1998 (2) TMI 234 - AT - Central Excise

Summary

Issues:
Refund claim for free replacement of damaged refractory material under project import.

Analysis:
The appeal was filed by M/s. Hindustan Petroleum Corpn. Ltd. against the order-in-appeal passed by the Collector of Customs (Appeals), Madras, regarding a refund claim for refractory material received free of cost as a replacement for damaged material imported under project import. The appellants had imported equipment under a registered contract with customs. Upon discovering damaged refractory material during project commissioning, the suppliers agreed to provide replacement material free of cost. The appellants paid full duty on the replacement material without availing project import benefits and later filed a refund claim, which was rejected due to lack of a registered contract for the free supply.

The Sr. Manager (Tax) for the appellants argued that since the replacement material was related to the project import items, a separate contract registration for the free supply was unnecessary. The suppliers confirmed the free replacement in lieu of previously paid duty on the damaged material. The appellants sought application of project import duty rates, not full exemption. The JDR for the respondent supported the Collector's grounds for rejecting the refund claim.

The Tribunal noted that the original contract covered the import of various materials, including the damaged refractory material replaced free of cost. The suppliers certified the replacement material as free replacements under a warranty clause, stating the damaged material had no commercial value. The Tribunal disagreed with the Collector's view that separate registration was required for the free replacements, as they were part of the original contract with a warranty clause. The appellants were entitled to project import benefits for the free replacements as no charge was levied for them. The appellants only sought assessment at concessional duty rates applicable to project import, not full exemption.

Considering all facts, the Tribunal held that the appellants were eligible for the refund claim if admissible under the law. Consequently, the appeal was allowed, granting the refund claim for the free replacement of damaged refractory material under project import regulations.