2007 (11) TMI 140 - AT - Customs

Imported hard disk drives bearing a label Factory Re paired - Revenue proceeded against importer on the ground that there is a restriction in the Exim Policy with regard to the import of PCs/Laptops which are second hand - these spare parts are actually manufactured by the original equipment manufacturer and sticker factory repaired does not mean that these are second hand - Charted Engineer has examined the goods and given the certificate so confiscation & penalty are set aside

Summary

Issues:
1. Interpretation of Exim Policy regarding import restrictions on second-hand goods.
2. Classification of imported hard disk drives as capital goods or second-hand goods.
3. Validity of the Commissioner (Appeals) decision in setting aside the Order-in-Original.

Analysis:
1. The main issue in this case revolves around the interpretation of the Exim Policy concerning import restrictions on second-hand goods. The Revenue argued that the hard disk drives, labeled as "factory repaired," should be considered as second-hand goods and thus subject to the restrictions under the Exim Policy. However, the Commissioner (Appeals) disagreed, concluding that the goods were not actually used second-hand goods but rather dedicated replacement spare components for use in large computer systems, exempting them from the policy restrictions.

2. Another crucial issue was the classification of the imported hard disk drives as either capital goods or second-hand goods. The Revenue contended that since the goods were labeled as "factory repaired" and could be used in PCs and laptops, they should be considered as parts of such devices and subject to import restrictions. On the other hand, the respondent argued that the goods were specifically designed for use in large duty workstation servers of significant computer systems, making them capital goods exempt from the policy restrictions. The Commissioner (Appeals) supported this argument, emphasizing that the goods were original spare parts compatible with various configurations and subjected to compatibility tests, further solidifying their classification as capital goods.

3. Lastly, the validity of the Commissioner (Appeals) decision in setting aside the Order-in-Original was challenged by the Revenue. The Commissioner thoroughly examined the issue, considered all relevant documents and submissions, and concluded that the imported hard disk drives were not second-hand goods but capital goods intended for specific use in large computer systems. The Commissioner's decision was based on detailed reasoning and analysis of the available material, ultimately dismissing the Revenue's appeal due to the lack of merit and upholding the relief granted to the respondent.

In conclusion, the judgment by the Appellate Tribunal CESTAT, Bangalore, highlighted the importance of accurately interpreting import policies, distinguishing between second-hand goods and capital goods, and providing detailed justifications for decisions to ensure fair and lawful outcomes in customs cases.