Holding

Second‑hand photocopier machines imported before 19 Oct 2005 are second‑hand capital goods and were freely importable; the restriction imposed by Notification No. 31/2005 applies only after that date and cannot be effected by DGFT circulars.

Summary

The appellant imported second‑hand photocopier machines in January 2005 under the "general imports" category of the Foreign Trade Policy (FTP) 2004‑09. The Customs authority treated the machines as "restricted" under para 2.17 of the FTP, relying on DGFT circulars and seized them. The Supreme Court held that the machines are "second‑hand capital goods" as defined in para 9.12 of the FTP and therefore were freely importable before the amendment of 19 Oct 2005. The Court clarified that only a Central Government amendment under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 can change an item’s categorisation; DGFT circulars are merely clarificatory and cannot convert a free item into a restricted one. Consequently, Notification No. 31/2005, which restricted such imports, applies only prospectively, not to the 2005 imports. The High Court judgment was set aside and the Tribunal’s decision in favour of the appellant was restored.

Issues considered

Whether second‑hand photocopier machines imported in January 2005 fall within the "restricted" category under para 2.17 of FTP 2004‑09.
Whether DGFT policy circulars (Nos. 16/03, 19/03, 20/05) can amend the categorisation of items from "free" to "restricted".
Whether the import of such machines required a licence prior to 19 Oct 2005.
Whether photocopier machines used for rendering services qualify as "capital goods" under para 9.12 of the FTP.
Whether Notification No. 31/2005 restricting these imports operates retrospectively.

Legislation cited

Customs Act, 1962s. 111, s. 124
Foreign Trade (Development and Regulation) Act, 1992s. 5, s. 6(3)

Subjects

foreign trade policysecond‑hand goodscapital goodsimport licenceDGFT circularspolicy amendmentrestricted importsNotification 31/2005FTP 2004‑09

Judgment

[2009] 3 S.C.R. 589

MIS ATUL COMMODITIES PVT. LTD. & ORS. A
v.
COMMISSIONER OF CUSTOMS, COCHIN-9
(Civil Appeal NO. 2999 of 2007)
FEBRUARY 24, 2009
B
[S.H. KAPADIA AND H.L. DATTU, JJ.]

Export-Import: FTP 2004-09 - Para 2. 17 - Second hand
photocopier machines - Import of, under the category of
'general imports', in January 2005 - Held: It is restricted item C
for import under para 2. 17 of FTP 2004-09 - By amendment
Notification No. 31 dated 19.10.2005 issued by the Central
Government under s.5 of 1992 Act, import of second-hand
photocopying machines under the "general" category came
under the "restricted" category of imports - Hence, after o
19.10.2005, second-hand photocopying machines came
within the "restricted" category- Foreign Trade (Development
and Regulation) Act, 1992 - s.5 - Handbook of Procedures
2002-07- Para 2.33- Notification No. 31dated19.10.2005.

Foreign Trade (Development and Regulation) Act, E
1992: s.5 - Change of categorization of items from category
of free to category of restricted imports can only be done by
an amendment to the policy - s.5 empowers only Central
Government to amend the Policy - This power is not given
to DGFT - It is not open to DGFT to issue circulars to change F
categorization - FTP 2004-09 - Para 2. 17.

Circulars/Government orders/Notifications: Circulars
are clarificatory and not amendatory in nature.
G
Import of second hand photocopier machines took
place in January 2005 under the category of 'general
imports'. Question is whether it is restricted item for
import under para 2.17 of current FTP 2004-09.
589 H
590 SUPREME COURT REPORTS [2009] 3 S.C.R.

A Allowing the appeal of assessee and dismissing the ' .
appeals of Department, the Court

HELD: 1.1. On 31.8.2004, the Central Government by
Notification No. 1/2004-09 notified the FTP 2004-09. The
Policy came into force from 1.9.2004. That Policy came
B
to be amended by Notification No. 31 dated 19.10.2005
.
issued by the Central Government under Section 5 of the
Foreign Trade (Development and Regulation) Act, 1992 ,. ...
by which import of second-hand photocopying machines
imported under the "general" category came under the
c "restricted" category of imports, which made the importer
to import the said machine only against a licence issued
in that behalf. Such a restriction could be placed only by
an Amendment and not by Policy Circulars. Hence, after
19.10.2005, second-hand photocopying machines came
D within the "restricted" category. Such a change of
category took place by way of Amendment by Central
Government under Section 5 of the 1992 Act. On the other
hand, the three administrative/policy circular Nos. 16/03,
19/03 and 20/05 only refer to clarifications issued by
E DGFT pursuant to representations received by him from
the Trade. These circulars are clarificatory and not
amendatory in nature. Therefore, under the scheme of the
Statute, one finds a clear demarcation between an
•
amendatory provision and a clarificatory provision. [Para
F 18] [615-D-H; 616-A-B]
1.2. Section 5 of the 1992 Act contemplates
amendment to the FTP. It empowers only the Central
Government to amend the Policy. This power is not given
to the DGFT. It is not open to DGFT .to issue circulars to
G
change categorization of items from the category of
"free" to the category of "restricted" imports. This aspect
is important for two reasons. Firstly, notification no. 31
dated 19.10.2005, is an amendment to the Policy. It
operates only from 19.10.2005. It recites that second-hand
H
ATUL COMMODITIES PVT. LTD. & ORS. v. 591
COMMISSIONER OF CUSTOMS, COCHIN-9

capital goods were importable freely. The Notification A
states that after 19.10.2005, however, import of second-
... hand photocopying machines would be allowed only
against a licence. This amendment pre-supposes that
photocopying machines are kept out of the purview of
"second hand capital goods" only after 19.10.2005. B
Secondly, broadly imports fall in two categories - general
and restricted categories including prohibited category.
,.. When there is change of categorization, it can be done
only by an amendment. This has been done by
notification no. 31 dated 19.10.2005. It is only by
Amendment that import of second-hand photocopying
c
machines can be kept out of the definition of "second-
hand capital goods". [Para 18] [616-B-F]
2.1. Both the circulars 16/03 and 19/03 referred to FTP
(2002-07) whereas appellant imported the machines D
under FTP (2004-09) in which para 2.17 of FTP and para
2.33 of the Handbook had undergone a change.
Therefore, Policy circular nos. 16/03 and 19/03 had no
application to the facts of the present case. [Para 19] [617-
G-H; 618-A] E
2.2. Policy circular No. 20/05 is in continuation of
Policy circular Nos. 16/03 and 19/03. Para 1 of Policy
circular no. 20/05 recites that photocopying machines are
not to be imported without a licence even if they are less
F
than 10 years old and even if the photocopying machines
are imported for service providers. By virtue of para 3, the
Policy circular no. 20/05 clarifies that second-hand
photocopying machines are covered under the definition
of "second-hand goods", therefore, their import shall be
governed by the provisions of para 2.17 of the Policy and G
shall not be permitted to be imported under para 5.1 of
the Policy. Para 2.17 of FTP (2004-09) is in two parts. The
first part deals with the meaning of the words "second-
hand goods". The second part states that import of
second-hand capital goods shall be allowed freely. Para H
592 SUPREME COURT REPORTS [2009] 3 S.C.R.

