2016 (11) TMI 675 - AT - Customs

Project import - second-hand thermoforming plant and production line - N/N. 132/85 - Held that - the Revenue has failed to establish any provision under Notification 132/85 or the Project Import Regulations or under Chapter heading 98.01 that prohibited sale of goods imported under chapter heading 98.01. The chapter heading 98.01 is a facility extended and not a concession granted. When a complete plant is imported, it may consist of thousands of different items, parts and components. To classify each and every component separately and to determine the value of each and every component would be a herculean task wasting time of importer as well as Revenue. In these circumstances, chapter heading 98.01 has been introduced where the entire plant is classified under a single heading and charged to a single rate of duty. In the instant case, the appellant has clearly imported the goods for bona fide use and manufacture of the intended final product. They have installed machinery in their plant and put the equipment to use for more than two years. It is only when the plant became unviable and was lying idle for more than 18 months that the appellant disposed of the plant. We find that in the absence of any restriction of such sale, the benefit of assessment under chapter heading 98.01 cannot be denied - appeal allowed.

Summary

Issues:
1. Classification of imported goods under project imports.
2. Violation of Project Import Regulations.
3. Prohibition on sale of imported machinery.
4. Benefit of assessment under chapter heading 98.01.

Analysis:
1. The case involved the classification of imported goods under project imports. The appellant imported a second-hand thermoforming plant and production line under chapter heading 98.01 as project imports. The goods were assessed provisionally, and the effective rate of duty prescribed under Notification 132/85 was levied. The issue arose when the goods were not found installed in the factory during a verification process, and it was alleged that the appellant violated the conditions of the Project Import Regulations. Consequently, the goods were reclassified under a different heading, and a demand was issued for various duties.

2. The violation of Project Import Regulations was a key issue in the case. The appellant argued that they had installed and commissioned the plant in their factory, and production had commenced for a significant period. The appellant contended that there was no prohibition on selling the machinery imported under the Project Import Regulations after installation and use. The appellant had submitted evidence of installation and usage of the plant, which the Revenue failed to dispute adequately. The Tribunal found that the appellant had imported the goods for bona fide use and manufacture, and the benefit of assessment under chapter heading 98.01 could not be denied based on the absence of any restriction on sale.

3. The question of whether there was a prohibition on the sale of imported machinery was crucial to the case. The Tribunal noted that there was no provision under Notification 132/85, Project Import Regulations, or Chapter heading 98.01 that prohibited the sale of goods imported under project imports. The Tribunal emphasized that the chapter heading was a facility extended and not a concession granted, and the appellant had used the machinery for its intended purpose for over two years before selling it. The Tribunal distinguished previous cases where goods were not used for the intended purpose, highlighting the importance of actual usage in determining compliance.

4. Finally, the case addressed the benefit of assessment under chapter heading 98.01. The Tribunal held that since the appellant had used the imported machinery for its intended purpose for a substantial period before selling it due to economic unviability, they were entitled to the benefit of assessment under chapter heading 98.01. The Tribunal overturned the impugned order and allowed the appeal, emphasizing the importance of actual usage and lack of prohibition on sale in determining the eligibility for project imports benefits.