Project exemption under Notification 108/95-C.E. cannot be denied without proof of premature removal of goods.

Exemption under Notification No. 108/95-C.E. could not be denied on a mere presumption that hydraulic excavators supplied to project contractors might be withdrawn before project completion. The decisive inquiry was whether the goods were actually removed during execution of the UN or internationally financed project, and the record contained no evidence of the removal date, project completion date, or any concrete diversion of the machinery. Because the demand was confirmed without proof of breach of the notification condition, the exemption remained available. The stated interpretation also recognised that capital goods may be withdrawn after completion of the project, but not during its execution.

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Issues: Whether the exemption under Notification No. 108/95-C.E. could be denied on the basis of a presumption that the hydraulic excavators supplied to project contractors might be withdrawn from the project, in the absence of evidence that they were removed before completion of the project.

Analysis: The exemption was available for goods supplied for use in projects financed by United Nations or international organisations, and the decisive factual inquiry was whether the goods were withdrawn during the course of execution of the project. The record did not contain evidence of the date of removal, the date of completion of the project, or any concrete material showing premature diversion or withdrawal of the machinery. The demand had been confirmed on a presumption rather than on proof of breach of the notification condition. The conclusion was reinforced by the interpretation that capital goods may be withdrawn after completion of the project, but not during its execution.

Conclusion: The exemption could not be denied in the absence of proof of removal of the goods before completion of the project, and the duty demand was unsustainable.

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