A 3 of the Policy circular no. 20/05 states that import of
second-hand goods shall be governed by the provisions
of para 2.17 of the Policy. Para 2.17 has to be read in its
entirety. That para draws a dichotomy between "second-
hand goods" and "second-hand capital goods". Para 2.33
B of the Handbook (2004-09) places restriction only qua
computers and not qua photocopying machines.
Therefore, one has to give weightage to the second part
of para 2.17 which allows "free" import of second-hand
capital goods. What is not permitted in para 3 of the Policy
C circular no. 20/05 is importation under EPCG. This case
is concerned with imports under "general category" and
not under EPCG. The Tribunal rightly held that
photocopying machines are capital goods as defined
under para 9.12 and that the use of these machines for
rendering services makes them capital goods. In fact, this
0
finding on the "user" is not challenged by the
Department. Therefore, import of old and used
photocopying machines stands covered by the concept
of "second-hand capital goods" in para 2.17. [Para 20]
[618-8-H; 619-A-C]
E
3. Para 2.33 expressly states that import of old and
used computers/second-hand computers are restricted.
Para 2.33 of the Handbook do not restrict photocopying
machines. Import of photocopying machines are
F expressly restricted only by Notification no. 31 dated
19.10.2005. This itself indicates that categorization/re-
categorization cannot be done by policy circulars. Such
exercise has to be undertaken by specific amendment to
the Policy by Section 5 of the 1992 Act. In this case,
G Notification no. 31 dated 19.10.2005 indicates that the
Central Government has brought in photocopying
machines into the category of second-hand goods by
amendatory Notification, therefore, import of
photocopying machines stand.restricted only on and
H after 19.10.2005. [Para 21] [619-E-G]
ATUL COMMODITIES PVT. LTD. & ORS. v. 593
COMMISSIONER OF CUSTOMS, COCHIN-9
., CIVIL APPELLATE JURISDICTION : Civil Appeal No. A
2999 of 2007.

From the Judgment & Order dated 7.4.06 of the High Court
of Kerala at Ernakulam in CUA Nos. 11, 14, 15, 18, 19/2005
& 01, 06, 10, 11, 12/2006.
B
WITH

Civil Appeal Nos. 5259/2007, 3226/2007 and 3977/2007.

S.K. Bagaria, Nikhil Nayyar, T.V.S. Raghavendra Sreyas C
and Ambuj Agrawal for the appearing Parties.

K. Radhakrishnan, II. Raghavendra Rao, Rupesh Kumar,
Anil Katiyar B. Krishna Prasad for the Respondent.

The Judgment of the Court was delivered by D
•
S.H. KAPADIA, J.

Civil Appeal No. 2999 of 2007:

1. This civil appeal is directed against the judgment and E
order dated 7.4.2006 in Customs Appeal No. 15/05 delivered
by the Division Bench of Kerala High Court by which the
Department's appeal came to be allowed and the judgment of
the Tribunal dated 12.7.2005, following the decision of its
Larger Bench in the case of Mis Atul Commodities Pvt. Ltd.
F
... v. CC, came to be set aside .
2. The issue involved in this civil appeal is - Whether,
during the period in question, Photocopying Machines
(Photocopiers) were "freely importable" or whether its import
required a licence/permission/certificate . G
•
Facts:

3. The facts lie within a very narrow compass.

4. In exercise of the powers conferred under Section 5 of H
594 SUPREME COURT REPORTS (2009] 3 S.C.R.

A the Foreign Trade (Development and Regulation) Act, 1992,
the Central Government notified Foreign Trade Policy ("FTP"
for short) for the period 2004-09 incorporating the Exim Policy
for the period 2002-07 as modified. The Policy was announced
on 31.8.2004. It came into force with effect from 1.9.2004. It
B remains in force up to 31.3.2009, unless otherwise specified.
5. The appellant imported in January, 2005 Photocopying
Machines under the category "general imports".

6. On 25.2.2005, the Dy.Coe (Import) issued a show
c cause notice under Section 124 of the Customs Act alleging
that the Used Photocopying Machines were restricted items for
import under para 2.17 of the current FTP 2004-09 read with
circular No. 20 dated 23.2.2005 issued by DGFT. In the show
cause notice, it was thus alleged that goods have been
D imported without a valid import licence and consequently, they
were liable to be confiscated under Section 111 (d) of the
Customs Act, 1962 read with para 2.17 of the FTP (2004-09).

7. In its reply dated 3.3.2005, appellant submitted inter alia
that photocopying machine (photocopier) is an item of capital
E goods. The appellant pointed out that on 21.8.2003 the
Customs House, Cochin, had obtained a clarification from
JDGFT, Cochin, which confirmed that photocopying machines
can be classified under Capital Goods and Second Hand
Photocopier Machines which are less than 10 years old shall
F be allowed free importation under para 2.33 of the Handbook
of Procedures 2002-07. In its reply, the appellant further pointed ~.

out that, circulars of DGFT No. 16 dated 29.9.2003 and No.
19 dated 11.11.2003 had been issued specifically for EPCG
Scheme(s) only and not for normal imports on which full duty is
G payable. It is further pointed out that the above policy circulars
are intended to be applied to EPCG Scheme wherein there is >
a provision for an exemption of customs duty and, therefore,
the above two circulars cannot be suo motu applied to the
imports in question.
H
ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 595
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.]

8. Vide Order of adjudication dated 11.3.2005, the A
adjudicating authority (Commissioner) came to the conclusion
that as per para 2.17 of the FTP all second-hand goods, except
capital goods, came in the category of "restricted for import".
He relied upon circular No. 19 dated 11.11 .2003 in support of
his above conclusion. It was held that second-hand photocopier B
machines, air-conditioners, diesel generating sets are air
covered under the definition of "second-hand goods" and,
therefore, there import is governed by para 2.17 of the current
Policy which restricts import of second-hand goods without a
licence. Accordingly, the adjudicating authority confirmed the c
show cause notice.

