Substantial expansion for project import concession can cover modernisation of an existing industrial unit under customs regulations.

Modernisation and revamping of an existing industrial unit can qualify as substantial expansion for project import concession where the imports form part of an approved major project and the contract is registered under the prescribed customs regulations. The commentary notes that the benefit under Heading 84.66 depended on initial setting up or substantial expansion, but the relevant regulations did not require a formal reference to section 13 of the Industries (Development and Regulation) Act, 1951. Because the proposed changes involved major alterations in machinery, furnaces, rolling capacity, thickness tolerance, and output characteristics, the conditions for contract registration were treated as substantially satisfied and the project import benefit was upheld.

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Issues: Whether modernisation and revamping of an existing industrial unit could amount to substantial expansion for the purpose of project import concession and registration of contract under the relevant customs regime.

Analysis: The concession under Heading 84.66 of the Customs Tariff depended on registration of the contract in accordance with the prescribed regulations and on the project being for initial setting up or substantial expansion of an existing unit. The record showed that the imports formed part of a major project approved by the competent governmental and technical authorities, that the licences were endorsed as project imports, and that the proposed modifications were not merely cosmetic but involved substantial changes in machinery, furnaces, rolling capacity, thickness tolerance, and output characteristics. The applicable regulations did not make the concession turn on a formal reference to section 13 of the Industries (Development and Regulation) Act, 1951, and modernisation or revamping did not by themselves exclude substantial expansion. On the facts, the conditions for registration were treated as substantially fulfilled.

Conclusion: The challenge to the appellate order failed and the contract registration and project import benefit were upheld in favour of the importer.

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