Free importability of second hand photocopiers upheld; internet-based valuation rejected absent contemporaneous import evidence.

Second hand photocopier machines were treated as capital goods freely importable under the Foreign Trade Policy and EXIM Policy, so confiscation, fine and penalty on that count could not be sustained. The main frame of such machines was, however, held licence-requiring and not freely importable, so confiscation and penalty were justified for that component. Valuation could not be enhanced on the basis of internet price in the absence of evidence of contemporaneous imports, and the declared transaction value had to be accepted. Redemption fine was restricted to 10% of the transaction value, while the penalty was maintained.

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Issues: (i) Whether second hand photocopier machines were importable as capital goods and freely importable, so as to avoid confiscation, fine and penalty; (ii) Whether the main frame of second hand photocopier machines required a licence and whether valuation could be enhanced on the basis of internet price.

Issue (i): Whether second hand photocopier machines were importable as capital goods and freely importable, so as to avoid confiscation, fine and penalty.

Analysis: The issue was covered by the Larger Bench view that second hand photocopiers fall within the ambit of capital goods under the relevant Foreign Trade Policy and are freely importable under the EXIM Policy. They are not to be treated as consumer goods for the purpose of import restriction. In view of that binding reasoning, confiscation and the consequential levy of fine and penalty on the importers could not be sustained.

Conclusion: The importers succeeded on this issue and the confiscation, fine and penalty relating to the imported second hand photocopier machines were set aside.

Issue (ii): Whether the main frame of second hand photocopier machines required a licence and whether valuation could be enhanced on the basis of internet price.

Analysis: The main frame of the photocopier machines was held to be licence-requiring and not freely importable, so confiscation and penalty were justified on that count. However, enhancement of value on the basis of internet price was not accepted because there was no evidence of contemporaneous imports, and the declared transaction value was required to be accepted. The redemption fine was therefore restricted to 10% of the transaction value, while the penalty was left undisturbed.

Conclusion: The assessee partially succeeded on valuation, but failed on the licence and confiscation issue; the order was modified by accepting the transaction value and reducing the redemption fine, with penalty maintained.

Final Conclusion: The appeals relating to second hand photocopier machines were allowed, the Revenue appeal was rejected, and in the appeal concerning the main frame the order was sustained except for setting aside value enhancement and fixing the redemption fine at 10% of the transaction value.

Ratio Decidendi: Second hand photocopier machines are freely importable as capital goods under the applicable Foreign Trade Policy and EXIM Policy, but valuation cannot be enhanced on the basis of internet price in the absence of evidence of contemporaneous imports; the declared transaction value must then be accepted.

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