9. Aggrieved by the Order of adjudication dated
11.3.2005, the matter was carried in appeal to the Tribunal,
which, as stated above, allowed the appeal in favour of the
appellant placing reliance on the decision of the Larger Bench D
of the Tribunal dated 11.5.2005.

10. Aggrieved by the decision of the Tribunal , the
Department carried the matter in appeal to the High Court. By
the impugned judgment dated 7.4.2006, the High Court held E
that, the import of second-hand photocopier machines effected
prior to 19.10.2005 (the date on which Notification No. 31 /05
came to be issued amending the current Policy) would be
governed by circular Nos. 16/03, 19/03 and 20/05 issued by
DGFT warranting a licence for import. It was further held that F
on a combined reading of circulars 16/03, 19/03 and 20/05
made the position clear that second-hand photocopier
machines are not covered by the definition of capital goods as
defined under para 9.10 of the FTP (2004-09). It was further
observed that second- hand photocopier machines were not G
freely importable as "capital goods". The Division Bench of the
Kerala High Court vide its impugned judgment observed that
it did not agree with the view taken by the Andhra Pradesh High
Court in Central Excise Appeal No. 52/2005 in favour of the
assessee.
H
596 SUPREME COURT REPORTS [2009] 3 S.C.R.

A 11 . Before concluding the facts, we may state that, vide
Notification No. 31/05 dated 19.10.2005 issued by the Gol
under Section 5 of Foreign Trade (Development and
Regulation) Act, 1992 read with para 1.3 of FTP 2004-09
import of second-hand photocopier machines, air-conditioners
s etc. are made restricted items warranting a licence for import.
However, we are concerned with the imports effected prior to
19.10.2005.

Judgment of the Larger Bench of the Tribunal:

C 12. The controversy in hand first came to be decided, even
before the impugned judgment, on 11.5.2005 by the Larger
Bench of CESTAT which came to the conclusion that Used
Photocopier Machines are capital goods. In this connection, it
may be noted that there was a difference of opinion between
D different Benches of the Tribunal. One view was that
photocopying machines were consumer goods. The other view
was that photocopying machines were capital goods. Therefore,
the matter came to be decided by the Larger Bench, which took
the view that photocopying machines are capital goods,
E particularly in view of its definitions in para 9.12 of the FTP
(2004-09). As regards the applicability of circulars 16/03, 19/
03 and 20/05, the Larger Bench held that all the three Circulars
came to be issued in the context of imports made under EPCG
Scheme with the "actual user" condition attached to the import
F of capital goods under the said Scheme and that the said three
circulars had no application to "general imports" made by the
appellants. Accordingly, the Larger Bench of the Tribunal
decided the matter in favour of the appellant This view of the
Larger Bench of the Tribunal stood overruled by the impugned
G judgment of the High Court, hence, this civil appeal is filed by
the appellant.

Contentions:

13. Shri S.K. Bagaria, learned senior counsel appearing
H
ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 597
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.]
;
"'
on behalf of the appellant, submitted that in this case we are A
concerned with normal imports and not imports under the
EPCG or Advance Licencing or Passbook or 100% EOU or
EPZ Scheme(s). He submitted that the definition of the words
"capital goods", "consumer goods", "second-hand goods" are
all to be seen in the context of the Scheme. He submitted that B
in the case of normal/general imports, there is no concession/
_, exemption which is there under EPCG Scheme. He submitted
that export promotion stood on a different footing vis-a-vis
general imports. He submitted that in the case of EPCG, we
have important other conditions like, fulfilment of export
obligations, existence of a licence, Actual User condition etc.,
c
which are not there in the case of general imports. He further
submitted that, each Scheme under the FTP forms a Code by
_,
itselfand therefore one has to read the definition of capital
goods, consumer goods and second-hand goods in the context
D
of each of these Schemes. He submitted that existence of a
licence is required whenever an import falls under any of the
above Schemes. He submitted that the general/normal imports
do not come under any of the above Schemes. He further
submitted that it is only Gal which is empowered to amend the
Policy. According to the learned senior counsel, DGFT has the E
power to interpret and issue administrative circular(s) in
implementation of the Policy but he has no power to amend the
Policy, which power under Section 5 of the Foreign Trade
(Development and Regulation) Act, 1992 ("1992 Act") remains
F>
vested only in Gol. In this connection, learned counsel placed F
reliance on Sections 5 and 6(3) of the 1992 Act. He further
contended that the three Circulars issued by DGFT were
clarificatory in nature. They were not amendatory. He further
submitted that DGFT had no authority to issue a circular which
); is contrary to the statute consisting of the 1992 Act, the FTP, G
the ITC(HS) and the Handbook of Procedures. Learned counsel
further submitted that all the three circulars issued by DGFT
were confined to imports under EPCG. They had no connection
with general/normal imports. He further submitted that the above
circulars did not bind the assessee. They· do not bind the H
•

598 SUPREME COURT REPORTS [2009] 3 S.C.R.

A Courts. He further submitted that there are three broad
categories of item-wise imports mentioned in ITC(HS), they are
"free", "restricted" and "prohibited". According to the learned
counsel, ITC(HS) is goods-specific whereas Other Conditions
like actual user, export obligations, existence of licence etc. are
B Scheme-specific. Learned counsel submitted that the basic
error in the impugned judgment is that the High Court has only
applied the above three circulars, which had no application to
normal imports, to come to the conclusion that import of
photocopying machines, air-conditioners etc. required a
C licence. According to the learned counsel, it has not considered
the Scheme of the 1992 Act and it has failed to consider the
basic fact that the imports in question were made under the
category of "general imports" and not under EPCG Scheme.

