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CASE NO.: Appeal (civil) 96  of  1998

PETITIONER: TATA IRON & STEEL COMPANY LTD.

       Vs.

RESPONDENT: COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, BHUBANESWAR, ORISSA.

DATE OF JUDGMENT:       16/02/2000

BENCH: R.C.Lahoti, S.P.Bharucha

JUDGMENT:

R.C.  Lahoti, J. L.....I.........T.......T.......T.......T.......T.......T..J

     The Tata Iron & Steel Company Ltd.  (TISCO, for

     short), the appellant before us, has imported certain

     equipments and drawings and engineering documents from

     Siderugia National of Portugal - a Government of

     Portugal  Undertaking.   It appears that some time  in the

     year 1981 Italimpianti, Genevo, Italy supplied

     materials, designs and engineering drawings etc.  to

     Siderugia  National  Portugal  (hereinafter  SNP,  for short)

     for setting up rolling mill project in Portugal.  The

     supplies consisted of equipments for blast furnace, LD

     converter, steel plant bellet castors, wire rod mills,

     torpedo   ladle  cars  etc..    However,  before   the equipments

     could be installed, Portugal decided to join European

     Economic Community (EEC) consequent whereupon Portugal

     could not have expanded its steel making capacity.

     SNP decided to cancel its investment plan and to sell

     the equipments and materials which were lying unused

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     from 1981 to 1986.  On 14th April, 1988 a protocol was

     signed  between  the  seller and  purchaser  companies (i.e.

     SNP and TISCO) which inter alia stated that the total

     price  will be price for the equipment plus price  for the

     engineering  FOB Portugal-Lisbon port.  The price  for the

     equipment with suitable sea-worthy packing to be

     provided  by  SNP will be 13.5 million Deutsche  Marks (DM)

     and the price for engineering will be 12.5 million

     Deutsche Marks.  The protocol also provided that the

     equipment was being sold without any operation on

     performance guarantees and in "as is where is"

     condition.  Subsequently on 11th October, 1989 three

     contracts  were  entered into between the  parties  as under:-

     1.  Agreement for supply of technical documentation -

     called MD 301.

     2.  Agreement for sale of equipments and materials

     (part of equipments of a blast furnace and three

     torpedo ladle cars) - called MD 302.

     3.  An overall sale contract, being an umbrella

     contract, covering the abovesaid two agreements

     for establishing contractual relationship and

     setting up conditions both for sale of equipment

     and supply of technical documentation.

     The over-all sale contract recited an overall

     price of 26 million DM and its break-up into two,

     namely,  12.5  million DM for technical  documentation and

     13.5 million DM for equipments and materials.  The

     earlier two agreements recited the considerations of

     12.5  million  DM  and 13.5 million  DM  respectively. Thus

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     the prices as recited in the protocol dated 14.4.88

     remained unchanged.

     The appellant sought for registration of its

     contract  MD  302 under Project  Imports  Regulations, 1986

     with the Customs House, Paradeep which was allowed

     entitling it to avail the benefit of concessional rate

     of duty for project imports.

     The consignment consisting of technical documents,

     engineerings  etc.  covered by contract MD 301 arrived at

     Calcutta and was cleared by Calcutta Customs House in

     the months of April-May, 1990.  The consignment was

     claimed by the appellant to be classifiable under sub-

     Heading No.4906.00 of the Customs Tariff Act, 1985

     assessable to nil duty.

     As against the contract MD 302 the first

     consignment arrived at Port Paradeep and was cleared

     under Bill of Entry dated 6.4.90.  The value of the

     goods  was  shown as D.M.  60,75,000 FOB.   The  goods were

     assessed   provisionally  and   allowed  clearance  on payment

     of duty on the declared value.  The second consignment

     under  this  contract also arrived at  Paradeep  port. Bill

     of Entry dated 7.7.90 was filed declaring the value to

     be 6,75,739 D.M..  In between the department had

     gathered intelligence and formed an opinion that the

     contract MD 302 registered under the Project Import

     Regulations was actually a sub-contract of another

     contract of the same date and the value thereof was 26

     MDM.   The  Assistant Collector of Customs,  Paradeep, vide

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     communication dated 7th July, 1990, called upon the

