Capital goods treatment for used audio visual equipment barred confiscation where later DGFT clarification removed licence requirement.

Used audio visual equipment imported by a service provider was treated as capital goods under the Foreign Trade Policy following a subsequent DGFT clarification, so the restriction on second hand goods did not require an import licence. On that basis, the Customs Act confiscation could not stand, and the related redemption fine and penalty were set aside. The decision turns on the importer's status as a provider of audio visual services and the clarificatory position that such equipment qualified as capital goods for that use.

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Issues: Whether used audio visual equipment imported by a service provider could be treated as capital goods so as to be imported without a licence under para 2.17 of the Foreign Trade Policy, and whether confiscation under the Customs Act was sustainable.

Analysis: The goods were imported without an import licence on the footing that second hand goods were restricted under para 2.17 of the Foreign Trade Policy unless they were capital goods. The later clarification of the DGFT stated that audio visual equipment imported by service providers could be treated as capital goods. On that basis, the imported goods answered the description of capital goods for the importer, who was providing audio visual services, and the requirement of an import licence did not apply.

Conclusion: The confiscation and consequential redemption fine and penalty were not sustainable; the issue was decided in favour of the assessee.

Ratio Decidendi: Where imported second hand goods are shown, by a subsequent clarificatory position of the competent authority, to be capital goods for a service provider, import without a licence does not attract confiscation under the customs and foreign trade law framework.

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