14. Shri K. Radhakrishnan, learned senior counsel
D appearing on behalf of the Revenue, submitted that it is clearly
mentioned in the FTP 2004-09 that second-hand goods, other
than second-hand capital goods, are restricted for import.
According to the learned counsel, the imported items are
second hand goods. They are, therefore, restricted. Therefore,
E they require a licence. In this connection, learned counsel
placed reliance on circular no. 20 dated 23.2.2005, which came
to be issued prior to Notification no. 31 dated 19.10.2005.
According to the learned counsel, second-hand photocopying
machines came within the definition of second-hand goods and
F consequently their import stood governed by para 2.17 of the
FTP and shall not be permitted to be imported under para 5.1
of the Policy. According to the learned counsel, para 2.17 of
the Policy restricts import of second-hand goods without a
licence. This position, according to the learned counsel, stood
G reaffirmed vide Policy circular No. 20 dated 23.2.2005. Learned ,
counsel submitted that Second Hand Photocopying machines
imported by the appellant(s) were second-hand goods other
than second-hand capital goods, hence, the said import is
restricted by FTP (2004-09) and Policy circular no. 20/05.
H According to the learned counsel, the import of subject goods
ATUL COMMODITIES PVT. LTD. &ORS. v. COMMISSIONER 599
.... OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.]
• ... is made during the current FTP, that para 2.1 of the FTP A
postulates that exports and imports are "free" unless regulated,
that it further postulates that such regulation can be by FTP and
that DGFT is the statutory authority in-charge of the
implementation of the 1992 Act and the Policy thereunder.
According to the learned counsel, the said circular no. 20/05 8
was part of the FTP, that FTP is regulated through para 2.17
and that the said para 2.17 read with circular no. 20/05 .
declares second-hand photocopying machines as second-hand
goods other than second-hand capital goods. According to
the learned counsel, circular no. 20/05 prohibits imports of
second-hand photocopying machines under para 5. 1 of FTP
c
because the said machines are not capital goods. According
to the learned counsel, the amendment to para 2.17 via
Notification dated 19.10.2005 re-affirms the Circular No. 201
05, which in turn refers to para 2.17 and therefore it cannot be
• D
confined to EPCG Scheme. According to the learned counsel,
a combined reading of paras 2.1, 2.2, 2.3, 2.17 and Circular
No. 20/05 lead to unequivocal conclusion that the import of
second-hand photocopying machines is restricted under FTP
(2004-09) since they are second-hand goods other than
second-hand capital goods, hence, the civil appeal is liable to E
be dismissed.

15. To decide the controversy we need to examine the
;. 1992 Act read with the FTP (2002-07), the FTP (2004-09), the
Handbook of Procedures and ITC(HS). F

(A) Contents of the Policy including ITC(HS) and the Handbook
of Procedures:

G

H
600 SUPREME COURT REPORTS (2009] 3 S.C.R.
,&

A (i) Notification No. 1/2004-09 dated 31.8.2004:-
"TO BE PUBLISHED IN THE GAZETTE OF INDIA
EXTRAORDINARY
PART-II, SECTION-3, SUB SECTION (ii)
GOVERNMENT OF INDIA
B
MINISTRY OF COMMERCE AND INDUSTRY
NOTIFICATION No. 1/ 2004-09
NEW DELHI: the 31st August, 2004,
In exercise of powers conferred by Section 5 of the
c Foreign Trade (Development and Regulation) Act, 1992
(No 22 of 1992) read with paragraph 1.2 of the Foreign
Trade Policy, 2004-09, the Central Government hereby
notifies the Foreign Trade Policy 2004-09 as contained in
Annexure to this notification. The Policy shall come into •
D force from 1st September, 2004.

This issues in public interest.
(GOPAL. K. PILLAI)
Director General of Foreign Trade and
E Ex Officio Additional Secretary to the
Government of India ,,
(F.No. 01/94/180/Foreign Trade Policy /AMOS/PC-IV)"
(ii) Important provision(s) of the 1992 Act:-

F Section 5 of the Foreign Trade (Development and
Regulation) Act, 1992 reads as follows:

"5. Export and import policy.- The Central Government
may, from time to time formulate and announce, by
notification in the Official Gazette, the export and import
G
policy and may also, in the like manner, amend that policy."

"6. Appointment of Director General and his functions.-
H
ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 601
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.]

A

6(3) The Central Government may, by Order published in
the Official Gazette, direct that any power exercisable by
it under this Act (other than the powers under sections 3,
5, 15, 16 and 19) may also be exercised, in such cases 8
and subject to such conditions, by the Director General or
such other officer subordinate to the Director General, as
may be specified in the Order."

(iii) Important provisions of the Policy (2004-09).
c
"CHAPTER-1A
LEGAL FRAMEWORK

Duration 1.2 In exercise of the powers conferred under
Section 5 of The Foreign Trade D
(Development and Regulation Act), 1992
(No. 22 of 1992), the Central Government
hereby notifies the Foreign Trade Policy
for the period 2004-2009 incorporating the
Export and Import Policy for the period E
2002-2007, as modified. This Policy shall

- come into force with effect from 1st
September, 2004 and shall remain in force
upto 31st March, 2009, unless as
otherwise specified.
F
Amendments 1.3. The Central Government reserves the right
in public interest to make any amendments
to this Policy in exercise of the powers
conferred by Section-5 of the Act. Such
amendment shall be made by means of a G
Notification published in the Gazette of
India.

Transitional 1.4 Any Notifications made or Public Notices
Arrangements issued or anything done under the previous H
602 SUPREME COURT REPORTS (2009] 3 S.C.R.

• •
A Export/ Import policies, and in force
immediately before the commencement of
this Policy shall, in so far as they are not
inconsistent with the provisions of this
Policy, continue to be in force and shall be -
B deemed to have been made, issued or
done under this Policy.
"-
Licences, certificates and permissions
issued before the commencement of this
Policy shall continue to be valid for the
c purpose and duration for which such ,A

licence, certificate or permission was
issued unless otherwise stipulated.

CHAPTER-2
D
GENERAL PROVISIONS REGARDING IMPORTS AND
EXPORTS
Exports and 2.1 Exports and Imports shall be free, except
Imports free in cases where they are regulated by the
E unless regulated provisions of this Policy or any other law
for the time being in force. The item wise
export and import policy shall be, as
~

specified in ITC (HS) published and
notified by Director General of Foreign
Trade, as amended from time to time.
F
Interpretation 2.3 If any question or doubt arises in respect
of Policy of theinterpretation of any provision
contained in this Policy, or regarding the
classification of any item in the ITC (HS)
G or Handbook (Vol.1) or Handbook (~ol.2),
.,.
or Schedule Of DEPB Rate the said
question or doubt shall be referred to the
Director General of Foreign Trade whose /

decision thereon shall be final and binding.
H
ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 603
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.]
If any question or doubt arises whether a A
licence/ certificate/permission has been
issued in accordance with this Policy or if
any question or doubt arises touching upon
the scope and content of such documents,
the same shall be referred to the Director B
General of Foreign Trade whose decision
thereon shall be final and binding.

