2022 (9) TMI 1170 - AT - Customs

Tribunal: Second-hand office furniture part of manufacturing plant qualifies as capital goods

Ratnamani Metal and Tubes Limited Versus Commissioner of Customs, Mundra

The Tribunal concluded that the second-hand office furniture/equipment purchased as part of a stainless steel tube manufacturing plant qualified as ... Confiscation - redemption fine - penalty - import of restricted goods or not - import of office furniture/equipment being part of complete stainless steel tube manufacturing plant (second hand goods) - capital goods or not - HELD THAT:- There is no dispute to the use of the subject second hand office furniture/equipment in relation to the manufacturing of goods and hence the subject goods are part of complete stainless steel tube manufacturing plant. The authorities below have nevertheless taken a view that the said goods are not required for manufacture or production of goods and therefore not capital goods in terms of para. 09.08 of Foreign Trade Policy 2015-2020. The said view of the authorities below is bereft of any rational. If the said goods are part of the complete plant and its use in relation to the manufacturing of goods is not disputed, they are indeed required directly or indirectly in manufacturing of goods. It is clear from the definition of capital goods that any plant, machinery, equipment or accessories required for manufacture or production, either directly or indirectly, of goods would fall within the scope of capital goods. The scope of word “for manufacture” and “indirectly” appearing in the definition of capital goods under the policy is wide and thus use of such goods having indirect nexus with the manufacture or production of goods also qualify as capital goods. Since the subject goods qualify as capital goods in terms of para. 2.31 Sr. No. I (c) of the Policy; the import was in accordance with the policy - the said goods cannot be held to be liable for confiscation under Section 111(d) of the Customs Act 1962. Consequently, neither redemption fine under section 125 of the Act was warranted nor penalty under Section 112 (a) of the Act was required to be imposed, hence the same cannot be sustained. Appeal allowed - decided in favor of appellant. Issues:- Classification of second-hand office furniture/equipment as capital goods- Import restrictions under Foreign Trade Policy- Confiscation under Section 111(d) of the Customs Act 1962- Redemption fine and penalty under Sections 125 and 112(a) of the Customs Act 1962Classification of second-hand office furniture/equipment as capital goods:The case involved a dispute regarding whether second-hand office furniture/equipment purchased as part of a complete stainless steel tube manufacturing plant qualified as capital goods. The appellant argued that since the office furniture/equipment were used in relation to the manufacturing activity, they should be considered capital goods under the Foreign Trade Policy. The Tribunal analyzed the definition of capital goods provided in the policy, which includes machinery, equipment, or accessories required for manufacture or production, either directly or indirectly. The Tribunal referred to previous decisions supporting the broad interpretation of capital goods to include items used in relation to manufacturing activities. It concluded that since the office furniture/equipment were part of the complete plant and used for manufacturing stainless steel tubes, they qualified as capital goods.Import restrictions under Foreign Trade Policy:The dispute also involved import restrictions under the Foreign Trade Policy, specifically Sr. II of para. 2.31, which restricts the import of second-hand goods that do not qualify as capital goods. The authorities had denied clearance for the office furniture/equipment based on this restriction. However, the Tribunal found that since the goods were classified as capital goods, the import was in accordance with the policy, and therefore, the denial of clearance was not justified.Confiscation under Section 111(d) of the Customs Act 1962:The Additional Commissioner of Customs had ordered the confiscation of the office furniture/equipment under Section 111(d) of the Customs Act 1962, which allows confiscation of goods imported in contravention of the law. The Tribunal disagreed with this decision, stating that since the goods were rightfully classified as capital goods, they could not be considered liable for confiscation under this section.Redemption fine and penalty under Sections 125 and 112(a) of the Customs Act 1962:In addition to confiscation, a redemption fine of Rs. 5,00,000 and a penalty of Rs. 4,00,000 were imposed under Sections 125 and 112(a) of the Customs Act 1962, respectively. The Tribunal held that since the confiscation itself was not justified, the redemption fine and penalty were also not warranted. Therefore, it set aside the impugned order, allowing the appeal and providing consequential relief as per the law.This detailed analysis of the judgment highlights the key legal issues involved in the case and the Tribunal's reasoning and decision on each issue, emphasizing the classification of second-hand office furniture/equipment as capital goods under the Foreign Trade Policy and the Customs Act 1962.