ORDER
K.S. Venkataramani, Member (T)
1. This appeal is directed against the order dated 15-3-1988 passed by the Collector of Customs, Bombay by which he had confirmed the demand of Customs duty amounting to Rs. 2,54,15,846/- as being payable by the appellants. The facts briefly are that the appellants were granted an industrial licence in June, 1981 for setting up a DMT plant. The licence envisaged the purchase of a 2nd hand DMT plant situated in Burlington, New Jersey, USA owned by Her-cofina. On 12-7-1982, the appellants applied to the Bombay Customs House for registration of their Project contract with Hercofina, USA for the import of Second hand DMT plant for assessment under Heading 84.66 of the Customs Tariff Act, 1975 under Project Import Regulations. Under this Heading in the Customs Tariff Act, 1975, all items of machinery, instruments, apparatus and appliances, control gear and transmission equipment, auxiliary equipment or raw materials 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 of oil or other minerals and such other projects as may be notified by the Govt. are to be assessed at 40% ad valorem. The Heading also contains a proviso to the effect that provided these 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 prescribed by regulations under Section 157 of the Customs Act, 1962 and that such contract has been so registered before the goods are cleared out of the Customs charge. The Heading also includes for such assessment all apare parts, other raw materials or consumable stores as a part of a contract registered with the Custom House provided, the total value of such spare parts etc. does not exceed 10% of the value of the goods covered by the main contract. Accordingly, the appellant’s contract was registered by the Custom House for a value of US $ 17 millions of capital goods, spares, repairs, replacements, new equipments etc. as per import licence P/CG/12083613 dated 21-1-1982 for the value of US $ 16 millions equivalent to Rs. 15,66,82,100/- at the exchange rate US $ 10.85 = Rs. 100/-. The appellants also executed a continuity bond, in terms of which, all assessments were provisional and were to be finalised on submission of reconciliation statement with supporting documents. During the course of imports, the department in a letter dated 9/15-12-1982 informed the appellants that dismantling, packing and forwarding charges formed a part of assessable value and the department also started debiting these charges to the import licence. The appellants resisted this and obtained a clarification from the licensing authority to the effect that dismantling charges were not taken into account while issuing the licence. The department thereupon recredited the earlier debited dismantling charges to the licence. On 16-12-1986, a less charge demand was issued by the Custom House to the appellants for Rs. 1,67,60,323/-being duty towards dismantling charges in respect of nine Bills of Entry. They we’re also asked to submit a reconciliation statement which they were required to submit within 3 months of the last import consisting of the Project which took place in Feb. 1985. Such a statement was submitted by the appellants in which they informed that out of total value of the capital goods licence, US $ 17 million, they imported goods worth US $ 16,159,348.24. The Custom House, however, was of the view that the appellants had not furnished a complete accountal of the remittances made towards the value of capital goods, dismantling charges, fee for technology and technical assistance which were called for and duly furnished by the appellants in which they gave, the following expenditure were actually incurred and remitted:-
Capital goods, spares etc. : US $ 1,65,73,234.00 Fee for technical know-how and technical : US $ 17,50,000.00 assistance. Dismantling charges etc. : US $ 55,00,738.00 Thereupon a Show Cause Notice dated 1-10-1987 was issued to the appellants containing the following charges:- (i) Dismantling charges etc. are pre-importation charges and therefore formed part of assessable value. Foreign exchange expenditure of US $ 1,65,73,234.00 + US $55,00,738.00 = US $2,20,74,072.00 incurred by BDMC towards landed cost of project are includible in the assessable value under Section 14 of Customs Act and therefore, chargeable to duty. Duty however has been paid on US $ 1,81,99.788.00. As such BDMC is required to pay duty on a value equivalent to US $ 38,74,085.00 equal to Rs. 3,57,05,852.00 at the exchange rate of import licence i.e. US $ 10.85 = Rs. 100/-. (ii) BDMC were informed by the department as early as 15-12-1982 that dismantling charges formed the part of assessable value. Yet during the course of importation, BDMC did not disclose the foreign exchange expenditure of US $ 55,00,738/- till by letter dated 8-7-1987. Enquiry was made regarding remittances towards cost of project and dismantling charges. Though higher value as worked out above were paid for the project, the same was not duly declared in the reconciliation statement. This appears to constitute an offence under Section lll(m) of the Customs Act. Since the goods are not available for confiscation, BDMC is liable for penalty- (iii) Value of the main machinery imported is Rs. 16,23,72,949.00. Spares to the extent of 10% value of the main machinery are only eligible for project rate of duty. Spares in excess of this limit are chargeable to duty on merit. The value of the spares is Rs. 2,03,80,587.00 as against Rs. 1,62,37,294/- admissible to concession of project rate of duty. Hence, duty on merit on a value of Rs. 41,43,293/- is also recoverable in addition to (i) above. Duty on Rs. 41,43,293/- at the rate of 60% + 40%, + CVD 12% under Heading 84.65-CTA is Rs. 51,37,683/-. Since duty amounting to Rs. 26,93,140/- under project has already been paid on these excess spares also, differential duty recoverable on excess spares work out to Rs. 24,44,543.00. In view of the above, the department has required BDMC to explain within 10 days of receipt of the notice as to why duty amounting to Rs. 2,56,346.00 should not be recovered from them and why penalty should not be imposed on them under Section 112 of the Customs Act. BDMC were also informed that the Collector of Customs would hear them on 14-10-1987". On consideration of the appellant's detailed reply thereto and after hearing them in the matter, the Collector of Customs passed the impugned order against which the present appeal has been preferred.
