Project import benefit for expansion machinery depends on proving the system's functional use in production and testing.

Machinery imported for the substantial expansion of an existing industrial unit may qualify for project import treatment under Tariff Item 84.66 when the expansion is supported by approval and other contemporaneous records. Where concessional customs duty depends on a specific functional use, such as software production or testing of mini-computers, the deciding authority must examine that factual requirement before denying the benefit. The import registration claim was therefore not rejected outright; the expansion issue was treated favourably, while the functional-use question was left for fresh factual examination and proof before the lower authority.

---

---

Issues: (i) whether the appellants were an existing industrial unit undertaking substantial expansion so as to qualify for project import treatment under Tariff Item 84.66; (ii) whether the imported computer system could be treated as machinery eligible for concessional customs duty if it was required for software production and testing of the mini-computers to be manufactured.

Issue (i): whether the appellants were an existing industrial unit undertaking substantial expansion so as to qualify for project import treatment under Tariff Item 84.66

Analysis: The record contained material showing that the appellants were already functioning as an industrial unit and that their proposed manufacture of mini-computers and micro-processor based systems had been approved by the competent authorities. The letters and sanctions relied upon supported the case that the import was connected with expansion of the existing unit, and the absence of registration of the main project was not treated as decisive against eligibility where the imported machinery was claimed independently for expansion.

Conclusion: The appellants were held to be an existing industrial unit pursuing substantial expansion, in their favour.

Issue (ii): whether the imported computer system could be treated as machinery eligible for concessional customs duty if it was required for software production and testing of the mini-computers to be manufactured

Analysis: The Tribunal accepted that the crucial factual question was whether the imported system was needed for producing software and for testing the hardware of the mini-computers. Since the lower authorities had not examined that factual aspect, the matter was not finally decided against the appellants. Instead, the Tribunal held that if the appellants could establish such use before the lower authority on reliable evidence, the benefit of project import treatment and consequential duty relief would follow.

Conclusion: The issue was left for fresh examination on remand, with the appellants succeeding in principle and the claimed concession made admissible subject to proof.

Final Conclusion: The rejection of the import registration claim was set aside, the appellants obtained favourable findings on expansion and eligibility in principle, and the matter was sent back for de novo decision on the remaining factual question.

Ratio Decidendi: Machinery imported for use in the substantial expansion of an existing industrial unit may qualify for project import benefit under Tariff Item 84.66, and where eligibility turns on a specific functional use, the deciding authority must examine that factual requirement before refusing the concession.

---