     appellant to submit all the documents including the

     correspondence with the foreign supplier, copy of the

     import licence etc..  The appellant submitted the

     required documents including copy of the agreement MD

     301.  An exchange of correspondence between the

     Assistant Collector of Customs and the appellant

     followed.   On 16th July, 1990 the Assistant Collector of

     Customs, Paradeep issued a show cause notice to the

     appellant calling upon it to show cause why the sum of

     12.5 MDM being the value of the goods covered by

     contract MD 301 should not be included in determining

     the assessable value of the goods imported under the

     contract MD 302 followed by other consequences flowing

     from  under-valuation  of  the goods  imported.   Vide order

     dated 10.8.90 the Assistant Collector permitted

     clearance of the goods upon furnishing of bank

     guarantees  of Rs.7,44,80,300/- and extra duty deposit of

     Rs.2,82,01,636  as  also payment of  admitted  customs duty.

     The appellant filed a writ petition before the

     Orissa  High  Court challenging the show cause  notice and

     the   demand  raised  by   order  dated  10.8.90.   On 30.8.1990,

     the Orissa High Court disposed of the writ petition

     directing   the  release  of   the  goods  subject  to furnishing

     a  bank  guarantee of Rs.8 crores and  depositing  the extra

     duty   reduced   by  1   crore  than  that   demanded, accompanied

     by payment of admitted customs duty.  The appellant

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     complied with the order of the High Court and got the

     goods cleared.

     The appellant also filed a reply to the show cause

     notice.  Personal hearing was given by the Assistant

     Collector.   On 23.8.1993 the Commissioner of  Customs and

     Central Excise, Bhubaneswar issued a second show cause

     notice  to  the appellant and two of its officers  and also

     to  the  appellant’s engineering consultant.   Replies were

     filed.   On  30th  April,  1996  the  Commissioner  of Customs

     and Central Excise, Bhubaneswar passed an order

     assessing    the    levy   of    customs    duty    at Rs.15,49,09,060/-.

     A penalty of Rs.5 crores was also imposed on the

     appellant under Section 112 of the Customs Act.

     Penalties were imposed on other noticees also.

     The appellant and other noticees preferred appeals

     before   the  Customs,  Excise   and  Gold   (Control) Appellate

     Tribunal, Calcutta which have been disposed of by a

     common order.  The Tribunal has held that the three

     contracts  entered into between the seller, i.e.,  SNP and

     the appellant were in fact parts of one package, that

     is,  the  three constituted one  composite  agreement. The

     technical  documentation  supplied  to  the  appellant could

     be  divided into three parts:  (i) those pertaining to the

     imported equipment, (ii) those pertaining to the

     equipment which was yet to be procured or manufactured

     by appellant, and (iii) those relatable to post-import

     activities undertaken by the appellant for assembly,

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     construction,  erection, operation and maintenance  of the

     imported equipment.  The value of the contract to the

     extent of (i) above was liable to be included in the

     value of equipments and materials imported by the

     appellant though the value of the technical documents

     covered  by  (ii)  and  (iii) above  could  have  been excluded

     for payment of customs duty by reference to

     Interpretative Note to Rule 4 of Customs Valuation

     Rules, 1988 (hereinafter Rules, for short).  However,

     since separate values have not been shown, the

     benefit of Interpretative Note to Rule 4 abovesaid was

     not available to the appellant and the entire value of

     the  two  contracts was liable to be clubbed  together for

     the purpose of levying customs duty.