2. The Senior Counsel Shri F.S. Nariman appeared for the appellants alongwith counsels Shri D.B. Engineer, S. Ganesh, N.N. Seervai, H.C. Daruwala. Shri Nariman contended that the project import under the import contract, which is duly registered with the Custom House in accordance with the Project Imports (Registration of Contract) Regulations, 1965 stands on an entirely different footing from the point of view of determination of the assessable value of the imported goods, as compared to a case where individual items of plant and machinery are imported and the assessable value of each item therefore, has to be determined under Section 14 of the Customs Act. The learned counsel urged that in a case of a registered project import, the import is made under a contract duly registered with the Customs before the goods are cleared, which is a specific requirement under the Heading 84.66-CTA. It was pointed out that at the time of granting registration, the Customs authorities had called for and examined the import contract and all other relevant information and particulars including inter alia, the valuation of the plant and machinery. The appellants had furnished alongwith the application for registration, the Valuation Report in respect of the plant from a Chartered Engineer, which had been accepted by the Government. It was after considering the contract and valuation report that the Customs had registered the contract for assessment as project import under Heading 84.66-CTA. Therefore, the Customs authorities, it was argued, are bound by law to value the imported plant and machinery in accordance with their registered value, which, in this case, was US $ 10 million set out in the registered project import contract. It was argued that the value so registered under the Project Import Regulations is always the starting point for assessment and it may be modified or enhanced only due to circumstances after the registration of the contract and the date of import. The assessable value is to be derived from the base value as on the date of registration of contract. Shri Nariman further contended that provisional assessment of the goods to duty in this context has to be read alongwith the provisions of the Project Imports (Registration of Contract) Regulations because the registration under these regulations is itself decided upon after due application of mind and making further enquiries. There is, thus, a pre-asscssmenl of the goods in respect of their value under project import assessment. It was further argued that in this case, the dismantling charges amounting to US $ 5.5 million, which was sought to be included originally by the Customs authorities, were not included in the import licence issued to the appellants and this fact had been clearly clarified both by the Chief Controller of Imports and Exports as well as the Reserve Bank of India to the Customs authorities. The Customs authorities had, in fact, accepted this position, when they agreed to re-credit the amount debited towards dismantling charges back to the import licence. The learned counsel urged that it is not permissible for two authorities of the Government to take a different view in respect of the same matter. He also questioned the reliance placed by the Collector in his order in the Bombay High Court judgment in the case of Union of India v. Glaxo Laboratories (India) Limited – 1984 (17) ELT 284 by contending that the case decided by the Bombay High Court dealt with valuation of an individual import under Section 14 and was not in the context of project import under the Project Import Regulations whereas the appellant’s case is a case which rests on a harmonisation of the Project Import Regulations which includes a pre-assessment under Heading 84.66-CTA with provisions of Section 14 of the Customs Act. The value for assessment and the value as given in the import licence, according to the appellants, go hand-in-hand and in fact, if it were not done, it will lead to a position when for lack of balance value in the licence, the goods will become confiscable. A further submission was also made that even if the dismantling charges were to be added, it was only the expenditure incurred towards the dismantling, packing and forwarding charges which would be includible in the assessable value, and the balance amount consisting of expenditure incurred on inspection carried out to verify the conditions of the plant and to determine the parts which would be feasible to take to India, the insulation removal charges, which was statutory expenditure under the US laws, Insurance charges incurred in USA as well as charges and reimbursement of expenses to Tata Incorporated, would all be elements of indirect expenditure not connected with the value of the goods, and hence these items will not form part of assessable value. In other words, charges other than dismantling, packing and forwarding have all been incurred by the importers and are not connected with the value of the goods imported and as such, were not includible because the charges incurred have to have a nexus with the value of the goods. It was also pointed out that even in the initial less charge demand, only dismantling, forwarding and packing charges were included and not other elements of expenditure.
