2008 (4) TMI 156 - AT - Customs

Tribunal rules in favor of 100% EOU, deems imported transformers eligible for duty-free import

The Tribunal allowed the appeal in favor of the appellant, a 100% EOU, in a case concerning the misdeclaration of imported goods as 'Transformer Scrap.' ... Appellant is a 100% EOU – allegation that goods imported “old & used transformers” were misdeclared as “Transformer Scrap” - admittedly the appellants were permitted to import used, old/damaged transformers, which are nothing but transformer scrap - not the Revenue’s case that new transformers or transformers in usable condition were imported – since importer is being EOU, no duty is payable on the imported consignment, hence, the charge of undervaluation cannot be upheld Issues:1. Misdeclaration of imported goods as 'Transformer Scrap.'2. Enhancement of value and confiscation of goods.3. Application of Customs Valuation Rules.4. Confiscation of goods and imposition of penalty.Misdeclaration of Imported Goods:The appellant, a 100% EOU registered for manufacturing and exporting recycled metal scrap, ingot, and metal alloys, imported goods declared as 'Transformer Scrap.' The Revenue contended that the goods were old and used transformers, not 'Transformer Scrap.' Proceedings were initiated for enhancement of value and confiscation of goods. The appellant argued that being a 100% EOU, no duty was applicable on the import, and the value declared was correct. Procurement Certificates and examination reports confirmed the goods were old and used electrical transformers. The Superintendent clarified the appellant's entitlement to import used/discarded transformers as raw materials.Enhancement of Value and Confiscation of Goods:The Commissioner did not confirm any duty demand but enhanced the value under Rule 7A of the Customs Valuation Rule due to lack of contemporary imports of identical goods. Consequently, the goods were confiscated with an option for redemption on payment of a fine and a penalty imposed on the appellant. The appeal was filed challenging these actions.Application of Customs Valuation Rules:The Tribunal found that the imported goods were permitted to be old, used, and damaged transformers, essentially transformer scrap. Since no duty was payable on such imports, allegations of misdeclaration and undervaluation were deemed irrelevant. As the appellant would not benefit from undervaluation in the absence of duty payment, confiscation of goods and penalty imposition were unjustified. The impugned order was set aside, and the appeal was allowed in favor of the appellant.Confiscation of Goods and Imposition of Penalty:The Tribunal concluded that since the appellant was eligible to import old, used, and damaged transformers, the charges of misdeclaration and undervaluation were baseless. As no duty was payable on the imported consignment, the appellant would not gain from any undervaluation. Consequently, the confiscation of goods and the penalty imposed were deemed unwarranted, leading to the order being set aside, and relief granted to the appellant.---