2023 (8) TMI 1102 - AT - Customs

Denial of benefit of exemption - 100% EOU - Import of used Enviro-tuff Liner (ETL) packing material - eligibility for N/N. 52/2003 dated 01.03.2003 - Benefit denied on the ground that the Enviro-tuff Liner (ETL) was neither used in the process of manufacture of the articles of exported goods nor it was used in connection with production or packing of exported goods - restricted goods or not - confiscation - redemption fine - penalty. HELD THAT - It is an admitted fact that the goods imported were used Enviro-tuff Liner (ETL) and on examination, it was found that it is a packing material to be used inside the 40 FT container to cover the goods inside the container. From the Notification, it is amply clear that the items specified therein are meant for manufacture of articles for export or for being used in connection with the production or packing of these goods for export by the EOUs - Admittedly, in this case, the imported goods are used as liners inside the container to ensure that the goods are safely transported. In similar circumstances, in the case of International Creative Foods Ltd. versus Commissioner of Customs, Cochin 1997 (12) TMI 400 - CEGAT, MADRAS , the appellant had imported refrigeration units to be mounted on trucks used for transport of raw materials. The Commissioner had held that the refrigeration trucks were mainly used for transportation and not for production or packing; therefore, the benefit of Notification No. 13/81-C.E. which was meant for material handling equipment was denied. The Tribunal observing that the refrigerated trucks were used for the transport of goods which was essential for transporting the raw materials but that itself cannot be the reason to hold that the trucks have been used for production of the goods as envisaged in the Notification and accordingly, the benefit of the Notification was denied. In the case on hand, it is an admitted fact that the item imported is used inside the container only for safe transportation and not for the production of exported goods. Moreover, the Notification does not allow any used items to be imported and therefore, the question of extending the benefit does not arise at all. The items imported were also found to be used ETL Liners which are categorised as second-hand goods fall under the category of restricted items. As per Para 2.17 of the Foreign Trade Policy, all second-hand goods are restricted for import and by importing used ETL liners, the importer had violated the provisions of Foreign Trade Policy thereby rendering the goods liable for confiscation. In view of the above, the Commissioner (A) had rightly confiscated the goods and imposed redemption fine and penalty - however, the redemption fine reduced from Rs.1,00,000/- to Rs.75,000/- (Rupees Seventy-five Thousand Only) under Section 125 of the Customs Act, 1962 and penalty from Rs.50,000/- to Rs.35,000/- (Rupees Thirty-five Thousand Only) under Section 112(a) of the Customs Act, 1962. Appeal allowed in part.

Summary

Issues:
The issues involved in this case are the classification of imported Enviro-tuff Liner (ETL) packing material, eligibility for benefit under Notification No. 52/2003, violation of Foreign Trade Policy regarding import of second-hand goods, and imposition of duty, redemption fine, and penalty.

Classification of Imported Goods:
The appellant, engaged in manufacturing uninterrupted power supply and inverters, imported used Enviro-tuff Liner (ETL) packing material classified under 39232990. The Commissioner (A) held that the liner was not used in the manufacture of exported goods or in connection with production or packing of exported goods, denying the benefit of the exemption as packing material.

Eligibility for Benefit under Notification No. 52/2003:
The appellant argued that the sophisticated electronic items they exported required extra packing to prevent damage during transportation. They claimed that the Enviro-tuff Liner (ETL) provided a controlled environment for the goods inside the container, qualifying it as packaging material eligible for the benefit under Notification No. 52/2003.

Violation of Foreign Trade Policy:
The Revenue contended that the imported goods were second-hand and not related to the exported goods, violating the provisions of the Foreign Trade Policy regarding restricted items. The Commissioner (A) rightly confiscated the goods and imposed redemption fine and penalty for the violation.

Decision and Rationale:
The Tribunal found that the imported Enviro-tuff Liner (ETL) was used solely for safe transportation inside the container and not for the production of exported goods, thus not eligible for the benefit under Notification No. 52/2003. Additionally, the imported second-hand goods violated the Foreign Trade Policy, justifying the confiscation, redemption fine, and penalty imposed by the Commissioner (A). The duty demand was upheld, with a reduction in redemption fine and penalty based on precedents regarding reasonable amounts.