SC widens scope of capital goods

The Supreme Court today widened the meaning of 'capital goods' to benefit textile manufacturers, who export their goods after importing machinery to modernise their plants to make them internationally competitive.

The Apex Court dismissed the appeal of the Commissioner of Customs, Kolkata.

The Kolkata Commissioner of Customs insisted that the 100 per cent customs duty exemption was available only to those machinery which were used directly for the manufacture of textile goods that were strictly meant for export.

A Bench consisting of Justice S N Variava and Justice Arijit Pasayat ruled that the benefit would also go to machinery that was meant for stitching, knitting, cutting yarn or fabric.

Similarly, the equipment for dyeing and drying, inspecting defects and other allied functions, would also be entitled to the Customs duty exemption, the judgment said.

The term 'capital goods', said the judgment, meant goods which are used in the manufacture of textile garments and also goods which would be required for manufacture or production of other goods, which includes packaging machinery and equipment.

The term also includes a range of instruments used for testing, research and development.

The term includes machines for pollution control, refrigeration, power generating sets and the like.

"If after manufacturing of textile garments have to be packed, the machinery required for packing would be capital goods required for manufacture of textile garments. Similarly, refrigeration machinery for refrigerating the plant would also fall within the term capital goods required for manufacture of textile garments," the jugment explained.

A large number of textile companies had imported such allied machinery. The commissioner of customs denied exemption to such machinery.

On appeal, the Customs Excise & gold [Control] Appellate Tribunal overruled him and pointed out that export of garments to Europe and the United States of America required good quality equipment according to the standards of the International Federation of Knitting Technologists.

Therefore several machinery which are not directly involved in the manufacture of textile garments were required to be imported.

This view was upheld by the Supreme Court.