ESSAR STEEL LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) . The petitioner No.1 - Company incorporated under the provisions of the Companies Act, 1956, is engaged in manufacture of Sponge Iron at its plant located at Hazira, Surat. The petitioners, by this petition, have challenged the arbitrary, unreasonable and illegal demand of duty as well as of interest without finalisation of the assessment under the provisions contained in the Customs Act, 1962.

(2.) The petitioner-Company purchased a Secondhand Plant on "as is where is basis " from Messers Teviot Investments Limited, ( 'TIL' for short ) for manufacture of Hot Briquetted Sponge Iron by Midrex Process. The Plant was to be dismantled which was situated at Emden, Germany and after shipment, the same was to be re-engineered to erect and instal at Hazira, Surat. There was an agreement with Messers Voest Alpine Incorporation ( 'VAI' for short ) and also an agreement with Midrex International whereunder the petitioner was to pay a sum of DM 2 Million, DM 10.10 Million and DM 23 Million towards the License fees and technical services to be rendered by VAI. After the shipment, for each consignment Bill of Entry for clearance for Home Consumption under Section 46 of the Customs Act was filed. The contract was registered for import of the machinery under the Project Imports Regulations, 1986 ( for short "Regulations" ) for classification and assessment under heading 98.01 of the First Schedule to the Customs Tariff Act, 1975 ( for short "Tariff Act" ). Pursuant to the Registration of contract, the petitioner-company executed a Bond and furnished two Bank Guarantees dated 10/08/1998 and 06/05/1997 for Rs.1,86,19,350.00 and Rs.30,86,200.00 respectively. All assessments under the Project Imports were provisional and the petitioner extended and renewed the Bank Guarantes and Bond. Validity was upto the period as mentioned in the Bank Guarantees ( 24/12/2000 & 20/01/2001 respectively ). The Bill of Entry was accompanied with invoice issued by TIL and other relevant documents along with contract. Pro rata value of each consignment and calculated assessment of the customs duty on the basis of the value declared being the transaction value under Rule 4 of the Customs Valuation ( Determination of Price of Imports Goods ) Rules 1988 ( hereinafter referred to as "the rules" ) were before the Revenue.

(3.) A dispute arose with regard to the amount paid by the petitioner-company to VAI and Midrex, whether it should form part of the assessable value and should be added to the transaction value by virtue of Rule 9 (1) (b) (c) and (e) of the rules or not which was required to be decided. According to the petitioners, pending determination of the correct assessable value, the assessments were once again made provisional. The petitioner-company paid customs duty as assessed by the proper Officer and on payment thereof the proper Officer made an order whereupon the goods were allowed clearance for home consumption under section 47 of the Customs Act. The whole of the plant imported by the petitioner has since been cleared and is presently erected and installed and operating at Hazira. In the year 1988, a Show Cause Notice was issued calling upon the petitioner-company as to why the amounts referred under the agreements to VAI and Midrex should not be added to the assessable value and why the said amounts should not be added / allowed to the value declared in the Bill of Entry which was assessed provisionally. In paragraph 10 of the notice, it was specifically stated as under :