Per S.S. Sekhon :

1a) The appellants, having their office at 104, 1st Floor, Geneva House, Cunningham Road, Bangalore-560 001, are registered with the Directorate of Industries and Commerce, Government of Karnataka and a Certificate was issued to this effect by the authorities on 18.5.2001 to engage in the repair and assembly of Diesel Generators. They imported 133 Diesel Engines, CFS-Pune, for assembling them into D.G. Sets, after procuring alternators from the local market and filed two Bills of Entry, viz., B.E. No. 75 dated 19.5.2001 for 75 pcs of old and used Diesel Engines and B.E. No. 82 dated 24.5.2001 for 58 pcs of old and used Diesel Engines. The appellants claim of import under OGL as second hand capital goods was not entertained. A Show Cause Notice asking the appellants to show cause as to why the goods should not be confiscated under Section 111 (d) and 111 (o) of the Customs Act, 1962 read with Section 3 (3) of the Foreign Trade (Development & Regulation) Act, 1992 on the ground that the import of old and used diesel engines fall under the restricted category of imports in terms of Para 5.3 of the EXIM policy 2001-2002 AM, and requires specific licence for such imports. After hearing them on 06.08.2001, the Ld. Commissioner, vide impugned Order-in-Original ordered absolute confiscation of the impugned goods covered by the two Bills of Entry, and imposed a penalty of Rs. 3.00 lakhs in respect of B.E. No. 82 dtd. 24.5.2001 and Rs. 4.00 lakhs in respect of B.E. No. 75 dtd. 19.5.2001.

1b) The issues involved herein:-

i) Whether the impugned goods viz., old and used diesel engines imported by the appellants are liable for absolute confiscation under the provisions of Sections 111 (d) of the Customs Act, 1962 read with Sections 3 (2) and 3 (3) of the Foreign Trade (Development & Regulation) Act, 1992;

ii) Whether the Commissioner of Customs, Pune was correct in absolutely confiscating the impugned goods when admittedly 37 such consignments of used Diesel Engines imported by various other importers through C.F.S. Pune, alone were released on payment of Redemption Fine.

2a) i) The Commissioner in the impugned order relies upon the case of Shehla Enterprises, 1995 (11) RLT 129 (CEGAT)=1995 (80) ELT 360 (T) where Tribunal has upheld absolute confiscation of Diesel engines.

ii) Reliance was also placed on the decision of the Hon'ble Supreme Court in the case of Sheikh Mohammed Omar reported in 1983 (13) ELT 1439 (SC) to arrive at the conclusion that any 'restriction' on imports should be treated as a 'prohibition'.

iii) During the period 1998-99 alone, at least 37 consignments of used Diesel Engines have been imported by various importers through CFS, Pune in contravention of the Import-Export policy and since imposition of redemption fine has not deterred the unauthorized imports of second hand diesel engines without obtaining specific import licence, the impugned goods covered by both the show cause notices would have to be confiscated absolutely under Section 111 (d) of the Customs Act.

2b) The appellants submit:-

i) The impugned order has traversed beyond the Show Cause Notice in as much as no where in the Show Cause Notice reference has been made to the import of 37 such consignments nor any suggestion has been made that in view of the above it is proposed to take deterrent action against the present appellant, though it was his first import. On this ground alone the impugned order is liable to be quashed.

ii) The appellants are registered as a Small Scale Unit vide Registration Certificate dated 18.5.2001, issued by the Directorate of Industries and Commerce, Karnataka. In that capacity and as actual users they imported old and used Diesel Engines for being used along with alternators to be procured locally, for the assembly of DG Sets, in terms of Para 5.3 of the EXIM Policy. The appellants submit that the impugned goods were imported in their capacity as actual users, and this was not disputed in the impugned order. How