     It will be useful to extract and reproduce

     verbatim a few findings from the order of the tribunal

     as under :-

     "It  is pertinent to mention, on first appellant’s own admission  that  where an item has been partly supplied  and partly  not  supplied by S.N., technical documents  for  the latter  have been supplied.  These technical documents  will serve  the  purpose for the whole items as  such,  technical documents  being  common  to an item.  In this  manner,  the first  appellant has got technical documents for manufacture of  substantial  number  of import items.  It  is  therefore obvious  that  the  technical   documents  supplied  to  the appellants  pertain  both to (i) the imported equipment  and (ii)  the  equipment  which  was   yet  to  be  procured  or manufactured  by the appellants.  It may also contain  (iii) technical  documents  which are related to  post-importation activities  undertaken  by  the   appellants  for  assembly, construction,  erection,  operation and maintenance  of  the imported equipment.  Value of two categories of documents at (ii)  and  (iii) above could be excluded, had  these  values been  separately shown in the contract, MD-301 or  invoices. Since  separate  values  have not been shown,  support  from Interpretative  Note  to  rule  4  of  the  Valuation  Rule, proposed  by  the ld.  Advocate Dr.  Chakraborty  cannot  be taken.   Hence  the  entire  value of  12.5  million  DM  of technical  documentation  will have to be included in  value (13.5  million  DM) of the equipment of B.E.   and  T.L.Cs."

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[Para 6.2.II]

     "Claim  of  the  appellant’s Counsel  that  these  are separate  contract  is not tenable.  Article 2  relating  to ‘Price"  and Clause 1 thereof makes it abundantly clear that "over-all price of the sale scope of the present contract is fixed  and not subject to any revision and amounts to  DM-26 million"  giving a break-up of the same in 13.5 million  and 12.5  million  DMS.   It is thus the over- all price  of  26 million  DM  which is material in the Contract.   Article  3 makes  it  binding  on  both the  contracting  parties  that neither  of  them  shall transfer totally or  partially  its contractual  position,  either  gratuitously  or  onerously, without  previous written consent of the other party.  It is thus  apparent  that  the  appellants  cannot  back  out  of contract  for  supply of technical documents, even  if  they wished,  without the written consent of the other party i.e. S.N.   Portugal.   These  facts brings out  the  element  of compulsion  in  purchase  of   the  technical  documents  of whatever  nature  alongwith the purchase of  equipments  and materials.   That being the factual position, provisions  of rule  9  (1)(e) of the Valuation Rules 1988 come into  play. Clause  (e) of Sub-rule (1) of Rule 9 envisages addition  of "all  other  payments  actually  made or to  be  made  as  a condition of the sale of the imported goods, by the buyer to the  seller.........".  Therefore, entire 26 million DM will have  to be taken as value of the equipments and materials." [Para 6.3.III]

     In spite of the findings as abovesaid having been

     arrived  at  vide para 10.4, the Tribunal  has  stated that

     though in its opinion the value of equipments would be

     entire contract price of 26 million DM as against

     21.2747826086 million DM computed by the adjudicating

     officer  as  detailed  in Annexure 1 appended  to  his order,

     since  only  TISCO had appealed to it and the  Revenue had

     chosen not to file any appeal, the appellant could not

     be  put in a situation worse than if it had not  filed an

     appeal and therefore duty liability of the appellant

     shall have to remain confined to the value of the

     equipment at 21.2747826086 million DM as found by the

     adjudicating  officer.  The quantum of penalty imposed on

     the appellant was reduced by the Tribunal from Rs.5

     crores  to  Rs.   4 crores.  The  penalties  on  other noticees

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     were  set  aside.  The appellant has come up  to  this Court

     by  filing  this  appeal under Section 130  E  of  the Customs

     Act, 1962.

     We have heard Shri Ashok Desai, the learned senior

     counsel for the appellant and Shri Kirit Raval, the

     learned Additional Solicitor General for the

     respondents.  We are satisfied that the impugned order

     of  the Tribunal cannot be sustained and therefore has to

     be set aside followed by a remand so as to assess the

     value  of the goods liable to payment of customs  duty and

     thereupon  determine the quantum of duty and  penalty, if

     any, for the reasons stated hereinafter.

