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TMI Blog2013 (6) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... of import of secondhand capital goods has to be followed and if the procedure contemplated therein is followed, then the benefit of free import should be granted to the present crop of goods, as they are freely importable. Thus he reasoning and the findings of the respondent are untenable and contrary to the law laid down by this Court a it stems from a misreading of the Foreign Trade Policy 2009-2014. Therefore, para 12(a) of the order holding that secondhand Digital Multifunction Print and Copying Machines are restricted for import under Para 2.17 of the Foreign Trade Policy 2009-2014 is contrary to law and accordingly, is liable to be set aside. There is a clear distinction between machines and assemblies. The authority failed to take note of the same. In fact, on classification of export and import items, ITC(HS) is binding on the authorities. On inspection it is clarified that imported goods are complete machines and not electrical and electronic assemblies. Since already held that Part B of Schedule III does not apply to the goods in question, the finding in para 11.7 of the order that the goods imported are electrical and electronic assemblies as per Third Sub-entry of B1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.12.2012 passed by the respondent, to quash the same and to consequently direct the respondent to assess and permit clearance of the secondhand digital multifunction print and copying machines as per the Bills of Entry. 2. As all the petitioners are aggrieved by a common order dated 17.12.2012 passed by the respondent and are similarly placed, suffice it to refer to the facts leading to the filing of W.P.No.1439 of 2013. 3. The petitioner in W.P.No.1439 of 2013 is engaged in the business of importing and trading in Secondhand Digital Multifunction Print and Copying Machines as well as Secondhand Photocopier Machines, besides trading in accessories, parts and consumables for the said machines. The petitioner imported a consignment comprising 96 units of old and used Digital Multifunction Print and Copying Machines of various models from the overseas supplier and filed a Bill of Entry bearing No.7380417, dated 13.7.2012 with the Customs House, Chennai and sought clearance of the goods under "free importability" as secondhand capital goods in terms of Para 2.17 read with Para 9.12 of Foreign Trade Policy 2009-2014 and Para 2.33 of Hand Book of Procedures V.1 2009-2014. The parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreeable and Mr.Ravi Anantha Padmanabhan on instruction states that the Customs Department will assess and adjudicate the matter, if required, in terms of the provisions of the Customs Act. The said statement is recorded. 7. In such view of the matter, the competent authority of the Customs Department viz., the Assessing Authority is directed to assess the goods in question in terms of the Customs Act read with the relevant Foreign Trade Policy as may be applicable and if it is found that the issue requires adjudication, the same shall be adjudicated taking into consideration the practice that is followed in similar cases without discrimination. Such exercise to be done preferably within a period of three weeks from the date of receipt of a copy of this order. The petitioners in each case represented by their counsel undertake that they will co-operate with the Customs Department for early disposal of the matter." 6. After passing of the order dated 9.11.2012, the petitioners, it appears, have made further representations to the competent authority on 16.11.2012 and 17.11.2012. Thereafter, the impugned order came to be passed by the respondent in respect of all the imports by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed/reconditioned spares, are freely importable. It is further submitted that the condition that is required to be complied with is only with regard to the import of spares, whereas the goods imported by the petitioners are photocopier machines, digital multifunction print and copying machines, which though fall under restricted category in the Foreign Trade Policy 2009-2014 are freely importable as per Para 2.33 of the Hand Book of Procedures V.1 2009-2014. 8. The learned Standing Counsel for the respondents contended that the secondhand Digital Multifunction Print Copying machines are restricted for import under Para 2.17 of the Foreign Trade Policy 2009-2014 and, therefore, the same cannot be freely imported. The learned Counsel reiterated the department's stand as set out in the impugned proceedings. 