2007 (11) TMI 203 - AT - Customs

Imported goods, HP server for testing (data processing equipment) - contention of Revenue is that as per Exim Policy, import of computers including PCs & Laptops are restricted & they actually require licence - held that the restriction of the import of second-hand computers including personal computers & laptop wouldn t be applicable to server - server are different from PCs & laptop computers, which are actually stand-alone equipments - no reason to exclude them from scope of Capital Goods

Summary

Issues:
1. Interpretation of Exim Policy regarding import restrictions on second-hand computers.
2. Classification of servers as computers under the Exim Policy.
3. Mis-declaration and valuation of imported goods.

Analysis:
1. The appeal was filed against the Order-in-Appeal passed by the Commissioner of Customs (Appeals), challenging the confiscation and penalty imposed on imported goods for under-valuation and violation of the Exim Policy.

2. The dispute centered around whether the prohibition on importing second-hand computers without a license applies to servers. The Revenue contended that since servers are a type of computer, the restriction should be applicable. However, the Commissioner (Appeals) differentiated between personal computers/laptops and servers, holding that the restriction does not extend to servers.

3. The Tribunal examined the definition of a server as a computer running administrative software in a network, distinct from personal computers and laptops. It noted that servers are specialized for network applications, lack keyboards and monitors, and are classified as capital goods due to their high memory and processing speed. The Tribunal agreed with the Commissioner's interpretation that the Exim Policy restriction applies only to personal computers and laptops, not servers.

4. Additionally, the Tribunal upheld the confiscation based on other grounds and affirmed the redemption fine and penalty imposed by the Commissioner. The valuation of the goods was not disputed by the Revenue. Consequently, the Tribunal dismissed the Revenue's appeal, finding no merit in challenging the Commissioner's decision.

5. The Tribunal's decision was based on the distinction between servers and personal computers/laptops, emphasizing the specialized nature of servers for network use. The judgment highlighted the technical and functional dissimilarities between servers and standard computers, supporting the Commissioner's interpretation of the Exim Policy.

6. The case serves as a precedent for interpreting import restrictions on computer equipment under the Exim Policy, clarifying the classification of servers and emphasizing the specific characteristics that differentiate servers from personal computers and laptops in the context of customs regulations.