Freely importable second-hand capital goods cannot face redemption fine or penalty for breach of an unnecessary re-export bond.

Second-hand capital goods that were freely importable under the Foreign Trade Policy and cleared on payment of full duty did not attract redemption fine or penalty merely because a re-export bond had been executed unnecessarily. Paragraph 2.17 of the Foreign Trade Policy 2002-07 did not require such a bond for these imports, so the re-export condition could not be treated as a binding obligation. In the absence of any violation of the Foreign Trade Policy or the Customs Act, the attempted enforcement of that unwarranted bond condition had no legal basis, and the article states that redemption fine and penalty were unsustainable.

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Issues: Whether redemption fine and penalty could be sustained where second-hand capital goods were freely importable under the Foreign Trade Policy and the bond for re-export was executed though not required.

Analysis: The imported equipment was second-hand capital goods cleared on payment of full duty, and no exemption under the Foreign Trade Policy was availed. Under paragraph 2.17 of the Foreign Trade Policy 2002-07, such old capital goods were freely importable and no bond was required. Since the bond itself was unnecessary, the condition to re-export the goods could not be treated as a binding obligation whose breach would justify penal consequences. In the absence of any violation of the Foreign Trade Policy or the Customs Act, the imposition of redemption fine and penalty had no legal basis.

Conclusion: Redemption fine and penalty were not sustainable and were set aside in favour of the assessee.

Ratio Decidendi: Where goods are freely importable and no bond is legally required, an unwarranted bond condition cannot be enforced to impose redemption fine or penalty for non-compliance with re-export.

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