Broad import-policy definition of capital goods can cover second-hand tools and a diesel engine used for standby power.

A broad import-policy definition of capital goods can extend to equipment directly or indirectly required for manufacture or production, including machine tools and similar items. On that basis, second-hand tools may be imported without a licence where they fall within the policy definition and no breach of the applicable conditions is shown. A second-hand diesel engine imported as part of a motor car was also treated as permissible for import, because it was intended for standby power in the factory and was not shown to be excluded by the policy. The appellate view allowing clearance of the goods was sustained.

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Issues: (i) Whether a second-hand diesel engine imported as a part of a motor car could be treated as capital goods or otherwise covered for import under the relevant Import Policy provisions. (ii) Whether the imported tools, though second-hand, could be regarded as capital goods and cleared without a licence under the relevant Import Policy provisions.

Issue (i): Whether a second-hand diesel engine imported as a part of a motor car could be treated as capital goods or otherwise covered for import under the relevant Import Policy provisions.

Analysis: The engine, though part of a motor car, was not itself capable of satisfying any human need in isolation and therefore could not be treated as consumer goods merely because it originated from a consumer durable. The record also supported the explanation that it was intended to provide standby power in the factory. Since it was a second-hand diesel engine and there was no adequate basis to disturb the appellate finding, interference was unwarranted.

Conclusion: The finding that the diesel engine was permissible for import was upheld, in favour of the assessee.

Issue (ii): Whether the imported tools, though second-hand, could be regarded as capital goods and cleared without a licence under the relevant Import Policy provisions.

Analysis: The nature of the tools was not specifically established, but the policy definition of capital goods was wide enough to include plant, machinery, equipment and accessories required directly or indirectly for manufacture or production, including machine tools and similar equipment. On that footing, the tools were capable of falling within the expression capital goods, and second-hand capital goods were covered by the policy provision relied upon by the importer. No non-compliance with the applicable conditions was shown.

Conclusion: The tools were rightly treated as capital goods and their import was upheld, in favour of the assessee.

Final Conclusion: The appellate order allowing clearance of the goods was sustained and the department's challenge failed.

Ratio Decidendi: A broad import-policy definition of capital goods extends to equipment indirectly required for manufacture or production, and a second-hand item may be cleared where it falls within that definition and no breach of the applicable policy condition is established.

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