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Ratnamani Metal And Tubes Ltd vs Commissioner of Customs, Mundra - (Customs, Excise and Service Tax Appellate Tribunal) (23 Sep 2022)

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 Appellant purchased a "Complete Used Stainless Steel Tube Manufacturing Plant" including parts, spares, accessories, tools & tackles and office related furniture/equipment, at a total purchase price of 31,00,000 Euros from SN Aussenhandel E.K. Germany in terms of purchase agreement and sought clearance of the said goods vide Bill of Entry. The proper officer of customs, in respect of all other parts of second-hand tube manufacturing plant, permitted clearance.

However, in respect of office furniture/equipment, he denied clearance on the premise that, the said item cannot be construed as "capital goods" and accordingly the same falls under Sr. II of para. 2.31 of Foreign Trade Policy - 2015-2020 whereunder the second-hand goods that are not capital goods are restricted and is importable only against authorization.

However, the Additional Commissioner of Customs, vide his Order ordered confiscation of the said goods under Section 111(d) of the Customs Act, 1962 and gave an option to redeem the goods on payment of fine of Rs. 5,00,000.00 and further imposed penalty of Rs. 4,00,00.00 on the Appellant holding that the second hand office furniture/equipment are not "capital goods" as the same are not required for manufacture or production either directly or indirectly, therefore not covered under definition of capital 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.

The office furniture, tools etc which are used in relation to the manufacturing plant/services answers "user test" and in view of the wide and inclusive definition of "capital goods" under the Foreign Trade Policy; such goods 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. In the circumstances, the said goods cannot be held to be liable for confiscation under Section 111(d) of the Customs Act. 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. The impugned order is not set aside. Appeal allowed.


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