Project import benefit applies to testing materials used for plant performance trials under an integrated supply and commissioning contract.

Hot rolled coils imported for performance testing under a plant contract were treated as raw materials required for the initial setting up of the industrial plant, because the contract covered design, supply, erection, commissioning and testing as an integrated process. The performance tests, including use of raw materials, were necessary before final acceptance and to ensure guaranteed output. On a harmonious and practical reading of Heading 84.66 of the Customs Tariff, the imports qualified for project import benefit, and rejection of registration was unsustainable.

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Issues: Whether hot rolled coils imported for testing under the performance guarantee clause of the plant contract were eligible for project import benefit under Heading 84.66 of the First Schedule to the Customs Tariff Act, 1975.

Analysis: The contract contemplated design, supply, erection, commissioning and testing of the complete plant, and the performance tests, including use of raw materials, were an integral part of the contract and necessary before final acceptance. The imported coils were required for testing so that the plant could achieve guaranteed performance and output, and the correspondence from the Government also recognised such imports as connected with initial setting up of the unit. On a harmonious and practical construction of the tariff entry, the goods fell within the scope of raw materials required for the initial setting up of the industrial plant.

Conclusion: The import qualified for project import benefit under Heading 84.66 and the rejection of registration was unsustainable.

Final Conclusion: The appellants were entitled to concessional project import treatment for the imported hot rolled coils, and the impugned order was set aside.

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