3. The learned Senior counsel also contended that the Collector ought to have excluded the proportionate value of the goods left behind in America as under Section 14 of the Customs Act, it could only be value less this amount upon which Customs duty can be levied being the assessable value. As regards the question whether the appellants had imported spares of a total value of Rs. 2,03,80,587/- and whether this was in excess of 10% of the value of the main machinery, it was submitted that the appellants in their reply dated 2-12-1987 to the Collector of Customs exhaustively dealt with the issue of spare parts and had established that they have not imported spare parts in excess of 10% of the value of the main machinery. Exhibits ‘K’ & ‘L’ to the appellant’s reply were referred to wherein it was contended that parts to the value of Rs. 29,23,355 have been incorrectly included as spares whereas, in fact, these items were, according to the appellants, integral part of the main DMT plant. The Collector has not at all given any finding with reference to the detailed contentions raised by the appellants in this regard. It was also incorrect and unlawful on the part of the Collector to have applied different currency exchange rates as compared to the exchange rate taken for the main DMT plant in determining the value of the spares as a percentage of the value of the plant. The Collector, according to the appellants, ought to have taken the same exchange rate for the spares as for the main plant.
4. Shri S. Krishnamurthy, the learned SDR appearing for the department contended that it was wrong to argue that registration of the contract under the Project Import Regulations would amount to a pre-assessment. The assessment of goods to duty imply two aspects, nemely, classification and value. The registration of the contract under the Project Import Regulations is only to facilitate classification of the goods under one tariff heading, namely, 84.66, which would otherwise have resulted in classification of the constituent units of the project under various appropriate headings in the Tariff. The facility of project import follows registration of the contract and also the execution of a bond for provisional assessment under Section 18 of the Customs Act, 1962, which was also duly complied with the appellants in this case. The provisional assessment is clearly in respect of valuation and these assessments are to be finalised after the clearance of the last consignment under the Project on the basis of re-conciliation statement. The learned SDR reiterated the reliance placed on the Glaxo Laboratory case as in the impugned order of the Collector to say that expense of CIF value for import licence purposes would not mean that the same would constitute assessable value under Section 14 of the Customs Act also. The learned SDR contended that all the elements of expenditure incurred in relation to the goods to make the goods ready for delivery for “shipment should go into the assessable value. The dismantling and other charges had been taken upon themselves by the appellants herein who had by an agreement with the supplier, purchased the plant in as-is-where-is condition. If they had not done so, the plant could not have been imported into India without incurring expenses towards dismantling and other charges. The learned SDR, in this context, relied upon the decision of this Tribunal in the case of Bombay Gas Company Ltd. v. Collector of Customs, Bombay in Appeal No. CD(SB) (T) A. No. 336/77-A in its Order No. 636/84-A dated 15-9-1984 wherein the Tribunal held that cost of services incurred by the appellants abroad in the context of the valuation of the goods should get reflected in the assessable value of the goods when delivered in India. It was also pointed out that the Collector has followed the provisions of Section 14 specifying the exchange rate applicable as that in force of the filing of the Bill of Entry and the valuation of the spares adopted by the Collector also, according to the learned SDR, needs no modification.
