NUMALIGARH REFINERY LTD Vs. DAELIM INDUSTRIAL COMPANY LTD

JUDGEMENT

(1.) LEAVE granted.

(2.) BOTH these appeals arise out of the order dated 24.8.2006 passed by the Division Bench of the High Court of Gauhati at Guwahati in Arbitration Appeal No.1 of 2002. Therefore they are taken up together and disposed of by this common order.

(3.) NOW, coming to another head " Turbo technical price, under this head Turbocechnica SPA of Italy, a consortium partner of DIC in the contract agreement with NRL, had to supply various imported items for a consideration of US $4150000 and DM 22990000 as specified in the Price Schedule of the Overseas Contract. The said consideration under Item No.2.1.1 was a consolidated figure including payment on account of service like third party inspection charges, ocean fright and marine insurance. Note 1 of the above Price Schedule permitted DIC / Turbotechnica to furnish list of goods with CIF (cost insurance and freight) value of NRL for availing concession in payment of customs duty payable in respect of import from overseas. Note 2 reiterated that third party inspection charges were included in the above price. DIC vide letter dated 13.9.1995 requested NRL to bifurcate the total consideration of the import items into CIF cost and service cost and to amend the contract agreement for that purpose but no amendment was made. It was pointed out that if no amendment was made for the relevant portion, Turnotechnica shall have to declare the entire contract value as CIF cost to the customs authority and since payment of customs duty was DIC's responsibility, DIC will have to pay customs duty on service portion also. DIC vide letter dated 25.11.1995 pointed out to NRL that contract price consisted of CIF value, cost of design and engineering and supervision and other incidental costs and requested for break -up of costs, so that DIC may not pay customs duty on the total contract price when such duty was payable on CIF value by the owner. Therefore, the amendment not being carried out by the NRL, DIC could not avail necessary concession in customs duty. Therefore, they claimed under this head a sum of Rs.1.65 crores and the same was accepted by the majority of the Arbitrators. The majority took the view that DIC had to unnecessarily pay the customs duty on service portion of the price consideration and as such allowed the claim. As against this, Justice M.M.Dutt in minority took a contrary view and held that NRL was not responsible for framing of such agreement and it was held that it was the fault of DIC and as such the claim was turned down. However, it was observed that DIC could justify and claim the said amount from the Customs department but NRL could not be held responsible for the extra duty paid by the DIC. The District Judge agreed with the minority award. However, the Division Bench of the High Court reversed the finding and approved the view taken by the majority of the Arbitrators. We have heard learned counsel for the parties and find that it depends upon the framing of the terms of the agreement, if the DIC would have been vigilant then they could have excluded the service charges; like design engineering etc. It was their duty to have excluded the services charges but they have not properly framed the contract and they cannot insist on amendment of the contract. If all the services were subjected to duty which they could have segregated the same but since they did not do this, therefore they could claim the benefit. No direction could be given to the contracting party to amend their agreement. It is a mutual affair of the contracting party. The view taken by the High Court does not appear to be correct. Secondly, it was not possible for the NRL to amend the agreement as the same has already been registered with the Customs authorities and the Reserve Bank of India/ Hence, the DIC is not entitled to the aforesaid amount of Rs.1.65 crores under this head. [Claim of Rs.1.65 crores under this head not allowed] Next issue is with regard to countervailing duty. DIC claimed a sum of Rs.8.78 crores which was paid on account of excise duty.