IMPORTANT POINT
What is required under Heading 98.01 Tariff Act is that machinery imported should be required for initial setting up of a unit or substantial expansion of an existing unit and mere possibility of its being used subsequently for other project would not debar assessee from availing benefit of project import scheme.

Headnote:Customs Tariff Act, 1975—Heading 98.01—Benefit under Project Import Scheme—Notification No. 72/85-Cus., dt. 17-3-1985—Respondent-assessee was engaged in setting up of Industrial Unit—M/s. Indian Farmers Fertilizers Cooperative Ltd. entered into contract with Parent company of respondent in Japan for commissioning an Ammonia Storage Package Unit—Respondent imported various special construction equipments and claimed benefit under Project Import Scheme—Asst. Collector and appellate authority rejected request on ground that imported goods were property of respondent and even after execution of project goods would remain property of respondent and ownership of imported goods would not pass on to Project Authority and thus goods did not qualify for classification under Heading 98.01 of the Act—Tribunal set aside the order and held respondent eligible for benefit—Appeal—Heading 98.01 covered all “auxiliary equipments” also which were required for initial setting up of unit and could be imported under Project Import Scheme—Mere possibility of imported equipments being used subsequently for other project would not debar respondent from availing benefit of project import—No interference was warranted.
Held : It is not disputed that construction equipments imported by the respondent were used in the initial setting up of the plant. The Assistant Collector and the appellate authority denied the facility of the project import as the ownership of the imported goods would not pass to the project authority and that the machinery imported could be utilized elsewhere in the setting up of any other plant. What is required under heading 98.01 Tariff Act is that the machinery imported should be required "for the initial setting up of a unit, or the substantial expansion of an existing unit". This heading specifically mentions and includes "auxiliary equipment". The "auxiliary equipment" has not been defined under the Tariff Act. As per Dictionary meaning, extracted above, it is an equipment which aids or helps. Any equipment which aids or helps in the setting up of an industrial plant would fall and be covered under heading 98.01 of the Tariff Act. The mere possibility of its being used subsequently for other project would not debar the respondent from availing the facility of project import. If the contention of the Revenue is accepted, then resultant effect as put by the Tribunal.(Para 9)
The goods imported by the respondent such as hydle truck cranes, excavator, shovel loader, truck, forklift truck, power generators, diesel welder, welding rectifier, containers tools and tackles instruments, level Nako with tripod and theodlite nako with accessories & tripod would certainly be auxiliary equipments which would help in the initial setting up of the industrial plant. The facility of the project import was denied to the respondent because the ownership of the imported goods did not pass to the project authority. Since it is not disputed that the construction equipments imported by the respondent were used in the initial setting up of the plant, then, as per the provisions of heading 98.01 of the Tariff Act the respondent could not be denied the benefit of the project import.(Para 11)

JUDGMENT

Bhan, J.—Revenue has filed this appeal against the final Order No. 1813/2000-B dated 25.10.2000 in Appeal No. C/164/89-B2 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (for short "the Tribunal") whereby the Tribunal has set aside the order in original as well as the order passed in the appeal and held that the machinery and equipment imported by the assessee-respondent was classifiable under Heading 98.01 of the First Schedule to the Customs Tariff Act, 1975 (for short "the Tariff Act") and granted the benefit of Project Import under the Project Import Regulation to the assessee.

Facts :

2. Assessee-respondent (for short "the respondent") is engaged in the setting up of industrial unit such as fertiliser plant. M/s. Indian Farmers Fertilisers Cooperative Ltd. entered into a contract with their parent Company M/s. Toyo Engineering Corporation, Japan for designing, engineering, fabricating and commissioning an Ammonia Storage Package Unit and a Co-generation Plant. Their Parent Company in turn entered into an agreement with the respondent to carry out all the works, services, erection and commissioning of the project on turn key basis. The respondent filed an application on 17.03.1986 with the Contract Registration Cell for grant of the benefit under the Project Import Scheme read with Notification No. 72/85-Cus., dated 17.03.1985 in respect of goods sought to be imported. Respondent has imported various special construction equipments, available at their overseas project at Kuwait, and filed eleven Bills of entry in March, 1986 for the clearance of goods, which were cleared on payment of duty under protest.

3. The Assistant Collector, under Adjudication Order No. S/5-Misc. 376/86-CC, dated 18.08.1987, rejected the request of the respondent for registration under the Project Import Regulation on the ground that the imported goods are the property of the respondent and even after execution and completion of the work, these goods would remain the property of the respondent and the ownership of the imported goods would not pass on to the Project Authority. It further held that as the goods could be used for other work elsewhere after the completion of the present project, the imported goods would not qualify for classification under Heading 98.01 of the Tariff Act.

4. Being aggrieved, the respondent filed an appeal before the Appellate Authority which was rejected. It was held that as per Heading 98.01 of the Tariff Act the items of machinery or component parts should go into the initial setting up of the unit and should not merely be used as an aid for the setting up of the unit or its substantial expansion. As the respondent could utilise the machinery elsewhere in the setting up of other plants, the impugned goods could not be classified under Heading 98.01 of the Tariff Act.

5. The respondent being aggrieved filed an appeal before the Tribunal which has been accepted by the impugned order. The Tribunal held that the grounds on which both the lower authorities have denied the facility of project import to the respondent were not sustainable in law. After detailed discussion the Tribunal set aside each of the findings recorded by the appellate authority and held that the respondent would be eligible to the benefit asked for.

6. Heading 98.01 of the Tariff Act reads as under:

"98.01 All items of machinery including prime movers, instruments, apparatus and appliances, control gear and transmission equipment, auxiliary equipment (including those required for research and development purposes, testing and quality control), as well as all components (whether finished or not) or raw materials for the manufacture of the aforesaid items and their components, required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified:

(1)Industrial plant,

(2)Irrigation project,

(3)Power project,

(4)Mining project,

(5)Project for the exploration for oil or other minerals, and

(6)Such o

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