Project import benefit requires equipment directly used in setting up a project; transport wagons do not qualify.

Chapter Heading 98.01 grants project import treatment only to machinery, apparatus, auxiliary equipment and components or raw materials for their manufacture that are required for the initial setting up of a specified project. The expression "auxiliary equipment" was construed narrowly to mean equipment directly used in setting up the project, not transport equipment that merely assists movement of materials. Special purpose wagons used only to carry coal from the mine to the thermal plant were treated as transport equipment, and prior decisions had similarly excluded vehicles, wheel sets and conveying systems from the benefit. The imported components and raw materials for the wagons were therefore not eligible for project import treatment.

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Issues: Whether components and raw material imported for manufacture of special purpose railway wagons, intended to transport coal to a power project, qualified for the project import benefit as auxiliary equipment or components required for the initial setting up of the project.

Analysis: Chapter Heading 98.01 extends project import treatment to machinery, apparatus, appliances, control gear, transmission equipment, auxiliary equipment, and components or raw materials for their manufacture, where required for the initial setting up of a specified project. The expression "auxiliary equipment" was treated as requiring a narrow construction and as meaning equipment directly used in the setting up of the project, not merely equipment that assists project-related transport. Special purpose wagons used only for carriage of coal from the mine to the thermal plant were held to be transport equipment and not equipment directly used in setting up the project. The earlier decisions relied on by the Tribunal had already ruled that transport-related items such as vehicles, wheel sets, and conveying systems do not fall within the project import benefit as auxiliary equipment.

Conclusion: The imported components and raw materials for manufacture of wagons were not eligible for project import benefit, and the appeal failed.

Ratio Decidendi: For project import purposes, auxiliary equipment must be equipment directly used in the setting up of the project, and transport equipment used only for moving materials or goods to or within the project site does not qualify.

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