Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2009 Supreme(SC) 353

2009(2) Supreme 426
SUPREME COURT OF INDIA
(From Kerala High Court)
S.H. Kapadia and H.L. Dattu, JJ.
M/s Atul Commodities Pvt. Ltd. & Ors. — Appellant(s)
versus
Commissioner of Customs, Cochin-9 — Respondent(s)
Civil Appeal No. 2999/2007
with
Civil Appeal Nos. 5259/2007, 3226/2007 and 3977/2007
Decided on : 24-02-2009

Advocates appeared:
For the Appellant :S.K. Bagaria, Sr. Adv., Nikhil Nayyar, T.V.S. Raghavendra Sreyas, Ambuj Agrawal, Advocates.
For the Respondent:K. Radhakrishnan, Sr. Adv., H. Raghavendra Rao, Rupesh Kumar, Mrs. anil Katiyar, B. Krishna Prasad, Advocates.

IMPORTANT POINT
The power to amend the FTP is exclusively vested in the Central Government whereas the power to clarify is vested in DGFT.

Headnote:(a)Foreign Trade (Development and Regulation) Act, 1992 – Section 5 r/w Para 2.3, FTP 2004-09 – The power to amend the FTP is exclusively vested in the Central Government whereas the power to clarify is vested in DGFT – It is not open to DGFT vide circulars to change categorization of items from the category of “free” to the category of “restricted” imports. (Paras 17 and 18)
        (b)FTP (2002-07) and FTP (2004-09) – Circulars issued clarifying issues under FTP (2002-07) cannot be applicable to imports made under FTP (2004-09). (Para 19)
       (c)FTP (2004-09) r/w para 2.33, Handbook (2004-09) – A conjoint reading of the two provisions makes it clear that import of second-hand capital goods is made “free”. (Para 20)
       (d)Foreign Trade (Development and Regulation) Act, 1992 – Section 5 – By notification no. 31 dated 19.10.2005 photocopying machines brought into category of second-hand goods – Therefore, import of photocopying machines stand restricted only on and after 19.10.2005. (Para 21)
       Facts of the case :
       1. The appellant imported in January, 2005 Photocopying Machines under the category “general imports”.
       2. On 25.2.2005, the Dy.CoC (Import) issued a show cause notice alleging that the Used Photocopying Machines were restricted items for import. It was alleged that goods have been imported without a valid import licence and consequently, they were liable to be confiscated.
       3. Vide Order of adjudication dated 11.3.2005, the adjudicating authority (Commissioner) came to the conclusion that all second-hand goods, except capital goods, came in the category of “restricted for import”. It was held that second-hand photocopier machines, air-conditioners, diesel generating sets are all covered under the definition of “second-hand goods” and, therefore, there import is governed by para 2.17 of the current Policy which restricts import of second-hand goods without a licence. Accordingly, the adjudicating authority confirmed the show cause notice.
       4. Aggrieved by the Order of adjudication dated 11.3.2005, the matter was carried in appeal to the Tribunal, which, as stated above, allowed the appeal in favour of the appellant.
       5. Aggrieved by the decision of the Tribunal, the Department carried the matter in appeal to the High Court which held that, the import of second-hand photocopier machines effected prior to 19.10.2005 would be governed by circular Nos. 16/03, 19/03 and 20/05 issued by DGFT warranting a licence for import.
       Finding of the Court :
       Impugned judgment cannot be sustained.
       Result : Appeal allowed.

JUDGMENT

S.H. Kapadia, J. —

Civil Appeal No. 2999 of 2007:

1.This civil appeal is directed against the judgment and order dated 7.4.2006 in Customs Appeal No. 15/05 delivered by the Division Bench of Kerala High Court by which the Department’s appeal came to be allowed and the judgment of the Tribunal dated 12.7.2005, following the decision of its Larger Bench in the case of M/s Atul Commodities Pvt. Ltd. v. CC, came to be set aside.

2.The issue involved in this civil appeal is - Whether, during the period in question, Photocopying Machines (Photocopiers) were “freely importable” or whether its import required a licence/permission/certificate.

Facts:

3.The facts lie within a very narrow compass.

4.In exercise of the powers conferred under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, the Central Government notified Foreign Trade Policy (“FTP” for short) for the period 2004-09 incorporating the Exim Policy for the period 2002-07 as modified. The Policy was announced on 31.8.2004. It came into force with effect from 1.9.2004. It remains in force up to 31.3.2009, unless otherwise specified.

5.The appellant imported in January, 2005 Photocopying Machines under the category “general imports”.

6.On 25.2.2005, the Dy.CoC (Import) issued a show cause notice under Section 124 of the Customs Act alleging that the Used Photocopying Machines were restricted items for import under para 2.17 of the current FTP 2004-09 read with circular No. 20 dated 23.2.2005 issued by DGFT. In the show cause notice, it was thus alleged that goods have been imported without a valid import licence and consequently, they were liable to be confiscated under Section 111(d) of the Customs Act, 1962 read with para 2.17 of the FTP (2004-09).

7.In its reply dated 3.3.2005, appellant submitted inter alia that photocopying machine (photocopier) is an item of capital goods. The appellant pointed out that on 21.8.2003 the Customs House, Cochin, had obtained a clarification from JDGFT, Cochin, which confirmed that photocopying machines can be classified under Capital Goods and Second Hand Photocopier Machines which are less than 10 years old shall be allowed free importation under para 2.33 of the Handbook of Procedures 2002-07. In its reply, the appellant further pointed out that, circulars of DGFT No. 16 dated 29.9.2003 and No. 19 dated 11.11.2003 had been issued specifically for EPCG Scheme(s) only and not for normal imports on which full duty is payable. It is further pointed out that the above policy circulars are intended to be applied to EPCG Scheme wherein there is a provision for an exemption of customs duty and, therefore, the above two circulars cannot be suo motu applied to the imports in question.

8.Vide Order of adjudication dated 11.3.2005, the adjudicating authority (Commissioner) came to the conclusion that as per para 2.17 of the FTP all second-hand goods, except capital goods, came in the category of “restricted for import”. He relied upon circular No. 19 dated 11.11.2003 in support of his above conclusion. It was held that second-hand photocopier machines, air-conditioners, diesel generating sets are all covered under the definition of “second-hand goods” and, therefore, there import is governed by para 2.17 of the current Policy which restricts import of second-hand goods without a licence. Accordingly, the adjudicating authority confirmed the show cause notice.

9.Aggrieved by the Order of adjudication dated 11.3.2005, the matter was carried in appeal to the Tribunal, which, as stated above, allowed the appeal in favour of the appellant placing reliance on the decision of the Larger Bench of the Tribunal dated 11.5.2005.

10.Aggrieved by the decision of the Tribunal, the Department carried the matter in appeal to the High Court. By the impugned judgment dated 7.4.2006, the High Court held that, the import of second-hand photocopier machines effected prior to 19.10.2005 (the date on which Notification No. 31/05 came to be issued amending

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2009 Supreme(SC) 353

IMPORTANT POINTThe power to amend the FTP is exclusively vested in the Central Government whereas the power to clarify is vested in DGFT.

IMPORTANT POINT
The power to amend the FTP is exclusively vested in the Central Government whereas the power to clarify is vested in DGFT.