Capital goods classification upheld for titanium reactor lining under the import scheme, preserving exemption eligibility.

Titanium sheets imported under the Status Holder Incentive Scheme were treated as capital goods because the notification used an inclusive definition covering items used directly or indirectly in manufacture, including materials forming part of plant or equipment. The sheets functioned as lining material in chemical reactors for a corrosive process, and the EPCG licence had already classified them as capital goods under the same policy framework. Customs could not take a different view from the licensing authority on that classification, so the exemption under Notification No. 104/2009 was upheld.

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Issues: Whether titanium sheets imported under the Status Holder Incentive Scheme were eligible as capital goods for exemption under Notification No. 104/2009.

Analysis: The definition of capital goods in the notification was wide and inclusive, covering plant, machinery, equipment, accessories and items required directly or indirectly for manufacture or production, including refractories for initial lining. The titanium sheets were used as lining material in chemical reactors for a corrosive process and were therefore employed as part of the reactor structure in the assessee's manufacturing activity. The goods were also specifically included as capital goods in the EPCG licence, and the definition under the Foreign Trade Policy was treated as identical to the notification. Once the licensing authority had accepted the items as capital goods, customs could not take a different view on the same goods for SHIS clearance.

Conclusion: The titanium sheets were capital goods eligible for exemption under Notification No. 104/2009, so the assessee's appeal was allowed and the Revenue's appeal was rejected.

Final Conclusion: The exemption benefit was upheld for the imported titanium sheets, and the contrary order disallowing the benefit was set aside.

Ratio Decidendi: Where the policy and notification define capital goods in inclusive terms and the licensing authority classifies the imported item as capital goods for the same import scheme framework, customs cannot deny that classification merely because the goods function as lining material or form part of the capital equipment.

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