Project import classification fails where a single machine does not create the required 25% capacity expansion.

Project import classification under Heading 98.01 requires a qualifying substantial expansion of existing installed capacity, meaning an increase of not less than 25%. A single reverse osmosis machine imported for factory use did not satisfy that test because the evidence did not show that its installation would expand oil-manufacturing capacity to the required extent. The exemption claimed under Notification No. 14/2004-Cus. was also unavailable because it was confined to water supply projects and did not cover the imported machine. The claimed classification and exemption were therefore not sustained.

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Issues: Whether a single reverse osmosis machine imported for use in the factory qualified as a project import under Heading 98.01 and Regulation 3(a)(ii) of the Project Import Regulations, 1986, and whether exemption under Notification No. 14/2004-Cus. dated 08.01.2004 was .

Analysis: The expression "substantial expansion" in the project import regime contemplates an expansion that increases the existing installed capacity by not less than 25%. The imported machine was a single RO machine and the evidence did not show that its installation would increase the appellant's installed capacity for manufacture of oil by the required extent. The notification relied upon was confined to water supply projects and did not cover the imported machine. The claimed classification and exemption therefore could not be sustained.

Conclusion: The import did not qualify as a project import and the exemption under the notification was not available.

Ratio Decidendi: A single machine can be treated as a project import only if its installation results in a qualifying substantial expansion of the existing installed capacity, namely an increase of not less than 25%.

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