143 - AT - Customs

Interpretation to para 2.17 of FTP, 2004-09 - import of Used Projection fixture and Used Pinned Rollers in this case would be import of old and used i.e. second-hand capital goods as per para 2.17 - Para 2.17 uses the term import of second-hand CG, including refurbished/reconditioned spares shall be allowed freely . This would not restrict spares, which are not refurbished/reconditioned - effort of Revenue to equate spare with part and, therefore, deny the imports would not be acceptable

Summary

Issues:
Interpretation of para 2.17 of the Foreign Trade Policy, 2004-2009 regarding import of second-hand goods, specifically old and used machinery parts, as capital goods.

Analysis:
The case involves an appeal by the Revenue against the interpretation of para 2.17 of the FTP, concerning the import of old and used machinery parts. The Respondents imported various items, including used lathe, projection fixture, drilling head lathe, and pinned rollers. The lower authority held that while some items were capital goods freely importable under para 2.17, others were restricted for imports requiring a specific license due to being old and used second-hand parts of machinery. The Commissioner (Appeals) allowed the appeal, stating that the parts in question were within the definition of capital goods. The Revenue's appeal raised concerns regarding the definition of capital goods under the FTP and the redundancy of conditions regarding the import of spares.

The grounds in the Revenue's appeal highlighted that the parts in question were not disputed to be parts of textile machinery. The appeal questioned the interpretation of capital goods under para 9.12 of the FTP and the relevance of conditions for importing spares. The judgment referred to para 2.17 and 2.33 of the FTP, emphasizing that the impugned goods were not refurbished or reconditioned, thus not covered under the provisions for importing spares. The Revenue argued that the goods were imported for training and quality control purposes, but the Commissioner (Appeals) failed to consider the examination staff's findings.

The analysis delved into the process of manufacturing the final products using the imported machinery parts. The functional use of the machinery parts, such as the projection fixture and pinned rollers, in the manufacturing process was detailed. It was established that the imported machinery parts were indeed capital goods used directly or indirectly in the manufacturing process. The judgment rejected the Revenue's attempt to equate "spare" with "part" and emphasized the distinction between the two terms based on common dictionary meanings.

The judgment concluded that the import of the machinery parts in question fell under the category of old and used second-hand capital goods as per para 2.17 of the FTP. The plea for a certificate from a chartered engineer was dismissed, and it was noted that the Revenue's grounds were insufficient to overturn the Commissioner (Appeals) order. Consequently, the Revenue's appeal was dismissed, upholding the decision in favor of the Respondents.