2000 (4) TMI 404 - AT - Customs

Summary

Issues Involved:
1. Classification of the imported machine under the Customs Tariff.
2. Eligibility for exemption under Notification Nos. 26/88 and 14/88.
3. Validity of import under the Open General License (OGL).
4. Confiscation and imposition of redemption fine and penalty.

Issue-wise Detailed Analysis:

1. Classification of the Imported Machine:
The appellants imported an Automatic Noise Testing Machine for Ball Bearings and classified it under sub-heading 9024.10 of the Customs Tariff Act, seeking the benefit of Notification No. 26/88. The Department issued a Show Cause Notice proposing classification under sub-heading 9031.80, arguing the machine was not automatic due to the absence of a microcomputer interface. The Additional Collector upheld this classification, stating the machine required manual operations and did not perform fully automatic testing, analyzing, and sorting functions.

2. Eligibility for Exemption under Notification Nos. 26/88 and 14/88:
The appellants contended that their machine qualified for exemption as an "Automatic noise and/or vibration tester for bearings" under Notification No. 26/88. They argued that the machine's operational functions were automatic, supported by expert opinions. The Department countered that the machine did not meet the criteria for being automatic due to manual loading and quality checks, referencing a more automated machine used by M/s. SKF Bearings. The Tribunal found that the appellants' machine did not qualify for the exemption as it did not match the higher degree of automation envisioned by the notification.

3. Validity of Import under Open General License (OGL):
The appellants sought clearance under OGL, arguing their machine fell under the category of "Automatic noise and/or vibration tester for bearings" listed in Appendix I of OGL. The Department disputed this, citing the manual operations involved. The Tribunal agreed with the Department, concluding that the machine did not qualify for clearance under OGL due to its lack of full automation.

4. Confiscation and Imposition of Redemption Fine and Penalty:
The Additional Collector ordered the confiscation of the machine under Section 111(d) of the Customs Act, 1962, with an option to redeem it on payment of a fine of Rs. 8 lakhs, and imposed a penalty of Rs. 2 lakhs under Section 112. The appellants argued that the penalty was unwarranted due to the technical nature of the dispute. The Tribunal, considering the bona fide nature of the appellants' classification claim, set aside the penalty. However, there was a difference of opinion on the amount of redemption fine. The Vice President suggested reducing the fine to Rs. 6 lakhs, which was later agreed upon by the third Member.

Conclusion:
The Tribunal upheld the classification of the machine under sub-heading 9031.80 and denied the benefit of Notification No. 26/88 and clearance under OGL. The confiscation order was maintained, but the redemption fine was reduced to Rs. 6 lakhs, and the penalty of Rs. 2 lakhs was set aside. The majority opinion confirmed these modifications, providing partial relief to the appellants.