Osram India Ltd. Vs. Commissioner of Customs - Court Judgment

Excerpt:
1. this appeal is directed against s/26-27/2000 va/s 10-01/2000 va dated 7.2.2000. the relevant facts of the issue that arise for consideration are that the appellant imported one consignment of goods described as "electrical lamp making 2^nd fusion machine (3 tubes)" and "electrical lamp making 2^nd fusion machine (2 tubes)" and filed bills of entry for the clearance of the same. the appellant claimed that the clearance of the goods under freely importable category in terms of para 5.1 of the itc policy 1997-2002. the bill of entry was assessed, under second check appraisement basis on the strength of the declarations made by the appellant. at the time of examination of the goods in the docks the said machinery was found to be old and used and not brand new as declared. the examination report indicated that the machinery was old and used and thoroughly re-conditioned. the said examination report was challenged by the importer and the machinery was re-examined second time. the second examination report also concluded that the machinery is not a new machinery as claimed by the importer.the appellant waived the issue of show cause notice and participated in the proceedings. the appellant, before the adjudicating authority, in their personal hearing submitted that they had purchased the machinery directly from manufacturer and this machinery was tailor made specifically for their requirement. it was submitted that the order was placed in may, 1999 after protracted negotiations. subsequently the machines were put to trial urn in the premises of the manufacturer and hence the machinery seemed to be second hand. the appellant also produced the correspondence entered by them with the manufacturer on this point. adjudicating authority after considering all the contentions raised by the appellant came to the conclusion that the appellant has mis-declared the machinery and hence the said machinery is liable to be confiscated and did so, but permitted the appellant to redeem the same on payment of redemption fine and also imposed personal penalty on the appellant. hence this appeal.2. ld. counsel appearing on behalf of the appellant draws out attention to various correspondences entered by them with the manufacturer of the machinery. it is his submission that in january, 2000 itself the appellant had clearly indicated to the authorities that these machinery were new and have not been put to any commercial use before being dispatched to india. it was also submitted that since the machinery was of worth rs. 1.40 crones, the said machines were put to trial runs at the manufacturer's premises and hence the heater etc. were found to be used. he submits that the correspondence with the original manufacturer itself shows that the machinery was manufactured for the appellant only.3. ld. jt. c.d.r appearing on behalf of the revenue submits that the appellant had not contested both the examination reports. he submits that the examination report clearly indicated that the working device of the machinery like sprocket and chains, levers and operating mechanisms were showing appreciable signs of wear marks. he also submits that the items like burners, heater burners, fusion burners, annealing burners etc shows appreciable signs of blackening or heating marks which would indicate that the machinery was used prior to its importation. he reiterates the findings of the adjudicating authority.4. considered the submissions made by both sides and perused the records. the dispute in this case is regarding whether machinery imported by the appellant is second hand machinery or a new machinery.ld. adjudicating authority while coming to the conclusion that the machinery imported by the appellant is not new, relied upon the examination reports of the lower authorities. we reproduce the said findings. the examination by the expert panel indicated that the moving component like cam, cam rollers, spiral gears, work piece holding devices, sprocket and chains, levers and operating mechanisms etc. showed appreciable signs of wear marks. this is in direct contradiction to the party's contention that the machinery was used only for trial runs after their manufacture in the supplier's factory. this contention does not appear to be born out especially when the moving parts show signs of appreciable use and items like burners, heater burners, fusion burners, annealing burners etc. shows appreciable signs of blackening or heating marks. in view the examination report by the experts i hold that the machinery imported is old and used machinery. in so far as submissions made by the party with respect to the reference "second hand goods" in para 5.3 of exim policy, party's contention is that goods have been bought directly from manufacturer and therefore they are not second hand and therefore not hit by para 5.3 of exim policy.on a plain reading of the above reproduced findings of the adjudicating authority, we find that the adjudicating authority has not considered the factual matrix this case. it is seen from the records that the appellant had placed an order with the manufacturer of machinery in the month of may, 1999. the said correspondence very clearly indicate that the machinery is tailor made. this has not been disputed by the revenue any where. if a machinery is a tailor made machinery, and is not available off the shelf, then the question of that machinery being used by somebody else does not arise. revenue has not contradicted this stand of the appellant by adducing any kind of evidence. in the absence of any evidence it has to be held that the said machinery imported by the appellant are tailor made. further, we find that the invoice of the manufacturer of the machinery, very clearly shows that the machinery is manufactured in 1999. if that be so, the revenue cannot dispute the manufacturing date of the machinery as has been indicated by the manufacturer himself. the entire correspondence entered by the appellant with the foreign manufacturer clearly indicate that there were negotiations for the manufacture and supply of specific tailor made machines as per the requirements of appellant. we find strong force in the contention of the appellant that the said machinery is new one. as regards the contention raised by the jt. c.d.r. as to the machinery parts showing appreciable signs of wear and tear, we are of the view that no prudent buyer of machinery of such a high cost, will accept the said machinery unless it has been put to trial runs, more so when the said machinery is a tailor made one and imported from a foreign country. the so called appreciable wear and tear as indicated in the order-in-original in itself is only on the movable parts which must have taken place during the trial runs conducted at the manufacturer's premises.accordingly, we find that the impugned order is unsustainable in view of the reasoning given above and the same is liable to be set aside and we do so. the appeal is allowed with consequential relief, if any.

