Import policy classification and capital goods criteria controlled clearance; redemption fine was reduced for actual-user importers.

Imported digital bearing checker was held not to fall within a licence for restricted spares because it was an instrument in its own right, not a spare satisfying the policy definition. It also did not qualify for Open General Licence treatment as bearing inspection equipment, since it was not capital goods used directly for production or rendering services and was only maintenance-support equipment. On redemption fine, the actual-user character of the import and absence of profit motive made a fine equal to the full value excessive, so the fine was reduced. Confiscation and denial of clearance were otherwise sustained.

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Issues: (i) Whether the imported digital bearing checker was covered by the licence for restricted spares. (ii) Whether the item was importable under Open General Licence as bearing inspection equipment falling within the relevant import policy entry. (iii) Whether the redemption fine required reduction.

Issue (i): Whether the imported digital bearing checker was covered by the licence for restricted spares.

Analysis: The licence could be used only for goods answering the policy definition of spares. The imported article was an instrument by itself and not a spare ready for replacement of machinery. The policy entry relied upon had to be read with the definition of spares, and the requisite criterion was not satisfied.

Conclusion: The import was not covered by the licence for restricted spares and the finding was against the assessee.

Issue (ii): Whether the item was importable under Open General Licence as bearing inspection equipment falling within the relevant import policy entry.

Analysis: Mere portability did not take the item out of the description of inspection equipment. However, the item still had to answer the policy requirement of capital goods. Capital goods were those used for production or for rendering services directly, and not merely equipment that assisted in maintenance of machinery. As the imported item was not capital goods, it could not qualify under the OGL entry.

Conclusion: The import was not covered under the OGL entry and the finding was against the assessee.

Issue (iii): Whether the redemption fine required reduction.

Analysis: The appellants were actual users and no profit motive was involved. In those circumstances, a redemption fine at 100% of the value of the goods was considered excessive.

Conclusion: The redemption fine was reduced.

Final Conclusion: The confiscation and rejection of import clearance were sustained, but the redemption fine was substantially reduced, resulting in only limited relief to the appellants.

Ratio Decidendi: An imported article can be cleared under a spares licence or an OGL entry only if it satisfies the policy definition applicable to that category, and equipment used merely for maintenance support does not qualify as capital goods for services.

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