1989 (1) TMI 281 - AT - Customs

Summary

Issues:
- Interpretation of Appendix 21 of the Policy for units in Free Trade Zone.
- Applicability of Appendix 2 and Appendix 10 to units in Free Trade Zone.
- Justification of order of confiscation and redemption fine.

Analysis:
1. The appeal challenged the order of the Collector of Customs & Central Excise regarding the confiscation and redemption fine imposed on imported second-hand machinery by the appellants, who set up a unit for export production of cosmetics in the Kandla Free Trade Zone.

2. The appellants argued that units in Free Trade Zones are governed by the Open General Licence (OGL) specified in Appendix 21, allowing import of goods, including Capital Goods, for production purposes. They contended that the machinery imported for export production should be covered under Appendix 21, not Appendix 2, which lists Capital Goods permitted under OGL.

3. The department contended that units in Free Trade Zones are considered importers and must adhere to the items listed in Appendix 2 for import under OGL. The Collector justified the confiscation based on the absence of the imported goods in Appendix 2.

4. The Tribunal analyzed whether Appendix 21 exclusively applied to units in Free Trade Zones and whether they were also bound by the conditions of import under Appendix 2. It was noted that the OGL order under Appendix 21 mentioned a prohibition or regulation affecting imports, but it did not refer to Appendix 2 or Appendix 10.

5. The Tribunal agreed with the appellants that as long as the Development Commissioner approved the machinery for export production in the unit, there were no other restrictions under Appendix 21. The Collector's satisfaction that the imported Capital Goods were for export production supported the view that the import fell within the purview of Appendix 21, irrespective of Appendix 2 listings.

6. The Tribunal dismissed the argument that Para 230 included imports by units in Free Trade Zones as a category under Appendix 10. The positive findings of the Collector regarding the intended use of the imported goods for export production led to setting aside the order of confiscation and allowing the appeal.

7. The Tribunal directed the grant of consequential relief to the appellants in light of the decision to set aside the order of confiscation and redemption fine, emphasizing the applicability of Appendix 21 for units in Free Trade Zones importing machinery for production purposes.