Project Import - Applicability of exempted individual goods to goods forming part of project import.

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Project import - Applicability of exempted individual goods to goods forming part of project import: F. No. 528/213/87-Cus. (T.U.) lCD, dated 8-8-1987. Government of India, Ministry of Finance (Department of Revenue), New Delhi. Subject: Project Imports - Applicability of exemption on individual goods to goods forming part of project imports - Propriety and legality regarding: Find enclosed copy of D.O. letter no. S/S-433/86C, dated the 2nd June, 1987 from Collector of Customs, Bombay on the subject noted above. 2. The board has reviewed the position. As is well-known the basic idea underlying the creation of a tariff item pertaining to 'project imports' is simplification of assessment in as much as all imports required for a project are subjected to a uniform rate of duty. The assessment to customs duty is dependent on the classification of goods. Once a contract is registered as for initial setting up or for substantial expansion of an existing plant etc., the imports covered by the contract become classifiable under the Heading No. 98.01 of the Customs Tariff liable to duty at the project rate (earlier Heading No. 84.66 of CTA). Such goods forming part of the contract and assessed under Heading 98.01 lose their identity and cannot be classified on merits under any other heading of the Customs Tariff. Hence any differential rate of duty prescribed by exemption notification on individual goods (other than those for goods specifically covered under tariff heading 98.01) will not come into play for the assessment of project goods. Board also approves the view expressed by the Collector of Customs, Bombay that once a contract for project import is registered with the Customs House, no deregistration of the same or a part thereof should be allowed. JUDICIAL ANALYSIS C.B.E. & C. Circular Letter No. F 528/213/87-Cus/TU/ICO, dated 8-8-87 was relied by the Vice-President of the Tribunal but the majority held that project import assessment under Heading 98.01 of Customs Tariff Act, 1975 cannot be forced on the importer in respect of certain item carrying even lower rate of duty and already imported prior to Registration of the contract and regarding which the importer stated clearly in his application for Registration that they are not to be imported under project import facility notwithstanding that these items figured in the project import licence. Commissioner v. Maxxcon (I) Ltd. - 2001 (137) E.L.T. 590 (Tri. - Del.). C.B.E. & C Circular dated 8-8-1987 was referred by the Revenue, but the Tribunal held that in the absence of any source of power under which the Ministry of Finance by its letter dated 8-8-1987 has sought to modify, alter or clarify the contents of the Notification No. 132/85-Cus in exercise of powers under Section 25(1) of Customs Act, 1962, the clarificatory letter issued would have no legal efficacy. Hence, even though the machines (imported) were registered as project imports, in the light of non obstinate clause contained in Notification No. 132/85-Cus., the assessee is entitled to benefit under Notification Nos. 114/80-Cus., and 113/87-Cus. - Indian Express Newspapers (Bombay) Pvt. Ltd. v. Union of India - 2002 (150) E.L.T. 1374 (Bom.).

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