Case Law Details
PS Bedi & Co Pvt. Ltd. Vs Commissioner of Customs (CESTAT Chennai)
Introduction: In the case of PS Bedi & Co Pvt. Ltd. vs. Commissioner of Customs, the dispute revolves around the classification of imported hand tools. The Customs Department confiscated the goods, alleging they didn’t qualify as capital goods under Foreign Trade Policy (FTP). However, the appellant contested this decision, arguing that hand tools fall under the category of equipment and apparatus. This article delves into the details of the case and the tribunal’s ruling.
Detailed Analysis: PS Bedi & Co Pvt. Ltd. imported used and new hand tools, intending them for re-export. However, the Customs Department confiscated the goods, citing non-compliance with FTP regulations regarding capital goods. The appellant argued that hand tools should be considered capital goods under FTP para 9.12, as they fall under the category of equipment and apparatus.
The tribunal referred to the case of Asia Power Projects Ltd. vs. CC Chennai, where a similar issue was addressed. The tribunal in that case observed that hand tools should be treated as capital goods under FTP, as they contribute directly or indirectly to manufacturing, production, or service rendering. Additionally, the EPCG scheme includes all tools within the scope of capital goods, without distinction between machine tools and hand tools.
Examining the definition of capital goods under FTP and EPCG, the tribunal concluded that hand tools qualify as equipment necessary for manufacturing or production. As such, they are not restricted for import under FTP regulations. Therefore, the tribunal set aside the confiscation order and associated penalties.
Conclusion: The ruling by CESTAT Chennai in the PS Bedi & Co Pvt. Ltd. case provides clarity on the classification of hand tools as capital goods under FTP regulations. By deeming hand tools as equipment essential for manufacturing or production, the tribunal ensures fair treatment for importers and aligns with the broader objectives of trade policies. Importers can rely on this decision to defend similar cases involving the importation of hand tools, thereby promoting consistency and adherence to regulatory frameworks.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that the appellant imported used and new hand tools of 324 pieces under Bill of Entry dt. 18.9.2012. The Department was of the view that the tools which were imported does not fall under the definition of “Capital Goods” as per para-9.12 of Foreign Trade Policy. The appellant did not have licence to import such goods and therefore the goods were held to be liable for confiscation. The original authority after due process of law passed the order directing for confiscation of goods with an option to redeem the goods on payment of redemption fine. Penalty was also imposed. Against such order, the appellant preferred appeal before the Commissioner (Appeals) who upheld the same. Hence this appeal.
2. Ld. Counsel Ms. G. Varshitha appeared and argued for the appellant. It is submitted by the Ld. counsel that the goods are used goods which are intended for re-export. Appellant has also re-exported the same. The Department has ordered for confiscation of the goods observing that as per the definition of “Capital Goods” under para 9.12 of FTP, the hand tools do not fall within the definition and therefore are not freely importable. The Ld. Counsel submitted that such hand tools would fall under the category of equipments, accessories, apparatus etc. which are included in the definition of “capital goods” as per para 9.12 of FTP. The Ld. Counsel also adverted to the definition of “Capital Goods” under para 5.2 of the EPCG Scheme to argue that as per the scheme the definition does not specify ‘machine tool’ or ‘hand tool’. All tools are included within the scheme.
3. The decision rendered by the Tribunal in the case of Asia Power Projects Ltd. Vs CC Chennai – 2019 (370) ELT 477 (Tri.-Chennai) was relied by the Ld. Counsel to submit that on identical facts, the Tribunal observed that the goods in the nature of hand tools would fall under the category of equipments, instruments for testing, apparatus, accessories which are included in the definition of “Capital Goods” as per para 9.12 of FTP. So also, it was noted that as per the EPCG scheme, at para 5.2, the definition of ‘capital goods’ does not differentiate between machine tools or hand tools. The confiscation of goods was held to be not legal and proper. Ld. Counsel prayed that the appeal may be allowed.
4. A.R Sri Harendra Singh Pal appeared and argued for the department. The findings in the impugned order was reiterated.
5. Heard both sides.
6. The issue to be decided is whether the order of confiscation of the imported goods viz. used hand tools, is legal and proper. The issue has been considered by the Tribunal in the case of Asia Power Projects Ltd. (supra) wherein on identical set of facts the Tribunal observed that as per para 9.12 of FTP, any goods which fall under the category of equipments, apparatus etc. are freely importable irrespective of their size and nature. So also, as per the EPCG scheme, there is no difference as to whether tools are machine tools or hand tools. The relevant paragraph of the said decision reads as under :
“5.1 True, the definition of “capital goods” as found in para 9.12 of the FTP does not specifically mention “hand tools” . It is also true that details that have found mention are “machine tools”. However, what is important to be adjudged is whether “hand tools” will fall within the scope of machinery, equipment or accessories required for manufacture or production either directly or indirectly of goods or for rendering services. The definition in para 9.12 of the FTP indicates only gives examples of capital goods which can be directly or indirectly used. It certainly does not disbar any equipment based on the size. The definition also includes a wide range of equipments like refractories, catalysts, instruments for testing, research and development, quality and pollution control and so on. Hence the relevant aspect whether the equipments concerned will be used directly or indirectly in the manufacture or production of goods or for rendering services, irrespective of the size of such equipment. It is not the case of the department that in hand tools have no such use.
5.2 In any case, within the same FTP in Chapter 5 relating to import of goods under Export Promotion Capital Goods (EPCG) Scheme “all tools and not just machine tools” have been included within the scope of capital goods in para 5.2 . So also, in para 6.5.1 in the list of capital goods permitted to be imported / procured from DTA “tools” have been specifically indicated, without restricting its scope only to “machine tools”.
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5.4 In view of the discussions, conclusions herein above, and also relying upon the case laws cited supra, we are of the considered opinion that it is the functionality and utility of the equipments which would qualify for inclusion as ‘capital goods’ for the purpose of para 9.12 of the FTP, or otherwise. Nothing has been brought on record to prove that “hand tools” are not equipment and are not required for manufacture or production either directly or indirectly of goods or for rendering services. This being so, the impugned hand tools will very much come within the scope of “hand tools” for the purpose of para 9.12 of the policy and will then not become restricted for import in terms of para 2.17 of the FTP . Impugned order to the contrary cannot then sustain and is therefore set aside.”
7. After appreciating the facts, evidence placed before us and following the decision as above, we are of considered view that the order directing for confiscation of the goods and imposition of redemption fine and penalties cannot sustain. In the result, the impugned order is set aside. Appeal is allowed with consequential relief, if any.
(Dictated and pronounced in court)
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