2016 (6) TMI 756 - AT - Customs

Import of multifunctional devices (MFDs) from Canada - second-hand machines - 40 machines are treated as hazardous waste - adjudicating authority confirmed the higher assessable value based on the Chartered Engineer (C.E.) certificate. - Held that - the 40 MFDs imported were not functional and did not satisfy the condition of direct re-use as envisaged in the MOEF-OM. It is true that some of the 40 MFDs, (however, not all) were found to be working after being tested with another suitable hard disk. In our considered view, the MFDs, should have been functional/capable of direct re-use in the very state they are imported into India, without requiring addition of hard disk or other parts - Decided against the assessee.

Summary

Issues:
1. Valuation of imported multifunctional devices (MFDs) lacking certification.
2. Confiscation of non-functional MFDs and imposition of penalties.
3. Compliance with environmental regulations for import of MFDs.

Issue 1: Valuation of imported multifunctional devices (MFDs) lacking certification:
The appellant imported 114 MFDs from Canada, declared as used with a value of &8377; 12,06,492/-. During customs clearance, it was found that 40 machines were non-functional. The importer was asked to submit a local Chartered Engineer (C.E.) certificate valuing all 114 machines at &8377; 15,51,457/-. The lower adjudicating authority confirmed the higher assessable value based on the C.E. certificate, leading to confiscation of all machines under sections 111(d) and 111(m) of the Customs Act, 1962. The appellant was given the option to redeem 74 functional MFDs for home consumption and re-export the remaining 40 non-functional machines. The Commissioner (Appeals) upheld the order, prompting the appeal.

Issue 2: Confiscation of non-functional MFDs and imposition of penalties:
The appellant argued that the non-functional MFDs were found to be in working condition after fitting with a hard disk. They contended that the machines were wrongly confiscated and could not be exported as hazardous waste. The department cited an Office Memorandum requiring MFDs to be fully functional for direct re-use, which the 40 machines did not meet. The department emphasized that the machines failed the functionality test and were not suitable for direct re-use, unlike the case cited by the appellant from the Madras High Court judgment.

Issue 3: Compliance with environmental regulations for import of MFDs:
The MOEF Office Memorandum specified conditions for importing MFDs, including a residual life certification by chartered engineers, a license from DGFT if applicable, and proof of direct re-use destination with full functionality. The Customs Authorities were tasked with verifying these conditions and functionality before clearance. Failure to meet these conditions could lead to the MFDs being considered waste, triggering action under hazardous waste rules and the Customs Act. The tribunal found that the 40 imported MFDs were not functional as required for direct re-use, dismissing the appeal based on this non-compliance with environmental regulations.

This judgment highlights the importance of compliance with environmental regulations and functionality requirements for imported goods, emphasizing the need for full functionality at the time of import to avoid confiscation and penalties under relevant laws.