Project Import Regulations in India
Project imports is a special concessional rate import facility for assessment and clearance of the goods falling under heading No. 98.01 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). The detailed guidelines is given in the Project Import Regulations. The assessment under the said heading No. 98.01 shall be available only to those goods which are imported (whether in one or more than one consignment) against one or more specific contracts, which have been registered with the appropriate Custom House in the manner specified in regulation 5 . Every importer claiming assessment of the goods falling under the said heading No. 98.01, on or before their importation shall apply in writing to the proper officer at the port where the goods are to be imported or where the duty is to be paid for registration of the contract or contracts, as the case may be.The importer shall within three months from the – Customs clearance for home consumption of the last consignment of the goods or within such extended period as the proper officer may allow, submit a statement indicating the details of the goods imported together with necessary documents as proof regarding the value and quantity of the goods so imported in terms of this Regulation and any other document that may be required by the proper officer for finalisation of the contract.
-CHAPTER 98 of the Indian Customs Tariff Act which is aligned to HSN reads as follows
Project imports; laboratory chemicals; passengers’ baggage, personal importations by air or post; ship stores
This Chapter is to be taken to apply to all goods which satisfy the conditions prescribed therein, even though they may be covered by a more specific heading elsewhere in this Schedule.
Heading 9801 is to be taken to apply to all goods which are imported in accordance with the regulations made under section 157 of the Customs Act, 1962 (52 of 1962) and expressions used in this heading shall have the meaning assigned to them in the said regulations.
Tariff Item Description of goods
9801:- ALL ITEMS OF MACHINERY INCLUDING PRIME MOVERS, INSTRUMENTS, APPARATUS AND APPLIANCES, CONTROL GEAR AND TRANSMISSION EQUIPMENT, AUXILIARY EQUIPMENT (INCLUDING THOSE REQUIRED FOR RESEARCH AND DEVELOPMENT PURPOSES, TESTING AND QUALITY CONTROL), AS WELL AS ALL COMPONENTS (WHETHER FINISHED OR NOT) OR RAW MATERIALS FOR THE MANUFACTURE OF THE AFORESAID ITEMS AND THEIR COMPONENTS, REQUIRED FOR THE INITIAL SETTING UP OF A UNIT, OR THE SUBSTANTIAL EXPANSION OF AN EXISTING UNIT, OF A SPECIFIED :
(1) INDUSTRIAL PLANT,
(2) IRRIGATION PROJECT,
(3) POWER PROJECT,
(4) MINING PROJECT,
(5) PROJECT FOR THE EXPLORATION FOR OIL OR OTHER MINERALS, AND
(6) SUCH OTHER PROJECTS AS THE CENTRAL GOVERNMENT
MAY, HAVING REGARD TO THE ECONOMIC DEVELOPMENT OF THE COUNTRY NOTIFY IN THE OFFICIAL GAZETTE IN THIS BEHALF ; AND SPARE PARTS , OTHER RAW MATERIALS (INCLUDING SEMI-FINISHED MATERIAL) OR CONSUMABLE STORES NOT EXCEEDING 10% OF THE VALUE OF THE GOODS SPECIFIED ABOVE PROVIDED THAT SUCH SPARE PARTS, RAW MATERIALS OR CONSUMABLE STORES ARE ESSENTIAL FOR THE MAINTENANCE OF THE PLANT OR PROJECT MENTIONED IN (1) TO (6) ABOVE
9801 00 All items of machinery including prime movers, instruments, apparatus and appliances, control gear and transmission equipment, auxiliary equipment (including those required for research and development purposes, testing and quality control), as well as all components (whether finished or not) or raw materials for the manufacture of the aforesaid items and their components, required for the initial setting up of a unit, or the substantial expansion of an existing unit, of a specified :
- industrial plant,
- irrigation project,
- power project,
- mining project,
- project for the exploration for oil or other minerals, and
- such other projects as the Central Government may, having regard to the economic development of the country notify in the Official Gazette in this behalf; and spare parts, other raw materials (including semi-finished materials of consumable stores) not exceeding 10% of the value of the goods specified above, provided that such spare parts, raw materials or consumable stores are essential for the maintenance of the plant or project mentioned in (1) to (6) above :
— Machinery :
9801 00 11 —- For industrial plant project
9801 00 12 —- For irrigation plant
9801 00 13 —- For power project
9801 00 14 —- For mining project
9801 00 15 —- Project for exploration of oil or other minerals
9801 00 19 —- For other projects
9801 00 20 — Components (whether or not finished or not) or raw materials for the manufacture of aforesaid items required for the initial setting up of a unit or the substantial expansion of a unit