     A perusal of the order of the Tribunal shows that

     it has mainly proceeded on two sets of reasoning for

     holding against the appellant.  Firstly, the Tribunal

     has examined the applicability of Rule 9(1)(b)(iv) and

     formed  an  opinion  that   benefit  thereof  was  not available

     to the appellant.  By reference to the Interpretative

     Note to Rule 4 it has held that to the extent the

     drawings and technical documents were referable to the

     manufacture and sale of the imported equipments, their

     value was liable to be included in the value of the

     equipments and material imported and inasmuch as

     separate values thereof have not been shown the entire

     value of 12.5 million DM of technical documentation

     covered  by contract DM 301 was liable to be  included in

     the  value of the equipments.  Secondly, the  Tribunal has

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     held  the  provisions of Rule 9(1)(e) being  attracted and

     coming into play for the purpose of determining the

     valuation of the equipment and materials imported on

     the reasoning that the drawings and engineerings were

     compulsorily  purchasable by the appellant along  with the

     equipment and materials and hence the value of the two

     was  liable  to  be clubbed.  Shri  Ashok  Desai,  the learned

     senior  counsel  for  the   appellant  has  vehemently attacked

     the correctness of the reasoning employed by the

     Tribunal and has submitted that the Tribunal has gone

     totally  amiss  in interpreting the rules and  judging the

     case thereunder.  It was submitted by Shri Ashok Desai

     that the interpretation as placed on the rules by the

     Tribunal is not correct.  We will presently test the

     correctness of the contention so advanced.

     Section 12 of the Customs Act is the charging

     section.  Section 14 provides for the duty of customs

     being chargeable on any goods by reference to their

     value.  In exercise of the powers conferred by Section

     156  of  the Customs Act, 1962 the Central  Government has

     framed Customs Valuation (Determination of Price of

     Imported Goods) Rules, 1988.  Clause (f) of Rule 2

     defines   "transaction  value"  to   mean  the   value determined

     in accordance with Rule 4.  Under Rule 3 either the

     value of imported goods shall be the transaction value

     or if it cannot be determined then the same shall be

     determined  by proceeding sequentially through Rules 5 to

     8.  Rule 4 provides that the transaction value of

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     imported goods shall be the price actually paid or

     payable for the goods when sold for export to India

     adjusted in accordance with the provisions of Rule 9.

     Under Rule 9, the value or price of certain cost and

     services  is  liable  to be added to  the  transaction value

     while  determining  the value of the  imported  goods. Rule

     9,  insofar as relevant and to the extent referred  to by

     the Tribunal is extracted and reproduced hereunder:-

     9.   Cost  and  services.    (1)  In  determining  the transaction  value,  there  shall  be  added  to  the  price actually paid or payable for the imported goods, -

     xxx xxx xxx

     (b)  the  value,  apportioned as appropriate,  of  the following  goods  and  services where supplied  directly  or indirectly  by  the buyer free of charge or at reduced  cost for  use  in  connection with the production  and  sale  for export  of imported goods, to the extent that such value has not  been  included in the price actually paid  or  payable, namely:-

     (i)  materials, components, parts and similar used  in the production of the imported goods;

     (ii) tools, dies, moulds and similar items used in the production  of the imported goods;  (iii) materials consumed in the production of the imported goods;

     (iv)  engineering, development, art work, design work, and plans and sketches undertaken elsewhere than

     in  India  and  necessary for the  production  of  the imported goods;  xxx xxx xxx

     (e)  all other payments actually made or to be made as a  condition of sale of the imported goods, by the buyer  to the  seller, or by the buyer to a third party to satisfy  an obligation  of  the seller to the extent that such  payments are not included in the price actually paid or payable.

     xxx xxx xxx

     (3)  Additions  to the price actually paid or  payable shall  be made under this rule on the basis of objective and quantifiable data.

     (4)  No  addition shall be made to the price  actually paid  or  payable in determining the value of  the  imported goods  except  as  provided  for in  this  rule.   [emphasis supplied]

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     Reference has also been made by the Tribunal to

     the Interpretative Notes.  Rule 12 provides that the

     Interpretative  Notes  specified  in the  Schedule  to these

     rules  shall  apply  for the interpretation  of  these rules.

