THIRUMALAI CHEMICALS LTD Vs. COLLECTOR OF CUSTOMS

JUDGEMENT

(1.) THE order of the Collector of Customs, Madras fixing the assessable value at DM 3,98,000 on the consignment imported by the appellant, treating the import as a fresh supply and not as a repaired or re -exported article, confirming the short levy amounting to Rs. 38,66,945/ - and denying the appellant the benefit of Notification No. 204/76, is challenged in this appeal. We have heard both sides.

(2.) APPELLANT is a manufacturer of Phthalic Anhydride in its ractory at Ranipet. In 1985 -86 a new plant was set up in the factory and tor this purpose, a tripartite agreement was entered into between appellant and M/s. PSA -LVC Von Deyden, West Germany (for short PSA) and M/s. Davy Mckee Zimmer (for short, Davy). PSA was to supply technical know -how and the catalyst. Davy was to engineer the plant and coordinate all activities and supply some critical equipment, including the reactor and gas cooler. The plant including catalyst was imported on payment of duty treating the import as project import. 95% of the payment was to be made initially and the balance amount was to be made only on successfully commissioning the plant. The plant was commissioned in early 1986. Leak in the gas cooler supplied by Davy led to damage (fouling) to the catalyst supplied by PSA. The appellant insisted on replacement of the catalyst, which led to protracted three -way correspondence and negotiations. Ultimately, according to the appellant, the parties entered into a MOU dated 21 -11 -1986 whereby Davy undertook to assist and supervise in repair of the gas cooler and in the event of failure during the warranty period, to replace the entire gas cooler at its cost. PSA undertook to repair and regenerate the damaged catalyst free of cost and in case the catalyst after repair does not perform as per the terms of the contract, PSA undertook to replace the entire catalyst free of cost. Accordingly the defective catalyst was exported to PSA in February, 1987 after fulfilling the necessary formalities. The damaged catalyst was not spherical in shape. According to the appellant, the catalyst was repaired or re -generated and again sent to the appellant, that is, reimported by the appellant. The repaired catalyst was spherical in shape and had two concentric rings. The alleged repaired catalyst was shipped back on 23 -4 -1987. Bill of Entry for home consumption was submitted showing the goods to be spare parts catalyst Type 'R' (repair and rectification cost for one full charge of catalyst) and showing the cost to be DM 9,500 c.i.f. The invoice referred to cost of DM 9,500 for repair and rectification for one full charge of catalyst. It also referred to the original import of catalyst which was subsequently found defective and returned. The invoice also indicated the catalyst was repaired by cleaning and reactivation and change in the shape from ball to ring, by removal of inert mass and remoulding and the work had been done free of charge. The packing list showed one charge of catalyst consisting of 4 numbers of total net weight 8,940 kgs.

(3.) THE Custom House wanted to investigate the matter. The consignment was cleared on provisional assessment on execution of bond. Investigation was taken up. Various records were seized and information solicited from the concerns abroad. Ultimately, show cause notice was issued making a demand for differential duty on the ground that what was imported was not repaired catalyst but wholly new catalyst and the value of new catalyst would be DM 3,98,000. The appellant resisted the show cause notice affirming that what was imported was only a repaired catalyst which was repaired free of charge and the declared value should be accepted. Over -ruling the contention the Collector confirmed the demand.