Capital goods import eligibility for second-hand dolleys turned on service use, not free foreign exchange earnings.

Second-hand dolleys imported for cargo-loading operations were treated as capital goods used to render services, and the policy condition requiring tradable services and free foreign exchange earnings was confined to the definition of services, not capital goods. On that reading, the absence of free foreign exchange earnings did not defeat eligibility for free import without a specific licence. The imported dolleys were therefore regarded as second-hand capital goods eligible for import, and the confiscation, fine, and penalty were set aside in favour of the assessee.

---

---

Issues: Whether second-hand dolleys imported for use in loading and unloading pallets from cargo loaders qualify as capital goods entitled to free import without a specific licence, and whether the absence of free foreign exchange earnings from the related services denies such status.

Analysis: The imported dolleys were used as equipment for rendering services in cargo operations. The definition of services in the relevant policy referred to tradable services and earning free foreign exchange, but that requirement was found to be confined to the policy definition of services and not to the definition of capital goods. The authorities below had denied the benefit on the ground that the appellant was not earning free foreign exchange, but that condition was held to be inapplicable to the question whether the goods themselves were capital goods eligible for free import.

Conclusion: The imported dolleys were held to be second-hand capital goods not requiring a specific licence for import, and the confiscation, fine, and penalty were set aside in favour of the assessee.

---