Project import benefit upheld where contract registration before home consumption clearance was satisfied despite post-warehousing registration.

Under the Project Import Regulation, 1986, contract registration before clearance for home consumption was the governing requirement, and Regulation 5(1) was treated as a procedural step rather than a substantive eligibility condition. Because the project had sponsoring authority clearance, the goods fell under the relevant notification and Chapter 98, and the contract was registered before the warehoused goods were cleared for home consumption, the benefit could not be denied merely for delayed registration after warehousing. The lower authorities adopted an incorrect interpretation of the scheme, so the differential duty demand was held unsustainable and the importer was entitled to project import benefit.

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Issues: Whether the demand of customs duty under the Project Import Regulation, 1986 was sustainable where the contract was registered after warehousing but before clearance for home consumption, and whether Regulation 5(1) imposed a substantive eligibility condition or only a procedural requirement.

Analysis: The project was cleared by the sponsoring authority for import under the project import scheme, and the goods were covered by the relevant notification and Chapter 98 of the Customs Tariff Act, 1975. Regulation 4 was read as governing registration before clearance for home consumption, while Regulation 5 was treated as a procedural requirement to be complied with after obtaining sponsoring authority clearance. The absence of a prescribed time limit for such registration, coupled with the fact that the contract was registered before the warehoused goods were cleared for home consumption, showed that the benefit could not be denied merely because registration was not obtained before warehousing. The lower authorities were held to have applied an incorrect interpretation of the scheme.

Conclusion: The demand of differential duty was unsustainable and the importer was entitled to the project import benefit.

Final Conclusion: The impugned orders were set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Under the Project Import Regulation, 1986, contract registration before clearance for home consumption is the governing requirement, and delayed registration after warehousing does not defeat the benefit where sponsoring authority clearance has been obtained and the goods are otherwise eligible.

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