5. We have carefully considered the submissions made by the learned Senior counsel and the learned SDR. It has been argued that the assessment in this case cannot be held to be provisional. The reasoning of the appellants is that the question whether the assessment is provisional or not has to be seen in the context of the Project Imports (Registration of Contract) Regulations, 1965 whereunder the Customs Officers registered the contract in terms of the Regulations which require application of mind as to the various aspects of the import including its valuation. According to the appellants, there is thus a pre-assessment of the value on the date of registration of the contract for which purpose, reliance is placed on the provisions of Regulation 3(d) of the Project Imports Regulations which requires submission of all particulars relating to the project. On examining these contentions, it is found that the appellants have executed a continuity bond on 7-7-1982, the terms of which was for the provisional assessment of the import of the consignments relating to the project. In the Show Cause Notice, it is brought out that as per project register, the last import was effected in February, 1.985 and the appellants were required as per Project Import Regulations and the Custom House Public Notice No. 8/76 to submit a reconciliation statement within three months of the last import. The above goes to show that the consignment has been subjected to provisional assessment of duty under Section 18 of the Customs Act, 1962. The wording of Section 18 begins by stating “Notwithstanding anything contained in this Act”, the proper officer may for the reason given therein, direct that the goods be assessed provisionally, if the importer furnishes such security as the proper officer deems fit for the payment of the deficiency if any between the duty finally assessed and the duty provisionally assessed. Therefore, the very wording of Section 18 for provisional assessment shows that such provisional assessment is not controlled by anything contained in the Act elsewhere because of the use of the non obstante clause in the Section. A non obstante clause is used in a provision to indicate that that provision should prevail despite anything to the contrary in any other provision. Such a clause has the effect of over-riding the provisions of a law or of the law in which the said clause is inserted – (1981) 2 SCC 109 – Tulsiram Ghasiram v. Lakshmi Chand Ghambhir Chand and Ors. and also see AIR 1953 Nag. 234 – Superintendent and Remembrancer of Legal Affairs, West Bengal v. Salyen Bhowmick and Ors. In this view of the matter, we do not see any force in the argument that because the contract was registered by the Custom House in terms of Project Import (Registration of Contract) Regulations, 1965, the same would amount to pre-assessment as regards value. It is also significant to note that when it comes to the recovery provisions of short levy under Section 28 of the Customs Act, 1962, it has been laid down that the relevant date for the issue of notice for such short levy, in a case where duty is provisionally assessed under Section 18, will be the date of adjustment of duty after the final assessment thereof. Therefore, it is not acceptable that once the contract is registered, the assessment as regards value is also final and complete. On the other hand, the history of this item in the Customs Tariff for Project Import would show that it was a facility for easy classification of machinery and equipment imported for setting up the project. The Item 72 (i) of the erstwhile Indian Customs Tariff was identically worded and we note that when a new item relating to that was introduced, namely, Item 72A in the Tariff (the Budget of 1965), the Finance Minister explained the rationale by saying that it was with a view to avoid delay as a result of meticulous assessment at the appropriate rate of each constituent item required for setting up the project. It was further staled, while introducing the item, that the contract or contracts should have to be registered in advance with the Customs authorities, and a provisional assessment will be made immediately, obviating to the maximum possible extent, the need for detailed assessment of individual lots after the goods arrive. (This is contained in a letter F. No. 21/36/65-Cus. I dated 15-11-1965 of the Central Board of Excise & Customs, issued at the time of notifying the Project Imports (Registration of Contract) Regulations, 1965 notified in the Gazette of India on 18-11-1965). Therefore, it is clear that the idea of introducing a separate item for project imports was to avoid the hassle of classification of each constituent item under appropriate head in the Customs Tariff. For this reason also, we are unable to agree with the contention that the very registration of a contract in terms of the Project Regulations amounts to final assessment as regards value. On the other hand, in our view, the very scheme of Project Imports assessment is relating fundamentally to the classification of items under one head relating to the project which are to be assessed provisionally to be finalised after all the imports comprising the projects are cleared and at the end of which a reconciliation statement is to be submitted and verified. It is in evidence that the appellants had in fact followed this procedure, as is shown by the provisional assessment bonds executed by them with the Custom House in the manner set out by the Public Notice in this regard issued by the Custom House.
