Initial setting up under project import treatment can include later equipment imports needed to achieve licensed plant capacity.

Import of empty seamless steel cylinders was treated as eligible for project import concessional treatment because it formed part of the undertaking's initial setting up. The relevant test was whether the import was required to achieve the licensed capacity of the gas plant, and the fact that the plant had been commissioned and commercial production had commenced did not, by itself, rule out initial setting up. Technical certification and recommendation also supported the claim. On that basis, refusal to register the contract under project import was not justified.

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Issues: Whether the import of empty seamless steel cylinders was eligible for project import treatment as part of the initial setting up of the undertaking, despite the plant having been commissioned and commercial production having commenced.

Analysis: The appeal turned on the scope of "initial setting up" under project import treatment. The relevant facts showed that the cylinders were required to meet the licensed capacity of the gas plant and were the first import of such cylinders. Commissioning of a plant does not necessarily mean that the undertaking has been fully established or that its rated capacity has been achieved, and the commencement of commercial production does not by itself exclude a later import from being part of the initial setting up where production depends on the availability of the imported equipment. The certification and recommendation of the technical authorities also supported the claim for concessional project import treatment.

Conclusion: The import was held to be part of the initial setting up of the undertaking and the refusal to register the contract under project import was not justified.

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