Tariff classification and capital goods test bar EPCG benefit for storage bins used only for storage.

Where an EPCG authorisation specifies both the product description and the applicable HS code, the imported goods must conform to the tariff classification actually applicable; description alone is insufficient. Storage bins made of galvanized sheets, nuts, bolts, angles and frames, without mechanical or thermal equipment, were classified as containers of iron and steel, not machinery, so EPCG benefit was unavailable. Separately, storage bins that only store goods and do not perform a manufacturing or production function do not qualify as capital goods under the Foreign Trade Policy, and were therefore outside the EPCG scheme. The denial of EPCG benefit was upheld.

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Issues: (i) Whether goods described in the EPCG authorisation, but classifiable under a different tariff heading, were entitled to EPCG benefit; (ii) whether storage bins without mechanical or thermal equipment could be treated as capital goods under the Foreign Trade Policy.

Issue (i): Whether goods described in the EPCG authorisation, but classifiable under a different tariff heading, were entitled to EPCG benefit.

Analysis: The ITC HS code is intended to align import policy with customs tariff classification and is not a mere formality. The authorisation and the imported goods must satisfy the relevant tariff description as well as the applicable HS code. The goods imported were found to be storage bins made of galvanized sheets, nuts, bolts, angles and frames, without any electrical, mechanical or thermal equipment. On that factual basis, they were held to fall under the heading for containers of iron and steel and not under the machinery heading claimed by the importer. Since the authorisation did not cover that classification, the EPCG benefit could not be extended.

Conclusion: The issue was decided against the assessee and in favour of Revenue.

Issue (ii): Whether storage bins without mechanical or thermal equipment could be treated as capital goods under the Foreign Trade Policy.

Analysis: Capital goods under the Foreign Trade Policy mean plant, machinery, equipment or accessories required for manufacture or production, including specified allied items. Mere storage bins, which only store goods and do not perform any manufacturing or production function, do not satisfy that definition. The goods in question were therefore outside the scope of capital goods and, by consequence, outside the EPCG scheme.

Conclusion: The issue was decided against the assessee and in favour of Revenue.

Final Conclusion: The imported goods were correctly classified as storage containers and not as machinery or capital goods, so the denial of EPCG benefit was upheld and the appeal failed.

Ratio Decidendi: Where an import licence or EPCG authorisation specifies both description and HS classification, the imported goods must conform to the tariff classification actually applicable; goods that are merely storage containers and do not answer the definition of capital goods cannot claim EPCG exemption on the basis of description alone.

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