1979 (7) TMI 102 - HC - Central Excise

'AS IS Machines' not subject to countervailing duty; Customs refusal deemed unjustified. Petitioners granted relief.

The court concluded that the imported consignment of 'AS IS Machines' was not considered machines and therefore not subject to countervailing duty under ... Liability to countervailing duty on imported 'AS IS' Data Processing Machines - classification as 'Office machines and apparatus' under Item 33-D - binding effect of an earlier Government of India finding on the nature of goodsLiability to countervailing duty on imported 'AS IS' Data Processing Machines - classification as 'Office machines and apparatus' under Item 33-D - The imported 'AS IS' Data Processing Machines are not machines within the meaning of Item 33-D and therefore not liable to the countervailing duty claimed. - HELD THAT: - The court examined the factual matrix, the declared nature of the consignment and the invoice values, and found that the imported equipment had outlived economic life, were condemned and imported solely for disassembly and salvaging of usable parts. The petitioners had informed the customs authorities prior to clearance of the nonusable condition of the consignments. The authority's reliance on the declaration in the bills of entry and on the asserted continuity of identity of the units was held insufficient to characterise the consignments as usable 'office machines' capable of attracting Item 33D. On the material before the Court the assumption that the 'AS IS Machines' were capable of repair and use in India was without basis; consequently the customs authorities were in error in treating the consignments as falling within Item 33D and imposing countervailing duty. [Paras 9, 13, 14]The levy of countervailing duty under Item 33D on the imported 'AS IS' Data Processing Machines was set aside and the petitioners were held not liable to pay that duty.Binding effect of an earlier Government of India finding on the nature of goods - The prior Government of India order dated January 3, 1969, which found that 'AS IS Machines' in the condition imported were not machines for valuation purposes is binding and material on the question of the nature of the consignments. - HELD THAT: - The court accepted the petitioners' reliance on the earlier Government order which had rejected valuation on the basis of new cost less depreciation and had held that the condition of the import indicated they were not machines. The court held that the prior determination of the nature of the consignment was binding on subsequent proceedings unless contrary material was produced. The fact that the earlier order arose in a valuation context did not prevent its application to the question of classification and liability where the same question of the nature of the goods was involved. This reinforced the conclusion that the consignments were not machines liable to countervailing duty. [Paras 10, 11]The earlier Government of India finding that such 'AS IS Machines' were not machines is binding and supports the conclusion that the consignments are not liable to countervailing duty.Final Conclusion: The petition succeeds: the countervailing duty imposed under Item 33D on the imported 'AS IS' Data Processing Machines is set aside, the consignments being held not to be machines for the purposes of that levy; no order as to costs. Issues Involved:1. Legality of countervailing duty on 'AS IS Machines' under Item 33-D of the Central Excise Tariff.2. Whether 'AS IS Machines' retain their identity as machines and are liable to countervailing duty.3. Applicability of previous Government of India decision on valuation to the current case.4. Relevance of the explanation to Item 33-D regarding the usability of machines in offices, shops, factories, or workshops.Detailed Analysis:1. Legality of Countervailing Duty on 'AS IS Machines' under Item 33-D:The core issue revolves around whether the levy of countervailing duty at the rate of 10% under Item 33-D of the Central Excise Tariff for the import of Data Processing Machines (AS IS Machines) is legal and valid. The Petitioners argued that 'AS IS Machines' are not complete machines and thus should not attract countervailing duty. They relied on a previous decision by the Government of India dated January 3, 1969, which held that such machines, in their imported condition, cannot be considered as machines for valuation purposes.2. Whether 'AS IS Machines' Retain Their Identity as Machines and Are Liable to Countervailing Duty:The Petitioners contended that the imported 'AS IS Machines' are beyond economic repair, not saleable, and only imported for salvaging usable parts. They argued that these machines do not perform any function and cannot be considered as machines. The Customs authorities, however, maintained that despite being old or used, the machines retain their identity as Data Processing Machines and are thus liable for countervailing duty. The court found that the machines were indeed imported for disassembling and salvaging parts, indicating they were not in a usable condition. It was concluded that the assumption by Customs that the 'AS IS Machines' were machines was misconceived.3. Applicability of Previous Government of India Decision on Valuation to the Current Case:The Petitioners relied heavily on the Government of India's decision from January 3, 1969, which addressed the valuation of 'AS IS Machines' and concluded that they should not be treated as machines. The court agreed that this decision was binding unless new material justified a different view. The Customs authorities' valuation method, which added 140% to the ICBP price, further supported the Petitioners' claim that the consignment was not treated as machines.4. Relevance of the Explanation to Item 33-D Regarding the Usability of Machines:The Petitioners argued that even if 'AS IS Machines' were considered machines, they would not attract countervailing duty under Item 33-D because they were not capable of being used in offices, shops, factories, or workshops for data processing. The court did not delve deeply into this argument, as it had already concluded that the imported consignment did not qualify as machines. However, it acknowledged that the Petitioners' contention that the machines were not used, hired, or sold in the country was sound, further supporting their case against the applicability of countervailing duty.Conclusion:The court concluded that the consignment imported by the Petitioners were not machines and thus not liable to countervailing duty. The Customs authorities' refusal to grant a refund of the countervailing duty was based on irrelevant and extraneous factors. The Petitioners were entitled to the reliefs sought, and the rule was made absolute in their favor. The court dismissed the argument that two views were possible on the facts, affirming that the only conclusion was that the consignment was not machines and not liable to countervailing duty. The Petitioners' success resulted in the rule being made absolute without any order as to costs.