Another argument has been that the dismantling charges amounting to US $ 5,5 million could not be included in the assessable value because the Import Licensing Authority as well as the Reserve Bank of India had informed the Customs that these charges had not been included in the import licence and did not form part of the CIF value and that further, the acceptance of this position by the Customs authorities is indicated by the fact that they themselves had re-credited back to the import licence the amount debited towards dismantling charges. We are, however, unable to agree with the contention in this regard because it has been well settled by the Bombay High Court decision in the case of Union of India v. Glaxo Laboratories (India) Ltd. -1984 (17) ELT 284 (Bom.) that the value by which import licence is to be debited by the Customs authorities is the actual CIF value and not the international price of imported goods which is relevant and material only for calculating import duty thereon under Section 14(1) of the Customs Act, 1962. The Bombay High Court had held so after observing that the Customs Officer have to perform two duties. They have to guard the revenue and assess any imported article on the basis of Section 14(1) of the Customs Act, 1962 and that it is also part of their duty to debit the Customs copy of the licence with the value of the imported goods. The High Court pointed out the philosophy behind the grant of import licence having regard the need to conserve foreign exchange which is the guiding principle of the licensing authority for granting the licence, as distinct from the Customs authorities’ role under the Customs Act of assessing the goods to duty in terms of Section 14(1) of the Customs Act, 1962. A similar view was earlier taken by the Madras High Court in the case of 5. Narayanan v. Collector of Customs, Madras -1962 (2) MLJ 421. This view has been also followed by the Tribunal in the case of Junta Traders v. Collector of Customs, Bombay -1988 (34) ELT 65 and also in the case of Virchem Corporation v. Collector of Customs, Bombay -1985 (19) ELT 257. This Tribunal had also taken a similar view in Saurashtra Cement & Chemical Industries Ltd. v. Collector of Customs, Ahmedabad -1983 (12) ELT 829 where the Tribunal observed “import licence and Customs duty are two separate and distinct matters governed by two separate laws. One is not dependent on the other…”. “The Import Policy makes provision for granting such licences or places some of these imports under OGL. The question of rate of duty applicable to imports is determined by Customs when the goods actually arrive. If at this stage, an importer of machinery, instruments etc. were to claim assessment under Heading 84.66 just by having his contract registered under the Regulations, regardless of the purpose of his import and regardless also of the fact that his particular purpose may have nothing to do with the six industries and projects specified in that heading, the scheme of the Tariff would certainly be distorted”. Therefore, just because the licensing authorities and the Reserve Bank of India had confirmed that the import licence was not issued covering the dismantling cost, it would not, for that reason, mean that that value should be taken as the assessable value for purposes of Section 14 of the Customs Act, 1962 under which the value has to be assessed at the price at which such or like goods are ordinarily sold or offered for sale, and the provisions of the Section make it clear that an agreed price between the parties, though genuine, would not be conclusive for determining the assessable value for Customs duty, because the value under Section 14(1) (a) is deemed value. Therefore, the Customs authorities were in effect only acting on the lines of the ratio of the Bombay High Court decision when they accepted the appellant’s plea not to debit the dismantling charges to the import licence. This act of theirs cannot be taken as an admission by the Customs authorities that the dismantling charges were also not includible in the assessable value under Section 1.4(1) of the Customs Act. The argument that the Bombay High court judgment is not applicable to the present case of import under Project Import Regulations, is not acceptable as we have seen that these Regulations are for classification purposes and registration thereunder would not be conclusive of valuation aspect.
6. This brings us to the next question of the includability in the assessable value of the various elements including dismantling, packing and forwarding charges amounting to US $ 5.5 million. These consists of dismantling charges US $ 21,35,767.50 and packing & forwarding charges US $ 3,80,632.50. Apart from this, the balance amount out of US $ 5.5 million is on account of expenditure incurred on inspection, insulation, removal charges, insurance charges incurred in the USA and Tata Incorporated charges and reimbursement of Misc. expenses. The appellants have submitted that none of these charges are includible in the assessable value. They have, however, made an alternative plea that the Custom House should not include in the assessable value, expenditure other than dismantling, packing and forwarding charges because according to them, these other charges are totally unconnected with the, value of the plant and machinery. The department’s case is that these are all in the nature of pre-importation charges and hence, includible. Examining these contentions, we find that having regard to the provisions of Section 14(1) of the Customs Act relating to assessable value, it has to be held that in order to arrive at the value under Section 14(1), it will be reasonable to conclude that such of those expenses as can quite reasonably be put to sellers’ account in an ordinary arms-length transaction, such as where the services of an agent takes the place of services which the seller otherwise would have had to perform, or in a case where the services performed by the agent plainly add to the value of the goods sold, such expenses will have to be added to the assessable value. Such a view finds support in a decision by this Tribunal in the case of Bombay Gas Company Ltd. v. Collector of Customs, Bombay in Appeal No. CD(SB) T.A. No. 336/77-A disposed of by the Tribunal in its Order No. 636/1984-A dated 15-9-1984. In that case also, the appellants therein imported a second hand water gasification plant for which the price as was finally agreed to between the importer and the foreign seller was, after re-negotiations, reduced. The Custom House found that the price was reduced because the importer in that case agreed to take upon themselves the costs of dismantling and other charges. These dismantling and other charges were added to the assessable value by the Custom House in that case, which was challenged in the appeal which was decided by the Tribunal. The Tribunal held as fol-lows:-
“It is stated in the affidavit that dismantling charges had been reduced from Australian $ 28,000 to Aus. $ 12,842 subject to several services being undertaken to be performed by the appellants themselves instead of the supplier. [These services have been listed in paragraph 4 of the CEGAT order which are:
1. Supervision to be done by the company’s maintenance engineer at the spot;
2. dismantling work to be done by gas cutting the parts into suitable sections instead of removing the nuts and bolts of individual portions;
3. the Company waived the condition that the supplier should furnish isometric drawings;
4. the markings etc. was to be done by their own engineer posted on the spot;
5. the Company waived the condition regarding detailed photographs and dismantling facilities; and
6. the Company was not to insist on the dismantled sections being packed in wooden boxes.]
