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TMI Blog2008 (3) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... se imports of spare under 17 Bills of Entry. Therefore, the appellants were asked to pay the differential duty to the department. The appellant after exhausting the lower appellate remedy approached the Tribunal and the Tribunal remanded the matter to the Original Authority for deciding the issue after issuing show cause notice. Consequently, show cause notice was issued and it was held that the spares imported under the 17 Bills of Entries would not be covered by the contract. The Original Authority confirmed the demand. The Appellate Authority upheld the order of the Original Authority. Hence, the appellants have come before this Tribunal for relief. 3. Shri G. Sampath and Shri M.G. Varadarajan, learned advocates appeared on behalf of the appellants and Shri K. Sambi Reddi, Authorized Departmental Representative appeared on behalf of the Revenue. 4. We heard both sides. The learned advocate argued that it is incorrect on the part of the Revenue to hold that the spares are not covered under the contract. They particularly invited our attention to Article 2.1 of the contract and said that in terms of Article 2.1 operating spare parts for scheduled maintenance up to 12,000 hours s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the contract at all. It was also urged that the lower authorities have failed to appreciate the contention that 12,000 hrs of scheduled maintenance was not completed in 1998. This point has not been properly appreciated. It was also urged that the spares are always meant for replacement, so the concessional assessment cannot be denied just be cause the spares are for replacement. 4.1 The fact that the imports of spares are covered by the Contract No. 1/95 is proved by the following position contained in the contract itself. (a) As per Article 2 of the agreement, the scope includes in particular operating spares up to 12000 hours for scheduled maintenance etc. (b) As per Article 15.1.1 (Guarantee), the guarantee is for 18 months from the date of taking over or 9000 hours of operation whichever is earlier. (c) The supplier M/s. SEMT Pielstick is liable to replace the defective parts free of cost only during guarantee period. (d) The spares imported along with the plant and machinery in 1995-96 are not supplied free of cost. K.S.E. Board paid for those spares. (e) As per Artide 7.7, "the contractor or its authorized representative shall sign a separate agreement with the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract has been fulfilled. Alternative submissions were also made. If differential duty is to be demanded on spares though imported before 12,000 hours of scheduled maintenance but used after 12,000 hours it would work out to Rs. 10,13,808.46 as per the Principal Project Coordinator's letter dated 4-1-07. It was also stated that the demand is time-barred. The contract envisaged under Regulation 5 of Project Regulation Rules has been duly registered with Customs prior to the importation of the goods. 4.3 It was stated that the value of the plant is Rs. 1,92,53,65,000/-, therefore 10% of the value of the contract is Rs. 19,25,36,500/-. The total value of the spares imported is only Rs. 11,34,74,483/- hence, it was strongly argued that the concessional rate is clearly admissible. 5. The departmental representative took us through the order of the lower authority and invited our attention to certain letters dated 16-11-2000, 17-1-2001 land 23-2-2001 according to which the suppliers had categorically stated that their contractual obligations were over and they would not be in a position to supply the spares free of cost as the guarantee period is also over. The point made by the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expiry of the guarantee period. While deciding whether the imported spares are covered by the contract or not, the terms of the contract should be carefully gone through. Just because the appellants had to make extra payment for the spares imported, one should not jump to the conclusion that they are not covered by the contract. We reproduce Article 2 of the contract : Article - 2 : Scope of Supply 2.1 Overall Scope of Supply The scope of supply of the Contract shall be the design, manufacture and supply of site of 5 diesel generating sets with a capacity of 21.32 MW and their associated equipment and accessories in accordance with the scope and limits of supply as detailed in the Technical Specification annexed hereto. The scope includes in particular operating spare parts up to 12000 hours scheduled maintenance, erection and maintenance tools and testing equipment. It also covers transportation, insurance, handling transshipments and shop training for five engineers of the Purchaser, responsibility for supervision of erection and commissioning and technical engineering in France and drawings. 2.2 Scope of Supply of this Contract From the above, it is very clear that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, or the substantial expansion of an existing unit, of a specified: (1) industrial plant, (2) irrigation project (3) power project, (4) mining project, (5) project for the exploration for oil or other minerals and (6) such other projects as the Central Government may, having regard to the economic development of the country notify in the Official gazette in this behalf: and spare parts, other raw materials (including semi-finished material) or consumable stores not exceeding 10% of the value of the goods specified above provided that such spare parts, raw materials or consumable stores are essential for the maintenance of the plant or projects mentioned in 1 to 6 above, The Tariff item 98.01 also provides that spare parts up to 10% can be imported on concessional rate of duty for essential maintenance. The fact that these items are for essential maintenance is also not in dispute because the project sponsoring authorities have certified and the objection of the lower authority in making a fine distinction between maintenance spares and replacement spares is not acceptable. 6.4 We have already recorded in Para 4.3 that the value of the imported spares is only Rs. 11,34,74,483/- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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