9801 00 30 — Spare parts and other raw materials (including semi-finished materials or consumable stores for the maintenance of plant or project
Notification No.12 /2012 –Customs dated the 17th March, 2012 specifies the exemption conditionality’s under the project imports mentioned as below:
In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962) and in supersession of the notification of the Government of India in the Ministry of Finance ( Department of Revenue), No. 21/2002- Customs, dated the 1st March, 2002 Published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 118(E) dated the 1st March, 2002, except as respects things done or omitted to be done before such supersession, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description specified in column (3) of the Table below or column (3) of the said Table read with the relevant List appended hereto, as the case may be, and falling within the Chapter, heading, sub-heading or tariff item of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in column (2) of the said Table, when imported into India,-
From so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the standard rate specified in the corresponding entry in column (4) of the said Table;
From so much of the additional duty leviable thereon under sub-section (1) of section 3 of the said Customs Tariff Act 1975 (51 of 1975) as is in excess of the additional duty rate specified in the corresponding entry in column (5) of the said Table, subject to any of the conditions, specified in the Annexure to this notification, the condition number of which is mentioned in the corresponding entry in column (6) of the said Table:
The project import regulations were further clarified vide Circular No.- 12/2011-CustomsDated: 01 /03/2011 which clarified the aspect of requirement of cash security in lieu of bank guarantee. Referring to Board’s Circular No. 89 dated 9-8-1995 issued from F.No. 528/ 73/ 92 – (TU), in partial modification of letter F.No.521/192/ 90-Cus.(TU) dated 9.1.1992, advising Customs Houses / Commissionerates to take cash security equivalent to 2% of the CIF value of goods sought to be imported, subject to a maximum of Rs. 50 lakhs, at the time of registration of Project Contract under Project Import Regulations, 1986. It was further advised that in cases, where cash security of 2% of the value of the contract exceeds Rs. 50 lakhs, importers may be given an option to furnish cash security of Rs. 50 lakhs and balance amount by a bank guarantee, backed by an undertaking to renew it till the finalisation of the contract. Government Departments and Public Sector Undertakings, however, continued to be exempted from furnishing the above cash security in terms of the practice in vogue, Vide Board’s letter F.No. 521/192/90-Cus.(TU) dated 14.3.1993. Essentially stating that:
The issue regarding furnishing of a cash security equal to 2% of the CIF value of the goods sought to be imported under Project Import has further been examined by the Board. In view of the reduction in import duty and the inordinate delay associated with finalisation of the said project imports, it has been decided to do away with the practice of taking cash security. Henceforth, subject to a maximum of Rs. 1 Crore, only a bank guarantee, equivalent to 2% of the CIF value of goods sought to be imported, would be taken at the time of registration of the Project Contract under Project Import Regulations, 1986. The said bank guarantee shall be backed by an undertaking that it would be renewed from time to time. However, the said bank guarantee need not be renewed on completion of a period of six months from the date of submission of necessary documents, from the jurisdictional Central Excise authority or any other specified authority, as proof of utilisation / installation of goods for the finalisation of the contract. The project import of Government Departments and Public Sector Undertakings would continue to be covered by Board’s letter F.No. 521/92/90- Cus.(TU) dated 14.3.1993.
Circular No.22/2011-Customs,4th May, 2011.CBEC essentially stated that:
it has been decided by the Board that finalization of assessments under Project imports should completed within a period of 60 days from the date of submission of required documents by the importer. However, in exceptional circumstances where it is not possible to complete the finalization within the time limit for justifiable reasons, the time limit may be extended by the jurisdictional Commissioner of Customs for such further period as may be decided by him and for the reasons to be recorded in writing.
