Project import exemption for drinking water schemes applies only to water treatment plant goods, not distribution pipes.

Exemption for drinking water supply project imports is limited to goods used in a water treatment plant, such as desalination, demineralization or purification equipment that makes water fit for human or animal consumption. Pipes used only for transmission and distribution in a water supply scheme do not qualify for Project Import benefit under Heading 98.01 or exemption under Notification No. 21/2002-Cus. read with Notification No. 42/96-Cus. The Tribunal followed the settled position that such distribution infrastructure falls outside the scope of the project import scheme, and the goods were therefore not eligible for the claimed exemption.

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Issues: Whether pipes imported for a drinking water supply project, but used in transmission and distribution of water rather than in a water treatment plant, were eligible for Project Import benefit under Customs Tariff Heading 98.01 and exemption under Notification No. 21/2002-Cus. read with Notification No. 42/96-Cus.

Analysis: The exemption for drinking water supply projects is confined to a plant for desalination, demineralization or purification of water, or similar processes intended to make water fit for human or animal consumption. The Tribunal noted that the issue had already been finally settled by the Supreme Court, which upheld the view that pipes used in an existing water distribution improvement scheme do not qualify as a water treatment plant and therefore do not fall within the scope of the project import benefit or the notification-based exemption. The same principle was followed by the Bombay High Court.

Conclusion: The imported pipes were not eligible for Project Import benefit or exemption under Notification No. 21/2002-Cus. The issue was answered against the assessee.

Final Conclusion: The appeals failed because the goods were held to be outside the scope of the project import scheme for drinking water treatment projects.

Ratio Decidendi: Exemption for drinking water supply project imports applies only to goods used in a water treatment plant that makes water fit for consumption, and not to pipes used merely in water transmission or distribution systems.

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