By TIOL News Service

MUMBAI, JULY 12, 2017: IT was ascertained after submission of the prescribed reconciliation statement on 22nd July 2004 that the first machine had been shifted to the Pune plant in 2000 and the other to NOIDA which is alleged to be in contravention of regulation 5(3)(a) of Project Import Regulations, 1986.

Accordingly, the appellant was denied the benefit of concessional rate of duty applicable to project imports under heading 9801 by re-classifying the imported goods under heading 80477.40 and 80479.89.

The impugned order passed by the Commissioner of Customs (Import) has found that the concessional rate of duty was conditional upon retention of the imported goods at the location specified by the importer itself [Jackson Tavera - 2002-TIOL-213-SC-CUS relied upon].

A differential duty of Rs.30,22,361/- was confirmed besides confiscating the goods and imposition of redemption fine of Rs.10,00,000/-. A penalty of Rs.5 lakhs was also imposed u/s 112 of the Customs Act, 1962.

In appeal before the CESTAT, the appellant submitted that the imported goods were installed at the premises specified at the time of import and that there is no restriction in the Project Import Regulations, 1986 that imported machinery should not be moved or transferred.

It is also contended that the decisions relied upon by the original authority are not applicable to the present circumstances. Per contra ,reliance is placed in support on the decision in Toyo Engineering - 2006-TIOL-111-SC-CUS .

After extracting regulations 5 and 7 of Project Import Regulations, 1986, the Bench observed -

++ An import governed by Project Import Regulations, 1986 specifies registration of contract and finalisation within a stipulated time. A natural consequence is that the machinery is required to be installed in accordance with the terms of the contract which is entered into for establishing a new unit or for substantial expansion of an existing unit. It would also appear that the importer is obliged to submit the stipulated documents within the prescribed time for finalisation of assessment. Beyond these, no other restrictions have been included in the Regulations or in any of the connected notifications .

++ The consequence of classification under 9801 of the First Schedule to the Customs Tariff Act, 1975 is the bundling of goods; and the conditions that are prescribed in the regulations are related to that bundling for increasing the production capacity of the economy. There is no condition other than import in that state for installation in that form. There is no allegation of disaggregation of the imported goods and, therefore, its possession by another entity does not detract from the principal objective of such bundled classification i.e. capacity building.

++ It is also not a condition of any import- whether assessed provisionally or finally - that the goods should retain the form, structure and ownership that existed at the time of import. The transfer of ownership or re-location of the project after installation and meeting with the project objectives would not erase the classification and assessment that prevailed at the time of import .

++ Eligibility for such classification at the time of import, compliance with project approval conditions and installation at the permitted site are not in dispute here. Classification as 'project import' and assessment thereof cannot be denied.

The appeal was allowed.

(See 2017-TIOL-2383-CESTAT-MUM)