     Note to Rule 4 reads as under:-

     "Note to Rule 4 Price actually paid or payable

     The  price  actually  paid  or payable  is  the  total payment  made  or  to  be made by the buyer to  or  for  the benefit  of the seller for the imported goods.  The  payment need  not necessarily take the form of a transfer of  money. Payment  may  be  made  by  way  of  letters  of  credit  or negotiable  instruments.   Payment may be made  directly  or indirectly.   An example of an indirect payment would be the settlement  by the buyer, whether in whole or in part, of  a debt owed by the seller.

     Activities undertaken by the buyer on his own account, other than those for which an adjustment is provided in Rule 9,  are  not  considered to be an indirect  payment  to  the seller,  even though they might be regarded as of benefit to the  seller.   The  costs  of  such  activities  shall  not, therefore, be added to the price actually paid or payable in determining the value of imported goods.

     The  value  of  imported goods shall not  include  the following   charges  or  costs,   provided  that  they   are distinguished  from  the price actually paid or payable  for the imported goods :

     (a)  Charges  for  construction,  erection,  assembly, maintenance   or  technical   assistance,  undertaken  after importation  on  imported  goods such as  industrial  plant, machinery or equipment;

     (b) The cost of transport after importation;

     (c) Duties and taxes in India.

     The price actually paid or payable refers to the price for the imported goods.  Thus the flow of dividents or other payments  from the buyer to the seller that do not relate to the imported goods are not part of the customs value.

     [emphasis supplied]

     A bare reading of Rule 9(1)(b) shows that it

     refers to the value of the four specified goods and

     services supplied by the buyer free of charge or at a

     reduced cost for use in connection with the production

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     and sale of imported goods to the seller and to the

     extent that such value has not been included in the

     price actually paid or payable.  To illustrate, the

     seller may have manufactured equipments of a design,

     drawings  whereof were made available by the buyer say by

     engaging  an independent expert agency in the  country of

     the seller.  Although the seller has not incurred any

     expenditure on the technical/engineering design of the

     equipment manufactured by it yet the price paid for

     securing  the engineering designs and drawings will be a

     component of the value of the equipment manufactured.

     In spite of the price for the services rendered by the

     expert agency having been paid by the buyer, the value

     thereof is liable to be added to the value of the

     imported goods for determining the transaction value.

     In the case at hand it is nobody’s case that the buyer

     had  supplied any goods or services free of charge  or at

     reduced cost for use in connection with the production

     and  sale  for  export  of imported  goods.   All  the exercise

     done by the Tribunal in scrutinising the documents

     forming subject matter of contract DM 301 so as to

     classify them into three categories stated earlier in

     this judgment was therefore uncalled for.  SNP had

     purchased the entire steel plant equipment from an

     Italian supplier more than six years before the

     transaction in question had taken place with the

     appellant.  Such documents must have accompanied the

     equipments and materials made available to SNP by the

     Italian  supplier  of SNP.  It cannot be  comprehended and

     certainly it is not the case of the Revenue that the

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     technical documents were supplied or made available by

     the  Italian supplier to SNP either free of charge  at the

     instance of the appellant or cost thereof was incurred

     wholly or partially by the appellant.

     Clause (e) of sub-Rule (1) of Rule 9 is attracted

     when the following conditions are satisfied :-

     (i) There is a payment actually made or to be made as

     a condition of sale of the imported goods by the buyer

     to the seller or to a third party;

     (ii) such payment, if made to a third party, has been

     made or has to be made to satisfy an obligation of the

     seller;   and (iii) such payments are not included  in the

     price actually paid or payable.

     It is nobody’s case that the seller had an

     obligation towards a third party which was required to

     be satisfied by it and the buyer (i.e.  the appellant)

     had made any payment to the seller or to a third party

     in  order  to satisfy such an obligation.   The  price paid

     by the appellant for drawings and technical documents

     forming subject matter of contract DM 301 can by no

     stretch of imagination fall within the meaning of ‘an

     obligation of the seller’ to a third party.  There was

     also  no  payment  made  as a  condition  of  sale  of imported

     goods as such.  Rule 9(1)(e) also, therefore, has no

     applicability.