Procedure 2.4 The Director General of Foreign Trade
may, in any case or class of cases, specify C
the procedure to be followed by an
exporter or importer or by any licensing or
any other competent authority for the
purpose of Civil Appeal NO. 2999 of 2007
.. implementing the provisions of the Act, the
Rules and the Orders made thereunder D
and this Policy. Such procedures shall be
included in the Handbook (Vol.1 ),
Handbook (Vol.2), Schedule of DEPB
Rate and in ITC (HS) and published by
means of a Public Notice. Such E
procedures may, in like manner, be
amended from time to time.

The Handbook (Vol.1) is a supplement to
the Foreign Trade Policy and contains F
relevant procedures and other details. The
procedure of availing benefits under
various schemes of the Policy are given in
the Handbook (Vol.1 ).
Actual User 2.16 Capital goods, raw materials, G
Condition intermediates, components, consumables,
spares, parts, accessories, instruments
and other goods, which are importable
without any restriction, may be imported by
H
604 SUPREME COURT REPORTS [2009) 3 S.C.R.

~ .
A any person.

However, if such imports require a licence
certificate/permission, the actual user
alone may import such goods unless the
actual user condition is specifically
B
dispensed with by the licensing authority.

Second Hand 2.17 All second hand goods, excepting second
Goods hand capital goods, shall be 'restricted for
imports and may be imported only in
c accordance with the provisions of this
Policy, ITC(HS), Handbook (Vol.1), Public
Notice or a licence/certificate/permission
issued in this behalf.

D Import of second hand capital goods, >
including refurbished/ reconditioned
spares, shall be allowed freely. (This
clause is not there in FTP 2002-07)
(emphasis supplied)
E
CHAPTER-5
EXPORT PROMOTION CAPITAL GOODS SCHEME
EPCG Scheme 5.1The scheme allows import of capital
goods for pre production, production and
F post production (including CKD/SKD '
thereof as well as computer software
systems) at 5% Customs duty subject to an
export obligation equivalent to 8 times of
duty saved on capital goods imported
G under EPCG scheme to be fulfilled over a
period of 8 years reckoned from the date
of issuance of licence. Capital goods
would be allowed at 0% duty for exports of
agricultural products and their value added
H variants.
ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 605
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.]
" EPCG for 5.1 B An EPCG licence can also be issued for A
Projects import of capital goods for supply to
projects notified by the Central Board of
Excise and Customs under S.No 441 of
Customs Exemption Notification No 21/
2002 dated 01.03.2002 wherein the basic B
customs duty on imports is 10% with a
CVD of 16%.

The export obligation for such EPCG
licences would be eight times the duty
saved. The duty saved would be the c
difference between the effective duty
under the aforesaid Customs Notification
and the concessional duty under the
EPCG Scheme.
~
D
Conditions for 5.3 Import of capital goods shall be subject to
Actual User import of Capital condition till
the export obligation is completed. Goods
CHAPTER-9
E
DEFINITIONS

9.1. For the purpose of this Policy, unless the context
otherwise requires, the following words and
expressions shall have the following meanings F
attached to them.

9.4. "Actual User" means an actual user who may be
either industrial or non-industrial.

9.5. "Actual User (Industrial)" means a person who G
,, utilises the imported goods for manufacturing in his
own industrial unit or manufacturing for his own use
in another unit including a jobbing unit.
9.6. "Actual User (Non-Industrial)" means a person who
H
606 SUPREME COURT REPORTS [2009] 3 S.C.R.

A utilises the imported goods for his own use in

(i) any commercial establishment carrying on any
business, trade or profession; or

(ii) any laboratory, Scientific or Research and
B Development (R&D) institution, university or other
educational institution or hospital; or

(iii) any service industry.

9.12. "Capital Goods" means any plant, machinery,
c equipment or accessories required for manufacture
or production, either directly or indirectly, of goods
or for rendering services, including those required
for replacement, modernisation, technological
upgradation or expansion. Capital goods also >
D include packaging machinery and equipment,
refractories for initial lining, refrigeration equipment,
power generating sets, machine tools, catalysts for
initial charge, equipment and instruments for
testing, research and development, quality and
E pollution control. Capital goods may be for use in
manufacturing, mining, agriculture, aquaculture,
animal husbandry, floriculture, horticulture,
pisciculture, poultry, sericulture and viticulture as
well as for use in the services sector.
F
9.15. "Consumables" means any item, which participates
in or is required for a manufacturing process, but
does not necessarily form part of the end-product.
Items, which are substantially or totally consumed
during a manufacturing process will be deemed to
G
be consumables.

9.16. "Consumer Goods" means any consumption
goods, which can directly satisfy human needs
without further processing and includes consumer
H
ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 607
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.]
...
durables and accessories thereof. A

9.48. "Public Notice" means a notice published under the
provisions of paragraph 2.4 of the Policy.

(iv) Important provisions of the Handbook of
Procedures (2004-09): B

Para 2.33 of the Handbook:

"Import of Second Hand Capital Goods-

2.33 Import of second hand capital goods including C
refurbished/reconditioned spares, shall be allowed freely,
subject to conditions for the following categories:

The Import of second hand computers including personal
computers and laptops are restricted for imports. D
The import of refurbished/ reconditioned spares will be
allowed on production of a Chartered Engineer certificate
that such spares have a residual life not less than 80% of
the life of the original spare."
E
(v) Important provisions of ITC(HS):

"Col.3 Policy:

-
Two types of Restrictions have been indicated in this
column, namely, 'Prohibited' and 'Restricted'. F

Items which do not require any licence under the Exim
Policy have been denoted as ·Free' subject to the
Licensing Notes contained in the relevant chapter/heading/
sub-heading or as may have been indicated under column G
4 mentioning conditions relating to the policy and is also
subject to any other law for the time being in force.

Wherever the policy indicated as ·State Trading
Enterprise (STE)', the nominated STE shall make any H
608 SUPREME COURT REPORTS [2009] 3 S.C.R.

~
A such purchases or sales involving imports solely in
accordance with the provision at para 2.11 of Foreign
Trade Policy."