We observe that in the absence of such a stipulation, the supplier would have charged for the said services and the cost of dismantling charges would have necessarily gone up….But for the appellants’ undertaking to depute their own engineers and other workers for carrying out the above mentioned operations abroad, the element of dismantling charges could have been the same as orginal-ly stipulated. In any event, cost of services incurred by the appellants abroad in the context of the valuation of the present goods should in our view, get reflected in the assessable value of the goods when delivered in India”.
In the present case, the appellants have purchased the plant and machinery on as-is-where-is condition and the appellants have agreed to take upon themselves the cost of dismantling and removal of the equipment. The goods will not become ready for shipment without such dismantling, packing and forwarding. Therefore, they have to be considered as an element of value of the goods for the purposes of Section 14(1) of the Customs Act, 1962. Further, in respect of the inspection, it is stated in the agreement under para 9 “Certification of condition of plant equipment” that the appellants are to engage the engineering contractor at their expense in consultation with the seller Hercofina to inspect the major pieces of equipment. It is also stated therein that such contractor shall be bound by an appropriate secrecy commitment to Hercofina. It is after certification and approval thereof by the Govt. of India that the contractor is to take up dismantling acceptance moving and re-erection of the equipment. Similarly, para 7 of the sale agreement relates to Indemnification and Insurance which says that such insurance cover should be provided by the appellants prior to coming upon the premises of Hercofina for purposes of inspection, dismantling or removal of equipment. From these features of the agreement, therefore, it is reasonable to conclude that the services performed by the contractors on behalf of the appellants flows out of the terms of the agreement by which the appellants had taken upon themselves to incur these charges and that, but for the appellant’s undertaking to do so, the element of these charges would have gone into the price of the plant and equipment so as to make such an equipment ready for delivery at the port of shipment. In such a view of the matter, therefore, we hold that the Collector was right in including these expenses in the assessable value for finalising the imports made for the Project under the contract registered with the Custom House. The appellants have further argued that the proportionate value of items left behind in the USA should have been excluded from the levy of duty. They have stated that it is an admitted position that the actual value of the items imported comes to US $ 9,113,059 and that according to the appellants, under Section 14 of the Customs Act, it can only be this amount upon which Customs duty can be levied, this being the assessable value. The Collector’s reasoning, we find, is that US $ 10 million was the full value for the plant in as-is-where-is condition paid as a lump-sum amount for the goods as a whole and that it should be taken as the assessable value. Besides, he has pointed out that it was a belated claim on the part of the appellants that some part of the plant has not been paid for when the appellants have not been able to show that any part of US $ 10 millions has been received back from the supplier. On a consideration of the conditions, we find that the matter in the first instance requires investigation as to the factum of the non-import of the parts as claimed by the appellants. Since such an investigation does not appear to have been done and it cannot be undertaken at this stage of appeal before the Tribunal. It will be appropriate for the Collector to deal with this aspect of the case afresh based upon the detailed investigation into the matter and on a scrutiny of the records of imports and the background contracts for the imports. It is ordered accordingly.
