ORDER
Moheb Ali M., Member (T)
1. This appeal is directed against the order of the Commissioner of Customs, Mumbai.
2. The facts are that the appellants imported second hand goods viz. IMX analyser and AXYM analyser and sought clearance under bill of entry No. 400175 dated 15.10.2003. The appellants claimed that the said goods are used for diagnosing blood testing, for testing and to run kits for detection of hepatitis, AIDS, cancer diseases etc. They contended that the goods under import are capital goods and hence freely importable. Para 2.17 of Exim Policy 2002 – 2007 stipulates that all second hand goods are restricted goods for imports. However, under para 2.33, import of second hand capital goods, which are not more than 10 years old can be allowed freely. The Commissioner’s contention is that the goods under import are not capital goods and therefore are restricted. Having held so, he confiscated the good under Section 111(d) of the Customs Act and imposed a penalty of Rs. 1 lakh under Section 28 of the Customs Act on the importer. Hence this appeal.
3. Head both sides.
4. The learned advocate, Shri J.P. Sen, argued that the goods under import are instruments for testing and are therefore covered under the definition of capital goods. It is not denied by the department that the instruments are used for detection of various diseases; it is not necessary that the capital goods should necessarily be used in production of goods and even the goods that render a service are covered under the definition of capital goods. The Commissioner’s contention that the instruments for testing should also be of use in research and development, for them to be categorised as capital goods is erroneous. He argued that it is enough if the instrument under import is used for testing to be within the meaning of capital goods. As per the Commissioner’s argument that the goods under import are not capital goods used in rendering services, the advocate argued that the Commissioner went on the footing that ‘service’ means a service mentioned in GATT and such service should necessarily result in earning foreign exchange. The Commissioner analysed word ‘services’ as defined in para 9.46 of the Import Policy 2002-2007. It is argued that the definition given in para 9.46 is an inclusive definition and therefore cannot be restricted to only those services mentioned in that definition. The advocate relied on the Supreme Court’s decision in AIR 1960 SC 610 (V 47 C95) (The State of Bombay and Ors. v. The Hospital Mazdoor Sabha and Ors.). The Hon’ble Court dwelt on the issue of inclusive definitions. The court held that the words used in an inclusive definition, denote extension and cannot be treated as restricted in any sense.
5. The learned JDR, Shri K.K. Srivastava argued that the goods under import are second hand goods. They are not capital goods in as much as they do not contribute to the production of goods nor can they be called capital goods used in rendering services. The goods are primarily used for testing and are not engaged in research and development. Once the goods are not capital goods they cannot be imported without a valid license they being second hand.
6. We have gone through the rival contentions. We observe that the Commissioner proceed on the assumption that ‘capital goods’ must not only be of use in testing but should be simultaneously of use in research and development. He arrived at this conclusion by referring to the phraseology used in the definition of capital goods. We do not find any rationale in the Commissioner’s argument. For goods to be qualified as capital goods it is enough if they are used for testing without them being useful in research and development. As per the second leg of Commissioner’s argument that the services should be only those services which are inclusive in the GATT agreement and such services should earn foreign exchange, we observe that the Commissioner was wrong in restricting the meaning of services as appearing in para 9.46, The Commissioner erred in holding that the definition of services in para 9.46 is restrictive in its scope and meaning. An inclusive definition is wide enough to cover all services. The Commissioner erred in holding that the goods under imports are not capital goods. We hold that the goods are not liable to confiscation. They are freely importable under the Exim Policy as capital goods.
7. The order of the Commissioner is set aside and the appeal is allowed.
(Operative part pronounced in court)