     So far as Interpretative Note to Rule 4 is

     concerned it is no doubt true that the Interpretative

     Notes are part of the Rules and hence statutory.

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     However, the question is one of their applicability.

     The part of Interpretative Note to Rule 4 relied on by

     the  Tribunal has been couched in a negative form  and is

     accompanied  by a proviso.  It means that the  charges or

     costs described in clauses (a), (b) and (c) are not to

     be included in the value of imported goods subject to

     satisfying the requirement of the proviso that the

     charges were distinguishable from the price actually

     paid or payable for the imported goods.  This part of

     the Interpretative Note cannot be so read as to mean

     that  those  charges which are not covered in  clauses (a)

     to (c) are available to be included in the value of

     imported goods.  To illustrate, if the seller has

     undertaken  to  erect or assemble the machinery  after its

     importation into India and levied certain charges for

     rendering  such service the price paid therefor  shall not

     be  liable to be included in the value of the goods if it

     has    been   paid    separately    and   is   clearly distinguishable

     from  the  price  actually  paid or  payable  for  the imported

     goods.  Obviously, this Interpretative Note cannot be

     pressed into service for calculating the price of any

     drawings or technical documents though separately paid

     by including them in the price of imported equipments.

     Clause  (a)  in  third  para  of Note  to  Rule  4  is suggestive

     of charges for services rendered by the seller in

     connection   with  construction,   erection  etc.   of imported

     goods.   The  value  of documents  and  drawings  etc. cannot

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     be "charges for construction, erection, assembly etc."

     of imported goods.  Alternatively, even on the view as

     taken by the Tribunal on this Note, the drawings and

     documents  having been supplied to the  buyer-importer for

     use   during    construction,    erection,   assembly, maintenance

     etc.  of imported goods, they were relatable to post-

     import  activity  to be undertaken by  the  appellant. Such

     charges were covered by a separate contract, i.e.

     contract MD 301.  They could not have been included in

     the  value of imported goods merely because the  value of

     documents   referable  to   imported  equipments   and materials

     was mixed up with the value of those documents which

     were  referable  to  equipment  which was  yet  to  be procured

     or  imported  or manufactured by the  appellant;   the value

     of the latter category of documents also being neither

     dutiable nor clubbable with the value of imported

     goods.   The Tribunal has not doubted the  genuineness of

     the contracts entered into between the appellant and

     SNP.  Rather it has observed vide para 10.2 of its

     order that entering into two contracts (MD 301 and MD

     302)  was  a legal necessity.  The Tribunal  has  also stated

     that it was not recording any finding of ‘skewed split

     up’.  Shri Ashok Desai, the learned senior counsel for

     the  appellant  has  pointed out  that  under  Chapter Heading

     49.06  of  the  Customs  Tariff Act,  1975  plans  and drawings

     for   engineering   and   industrial  purposes   being originals

     drawn by hand as also their photographic reproductions

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     on sentisized papers and carbon copies thereof are

     declared free from payment of customs duty.  Sub-rules

     (3)  and (4) of Rule 9 clearly provide that  additions to

     the  price  actually  paid or payable  is  permissible under

     the Rules if based on objective and quantifiable data

     and no addition except as provided for by Rule 9 is

     permissible.

     The abovesaid reasons demolish the edifice on

     which the order of the Tribunal is based.  However,

     still the only thing that remains to be considered is

     whether  there  has  been  under  valuation  of  blast furnace

     equipment  covered  by the contract MD 302.  It  is  a pure

     and  simple  case of finding out ‘the  price  actually paid

     or payable for the goods’ - the phrase as occuring in

     Rules 2(f), 4 and 9, so as to find out the transaction

     value  and levy duty thereon under Sections 12 and  14 of

     the Customs Act.  One of the allegations made in the

     show cause notice given to the appellant was of the

     blast  furnace equipments(BFE) having been undervalued by

     transferring a part of the value of the equipments to

     the value of engineering documents and drawings.  In

     substance the show cause notice alleged the blast

     furnace equipment having been under valued by

     artificially   excluding   therefrom   the  value   of technical

     documents.   According  to the Revenue such  documents are

     even otherwise and in ordinary course supplied by the

     seller to the buyer.  Because of the absence of such

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     documents  the goods sold being equipments would be of no