Exim Code 9009 reads as follows:
B "EXIM Item Description Policy

Code
9009 Photocopying apparatus
incorporating an optical system
c or of the contact-type and thermo-
copying apparatus

Electrostatic photocopying
apparatus:
D 9009 11 00 Operating by reproducing the Free
original image directly onto the
copy (direct-process)
9009 12 00 Operating by reproducing the Free
original image Free via an
intermediate onto the copy (indirect-
E
process)

Other photocopying apparatus:

9009 21 00 Incorporating an optical system Free
F
9009 22 00
9009 30 00
Of the contact type
Thermo-copying apparatus
Free
Free
-
Parts and accessories:

G 9009 91 00 Automatic document feeders Free
9009 92 00 Paper feeders Free
9009 93 00 Sorters Free
9009 99 00 Other Free"
H
ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 609
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.]

(B) Policy Circulars (2002-07): A
(i) Policy Circular No. 16 dated 29.9.2003:-
"Government of India
Ministry of Commerce & Industry
Department of Commerce B
Directorate General of Foreign Trade
J
Udyog Bhawan, New Delhi.

POLICY CIRCULAR NO. 16(RE-2003)/2002-07
c
dated : 29 /09/2003

To
All Licensing Authorities,
All Commissioners of Customs. D

Sub:- Import of second hand personal computers (PCs)/
Laptops - clarification regarding.

E
1. Attention is invited to Para 2.17 of EXIM Policy, 2002-
07 stipulating that all second hand goods shall be
restricted for imports and may be imported only in
accordance with the provisions of the Policy, ITS(HS),
Handbook (Vol.I), Public Notice or a licence/certificate/ F
-. permission issued in this behalf.

2. Representations have been received seeking
clarifications as to whether second hand personal
computers (PCs)/Laptops are covered under the definition
of second hand capital goods and allowed freely as per G
the provisions of Para 2.33 of Handbook of Procedures
(Vol.I) 2002-07, provided these are not more than ten years
old.

3. The matter has been deliberated upon and it is clarified H
610 SUPREME COURT REPORTS [2009) 3 S.C.R.

A that the second hand personal computers (PCs)/Laptops
are covered under the definition of "second hand goods"
and their import is governed by the provisions of Para 2.17
of EXIM Policy,2002-07 and not covered under the
definition of "capital goods" as defined under Para 9.10
B of EXIM Policy and Para 2.33 of Handbook of Procedures
(Vol.I). In view of this, second hand personal computers
(PCs)/Laptops can also not to be permitted for import
under EPCG scheme under the provisions of para 5.1 of
the Exim Policy, even for service providers.
c 4. All the Licensing Authorities are advised to take action
accordingly.

This issues with the approval of DGFT.

D (M.C. Jauhari)

Jt.Director General of Foreign Trade"

(ii) Policy Circular No. 19 dated 11.11.2003:-
"Government of India
E Ministry of Commerce & Industry
Department of Commerce
Directorate General of Foreign Trade
Udyog Bhawan, New Delhi.

F
POLICY CIRCULAR NO. 19 (RE-2003)/2002-07
11th Nov.2003.

To
G All Licensing Authorities,
1
All Commissioners of Customs.
Subject: Import of second hand photocopier machines, Air
Conditioners, Diesel Generating Sets, etc., - clarification reg.
H
-· ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 611
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.]

- 1. In continuation of Policy Circular No.16 dated 29.9.2003
whereby it was clarified that Second Hand Personal
Computers(PCs)/Laptops are covered under the definition
of Second Hand goods, it is further clarified that the
second hand Photocopier Machines, Air Conditioners,
A

Diesel Generating Sets, etc., are also covered under the B
definition of "Second Hand Goods" and their import is
governed by the Provisions of Para 2.17 of EXIM Policy,
2002-07. In view of this, Second Hand Photocopier
Machines, Air Conditioners, Diesel Generating Sets, etc.,
can also not to be permitted for import under EPCG c
Scheme under the provisions of Para 5.1 of EXIM Policy
even if these are less than ten years old and even for
Service Providers.

2. However, import of new Personal Computers (PCs) I
Laptops , Photocopier Machines, Air Conditioners, Diesel D
Generating Sets, etc., may be permitted under EPCG
Scheme provided these are required for manufacturing of
goods or rendering services.

3. Licensing Authorities are advised to take action E
accordingly.
y

4. This issues with the approval of DGFT.

(M.C. Jauhari)
>.
F
JI.Director General of Foreign Trade"

(iii) Policy Circular No. 20 dated 23.2.2005:-
"Government of India
Mini~try of Commerce & Industry G
Department of Commerce
Directorate General of Foreign Trade
Udyog Bhawan, New Delhi
\

H
612 SUPREME COURT REPORTS [2009] 3 S.C.R.

A POLICY CIRCULAR N0.20 (2004-2009) Dt 23/02/2005

To
All Licensing Authorities,
-
All Commissioners of Customs.
B Subject: Import of Second Hand Diesel Generating Sets -
clarification reg.

1. Attention is invited to Policy Circular No.19
dt.11.11.2003 vide which it was clarified that Second Hand
c Photocopiers, Air Conditioners, Diesel Generating Sets,
etc. will not be permitted to be imported under EPCG
Scheme under the provision of Para 5.1 of the Exim Policy
2002-2007 even if these are less than 10 years old and
even for Service Providers. The intention of this Circular
•
D is to restrict the import of such items under EPCG Scheme
which are in the nature of Consumer goods.

2. Since Second Hand Diesel Generating Sets of 10 KVA
and above have industrial application and import of second
hand capital goods without any age restriction is permitted
E under EPCG Scheme in the Foreign Trade Policy 2004-
09, it is therefore clarified that Second Hand Diesel
Generating Sets of 10 KVA and above shall be allowed
to be imported under EPCG Scheme without any age
restriction.
F
3. However since Second Hand Photocopiers, Air
Conditioners and Diesel Generating Sets (below 1O KVA)
etc. are covered under the definition of ·second Hand
Goods', therefore their import shall be governed by the
G provisions of Para 2.17 of Policy and shall not be permitted
to be imported under Para 5.1 of Policy.

4. Licensing Authorities are advised to take action
accordingly.

H
ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 613
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.]
>
5. This issues with the approval of DGFT. A

Sd/-

(M.K. Parimoo)

Dy. Director General of Foreign Trade B

(Issued from F.No.01/94/160/14/AM05/PC-IV)"

(C) Para 2.17 of the Exim Policy (2002-07):

"Second Hand Goods c
2.17 All second hand goods shall be restricted for imports
and may be imported only in accordance with the
provisions of this Policy, ITC(HS), Handbook (Vol.1), Public
~ Notice or a licence/certificate/permission issued in this
D
behalf."