9. I have heard both sides at length and given anxious consideration to the issues involved in these cases. RESTRICTION ON IMPORT OF IMPUGNED GOODS: 10.1. To understand the issue as to whether there is a restriction for import in terms of Para 2.17 of the Foreign Trade Policy 2009-2014, it will be useful to refer to the following provisions of the Foreign Trade Policy 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technological upgradation or expansion. It also includes packaging machinery and equipment refractories for initial lining, refrigeration equipment, power generating sets, machine tools, catalysts for initial charge, equipment and instruments for testing, research and development, quality and pollution control. Capital goods may be for use in manufacturing, mining, agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for use in services sector. Handbook of Procedures V.1 2009-14: 2.33. Import of Second Hand Capital Goods. (a) Import of second hand capital goods including refurbished/reconditioned spares, except those of personal computers/laptops, shall be allowed freely, subject to conditions for following categories: (b) Import of second hand computers including personal computers/laptops and refurbished/ reconditioned spares thereof is restricted. (c) Import of refurbished/reconditioned spares of capital goods, other than those of personal computers/laptops will be allowed on production of a Chartered Engineer certificate that such spares have atleast 80% residual life of original spare. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok of Procedures V.1 2009-2014, which prescribes the manner of import of secondhand capital goods has to be followed and if the procedure contemplated therein is followed, then the benefit of free import should be granted to the present crop of goods, as they are freely importable. 10.5. The above said view of this Court is fortified by a decision of a learned Single Judge of this Court (VINOD K.SHARMA,J.) in Priyam Enterprises v. The Commissioner of Customs and others (W.P.(MD) No.12268 of 2012 and batch cases, dated 17.9.2012). In this decision, the learned Single Judge formulated the following question for determination: "19. The question of determination in this case therefore is whether the goods imported by the petitioner though under restricted category could be freely imported subject to conditions laid down under para 2.33 Handbook or not." and held as under:- "20. The answer is to be in favour of the petitioner, for the simple reason that while placing the imported goods under the restricted category, procedure has been laid down for import of these goods, which provides that the goods can be imported as per the procedure of FTP, ITC (HS), HBP Vol.I, Public Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of second hand capital goods, including refurbished/reconditioned spares as per sub clause (a) of Clause 2.33, one can say from the clear terms of the provision that there is no distinction made between second hand capital goods and second hand refurbished/reconditioned capital goods for purposes of free import. Except for those specifically mentioned restricted category of second hand capital goods which are not allowed free import, all other second hand capital goods including other enumerated restricted category of second hand capital goods are permitted free import. Thus, with no distinction maintained between other restricted category of second hand capital goods and second hand capital free goods, we do not find any good ground to read in Clause 2.33, a restriction on the free import of second hand digital multifunction print and copier machines. Thus reading sub clause (a) to Clause 2.33, if there is a restriction to be read on free import, it is only with reference to personal computers/laptops from among the restricted category of second hand capital goods group, which means, other restricted category under second hand capital goods group, specified in Para 2.17, namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al multifunction printing and copying machines being restricted category of second hand capital goods, cannot bring them under any assumed restriction on par with personal computers/laptops for the purpose of imports into this country. Contrary to the assertion of the Revenue, the import policy regime, as spoken to in Para 2.17, touches on compliance of conditions alternative and not on cumulative basis. In the circumstances, we reject the plea of the revenue." (emphasis supplied) 10.7. In view of the above, the reasoning and the findings of the respondent in paras 10.1, 10.2 and 10.3 are untenable and contrary to the law laid down by this Court. It also stems from a misreading of the Foreign Trade Policy 2009-2014. Therefore, para 12(a) of the order holding that secondhand Digital Multifunction Print and Copying Machines are restricted for import under Para 2.17 of the Foreign Trade Policy 2009-2014 is contrary to law and accordingly, is liable to be set aside. IMPORTED GOODS WHETHER HAZARDOUS WASTE: 11.1. The next issue that was considered by the respondent is whether the provisions of the Hazardous Wastes (Management, Handling and Transboundary Movement) Rules, 2008 will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule have to be treated as hazardous waste. The heading of Part (B) of Schedule III begins with "List of hazardous waste .....". Therefore, whatever is specified in part B of schedule III is to be treated as hazardous waste. b. There are 3 sub-entries under Basel No.B1110. The second sub-entry begins with 'waste electrical and electronic assemblies'. The 3rd sub-entry begins with 'electrical and electronic assemblies'. Thus, the word waste is missing in the 3rd sub-entry. It is a conscious omission by the legislature with the clear intention of bringing used electrical and electronic assemblies imported for direct re-use under the definition of Hazardous Waste. Waste electrical and electronic assemblies as mentioned in the 2nd sub-entry of Basel No.B1110 cannot be re-used whereas electrical and electronic assemblies mentioned in the 3rd sub-entry of Basel No.B1110 can be re-used. Both are treated as hazardous waste by the Hazardous Wastes (Management, Handling and Transboundary Movement) Rules, 2008." 