It may also be recalled that as per Board’s Circular No.12/2001-Customs dated 1.3.2011 issued from File No.334/3/2011-TRU, the field formations were advised not to renew the bank guarantee in respect of project imports, on completion of a period of six months from the date of submission of necessary documents from the jurisdictional Central Excise authority or any other specified authority, as proof of utilization / installation of goods for the finalization of the contract. It is hereby clarified that the above said relaxation is applicable, only if all the required documents including certificate for installation of imported goods at the Plant/ Project site, utilization of imported goods in the manufacture of declared goods etc. are submitted up to the satisfaction of proper officer for finalisation of contract. The Commissioner shall therefore ensure that the aforesaid time limit for finalization of Project Imports under PIR, 1986 is adhered to in all cases, so that such finalization is completed within the validity period of the bank guarantee in order to ensure that the government revenue is safeguarded. However, in cases where the importers have not submitted the requisite documents in time, it may be ensured that the bank guarantees are kept alive until finalization of project imports so that resultant delay does not adversely affect the interests of revenue.
Further, referring to the Regulation 7 of PIR, 1986, which stipulates that importer shall submit a statement indicating details of goods to be imported together with necessary documents as proof regarding the value and quantity of the goods imported within three months from the date of clearance of the last consignment along with any other documents that may be required by the proper officer for finalization of the Project Imports cases. CBEC states that: while the provisions contained in the Regulations are explicit, it has been brought to the notice of the Board that there are a large number of cases where project imports have not been finalized on account of non-submission of Statement by importers which indicate that the implementation of these provisions has been far from satisfactory. In order to address this issue and to deter the importers from non-submission or delayed submission of relevant documents, the Commissioners should ensure that in cases where the requisite Statement / documents under Regulation 7 of PIR, 1986 is not submitted in time or submitted incomplete, then necessary action for enforcing bond / undertaking, cash security/ bank guarantees executed in this regard, issue of notice for demand of duty, penalty for non-compliance with the provisions of the Regulations may be initiated against the importer. The adjudicating authority is expected to appreciate the evidence on record including documents submitted, if any, to arrive at a decision whether duty is to be confirmed and / or penalty imposed.
-In respect of goods cleared under Release Advice (RA), at ports other than the port where the contract for project imports is registered, it has been reported by field formations that provisionally assessed Bills of Entry are not finalized expeditiously, causing delay in finalization of Project Imports. It has, therefore, been decided that importer and his Custom House Agent should ensure that the provisionally assessed Bills of Entry for the imported goods at the ports other than the port of registration of project imports are finally assessed and audited at the respective ports, and should be submitted along with the documents submitted for finalization of Project Imports. In these cases the concerned Commissioner should ensure that such Bills of Entry are finalized without undue delay.
-In terms of the provisions of Regulation 7 of PIR, 1986 read with Board’s instructions for finalization of project imports, the importer is also required to submit a certificate from a registered Chartered Engineer certifying the installation of imported items of machinery along with other documents. In this regard, all importers may be advised to produce this document without any delay so as to ensure timely finalization of Project Imports. Further, in order to ensure that the imported goods have actually been used for the projects for which goods have been imported, Plant Site Verification (PSV) is required to be done in cases where value of project exceeds Rs. 1 crore and in other cases at least 10% of the project imports registered will be subject to such plant verification. All the relevant particulars of the contract giving complete details of the goods imported shall be communicated to the jurisdictional Central Excise Office to confirm whether the same have been installed at the registered plant site in time. It has been decided by Board that jurisdictional Central Excise Commissionerate should ensure that Plant Site Verification, where ever applicable, is completed within 15 days of submission of relevant documents by the importers. However, in cases of Government Departments and Public Sector Undertakings, the requirement of PSV under project imports can be fulfilled by means of issuing appropriate Certificate by the Head of PSU / Government Undertaking in the rank of Chairman / Executive Director.
Source: CBEC, Min of Commerce, Govt. of India
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