Customs exemption for components of capital goods extended to plastic foil used to erect a greenhouse.

Plastic foil imported for use in erecting a greenhouse was treated as a component of capital goods and therefore eligible for exemption under Customs Notification No. 49/2000. The notification extended to capital goods, capital goods in SKD and CKD condition, and components required for assembly or manufacture of capital goods. Because an erected greenhouse was regarded as equipment falling within capital goods, the plastic sheets used to make or erect it were covered by the exemption. The view that exemption applied only when all components of the capital goods were imported was rejected as unsupported by the notification and the relevant clarification, and the denial of exemption was set aside.

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Issues: Whether plastic foil imported for use in erecting a green house was eligible for exemption under Customs Notification No. 49/2000 as a component of capital goods.

Analysis: The notification covered capital goods, capital goods in SKD and CKD condition, and components of capital goods required for assembly or manufacture of capital goods by the importer. The Department's circular treated an erected green house as an equipment, and equipment fell within the definition of capital goods under the notification. On that basis, plastic sheets used for making or erecting the green house were treated as components of the capital goods. The view that exemption was available only when all components of capital goods were imported had no support in the wording of the notification or in the relevant clarification.

Conclusion: The imported plastic foil was covered by the notification as a component of capital goods, and the denial of exemption was unsustainable.

Final Conclusion: The appeal succeeded and the order denying the benefit of exemption was set aside.

Ratio Decidendi: Where a notification exempts components of capital goods required for assembly or manufacture of capital goods, an item used to erect an equipment that itself qualifies as capital goods falls within the exemption even if it is not the entirety of the capital goods or all its components.

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