TMI Blog2009 (2) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... photocopier machines effected prior to 19.10.2005 (the date on which Notification No.31/05 came to be issued amending the current Policy) would be governed by circular Nos. 16/03, 19/03 and 20/05 issued by DGFT warranting a licence for import. It was further held that on a combined reading of circulars 16/03, 19/03 and 20/05 made the position clear that second-hand photocopier machines are not covered by the definition of capital goods as defined under para 9.10 of the FTP (2004-09). It was further observed that second-hand photocopier machines were not freely importable as "capital goods". The Division Bench of the Kerala High Court vide its impugned judgment observed that it did not agree with the view taken by the Andhra Pradesh High Court in Central Excise Appeal No. 52/2005 in favour of the assessee. 11. Before concluding the facts, we may state that, vide Notification No. 31/05 dated 19.10.2005 issued by the GoI under Section 5 of Foreign Trade (Development and Regulation) Act, 1992 read with para 1.3 of FTP 2004- 09 import of second-hand photocopier machines, air-conditioners etc. are made restricted items warranting a licence for import. However, we are concerned with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd goods in the context of each of these Schemes. He submitted that existence of a licence is required whenever an import falls under any of the above Schemes. He submitted that the general/normal imports do not come under any of the above Schemes. He further submitted that it is only GoI which is empowered to amend the Policy. According to the learned senior counsel, DGFT has the power to interpret and issue administrative circular(s) in implementation of the Policy but he has no power to amend the Policy, which power under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 ("1992 Act") remains vested only in GoI. In this connection, learned counsel placed reliance on Sections 5 and 6(3) of the 1992 Act. He further contended that the three Circulars issued by DGFT were clarificatory in nature. They were not amendatory. He further submitted that DGFT had no authority to issue a circular which is contrary to the statute consisting of the 1992 Act, the FTP, the ITC(HS) and the Handbook of Procedures. Learned counsel further submitted that all the three circulars issued by DGFT were confined to imports under EPCG. They had no connection with general/normal imports. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t further postulates that such regulation can be by FTP and that DGFT is the statutory authority in-charge of the implementation of the 1992 Act and the Policy thereunder. According to the learned counsel, the said circular no. 20/05 was part of the FTP, that FTP is regulated through para 2.17 and that the said para 2.17 read with circular no. 20/05 declares second-hand photocopying machines as second-hand goods other than second-hand capital goods. According to the learned counsel, circular no. 20/05 prohibits imports of second-hand photocopying machines under para 5.1 of FTP because the said machines are not capital goods. According to the learned counsel, the amendment to para 2.17 via Notification dated 19.10.2005 re-affirms the Circular No. 20/05, which in turn refers to para 2.17 and therefore it cannot be confined to EPCG Scheme. According to the learned counsel, a combined reading of paras 2.1, 2.2, 2.3, 2.17 and Circular No. 20/05 lead to unequivocal conclusion that the import of second-hand photocopying machines is restricted under FTP (2004-09) since they are second-hand goods other than second-hand capital goods, hence, the civil appeal is liable to be dismissed. 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icy shall come into force with effect from 1 st September, 2004 and shall remain in force upto 31 st March, 2009, unless as otherwise specified. The Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the powers conferred by Section-5 of the Act. Amendments 1.3 Such amendment shall be made by means of a Notification published in the Gazette of India. Transitional Arrangements 1.4 Any Notifications made or Public Notices issued or anything done under the previous Export/ Import policies, and in force immediately before the commencement of this Policy shall, in so far as they are not inconsistent with the provisions of this Policy, continue to be in force and shall be deemed to have been made, issued or done under this Policy. Licences, certificates and permissions issued before the commencement of this Policy shall continue to be valid for the purpose and duration for which such licence, certificate or permission was issued unless otherwise stipulated. CHAPTER-2 GENERAL PROVISIONS REGARDING IMPORTS AND EXPORTS E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecifically dispensed with by the licensing authority. Second Hand Goods 2.17 All second hand goods, excepting second hand capital goods, shall be restricted for imports and may be imported only in accordance with the provisions of this Policy, ITC(HS), Handbook (Vol.1), Public Notice or a licence/certificate/permission issued in this behalf. Import of second hand capital goods, including refurbished/ reconditioned spares, shall be allowed freely. (This clause is not there in FTP 2002-07) (emphasis supplied) CHAPTER-5 EXPORT PROMOTION CAPITAL GOODS SCHEME EPCG Scheme 5.1 The scheme allows import of capital goods for pre production, production and post production (including CKD/SKD thereof as well as computer software systems) at 5% Customs duty subject to an export obligation equivalent to 8 times of duty saved on capital goods imported under EPCG scheme to be fulfilled over a period of 8 years reckoned from the date of issuance of licence. Capital goods would be allowed at 0% duty for exports of agricultural products and their value added variants. EPCG for Projects 5.1B An EPCG licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices sector. 9.15 "Consumables" means any item, which participates in or is required for a manufacturing process, but does not necessarily form part of the end-product. Items, which are substantially or totally consumed during a manufacturing process will be deemed to be consumables. 9.16 "Consumer Goods" means any consumption goods, which can directly satisfy human needs without further processing and includes consumer durables and accessories thereof. 