1993 (2) TMI 189 - AT - Customs

Issues Involved:
1. Mis-declaration of goods and their classification under Customs Act.
2. Applicability of Notification No. 13/81-Cus., dated 9-2-1981.
3. Applicability of Notification No. 206/76-Cus., dated 2-8-1976.
4. Imposition of redemption fine and confiscation of goods under Section 111(m) of the Customs Act, 1962.
5. Examination of conditions stipulated in Notification No. 13/81-Cus.

Issue-wise Detailed Analysis:

1. Mis-declaration of Goods and Classification under Customs Act:
The appellants imported 'Bare Image Intensifier Tube' and claimed it as raw material to benefit from Notification No. 13/81-Cus., dated 9-2-1981. The department contended that the goods were finished products, not raw materials, and charged the appellants with mis-declaration under Section 111(m) of the Customs Act, 1962. The appellants argued that the imported items required several processes before they could be used, thus qualifying as raw materials. The adjudicating authority initially held that the goods were finished products and thus mis-declared, leading to their confiscation.

2. Applicability of Notification No. 13/81-Cus., dated 9-2-1981:
The appellants argued that the imported items, being raw materials, should benefit from Notification No. 13/81-Cus., which exempts specified goods imported for production of goods for export or for use in 100% export-oriented undertakings. The adjudicating authority denied this benefit, stating that the items were finished products. However, upon review, it was found that the processes required to make the items usable were significant, indicating they were not finished products. The matter was remanded to examine if other conditions of the notification were fulfilled.

3. Applicability of Notification No. 206/76-Cus., dated 2-8-1976:
The appellants contended that they should also be considered under Notification No. 206/76-Cus., which grants exemption for goods imported for exclusive use by Defence Services. The adjudicating authority did not examine this claim. The appellate tribunal remanded the matter to the lower authority to examine the applicability of this notification.

4. Imposition of Redemption Fine and Confiscation under Section 111(m):
The adjudicating authority imposed a redemption fine of Rs. 10 lakhs in lieu of confiscation. The appellate tribunal found this excessive, especially since the goods were for Defence use and there was no profit motive. The fine was reduced to Rs. 2 lakhs, subject to further examination by the lower authority regarding the applicability of Notification No. 206/76-Cus. One member of the tribunal disagreed with the imposition of any fine, arguing that the charge of mis-declaration was not sustainable once it was established that the goods were not finished products.

5. Examination of Conditions Stipulated in Notification No. 13/81-Cus.:
The notification requires that the importer has a licence for the import, carries out manufacturing in a Customs bond, exports 100% of the manufactured goods, and executes a bond to fulfill these obligations. The appellate tribunal found that these conditions were not fulfilled by the appellants. However, one member disagreed with examining these conditions without a finding from the lower authority and thus remanded the matter for further examination.

Conclusion:
The appeal was allowed by remand, with instructions to the lower authority to re-examine the applicability of Notification No. 206/76-Cus. and the conditions of Notification No. 13/81-Cus. The redemption fine was reduced, and the charge of mis-declaration was found unsustainable by one member, leading to a difference of opinion on the imposition of any fine.

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