IMPORTANT POINT
The import of a new Thyristor Converter and the import of new ceramic wool by the appellants under the import licence to import second hand machinery like Temper Mills and Bright Annealing Furnace facility is not a contravention of the import licence as the new parts are necessary to maintain old machinery.

Headnote:Customs Act, 1962-Sections 111(d) and 112(a)-Liability of importer to pay penalty for irregularity committed in the import-Import permit issued to appellant to import into India second hand machinery, inter alia, Temper Mills and Bright Annealing Furnace facility-Appellant importing second hand machinery including import of a new Thyristor Converter and new ceramic wool as parts of Temper M.A. and Bright Annealing Furnace facility-Collector of custom issuing show cause but imposing no penalty on the view that imports of some new parts to maintain old machinery was not contrary to import permit-Tribunal, however, took a contrary view on appeal by narrow construction i.e. the permit should be used to import each and every part of permitted machinery which must be second hand and not new-Appeal against to Supreme Court-Whether Tribunal was right in its narrow construction? (No)-Appeal allowed to that extent.
       Held : We are of the opinion that the tribunal erred in reversing the finding of the Collector by adopting a very narrow approach while construing the words "for being used in connection with the production of goods for export". (Para 11)
       For the reasons stated above, we are in agreement with the view expressed by the Collector, hence, we reverse the finding of the tribunal to the extent it is challenged before us. We make it clear that the appellant has not questioned the finding of the tribunal in regard to the import of special steel plates weighting about 11 M.T. To this extent, the order of the tribunal remains undisturbed and as directed by the tribunal the matter shall stand remanded to the Commissioner for considering the liability of the appellant to pay penalty for the unauthorised import of the said special steel plates. The appeal is allowed to the extent aforesaid. No costs. (Paras 15 & 16)

JUDGMENT

Santosh Hegde, J.-This appeal is directed against the order of the Customs, Excise and Gold (Control) Appellate Tribunal, (the tribunal ), West Regional Bench, Mumbai dated 15th July, 1999 made in Appeal No.C/366/94A.

2. The appellant which is an approved unit situated in the Kandla Free Trade Zonc (KFTZ) was authorised to manufacture one lakh ton of Cold Rolled Closed Annealed (CRCA) and Tin Mill Black Plate (TMBP) Coils per year under a licence issued by the Ministry of Commerce, Government of India on 30.3.1981. The said Ministry by a letter dated 2.7.1982 approved the proposal of the appellant for import into the KFTZ of second-hand machinery for the purpose of the manufacture of the CRCA and TMBP under certain conditions which included that the imported machineries should not be over 10 years old and it should have a residual life of at least 5 years. Bases on the said permission, the appellant imported between the period 1983 and 1987 second hand machineries as capital goods for which they had filed as many as 17 Bills of Entry and claimed the benefit of Notification No. 77/90-Cus. dated 17.4.1980. On 7.2.1992, the Customs Authorities issued a show-cause notice to the appellant alleging among other grounds that the appellant had imported contrary to the import licence, one new Thyristor Converter over and above the Motor Generator Set, a part of the Temper Mill and certain quantity of ceramic wool as a new component for the purpose of fabrication of the Bright Annealing Furnace.

3. In the proceedings before the Collector of Customs, the appellant contended that the import was made with the permission of the authorities of KFTZ issued to them vide permission letter No.FTZ/Adm/2/822/90-IV/4750 dated 25/30.4.1991. They also contended that the import made by them was governed by the import export policy applicable for the year 1983-84 and the Thyristor Converter system was imported as a part of the complete Temper Mill which was in a second-hand condition. The said Thyristor Converter though was a new part of the Temper Mill, the same constituted in value equivalent to only 9% of the total value of the Temper Mill and this particular machinery part was imported as an alternative to Motor Generator Set which was supplied in a non working condition by the supplier. Similarly, it was contended that so far as ceramic wool which was also a new component of the annealing furnace, the same had to be new since the said ceramic wool had a limited life span, hence when a second-hand annealing furnace was to be installed, it was imperative that the ceramic wool in the same had to be replaced with new wool because the old ceramic wool had outlived its utility.

4. The Collector as per his order dated 31.3.1993 substantially dropped the charges levelled in the show cause notice and came to the conclusion that the machineries imported viewed as a whole was substantially old and that the Thyristor Converter was an essential part of the Temper Mill, and except for this particular part all other components of the Temper Mill were second-hand. He was also of the opinion that the ceramic wool which was a part of the annealing furnace was a periodically replaceable part, hence, same cannot be individually treated as a new machinery, therefore, was of the opinion that the import in question was covered by Notification 77/80-Cus. and that the entire imported machinery after fabrication remained within the KFTZ and was used for the purpose of export production, accordingly he did not consider it necessary to either impose the penalty and duty as reflected in the show-cause notice nor did he think it necessary to confiscate the goods.

5. As noticed above, the Department being aggrieved by the said order of the Collector filed an appeal before the tribunal, who by its order dated 6.8.1989 allowed the Department s appeal holding that the import in question was in contravention of the import export policy as well as the Notification issued

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