9.48 "Public Notice" means a notice published under the provisions of paragraph 2.4 of the Policy. (iv) Important provisions of the Handbook of Procedures (2004-09): Para 2.33 of the Handbook: "Import of Second Hand Capital Goods- 2.33 Import of second hand capital goods including refurbished/reconditioned spares, shall be allowed freely, subject to conditions for the following categories: The Import of second hand computers including personal computers and laptops are restricted for imports. The import of refurbished/ reconditioned spares will be allowed on production of a Chartered Engineer certificate that such spares have a residual life not less than 80% of the life o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with the provisions of the Policy, ITS(HS), Handbook (Vol.I), Public Notice or a licence/certificate/permission issued in this behalf. 2. Representations have been received seeking clarifications as to whether second hand personal computers (PCs)/Laptops are covered under the definition of second hand capital goods and allowed freely as per the provisions of Para 2.33 of Handbook of Procedures (Vol.I) 2002-07, provided these are not more than ten years old. 3. The matter has been deliberated upon and it is clarified that the second hand personal computers (PCs)/Laptops are covered under the definition of "second hand goods" and their import is governed by the provisions of Para 2.17 of EXIM Policy,2002-07 and not covered under the definition of "capital goods" as defined under Para 9.10 of EXIM Policy and Para 2.33 of Handbook of Procedures (Vol.I). In view of this, second hand personal computers (PCs)/Laptops can also not to be permitted for import under EPCG scheme under the provisions of para 5.1 of the Exim Policy, even for service providers. 4. All the Licensing Authorities are advised to take action accordingly. This issues with the approval of DGFT. (M.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicy 2002-2007 even if these are less than 10 years old and even for Service Providers. The intention of this Circular is to restrict the import of such items under EPCG Scheme which are in the nature of Consumer goods. 2. Since Second Hand Diesel Generating Sets of 10 KVA and above have industrial application and import of second hand capital goods without any age restriction is permitted under EPCG Scheme in the Foreign Trade Policy 2004-09, it is therefore clarified that Second Hand Diesel Generating Sets of 10 KVA and above shall be allowed to be imported under EPCG Scheme without any age restriction. 3. However since Second Hand Photocopiers, Air Conditioners and Diesel Generating Sets (below 10 KVA) etc. are covered under the definition of 'Second Hand Goods', therefore their import shall be governed by the provisions of Para 2.17 of Policy and shall not be permitted to be imported under Para 5.1 of Policy. 4. Licensing Authorities are advised to take action accordingly. 5. This issues with the approval of DGFT. Sd/- ( M.K. Parimoo ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods subject to such exceptions as it may deem fit. Under Section 5, the Central Government is empowered from time to time to formulate and announce by notification in the Official Gazette the Exim Policy and it may also amend that policy from time to time. Under Section 6, DGFT is empowered to advise the Central Government in the formulation of Exim Policy and shall be responsible for carrying out that Policy. Under Section 6(3) of the 1992 Act only Central Government is empowered to amend the FTP. 17. Under para 2.3 of the FTP (2004-09) DGFT is empowered to interpret the Policy. If any doubt or question arises in respect of interpretation of any provision in FTP or in the matter of classification of any item in the ITC (HS) or in the Handbook, the said question or doubt shall be referred to the DGFT, whose decision thereon shall be final and binding. 18. We have referred to the provisions of the 1992 Act and Para 2.3 of the FTP to demonstrate the difference between amendment and clarification. The power to amend the FTP is exclusively vested in the Central Government whereas the power to clarify is vested in DGFT. On 31.8.2004, the Central Government vide Notification No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge of categorization, it can be done only by an amendment. This has been done by notification no. 31 dated 19.10.2005. It is only by Amendment that import of second-hand photocopying machines can be kept out of the definition of "second-hand capital goods". 19. As stated above, in this case, we are concerned with imports dated January, 2005. It is submitted on behalf of the Department that in January, 2005 Policy circular No. 20 dated 23.2.2005 was applicable. However, Policy circular No. 20/05 is in continuation of Policy circular Nos. 16/03 and 19/03. They have to be read together. In this connection, it may be noted that para 1 of Policy circular No. 16/03 recites that import of all second-hand goods stood restricted under the FTP (2002-07). That circular clarified that import of second-hand PCs/Laptops would fall in the category of "second hand goods". That circular was in the context of FTP 2002-07. However, in the Handbook of Procedures relating to FTP (2002-07) it was provided that import of second-hand capital goods, not more than 10 years old, would be allowed freely (see para 2.33 of the Handbook). In other words, old and used goods of not more than 10 years was tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, were treated as "new" goods. This resulted in confusion. Therefore, DGFT stepped in to clarify that second-hand photocopying machines, irrespective of the period of use, shall fall in the restricted category (see Policy circular No. 19/03). Para 1 of Policy circular no. 20/05 recites that photocopying machines are not to be imported without a licence even if they are less than 10 years old and even if the photocopying machines are imported for service providers. Vide para 3, the Policy circular no. 20/05 clarifies that second-hand photocopying machines are covered under the definition of "second-hand goods", therefore, their import shall be governed by the provisions of para 2.17 of the Policy and shall not be permitted to be imported under para 5.1 of the Policy. Reverting to para 2.17 of FTP (2004-09) read with para 2.33 of the Handbook (2004-09) one finds that import of second-hand capital goods is made "free". Para 2.17 of FTP (2004-09) is in two parts. The first part deals with the meaning of the words "second-hand goods". The second part states that import of second-hand capital goods shall be allowed freely. Para 3 of the Policy circular no. 20/05 states that import of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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