1999 (8) TMI 535 - AT - Customs

Summary

Issues Involved:
1. Legitimacy of importing the thyrister converter system.
2. Eligibility of raw materials and components for the bright annealing furnace for exemption under notification 77/80.
3. Compliance with the Import Export Policy and the necessity of obtaining approval from the Board.

Detailed Analysis:

1. Legitimacy of Importing the Thyrister Converter System:
The respondent, a licensed unit in the Kandla Free Trade Zone, was permitted by the Ministry of Commerce to import specific items for manufacturing purposes. Upon examination, the department found that the thyrister converter system was imported instead of a motor generator set, which was authorized. The Collector justified the import by stating that the thyrister converter was part of the temper mill and that a second-hand machine might contain new parts without being considered new. However, the appellate tribunal found this reasoning insufficient, noting that the thyrister converter was a new and significant component, valued at Rs. 30 lakhs CIF, and not merely a small part of the temper mill. The tribunal concluded that the thyrister converter was not specified in the importer's application and was not authorized by the Board, making it liable for confiscation and ineligible for the benefits of notification 77/80.

2. Eligibility of Raw Materials and Components for the Bright Annealing Furnace:
The Collector found that the imported items for the bright annealing furnace included old and new components, with ceramic wool being a new, advanced refractory material. The tribunal noted that the appeal did not specifically allege issues with the ceramic wool but generally argued that the goods were not approved by the Board. The tribunal agreed with the Collector that ceramic wool could only be imported as new raw material. However, since the importer did not seek approval for importing new wool, the goods were ineligible for the notification's benefits due to non-compliance with the licensing requirement.

3. Compliance with the Import Export Policy and the Necessity of Obtaining Approval from the Board:
The tribunal emphasized that according to the Import Export Policy, the import of capital goods, raw materials, or components by units in the Kandla Free Trade Zone required prior approval from the Board. The notification 77/80 provided exemptions only if the import was authorized by a licence from the Board. The tribunal found that the special steel plates and other materials for fabricating the furnace were not approved by the Board and thus were unauthorized imports. The tribunal rejected the Collector's interpretation that the notification's scope included raw materials for fabricating machinery used in production, stating that the notification did not support such an extended meaning.

Conclusion:
The tribunal determined that the thyrister converter system and other unauthorized imports were liable for confiscation and ineligible for the benefits of notification 77/80. The matter was remanded to the Commissioner to consider the appropriate amount of redemption fine and penalty, as the Collector had not addressed these aspects due to his initial findings. The appeal was allowed, emphasizing strict adherence to the Import Export Policy and the necessity of obtaining proper approvals for imports.