2019 (6) TMI 1157 - AT - Customs

Import of restricted item - brass scrap engel comprising of 2 nos. pipes of over 19 feet length and thickness of 22 inches - requirement of specific items to import such goods or not? - HELD THAT - The goods were declared as scrap and it is on record that this is not in dispute. It has been held by the lower authorities that the ultimate usage is of no relevance to assessment. Scrap, by its definition, cannot but be old and used and, therefore, the provisions of Foreign Trade Policy pertaining to licensing will not apply. The restrictive provisions in the Policy would be applicable to goods, other than scrap , identifiable as such. It was, therefore, incumbent on the lower authorities to first reclassify the goods under the appropriate heading on the First Schedule to the Customs Tariff Act, 1975. In the absence of such an exercise, the goods cannot be anything other than scrap which is a separate heading in the First Schedule to the Customs Tariff Act, 1975. There cannot be two distinct determination of classification for the purpose of recourse to the general restrictions in the Foreign Trade Policy. There is no option but to consider the goods as scrap and import of scrap requires no licence - Confiscation fails - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of goods as 'scrap' for import under Customs Act, 1962.
2. Applicability of Foreign Trade Policy licensing requirements to imported goods.

Analysis:
1. The appeal challenged the Order-in-Appeal upholding the confiscation of goods valued at ?40,88,720 under Sections 111(m) and 111(d) of the Customs Act, 1962, with an option for redemption by paying a fine of ?8,50,000, and imposition of a penalty of ?3,50,000 under Section 112(a) of the Customs Act, 1962. The goods in question were imported as 'brass scrap engel' but were found to include 2 pipes over 19 feet in length and 22 inches in thickness. The original authority contended that these pipes, being old and used, required a specific license under the Foreign Trade Policy for import.

2. The Tribunal noted that the goods were declared as 'scrap,' which was not disputed. It was emphasized that 'scrap' by definition is old and used, making the provisions of the Foreign Trade Policy regarding licensing inapplicable. The lower authorities were criticized for not reclassifying the goods under the appropriate heading in the Customs Tariff Act, 1975, before invoking the Foreign Trade Policy restrictions. Since 'scrap' is a separate heading in the Tariff Act, there cannot be dual classification for the purpose of applying Foreign Trade Policy restrictions. Consequently, the import of scrap does not require a license, and the finding of liability for confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962, was deemed incorrect. The impugned order was set aside, and the appeal was allowed.

This detailed analysis of the judgment highlights the key issues of classification of imported goods and the application of licensing requirements under the Foreign Trade Policy, providing a comprehensive understanding of the legal reasoning and decision-making process involved in the case.