Bonded duty demand and customs exemption for refrigerated trucks were upheld where transport use did not make them capital goods.

A bonded duty-demand proceeding may validly encompass denial of exemption where the show cause notice and bond together indicate recovery of the duty difference, so the demand is not beyond the notice. Refrigerated trucks imported for a 100% EOU and used only to transport frozen raw materials to the factory and finished goods to the port were held not to qualify as capital goods for exemption under the customs notification. The customs demand and the lower authorities' findings were therefore sustained.

---

---

Issues: (i) Whether the demand could be sustained when the show cause notice proposed enforcement of the bond and bank guarantee; and (ii) whether refrigerated trucks imported by a 100% EOU could be treated as capital goods eligible for exemption under the relevant customs notification.

Issue (i): Whether the demand could be sustained when the show cause notice proposed enforcement of the bond and bank guarantee.

Analysis: The bond was executed specifically to secure the duty difference between normal duty without the exemption and duty payable under the EPCG scheme. The show cause notice proposed enforcement of that bond. On that basis, the department necessarily questioned the availability of the exemption and sought recovery of customs duty on the imported refrigerated trucks. The original and appellate authorities had examined the exemption claim and rejected it on merits, so the proceedings were not beyond the notice.

Conclusion: This issue was decided against the appellant.

Issue (ii): Whether refrigerated trucks imported by a 100% EOU could be treated as capital goods eligible for exemption under the relevant customs notification.

Analysis: Although refrigeration equipment may fall within the broad definition of capital goods in the EXIM Policy, the actual use of the refrigerated trucks was for transporting frozen raw materials to the factory and finished goods to the port. That use did not make the trucks capital goods for the purpose of the exemption notification. The cited precedent on refrigerated trucks was treated as directly applicable against the appellant.

Conclusion: This issue was decided against the appellant.

Final Conclusion: The customs demand and the findings of the lower authorities were sustained, and the appeal failed in its entirety.

Ratio Decidendi: A bonded duty-demand proceeding can validly encompass denial of exemption where the notice and bond together indicate recovery of the duty difference, and refrigerated trucks used only for transport do not qualify as capital goods for exemption under the notification.

---