In respect of the duty demanded on the spares imported in excess of 10% of the value of the main machinery, the appellants’ contentions are that in their reply to the Show Cause Notice dated 2-12-1987, they have explained the position with reference to exhibits ‘K’ and ‘L’. The appellants contend that items to the extent of Rs. 29,23,355/-had been incorrectly included in the value of the spares whereas, according to them, these items were an integral part of the main DMT plant. We find that the Collector had found, on going through Exhibit ‘L’ furnished by the appellants regarding the spares that out of 11 Bill of Entries involved, in 9 of them, the value of the main equipment and spares arc the same in the re-conciliation statement submitted by the appellants, in the Bills of Entry, and also as given in the Show Cause Notice, and the Collector has held that figures taken in the Show Cause Notice are correct. He has also admitted that in respect of 2 Bills of Entry, the value given relates to main equipment and not spares. However, we find that in their reply to the Show Cause Notice, the contention of the appellants has been that the various items of machinery and equipment set out in their Exhibit ‘L’ are not spares for the detailed reasons given against each item by them and they have also adduced arguments as to what is the nature of a spare part for their claim that the list (Exhibit ‘L’) consists wholly of integral parts of the plant and not spares. On this basis, they say that the demand for duty on the spares is not correct. Examining these contentions, we find that although the Collector has noted the items included in Exhibit ‘L’, there is no finding of the Collector with reference to a comparison of the claim in this regard by the appellants taking into consideration not only Exhibit ‘L’ but also Exhibit ‘K’ which the appellants say is a statement showing the correct values of main machinery and spares. There is further no finding given by the Collector with reference to the detail in Exhibit ‘L’ and with reference to their contentions, that by their very nature, the items in this Exhibit ‘L’ cannot be regarded as spares. Therefore, on this issue also, there is need, according to us, for a detailed finding to be given by the Collector dealing with all the contentions of the appellants herein and giving his findings thereon afresh in the matter after giving the appellants opportunity to explain their case in this regard. A contention has also been raised that the exchange rate applicable to the spares should be the one fixed by the Import Licensing Authority while granting the import licence to the appellants. We, however, arc unable to accept this contention because Section 14 of the Customs Act, 1962 lays down that the assessable value will be the price at which such or like goods are ordinarily sold or offered for sale for the delivery at the time of importation in the course of international trade in arms length transaction between the buyers and sellers and the proviso thereto says “provided that such price shall be calculated with reference to the rate of exchange as in force on the date on which a Bill of Entry is presented under Section 46”. This being a legal position, we find ourselves in agreement with the Collector’s conclusion that the exchange rate given in the licence is relevant for debiting the licence and for the purpose of calculation of assessable value including the value of spares, relevant exchange rate will be as per Section 14 of the Customs Act depending upon the date of presentation of different Bills of Entry. We have already found that the debits made to the import licence cannot be equated to the assessable value under Section 14 of the Customs Act. Further, we find that according to Heading 84.66(2), relating to spare parts, it is stated that the total value of such spare parts should not exceed 10% of the value of the goods covered by Item 84.66(i). The value for the purposes of this Heading is not defined in the Schedule and, therefore, one has to look to the definition of the term in the Act itself which says in Section 2 (41) that value in relation to any goods means the value thereof determined in accordance with provisions of Sub-section (1) of Section 14. Therefore, the 10% allowance for spare parts under the Heading 84.66 has to be computed with reference to the assessable value under Section 14 of the Customs Act and by the same token, it would mean that in arriving at such 10% limit, the Customs authorities in this case will have to take into account the total assessable value of the goods determined by the Custom House in terms of Section 14 of the Customs Act, 1962. The Collector, while determining the duty liability on spares will also have regard to this aspect.
In the result, we hold that the Collector was right in his finding that the goods have been provisionally assessed under Project Imports (Registration of Contract) Regulations and we hold that such registration determines finally the classification under Heading 84.66 of the goods imported and not their valuation for purposes of Section 14 of the Customs Act, 1962 which has to be determined only when the provisional assessments are finalised under Section 18 of the Customs Act, 1962 in accordance with law. It is also held that the CIF value adopted by the licensing authority functioning under a different Act cannot for that reason be taken as assessable value for the purposes of Section 14 of the Customs Act, 1962 which has to be determined under the relevant Section and Rules thereunder by the Customs authorities functioning under that Act. We further hold that in respect of the claim of non-import of certain equipments from USA, a factual finding has to be given by the Collector, as also on the question of demand of duty for spares in excess of 10% of the value of main equipment as permissible under Heading 84.66 for Project Import. This demand on excess spares imported should be re-determined in terms of the discussion on this aspect supra. The appeal is disposed of in the above terms.