2010 (1) TMI 455 - HC - Customs

Engines - Tribunal held that engine was not capital goods. According to revenue, the definition of capital goods given in paragraph 9.12 of Foreign Trade Policy 2004-2009, capital goods includes, plant, machine, machinery equipment or accessories required for manufacture. Secondly, engines in question are either machinery or plant or equipment. Tribunal side tracked earlier order in case of Wartsila India Ltd. v. Commissioner of Customs, Mumbai 2005 -TMI - 54226 - CESTAT, WEST ZONAL BENCH, MUMBAI, distinguishing on slender ground of being related to assembled engine. Held that - order in Wartsila India Ltd. case set aside earlier by court and matter remanded. Impugned order set aside and matter destroyed to be heard together.

Summary

Issues:
1. Interpretation of the term "capital goods" under para 9.12 of the Foreign Trade Policy 2004-09.
2. Application of judicial precedents in determining the classification of imported engines.
3. Consistency of the Tribunal's decision with previous judgments and the need for a fresh consideration of the matter.

Analysis:
1. The primary issue in this case revolves around the interpretation of the term "capital goods" as per para 9.12 of the Foreign Trade Policy 2004-09. The appellant contended that the imported engines, used for drilling purposes, should be considered capital goods as they fall within the definition provided by the policy. The counsel argued that the engines are essential for manufacturing activities and should not require a license from the DGFT. Reference was made to judicial decisions, including those by the Supreme Court, to support the classification of engines as machinery or plant, thus falling under the category of capital goods.

2. The second issue pertains to the application of judicial precedents in determining the classification of the imported engines. The appellant relied on judgments such as Commissioner of Income Tax v. Taj Mahal Hotel Ltd. and Scientific Engineering House (P) Ltd. v. CIT to establish that engines should be treated as plant or machinery. Additionally, distinctions were drawn from previous cases like Khurana Exports v. CC to support the argument that the engines in question were not second-hand and should be classified as capital goods. On the contrary, the respondent attempted to align the Tribunal's decision with the precedent set by Khurana Exports, emphasizing the need for a case-specific evaluation.

3. The final issue addressed the consistency of the Tribunal's decision with previous judgments and the necessity for a fresh consideration of the matter. The High Court noted that the Tribunal's reliance on a previous judgment was not justified as it did not adequately address the contentions of the parties. Consequently, the High Court set aside the impugned order and remanded the case back to the Tribunal for a reevaluation. The Court emphasized the importance of a detailed consideration of the arguments and directed the Tribunal to decide the appeal based on its own merits, following principles of natural justice. The Court refrained from expressing an opinion on the merits of the controversy, leaving it for the Tribunal to determine upon reconsideration.

In conclusion, the High Court quashed the impugned order, remanded the case to the Tribunal for fresh consideration, and restored the appeal to be heard alongside another related case. The decision highlighted the significance of a thorough evaluation of the issues at hand and the need for a reasoned order based on legal principles.