11.3. The above said finding of the respondent is per se incorrect and misconceived, as what is contemplated in Basel No.B1110 of Part B of Schedule III is waste electrical and ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In any event, as has been already pointed out, the goods in question are complete machines and not electronic assemblies. The verification by the Customs Department with the help of Chartered Engineer dispels such a finding. 11.5. It has been rightly pointed by the learned Senior Counsel appearing for the petitioners that even as per ITC(HS) Classifications of Export and Import Items 2009-2014, Vol.3-A, assemblies fall under a totally different category. They are parts of machines. To clarify this position, the EXIM Code relating to parts of engines, which are defined as assemblies, can be referred to in the following chapters: EXIM Code Item Description Policy 8409 91 Suitable for use solely or principally with spark ignition internal combustion piston engines:- Valves, inlet exhaust, piston, piston rings, piston assemblies:- Valves, inlet exhaust, piston, piston rings, piston assemblies:- 8409 99 11 Valves, inlet exhaust Free 8409 99 12 Pistons Free 8409 99 13 Piston rings Free In contrast, EXIM Code 8443 31 00 speaks about machines, which are the goods under import in the present case. The said Code reads as under: EXIM Code Item Description Policy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, etc. batch by Chitra Venkataraman,J. as under: "Pursuant to the directions of this Court, the Assistant Commissioner of Customs has filed an affidavit giving the name and address of the Chartered Engineer to inspect the imported materials and to give an opinion about the year of manufacture and the possible residual life of imported second hand machine. The Assistant Commissioner of Customs suggested that the Pollution Control Board may also be directed to find out whether there are hazardous materials in the imported goods. 2. Taking note of the said statement, this Court directs the Chartered Engineer, M/s.Inspectorate Griffith India Private Limited, 23, Rajaji Salai, 4th Floor P.T.Lee Chengalvaraya Naicker Maligai, Chennai and the Member Secretary of the Tamil Nadu Pollution Control Board to inspect the goods involved in W.P.Nos.21732, 21733 and 21985 to 21988 of 2011 and 22081 of 2011 and give their opinion within a period of two weeks from today. The petitioners herein are directed to extend necessary co-operation for conducting inspection by the Chartered Engineer. The report of the Chartered Engineer along with the opinion of the Pollution Control Board shall reach th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a direction to re-export, coupled with imposition of penalty, also suffers from the vice of arbitrariness and capriciousness in the proceedings under the Customs Act, 1962. 12.2. Section 124 of the Customs Act, 1962 contemplates issuance of show cause notice before confiscation of goods or imposition of penalty and it reads as follows: "Section 124. Issue of show cause notice before confiscation of goods, etc. No order confiscating any goods or imposing any penalty on any person shall be made under this Chapter unless the owner of the goods or such person - (a) is given a notice in writing with the prior approval of the officer of Customs not below the rank of an Assistant Commissioner of Customs, informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty; (b) is given an opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the grounds of confiscation or imposition of penalty mentioned therein; and (c) is given a reasonable opportunity of being heard in the matter: Provided that the notice referred to in clause (a) and the representation referred to in clause (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opportunity to submit their contentions for release of the goods for home consumption. 13.3. If the authority had found that the goods are prohibited goods or cannot be released for home consumption and are liable for confiscation, then the authority should have proceeded in terms of Section 124 of the Customs Act, 1962. In this case, after considering the claim of the petitioners for clearance under Section 47 of the Customs Act, the impugned adjudication order has been passed confiscating the goods and imposing penalty. This order of confiscation of goods and imposition of penalty runs counter to Section 124 of the Customs Act. 13.4. Admittedly, in this case no show cause notice has been issued calling upon the petitioners/importers to state as to why the goods should not be confiscated and penalty should not be imposed. The mandate of Section 124 of the Customs Act, 1962 has not been followed rendering the order arbitrary and contrary to the statutory provision. In any number of cases, the Supreme Court has held that when the authority acts contrary to the statutory provision or in an arbitrary and capricious manner, the party aggrieved is entitled to seek protection unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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