2005 (3) TMI 138 - SC - Customs

Notification issued on 19th June, 1980 by which an exemption was granted under Section 25(1) of the Customs Act, 1962 of custom duty in excess of 25% ad valorem payable in respect of the import of various items designed for use in the printing industry. Held that - The respondent authorities have taken an inconsistent stand. From the narration of the facts it is clear that the Commissioner had proceeded on the basis of the capacity of the imported machines and not their actual production. The show cause notice had also been issued on this basis. The Tribunal, on the other hand, has categorically rejected the capacity test and has come to the conclusion that the capacity was irrelevant. It held that the interpretation of the notification in fact shows that the only test was whether the output of a machine in one hour was 30,000 copies per hour in actuality and not whether the machine was designed for capacity of X or Y at speeds P & Q. Learned Counsel for the respondent has supported the Tribunal s interpretation of the notification. In our opinion, this would mean that the show cause notice had been issued on an incorrect interpretation of the notification. That should have been sufficient for the Tribunal to set aside the proceedings against the appellant. The appeal is allowed and the decision of the High Court is set aside.

Summary

Issues:
Exemption under Section 25(1) of the Customs Act, 1962 for printing machines with a speed of 30,000 copies per hour. Interpretation of notification criteria for exemption. Discrepancy between rated speed and actual performance of imported machines. Rejection of certificates and technical experts' opinions. Confiscation of machines, imposition of fines, and penalties. Inconsistency in authorities' stand on capacity versus actual output criteria for exemption.

Analysis:
The case revolved around the notification granting exemption under Section 25(1) of the Customs Act, 1962 for printing machines capable of producing 30,000 copies per hour. The appellant imported three machines with a claimed output exceeding 30,000 copies per hour. However, Customs authorities issued show cause notices alleging the machines' actual speed was 25,000 copies per hour, thus denying the exemption. The appellant provided manufacturer's documents, technical expert certificates, and offered demonstrations to prove the machines' capability, but Customs did not verify effectively.

The Commissioner rejected the appellant's evidence, stating the machines were not designed for 36,000 copies per hour, and the appellant failed to provide necessary details. The Commissioner emphasized the need for machines to be designed for higher output to qualify for exemption. The plea for testing actual machine performance was dismissed due to logistical constraints.

Subsequently, the machines were confiscated, fines and penalties imposed, and an appeal was made to the Tribunal. The Tribunal partially allowed the appeal, focusing on the actual output rather than the machine's capacity. However, the Tribunal upheld the Commissioner's decision for two machines due to lack of proof of actual output.

Upon further inspection by the Collector of Customs, it was found that the machines produced varying outputs, but the assessments were made over 15 years post-importation. The Supreme Court intervened, noting the inconsistency in authorities' approach regarding capacity versus actual output criteria for exemption. The Tribunal's rejection of the capacity test was upheld, leading to the appeal being allowed, setting aside the High Court's decision.

In conclusion, the Supreme Court highlighted the incorrect interpretation of the notification by the authorities, emphasizing the importance of actual output over machine capacity for exemption eligibility. The decision was overturned, emphasizing the need for a consistent and accurate assessment based on the notification criteria.