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Import Processes for Consortia
A joint venture (JV) between two organisations, formed under the Indian Partnership Act, was granted a notification of exemption for the import of road construction equipment. However, based on this certificate, one party of the JV imported equipment for clearance without payment of duty and has been reprimanded. Taxand India looks at the case.
The Revenue rejected the exemption claim on the ground that it could only be allowed if the equipment was imported by "a person who has been awarded the contract" (ie the JV) whereas in the present case, goods were imported by one party making up the JV.
The Supreme Court held that the import of equipment by one of the partners of an unincorporated joint venture in the individual name of that partner could not be considered as an import by "a person who had been awarded the contract" and therefore, the company did not fulfil the stipulated requirement.
This decision is fact specific and relies on the basis that no declaration was made by the importer that it was acting on behalf of a JV (as its partner); given this, it may still be possible to take a position that an end-use based exemption can be availed when imports are effected by one of the members of a consortium (in the form of an unincorporated joint venture executing a project), if it can be proved that the imports were on behalf of the said consortium.
This decision may necessitate a review of import processes by various consortia (in the form of unincorporated joint ventures, brought into existence for the purpose of executing of various projects). Import / customs clearance related provisions in the underlying contract documents may also merit a re-look.
Your Taxand contacts for further queries are:
Pratyush Saha T. +91 124 339 5010