Inclusive definition of capital goods allowed free import of second-hand diagnostic instruments without any research and development condition.

Second-hand diagnostic and testing instruments were treated as capital goods under the Exim Policy because they were used for testing and diagnosis of diseases, and the policy's inclusive definition of "services" was read broadly rather than restrictively. The view that capital goods must also be useful for research and development was rejected, so no additional research-linked condition was imposed. On that basis, the instruments were regarded as freely importable capital goods rather than restricted second-hand goods requiring a licence, and the stated consequence was that confiscation and penalty under the Customs Act were not attracted.

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Issues: Whether second-hand diagnostic/testing instruments qualified as capital goods and were freely importable under the Exim Policy, and whether confiscation and penalty under the Customs Act were justified.

Analysis: The instruments were used for testing and diagnosis of diseases. A condition that capital goods must also be useful in research and development was rejected. The meaning of "services" in the policy was held to be wide, as an inclusive definition cannot be read as restrictive. On that basis, the goods were treated as capital goods and not as restricted second-hand goods requiring a licence.

Conclusion: The goods were held to be freely importable as capital goods and not liable to confiscation or penalty.

Ratio Decidendi: Where the policy uses an inclusive definition, it must be given an expansive meaning, and goods used for testing may qualify as capital goods without any additional requirement that they be used in research and development.

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