EPCG eligibility for refractory materials and customs limitation under section 28 determined the dispute.

Refractory bricks and similar materials imported for furnace re-lining and maintenance were treated as eligible under the EPCG scheme, because the FTP definition of "capital goods" was read broadly to include plant, machinery, equipment and accessories used directly or indirectly in manufacture, and the reference to "refractories for initial lining" did not exclude replacement or re-lining materials. The Tribunal also held that the imports could qualify as permissible spares within the notification framework. On limitation, a customs demand had to comply with section 28 of the Customs Act, 1962, and could not rely on the notification mechanism to bypass the statutory time limit; in the absence of proved suppression or wilful misstatement, the demand was time-barred and confiscation, redemption fine, and penalty could not stand.

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Issues: (i) Whether refractory bricks/materials imported for re-lining and maintenance of furnaces were covered by the EPCG exemption as "capital goods" or "spares" under the relevant notifications and the Foreign Trade Policy. (ii) Whether the demand was barred by limitation under the Customs Act, 1962, and whether confiscation, redemption fine, and penalty could be sustained.

Issue (i): Whether refractory bricks/materials imported for re-lining and maintenance of furnaces were covered by the EPCG exemption as "capital goods" or "spares" under the relevant notifications and the Foreign Trade Policy.

Analysis: The definition of "capital goods" in the FTP was treated as covering plant, machinery, equipment and accessories required directly or indirectly for manufacture, and the inclusive part was held not to restrict the width of the opening part. Refractory bricks were found to be accessories used for lining and maintenance of furnaces and therefore fell within the main definition. The use of the expression "refractories for initial lining" did not exclude refractory materials used for replacement or re-lining. The Tribunal also held that the imported goods were eligible even as spares within the permissible framework of the notifications.

Conclusion: The issue was decided in favour of the assessee; the imports were held to be covered by the EPCG exemption.

Issue (ii): Whether the demand was barred by limitation under the Customs Act, 1962, and whether confiscation, redemption fine, and penalty could be sustained.

Analysis: The Tribunal held that the demand had to satisfy the limitation under section 28 of the Customs Act, 1962, and that the notification-based recovery mechanism could not override the statutory limitation regime. As the imports were made between 2009 and 2013 and the show cause notice was issued in 2016, the normal limitation period had expired. The Tribunal further found no material to sustain allegations of wilful misstatement or suppression, particularly in view of the installation certificates and subsequent departmental and DGFT actions. Once the exemption claim was accepted on merits, the confiscation and consequential redemption fine and penalty could not survive.

Conclusion: The issue was decided in favour of the assessee; the demand was held time-barred and the confiscation, redemption fine, and penalty were set aside.

Final Conclusion: The appeal succeeded on both merits and limitation, and the impugned order was not sustained.

Ratio Decidendi: Refractory materials used for re-lining or replacement of furnaces can fall within the main definition of "capital goods" as accessories under the EPCG scheme, and a customs demand raised beyond the statutory period under section 28 cannot be sustained in the absence of proved suppression or wilful misstatement.

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