Para 2.33 of the Handbook of Procedures (2002-07):

"2.33 Import of Second Hand Capital Goods
_..
E
Import of second hand capital goods, which are not
more than 10 years old, shall be allowed freely."

(0) Notification No. 31 dated 19.10.2005:-
"GOVERNMENT OF INDIA
., F
MINISTRY OF COMMERCE AND INDUSTRY
DEPARTMENT OF COMMERCE
'·

NOTIFICATION NO. 31 (RE-2005) / 2004-2009
NEW DELHI, DATED 19th October, 2005
G
S.O. (E) In exercise of powers conferred by Section 5 of
the Foreign Trade (Development and Regulation) Act, 1992
(No.22 of 1992) read with paragraph 1.3 of the Foreign
Trade Policy, 2004-09 as amended from time to time, the
Central Government hereby makes the following
H
.......
614 SUPREME COURT REPORTS [2009] 3 S.C.R.

A amendments:

1. The Paragraph of Para 2.17 will be amended to read
as follows:

"Import of second hand capital goods, including
B refurbished/ re-conditioned spares shall be allowed freely.
However, second hand personal computers/laptops,
photocopier machines, air conditioners, diesel generating
sets will only be allowed against a license issued in this
behalf."
c
This issues in public interest.

(K.T. Chacko)

Director General of Foreign Trade
D
\ And Ex-Officio Additional Secretary to the Govt. of India

(Issued from File No.01J94/162/270/AM06/PC-1A)"

Findings:
E
(A) Interpretation of Policy Circular Nos.16/03, 19/
03 and 20/05:

16. Before coming to the circulars, one needs to
understand the Scheme of the 1992 Act. The said Act is
F enacted to provide for development and regulation of Foreign
Trade by facilitating imports into, and augmenting exports from
India. Under Section 3, the Central Government is empowered
by Order published in the Official Gazette to make provision
for the development and regulation of foreign trade. Under sub-
G section (2) of Section 3 the Central Government may by Order
published in the Official Gazette prohibit, restrict or otherwise
regulate import/export of goods subject to such exceptions as
it may deem fit. Under Section 5, the Central Government is
empowered from time to time to formulate and announce by
H
ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 615
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.)
,. ..
notification in the Official Gazette the Exim Policy and it may A
afso amend that policy from time to time. Under Section 6,
DGFT is empowered to advise the Central Government in the

---- \
formulation of Exim Policy and shall be responsible for carrying
out that Policy. Under Section 6(3) of the 1992 Act only Central
Government is empowered to amend the FTP. B
17. Under para 2.3 of the FTP (2004-09) DGFT is
.. empowered to interpret the Policy. If any doubt or question
arises in respect of interpretation of any provision in FTP or in
the matter of classification of any item in the ITC (HS) or in the
Handbook, the said question or doubt shall be referred to the c
DGFT, whose decision thereon shall be final and binding.

18. We have referred to the provisions of the 1992 Act and
Para 2.3 of the FTP to demonstrate the difference between
.. amendment and clarification. The power to amend the FTP is D
exclusively vested in the Central Government whereas the
power to clarify is vested in DGFT. On 31.8.2004, the Centrar·
Government vide Notification No. 1/2004-09 notified the FTP
2004-09. The Policy was announced on 31.8.2004. The Policy
came into force from 1.9.2004. That Policy came to be E
amended vide Notification No. 31dated19.10.2005 issued by
the Central Government under Section 5 of the 1992 Act by
which the position came to be changed and, for the first time,
import of second-hand photocopying machines imported under
the "general" category came under the "restricted" category of
F
imports, which made the importer to import the said machine
only against a licence issued in that behalf. Why was that
Notification necessary? By the said Notification, import of
photocopying machines came to be restricted. It was provided
that the said import shall be against a licence. Such a restriction
G
could be placed only by an Amendment and not by Policy
• Circular(s). Hence, after 19 .10.2005, second-hand
photocopying machines came within the "restricted" category.
Such a change of category has to take place by way of
Amendment by Central Government under Section 5 of the
H
616 SUPREME COURT REPORTS [2009] 3 S.C.R.

... ~

A 1992 Act. On the other hand, the three administrative/policy
circular Nos. 16/03, 19/03 and 20/05 only refer to clarifications
issued by DGFT pursuant to representations received by him
from the Trade. These circulars are clarificatory and not
amendatory in nature. Therefore, under the scheme of the
B Statute, one finds a clear demarcation between an amendatory
provision and a clarificatory provision. Section 5 of the 1992
Act contemplates amendment to the FTP. It empowers only the
Central Government to amend the Policy. This power is not •
given to the DGFT. It is not open to DGFT vide circulars to
c change categorization of items from the category of "free" to
the category of "restricted" imports. This aspect is important
for two reasons. Firstly, notification no. 31dated19.10.2005,
quoted hereinabove, is an amendment to the Policy. It operates
only from 19.10.2005. It recites that second-hand capital goods
D
are importable freely. The Notification states that after ..
19.10.2005, however, import of second-hand photocopying
machines will be allowed only against a licence. This
amendment pre-supposes that photocopying machines are
kept out of the purview of "second hand capital goods" only after
19.10.2005. Secondly, as stated above, broadly imports fall in
E
two categories - general and restricted categories including
prohibited category. When there is change of categorization, ""'
it can be done only by an amendment. This has been done by
notification no. 31 dated 19.10.2005. It is only by Amendment
that import of second-hand photocopying machines can be kept
F out of the definition of "second-hand capital goods".

19. As stated above, in this case, we are concerned with
imports dated January, 2005. It is submitted on behalf of the
Department that in January, 2005 Policy circular No. 20 dated
G 23.2.2005 was applicable. However, Policy circular No. 20/05
is in continuation of Policy circular Nos. 16/03 and 19/03. They >
have to be read together. In this connection, it may be noted
that para 1 of Policy circular No. 16/03 recites that import of
all second-hand goods stood restricted under the FTP (2002-
H 07). That circular clarified that import of second-hand PCs/
ii
ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 617
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.)

