Legal principle

The categorization or re-categorization of imported goods as free or restricted can be effected only by a specific amendment to the Foreign Trade Policy under Section 5 of the FTDR Act, 1992, by the Central Government, and not by DGFT policy circulars.

Court decision

The Supreme Court set aside the Kerala High Court's judgment, restored the Larger Bench Tribunal decision dated 11.5.2005, allowed the importer's civil appeal with no order as to costs, and dismissed the Department's connected appeals (Nos. 3226, 3977 and 5259 of 2007). It held that photocopying machines are capital goods, and imports of second-hand photocopying machines made before 19.10.2005 were freely importable without a licence.

Facts

M/s Atul Commodities imported used photocopying machines in January 2005 under the category of 'general imports' (not under EPCG). The Deputy Commissioner of Customs (Import) issued a show cause notice under Section 124 of the Customs Act alleging the machines were restricted items under para 2.17 of FTP 2004-09 read with DGFT circular No. 20 dated 23.2.2005, and hence liable to confiscation under Section 111(d) for import without a licence. The Commissioner confirmed the notice, but the Tribunal (Larger Bench) allowed the importer's appeal holding photocopiers were capital goods. The Kerala High Court reversed in the Department's favour, and the importer appealed to the Supreme Court.

Key provisions

• Section 5, The Foreign Trade (Development and Regulation) Act, 1992 — Foreign Trade Policy.
• Section 111(d), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 124, Customs Act, 1962 — Issue of show cause notice before confiscation of goods etc