Judgment:
1. This appeal is directed against S/26-27/2000 VA/S 10-01/2000 VA dated 7.2.2000. The relevant facts of the issue that arise for consideration are that the appellant imported one consignment of goods described as "Electrical Lamp making 2^nd fusion machine (3 Tubes)" and "electrical lamp making 2^nd fusion machine (2 Tubes)" and filed bills of entry for the clearance of the same. The appellant claimed that the clearance of the goods under freely importable category in terms of para 5.1 of the ITC Policy 1997-2002. The bill of entry was assessed, under second check appraisement basis on the strength of the declarations made by the appellant. At the time of examination of the goods in the docks the said machinery was found to be old and used and not brand new as declared. The examination report indicated that the machinery was old and used and thoroughly re-conditioned. The said examination report was challenged by the importer and the machinery was re-examined second time. The second examination report also concluded that the machinery is not a new machinery as claimed by the importer.

The appellant waived the issue of show cause notice and participated in the proceedings. The appellant, before the adjudicating authority, in their personal hearing submitted that they had purchased the machinery directly from manufacturer and this machinery was tailor made specifically for their requirement. It was submitted that the order was placed in May, 1999 after protracted negotiations. Subsequently the machines were put to trial urn in the premises of the manufacturer and hence the machinery seemed to be second hand. The appellant also produced the correspondence entered by them with the manufacturer on this point. Adjudicating authority after considering all the contentions raised by the appellant came to the conclusion that the appellant has mis-declared the machinery and hence the said machinery is liable to be confiscated and did so, but permitted the appellant to redeem the same on payment of redemption fine and also imposed personal penalty on the appellant. Hence this appeal.

2. Ld. counsel appearing on behalf of the appellant draws out attention to various correspondences entered by them with the manufacturer of the machinery. It is his submission that in January, 2000 itself the appellant had clearly indicated to the authorities that these machinery were new and have not been put to any commercial use before being dispatched to India. It was also submitted that since the machinery was of worth Rs. 1.40 crones, the said machines were put to trial runs at the manufacturer's premises and hence the heater etc. were found to be used. He submits that the correspondence with the original manufacturer itself shows that the machinery was manufactured for the appellant only.

3. Ld. Jt. C.D.R appearing on behalf of the revenue submits that the appellant had not contested both the examination reports. He submits that the examination report clearly indicated that the working device of the machinery like sprocket and chains, levers and operating mechanisms were showing appreciable signs of wear marks. He also submits that the items like burners, heater burners, fusion burners, annealing burners etc shows appreciable signs of blackening or heating marks which would indicate that the machinery was used prior to its importation. He reiterates the findings of the adjudicating authority.

4. Considered the submissions made by both sides and perused the records. The dispute in this case is regarding whether machinery imported by the appellant is second hand machinery or a new machinery.

Ld. adjudicating authority while coming to the conclusion that the machinery imported by the appellant is not new, relied upon the examination reports of the lower authorities. We reproduce the said findings.

The examination by the expert panel indicated that the moving component like cam, cam rollers, spiral gears, work piece holding devices, sprocket and chains, levers and operating mechanisms etc.

showed appreciable signs of wear marks. This is in direct contradiction to the party's contention that the machinery was used only for trial runs after their manufacture in the Supplier's factory. This contention does not appear to be born out especially when the moving parts show signs of appreciable use and items like burners, heater burners, fusion burners, annealing burners etc.

shows appreciable signs of blackening or heating marks. In view the examination report by the experts I hold that the machinery imported is old and used machinery. In so far as submissions made by the party with respect to the reference "Second hand goods" in para 5.3 of EXIM Policy, party's contention is that goods have been bought directly from manufacturer and therefore they are not second hand and therefore not hit by para 5.3 of EXIM Policy.

On a plain reading of the above reproduced findings of the adjudicating authority, we find that the adjudicating authority has not considered the factual matrix this case. It is seen from the records that the appellant had placed an order with the manufacturer of machinery in the month of May, 1999. The said correspondence very clearly indicate that the machinery is tailor made. This has not been disputed by the revenue any where. If a machinery is a tailor made machinery, and is not available off the shelf, then the question of that machinery being used by somebody else does not arise. Revenue has not contradicted this stand of the appellant by adducing any kind of evidence. In the absence of any evidence it has to be held that the said machinery imported by the appellant are tailor made. Further, we find that the invoice of the manufacturer of the machinery, very clearly shows that the machinery is manufactured in 1999. If that be so, the revenue cannot dispute the manufacturing date of the machinery as has been indicated by the manufacturer himself. The entire correspondence entered by the appellant with the foreign manufacturer clearly indicate that there were negotiations for the manufacture and supply of specific tailor made machines as per the requirements of appellant. We find strong force in the contention of the appellant that the said machinery is new one. As regards the contention raised by the Jt. C.D.R. as to the machinery parts showing appreciable signs of wear and tear, we are of the view that no prudent buyer of machinery of such a high cost, will accept the said machinery unless it has been put to trial runs, more so when the said machinery is a tailor made one and imported from a foreign country. The so called appreciable wear and tear as indicated in the order-in-original in itself is only on the movable parts which must have taken place during the trial runs conducted at the manufacturer's premises.

Accordingly, we find that the impugned order is unsustainable in view of the reasoning given above and the same is liable to be set aside and we do so. The appeal is allowed with consequential relief, if any.