Free import of second-hand capital goods upheld for knitting machine beams; confiscation and penalty were unsustainable.

Second-hand beams imported for wrap knitting machines were treated as freely importable capital goods under the Foreign Trade Policy. Paragraph 2.17 permits free import of second-hand capital goods, and paragraph 9.12 defines capital goods broadly to include plant, machinery, equipment and accessories used in manufacture or production. The goods were found to be separate equipment for supplying yarn in the knitting process, not merely restricted spares, so they fell within the capital goods definition. On that basis, the import did not contravene customs law or the policy, and confiscation, redemption fine and penalty were unsustainable.

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Issues: Whether the imported second-hand beams for wrap knitting machines were capital goods freely importable under the Foreign Trade Policy and, if so, whether confiscation, redemption fine and penalty were sustainable.

Analysis: Paragraph 2.17 of the Foreign Trade Policy permits free import of second-hand capital goods, and paragraph 9.12 defines capital goods broadly to include plant, machinery, equipment and accessories required for manufacture or production. The goods were found to be separate equipment used for supplying yarn in the knitting process and not merely restricted spares. On that basis, they fell within the definition of capital goods and did not attract the restriction applied by the adjudicating authority.

Conclusion: The import was not in violation of the Customs law or the Foreign Trade Policy, and the confiscation, redemption fine and penalty were unsustainable. The appeal was allowed.

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