Laptops would fall in the category of "second hand goods". That A
circular was in the context of FTP 2002-07. However, in the
Handbook of Procedures relating to FTP (2002-07) it was
provided that import of second-hand capital goods, not more
than 10 years old, would be allowed freely (see para 2.33 of
the Handbook). In other words, old and used goods of not more B
than 10 years was treated as "second-hand capital goods".
This led to confusion. Therefore, representations came to be
made to DGFT seeking clarifications as to whether second-
hand PCs/Laptops stood covered under the definition of
second-hand capital goods, provided they were not more than c
10 years old. It is these representations which came to be
answered vide Policy circular No. 16 dated 29.9.2003 in the
manner indicated above. Accordingly, by Policy circular No. 16/
03, it was clarified that second-hand PCs/Laptops would not
fall under "second hand capital goods" as defined under Para
0
' 2.33 of the Handbook and consequently their import could only
be against a licence. In continuation of Policy circular no. 16/
03, circular no. 19/03 came to be issued by which photocopying
machines were sought to be brought in the connotation of
"second hand goods" in contradistinction to "second hand
capital goods". However, both these Policy circular nos. 16/03 E
and 19/03 pertain to period prior to January, 2005 when
appellant imported photocopying machines. Both the said
circulars referred to FTP (2002-07) whereas appellant imported
the machines under FTP (2004-09) in which para 2.17 of FTP
and para 2.33 of the Handbook had undergone a change. As F
can be seen from para 2.17 of the FTP (2004-09) a statement
is added to para 2.17 of the FTP (2002-07) that statement
reads as under:

"Import of second hand capital goods, including G
refwrbished/reconditioned spares, shall be allowed freely."

This statement was not there in para 2.17 of the FTP (2002-
07). Similarly, as quoted hereinabove, para 2.33 of the
Handbook of Procedures (2004-09) has been completely H
618 SUPREME COURT REPORTS [2009] 3 S.C.R.

A recasted. Therefore, Policy circular nos. 16/03 and 19/03 has
no application to the facts of the present case.

(B) Interpretation of Circular No. 20 dated 23.2.2005 read
with Para 2.17 of FTP (2004-09) and Para 2.33 of the
8 Handbook of Procedures:

20. Policy circular No. 20/05 appears to be in continuation
of Policy circular Nos. 16/03 and 19/03. In this connection, para r
1 of Policy circular No. 20/05 requires to be noted. As stated
above, under FTP (2002-07) import of "second-hand goods"
C could be made only against a licence. They came in the
restricted category. However, in the Handbook (2002-07) it was
inter alia provided that old and used capital goods which were
not more than 10 years old could be imported freely. Those
goods, therefore, were treated as "new" goods. This resulted
D in confusion. Therefore, DGFT stepped in to clarify that second-
hand photocopying machines, irrespective of the period of use,
shall fall in the restricted category (see Policy circular No. 19/
03). Para 1 of Policy circular no. 20/05 recites that photocopying
machines are not to be imported without a licence even if they
E are less than 10 years old and even if the photocopying
machines are imported for service providers. Vide para 3, the
Policy circular no. 20/05 clarifies that second-hand
photocopying machines are covered under the definition of
"second-hand goods", therefore, their import shall be governed
F by the provisions of para 2.17 of the Policy and shall not be
permitted to be imported under para 5.1 of the Policy. Reverting
to para 2.17 of FTP (2004-09) read with para2.33 of the
Handbook (2004-09) one finds that import of second-hand
capital goods is made "free". Para 2.17 of FTP (2004-09) is
G in two parts. The first part deals with the meaning of the words
"second-hand goods". The second part states that import of
second-hand capital goods shall be allowed freely. Para 3 of
the Policy circular no. 20/05 states that import of second-hand
goods shall be governed by the provisions of para 2.17 of the
H Policy. Para 2.17 has to be read in its entirety. That para draws
ATUL COMMODITIES PVT. LTD. & ORS. v. COMMISSIONER 619
OF CUSTOMS, COCHIN-9 [S.H. KAPADIA, J.]
>

a dichotomy between "second-hand goods" and "second-hand A
capital goods". Para 2.33 of the Handbook (2004-09) places
restriction only qua computers and not qua photocopying
machines. In our view, therefore, one has to give weightage to
the second part of para 2.17 which allows "free"· import of
second-hand capital goods. What is not permitted vide para 3 8
of the Policy circular no. 20/05 is importation under EPCG. As
• stated above, in this case, we are concerned with imports under
general category and not under EPCG. We are in agreement
with the view expressed by the Larger Bench of the Tribunal that
photocopying machines are capital goods as defined under C
para 9.12. The Tribunal has held that the use of these machines
for rendering services makes them capital goods. In fact, this
finding on the "user" is not challenged by the Department.
Therefore, import of old and used photocopying machines
• stands covered by the concept of "second-hand capital goods"
in para 2.17 (particularly in the light of the last statement in the D
said para, which we have underlined hereinabove).

21. One more aspect needs to be mentioned. Para 2.33
expressly states that import of old and used computers/second-
hand computers are restricted. Para 2.33 of the Handbook do E
not restrict photocopying machines. Import of photocopying
machines are expressly restricted only by Notification no. 31
, dated 19.10.2005. This itself indicates that categorization/re-
categorization cannot be done by policy circulars. Such
exercise has to be undertaken by specific amendment to the F
Policy vide Section 5 of the 1992 Act. In this case, Notification
no. 31 dated 19.10.2005 indicates that the Central Government
has brought in photocopying machines into the category of
second-hand goods vide amendatory Notification, therefore,
import of photocopying machines stand restricted only on and G
• after 19.10.2005. In fact, if the argument of the Department is
to be accepted, then there was no need to issue Notification
no. 31 dated 19.10.2005.

22. For the aforestated reasons, we set aside the
H
620 SUPREME COURT REPORTS [2009) 3 S.C.R.

A impugned judgment of the High Court and we restore the
decision of the Larger Bench of the Tribunal dated 11.5.2005
in the case of Mis Atu/ Commodities Pvt. Ltd. v. CC.

23. Accordingly, we allow the civil appeal filed by the
assessee with no order as to costs.
B
Civil Appeal Nos. 3226, 3977 and 5259 of 2007:

24. These civil appeals are filed by the Department against
the judgment and order dated 15.1.2007 of the Calcutta High
C Court upholding the view expressed by the Larger Bench of
CESTAT in the case of Mis Atul Commodities Pvt. Ltd. v. CC.

25. For the reasons given by us in Civil Appeal No. 2999/
07, hereinabove, we dismiss all the three civil appeals filed by
the Department with no order as to costs.
D
D.G. Appeal dismissed.