     use at all but the appellant had so manipulated the

     single transaction by bifurcating the single content

     into two documents so as to under value the blast

     furnace equipments by transferring a part of the value

     of  such  equipments  to   the  value  of  engineering documents

     and drawings.  The gist of the allegation is under

     valuation  of  blast  furnace equipment.   Shri  Kirit Raval,

     the learned Additional Solicitor General has submitted

     that  from  the  stage of the show cause  notice  till before

     the  Tribunal  the  Revenue has kept its  plea  alive. Vide

     para  7  of its order the Tribunal noted this plea  of the

     Revenue but did not go into it as the Tribunal

     considered it not necessary in view of other findings

     arrived at.  The learned Additional Solicitor General

     submitted that if this Court may not sustain the order

     of  the  Tribunal  then in all  fairness  the  Revenue should

     be  allowed an opportunity of substantiating its  plea of

     under valuation followed by such other relief to which

     it  may be entitled in the event of its succeeding  on its

     plea.   We  find  merit in this  submission.   In  our opinion

     on  the  order  of the Tribunal being  set  aside  the matter

     needs to be sent back to the Tribunal for examining on

     merits the abovesaid plea of the Revenue which was

     refused  to  be  gone into earlier on account  of  its having

     been found to be unnecessary.

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     The appeal is allowed.  The impugned order of the

     Tribunal is set aside.  The case is sent back to the

     Tribunal to entertain and examine the plea of the

     Revenue if the contract DM 302 is undervalued on the

     basis  of  the material already available  on  record. The

     Tribunal shall consistently with the observations made

     and  findings  recorded  in  this  judgment  hear  and dispose

     of the appeal before it within a period of six months

     from  the  date of communication of this  order.   The bank

     guarantee  furnished  by the appellant shall  be  kept alive

     and the amount deposited shall also continue to remain

     in deposit till the date of decision by the Tribunal

     whereafter the bank guarantee and the deposit shall be

     dealt   with  consistently  with   the  order  of  the Tribunal.

     Though we have set aside the order of the Tribunal

     and  made  a  remand we would like to  clarify  a  few points.

     Apart from the appellant, two officers of the company

     namely  Dr.J.J.  Irani and Shri S.L.  Shrivastava  and an

     engineering consultant of the appellant, namely, M/s

     M.M.  Dastur & Co.  were also proceeded against and

     penalties  were imposed on them.  They were exonerated by

     the Tribunal.  The Revenue has not come up in appeal

     against the order of the Tribunal exonerating the

     abovesaid  three.   This  order of  remand  would  not reopen

     the proceedings against those three.  Similarly, the

     Tribunal has held that the duty liability of the

     appellant  in  spite of a finding of  under  valuation could

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     not be re-determined by pegging the value of the

     equipment at an amount over and above 21.2747826086

     million DM as this was the figure found by the

     adjudicating  officer  and  not   challenged  by   the Revenue.

     The amount of penalty levied on the appellant was

     reduced  by the Tribunal to Rs.4 crores which too  has not

     been challenged by the Revenue.  On hearing the case

     after  remand  if  the plea of the  Revenue  may  find favour

     with the Tribunal, the dutiable value of the equipment

     and  materials shall not exceed 21.2747826086  million DM

     and  the  amount  of  penalty shall  not  exceed  Rs.4 crores.

     Shri Ashok Desai, the learned senior counsel for the

     appellant submitted that the Tribunal has also held,

     vide para 9 of its order, that the liability of the

     goods  to confiscation did not arise and that part  of the

     order should also be held to have achieved a finality.

     With this submission we do not agree.  If the Tribunal

     may find the equipments forming the subject matter of

     contract DM 302 to be under valued the legal

     consequences flowing from such finding may follow.

     The appeal stands disposed of accordingly.  No

     order as to the costs.