Customs, Excise and Gold Tribunal - Delhi
Kerala State Electricity Board vs Collector Of Customs on 22 December, 1986
Equivalent citations: 1987(13)ECR500(TRI.-DELHI)
ORDER
I.J. Rao, Member
1. This was originally filed as a revision application against the order passed by the Central Board of Excise & Customs and, on statutory transfer to the Tribunal, is now an appeal before us.
2. The appellants imported certain goods under a B/E No. 367 dated 28.11.1979 and requested the benefit of 'Project Import' and consequent concessional assessment in respect of the goods. The grounds on which the appellants sought concessional assessment (under Tariff H. 84.66 CTA) are as follows:
(i) M/s Canadian General Electric Company, Toronto, Canada, who are the manufacturers and suppliers of the Generator for the Idukki Hydro-Electric Project are now supplying some additional winding materials free of charge to bring up the winding to proper international standards as specified in the original contract for the supply, erection and commissioning of the 3 Generators. It was found that the stator bar armour to ground resistance are high and the additional works have to be done for long service of the machines as per specified standards. The firm has taken the full responsibility of sending their Technician also to supervise the work free of charge.
(ii) The firm is supplying the material under the same contract to complete the supply and erection etc. as per proper standards and that the materials are therefore to be treated as forming part of the original supply/contract.
3. The Collector of Customs, Cochin, who adjudicated the matter, referred to a letter dated 28.3.1979, from the Contract Administrator, Project Controls Section, Power Generation Department, M/s. Canadian General Electric Company Limited, addressed to the Chief Engineer (Electricity), Kerala State Electricity Board, observed that from this letter, it is evident that the materials imported were brought for further modifications mainly consisting of rewedging of Unit III and of injecting additional C.R.T.V. to give a better bar armour resistance to ground. He also observed that the warranty of the machines in question expired in December 1976, but the suppliers willingly expressed their readiness to share the costs of additional modifications, subject to certain conditions which, inter alia, consisted of the appellants' bringing the material from Canada and providing certain facilities to the Engineers who would arrive in India to carry out the work. The Collector held that, as can be seen from the letter dated 28.3.1979, it was established that these materials were not intended for setting right the defects inherent, or which were originally apparent in the equipment supplied by them and, therefore, ordered that the imported goods be assessed on merits.
4. The appellants filed an appeal before the Central Board of Excise & Customs. The Board rejected the appeal observing that the letter dated 28.3.1979 supported the Collector's finding that the imports were in the nature of replacements for improving the performance of the machines which were already in operation and, therefore, could not get the benefit of 'Project imports'. The appellants then filed a revision application which is now an appeal before us.
5. Shri N. Babu, Assistant Executive Engineer, who appeared for the appellants, explained the background of the matter and submitted that the Contract No. E/CAN/8/7025, with Canadian General Electric Company Limited, Canada (hereafter referred to as C.G.E.) covered not only supply of materials but also erection, commissioning and testing, etc., and acceptance was to be given only when all the work, including the generator-winding, conforms to standards acceptable. He argued that the Project Contract 8/69 is not closed yet. Shri Babu also submitted that the very fact that C.G.E. were supplying the materials free of charge under the same contract proves that the material erection and installation were being brought to proper standards only at the time of importation of those goods, and the main contract can be considered as completed only at the time when the work is completed. He further explained that the generation work started even before completing the works because of acute shortage of power in the Southern Grid and that the appellants acted in national interest.
6. Shri J. Gopinath, the learned SDR, opposing the arguments, submitted that, while the appellants have correctly stated the facts, the legal requirements for grant of a concession of 'Project Import' have not been satisfied in this case. Referring us to H. 84.66 of CTA, Shri Gopinath emphasised that assessment under this heading is available only if it is proved to be required for the initial setting-up of a unit or the substantial expansion of an existing unit, and not in other cases. Inasmuch as the present importation does not answer either of the criteria, the concessional assessment cannot be extended to it.
7. We have considered the arguments of both sides, and as submitted by the learned SDR, the factual position stated by the appellants, is correct. We have perused the letter dated 28.3.1979 wherein, inter alia, the following occurs:
Our Mr. J.R. Bernard, visited the Idukki site in November 1973 when Units I, II and III were shutdown for their actual maintenance inspection.
Mr. Bernard found all three units were mechanically very sound. The piled stators have tight laminations, there is no evidence of movement or fretting and the cores are in excellent condition. The rotor assemblies are in a similar good condition as the stator. The bearings are all operating within their rated temperatures. It would appear that the maintenance program carried out by your people has been very good.
Mr Bernard observed that a number of stator wedges on Unit III were loose.
It was also observed that the stator bar armour resistance of some bars to ground is higher than desired for long term service.
We, therefore, believe that further modifications could be made now which would be beneficial to the machines. These modifications would be mainly the rewedging of Unit III and injecting additional CRTV to give a better bar armour resistance to ground.
As you know, the warranty on these machines expired in December 1976. However, we are prepared to share the costs of the additional modifications with you under the following conditions....
3. From a perusal of this, it is clear that the project was already working and was closed down only for annual maintenance inspection. It is further clear that the warranty on the machines expired in December 1976 but CGE were willing to share the cost of the additional modifications subject to several conditions. Therefore, it cannot be accepted that the imports made were either for the initial setting-up or substantial expansion of the existing unit. This would mean that the goods were not eligible to the benefit of 'Project imports' and for assessment under H. 84.66 CTA.
9. We, therefore, hold that the Central Board of Excise & Customs correctly rejected the appeal. We dismiss this appeal.