Project-import duty treatment survives loss of goods at sea when they are not diverted to other use.

Project-imported goods lost or destroyed by circumstances beyond the importer's control, and not diverted to any alternate use, were treated as eligible for project-rate assessment; differential duty could not be demanded merely because the goods were never installed or commissioned in the project. The article notes that the imported gas turbine and generator were irretrievably lost at sea before installation, with no commercial diversion or other use, and that administrative instructions and departmental conference conclusions supported continued project-import treatment in such cases. On that basis, the differential duty demand was held unsustainable, while other objections such as provisional assessment and jurisdiction were left open.

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Issues: Whether differential duty could be demanded on project-imported goods that were lost and destroyed at sea before installation in the project and had not been diverted for any other use.

Analysis: The imported gas turbine and generator were irretrievably lost due to a sea storm and were therefore unavailable for installation in the power project. The demand was sought on the footing that the goods were not used in the project and hence should be assessed at the normal tariff rate, but the goods had not been diverted or put to any alternate use. The project import framework and the departmental conference conclusions recognised that damaged or destroyed goods, where not commercialised or diverted, could not be denied project-rate treatment merely because they were not installed, and the Revenue was bound by the applicable administrative instructions.

Conclusion: The demand for differential duty was not sustainable and was set aside, in favour of the assessee.

Final Conclusion: The appeal succeeded on the core issue of duty liability, while other objections, including those concerning provisional assessment and jurisdiction, were left open.

Ratio Decidendi: Where project-imported goods are lost or destroyed by circumstances beyond the importer's control and are not diverted for any other use, differential duty cannot be demanded merely because the goods were not installed or commissioned in the project.

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