Full Judgment
The customs house issued notice to him proposing confiscation of the goods and penalty on the importer on the ground that they were consumer goods as defined in paragraph 156 of the relevant Import Policy, and their import required a specific licence. In the order impugned in the appeal the Commissioner has ordered confiscation of the goods with an option to redeem them on payment of fine of Rs. 5 lakhs and imposed a penalty of Rs. 1 lakh on the importer.
2. The advocate for the appellant contends that it imported the goods in order to take them to its factory in the Santacruz Electronic Export Processing Zone for conversion into electronic lanterns to be exported.
Therefore, the benefit of paragraph 94 of the Import Policy would be available, and confiscation of the goods and imposition of penalty are not called for.
3. Paragraph 94 of the Policy provided that an export oriented united or unit in an export processing zone "may import free of duty all types of goods, including capital goods, required by it for manufacture, production or processing provided, they are not prohibited items in the negative list of imports." Basmati Paddy, brown rice was exempted. The negative list was in two parts. Part I specified prohibited items, which were not permitted to be imported. Part II is specified restricted items, which are described as consumer goods. These are permitted to be imported except against a licence on in accordance with public notice issued in this behalf. The reference to the prohibited items in the negative list of imports, therefore, clearly shows that a unit specified in para 94 is not prohibited from importing the restricted items specified in the negative list. This is no doubt is for the reason that such units are set up in order to export their finished products of which they can sell only a small part in the domestic market. Therefore, the relaxation of prohibitions or restrictions that would otherwise apply in respect of these goods, which would be applicable to other units, could not have any harmful effects to the economy.
4. That a unit in the export processing zone can a import consumer goods has to be accepted. In the case before us, however, the Commissioner has found that the appellant sold the goods instead of taking them to the SEEPZ. The explanation that the advocate for the appellant offers in justification is as result of the delay by the custom house in clearing the goods, the expor order, for fulfilment of which the goods were required, was cancelled. In order to mitigate the losses to some extent the appellant sold the goods in the open market.
There is some justification for this claim. There has been delay in clearing the goods. The appellant imported the goods in March 1995, and the bill of entry for their clearance filed in April. The letter dated 4th July 1995 of the Commissioner to the appellant permitted it to clear the goods on a provisional assessment, provided the CKD nature of the goods is not disputed. Acceptance of this condition would have severely limited the claim for classification of the goods the legal right of the importer with regard to the classification. It is understandable that the importer chose not to avail of this offer. The Commissioner passed his order with regard to the goods only in January 1996. However, the fact remains that the appellant did not take the goods to the export processing zone for manufacture. Therefore we are unable to accept in principle the claim that the goods would be entitled to the benefit of para 94 of the Policy.
5. However, we note that the appellant had made this claim in its letter dated 2.6.1995. Having regard to these factors while confirming the confiscation of the goods, we set aside the penalty imposed on the appellant and reduced the redemption fine from Rs. 5 lakhs to Rs. 2.5 lakhs.