TMI Blog2005 (5) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... have great significance in the tertiary sector where they would produce services without losing their functional characteristics. These photocopiers are clearly an input for production of services and they would not get consumed themselves by their users. We are, therefore, clearly of the view that the second hand photocopiers are capital goods and freely importable and are not consumer goods . The present imports are admittedly not under the EPCG Scheme and none of those Circulars on which reliance is placed for holding that second-hand photocopiers are consumer goods and require licence, would be applicable to these imports. In the Circular dated 29-9-2003, which refers to import of second-hand personal computers and lap-tops, a clarification was issued that these are covered under the definition of second-hand goods and that their import was governed by of the EXIM Policy and not covered under the definition of capital goods . It was stated that in view of this, the second-hand personal computers/lap-tops can also not be permitted for import under the EPCG Scheme under the provisions of the EXIM Policy even for service providers . The Circular dated 11-11-2003 which was issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent : Krishna A. Mishra, Authorized Representative of the Department Order Per Justice R.K. Abichandani, President 1. These appeals are placed before the Larger Bench because of a conflict of opinion on the question whether photocopiers are capital goods or consumer goods and whether the import of old and used (second-hand) photocopiers are allowed freely. The said question has been referred by order dated 15-4-2005 in view of divergent views of various Benches of this Tribunal. 2. The appellants of all these appeals were importing various models of used photocopiers. The goods were examined and found to be as per the declarations. Show cause notices came to be issued under Section 124 of the Customs Act on these appellants on the basis that in view of the clarifications issued in the Circulars mentioned in the show cause notices, used photocopiers were not importable under Paragraph 2.33 of the Handbook of Procedures to Foreign Trade Policy and they were restricted under Para 2.17. It was alleged that since the goods were so restricted for import and the importers did not produce valid import licences, they were liable to be confiscated under Section 111(d) of the said Act r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdance with the provisions of this Policy, ITC (HS), Handbook (Vol. I), Public Notice or a license/certificate/permission issued in this behalf, (emphasis added) 9.12 Capital Goods means any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods or for rendering services, including those required for replacement, modernisation, technological upgradation or expansion. Capital goods also include packing machinery and equipments, 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, piscicullture, poultry, sericulture and viticulture as well as for use in the service sector. 9.16 Consumer Goods means any consumption goods, which can directly satisfy human needs without further processing and includes consumer durables and accessories thereof. 5.1 Relevant provisions of the Handbook of Procedures issued under Section 5 of the For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) E.L.T. 549 (Tribunal), the Bench of this Tribunal held that a photocopying machine costing about a lakh of Rupees, could not certainly be an item of domestic use and that an item of this type is employed in large offices or institutions. It was held that the model of photocopier in question can be classified as other than consumer goods . (c) In SKD Commercial v. Commissioner of Customs, Nhava Sheva reported in 2005 (180) E.L.T. 84 (Tri. - Mum.), the Tribunal relying upon the earlier decision in 2004 (171) E.L.T. 460 wherein it was held that photocopying machines were not consumer goods, gave benefit of doubt to the importer. (d) In Competent Business Machines v. Commissioner of Customs, Trichirapalli reported in 2005 (182) E.L.T. 426, the Tribunal laid down that the photocopying machines were capital goods and not consumer goods and since there was no prohibition against the import of these goods, there could be no confiscation. (e) In an unreported decision in M/s. S.S. International, New Delhi v. Commissioner of Central Excise, Hyderabad, in Final Order No. 266/2005 dated 22-2-2005 rendered by the Bangalore Bench of the Tribunal, it was held that the findings of the authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the second-hand photocopiers were in the nature of consumer goods and imported in violation of the EXIM Policy and, therefore, dismissed the appeal. 7. There is no dispute about the fact that the goods imported by the appellants were in fact second-hand goods and that they were second-hand photocopiers. All second-hand goods excepting second-hand capital goods were restricted for import as provided in Paragraph 2.17 of the FTP, which emphasised that, the import of second-hand capital goods including refurbished/reconditioned spares shall be allowed freely. Therefore, if the photo-copiers are considered to be second-hand capital goods, their import was free. However, there is a strong disagreement on the question whether the photocopiers are capital goods or consumer goods. On one hand, it is sought to be contended that the photocopiers are used by the service sector and their import is not for any direct consumption while on the other, it is argued that since they directly serve the human needs without any further process, they are consumer goods even if they are consumer durables. 8. The learned Senior Advocate for the appellant referred to the past EXIM Policies to point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he effective protection of user industries. The fact that the capital goods are finished is, therefore, not directly relevant to the appropriate structure of tariff rates. 12. In contrast to producer goods, the consumer goods are used by individuals only for their consumption. Consumed goods have to be finished goods in the sense that they are ready for use without undergoing any further production process. If any such process is still required then they are not classified as consumer goods, but as intermediate goods. Though both consumer goods and capital goods are finished goods the latter are an input into the production of services while the former are not. 13. Economists divide the products of all economic activity into two broad categories, goods and services. Industries that produce goods i.e. tangible objects, include agriculture, mining, manufacturing and construction. Service industries include everything else - banking, communications, wholesale and retail trade, all professional services such as engineering and medical, all consumer services, and all Government services. 14. The service sector i.e. tertiary sector of industry or service industry is one of the three main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsumer goods and require licence, would be applicable to these imports. In the Circular dated 29-9-2003, which refers to import of second-hand personal computers and lap-tops, a clarification was issued that these are covered under the definition of second-hand goods and that their import was governed by Paragraph 2.17 of the EXIM Policy and not covered under the definition of capital goods . It was stated that in view of this, the second-hand personal computers/lap-tops can also not be permitted for import under the EPCG Scheme under the provisions of Para 5.1 of the EXIM Policy even for service providers . The Circular dated 11-11-2003 which was issued in the context of second-hand photocopiers, air-conditioners, etc. by way of clarification, also refers to the EPCG scheme in respect of which the clarification was given, that the import of new personal computers/lap-tops, photocopiers etc. may be permitted under the EPCG scheme provided these were required for the manufacture of goods or rendering the services. Even the Circular dated 23-2-2005 clearly mentioned in Para 3 that second-hand photocopiers, air conditioners etc., were covered under the definition of second-hand goods ..... X X X X Extracts X X X X X X X X Extracts X X X X
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