J.K. Synthetics Limited Vs. Collector of Customs - Court Judgment

Excerpt:
1. this appeal is directed against order-in-appeal no. 2255/88-boom, dated 26-5-1988 of collector of customs (appeals), bombay.2. the appellants imported two d.g. sets along with spare parts and accessories and claimed benefit of assessment under accessory (condition) rules, 1963. the lower authorities denied this benefit on the ground that the import of such spare parts and accessories was optional. hence, this appeal.3. arguing for the appellants, the learned advocate submits that these spare parts have been imported alongwith d.g. sets and their suppliers specifically informed them that spare parts and accessories are specially designed and tailor-made for d.g. sets and that suppliers would not be responsible for atleast for two years [if the] spare parts and accessories other than those supplied by them are used with d.g.sets. these spare parts are not for general use but specially made to work with the impugned goods. in fact, the invoice also indicates the composite price for d.g. sets and the parts. in order to indicate that the value of spares is included in the value of the machine they had also requested the supplier to indicate the breakup of price of d.g.sets as also the spares.4. the learned dr submits that they have not produced any contract to indicate that these spare parts were supplied compulsorily. while conceding that the letter from the supplier indicates that these spare parts are specially designed for use specifically with d.g. sets as imported, he submits that the appellants have to produce an order and a contract to indicate that the order was for supply for both of d.g.sets as well as accessories and spare parts.5. we have heard both sides. spare parts and accessories of any article, when imported with that article are chargeable at the same rate of duty as that article if the proper officer is satisfied that in the ordinary course of trade :- (i) such accessories, parts and implements are compulsorily supplied alongwith that article; and (ii) no separate charge is made for such supply, their price being included in the price of the articles.6. in the letter dated july 1,1987 from the supplier in annexure 'g' in the appeal papers to which our attention has been specifically drawn by the learned advocate the spare parts and accessories are specially designed and tailor-made for d.g. sets imported by the appellants. the suppliers have also clarified that since these spares are not of general use, these spare parts are not available in the open market.the suppliers have also confirmed that they always recommend the buyer that for smooth running of diesel engine they should import the spares and accessories from them alongwith the machine for atleast two years normal operation of d.g. sets. the suppliers also indicated that they would not entertain any claim if the buyer operates their d.g. sets on indigenous spares.7. from this it would be clear that these spare parts specially designed to work with a d.g. sets as imported have to be taken as if these were compulsorily supplied. since the suppliers clearly absolved themselves from any obligation to compensate the appellants for anything if the d.g. sets were used with accessories and spares other than those supplied an element of compulsion can be clearly read in the arrangement. in view of this we are satisfied that such accessories and spare parts were compulsorily supplied alongwith the d.g. sets. in regard to composite price of these out attention has been drawn to invoice placed in annexure 'e' in the paper book. this invoice indicates the composite price and on the second page indicates the price of d.g. sets and prices of spare parts separately. there is a lot of force in the argument of the learned advocate that while placing order at the supplier they asked them also to indicate, in addition to composite price, the price breakup to satisfy the customs authorities, should they entertain any doubt, that the composite price of the d.g.sets also include the price of the spare parts. in view of this we are also satisfied that since the composite price includes the price of the spare parts no separate charge was made for supply their price being included in the prices of the articles.8. in the result, for the reasons mentioned herein before, we allow the appeal and set aside the impugned order. the appellants would be entitled to consequential relief in accordance with law.

Judgment:
1. This appeal is directed against Order-in-Appeal No. 2255/88-Boom, dated 26-5-1988 of Collector of Customs (Appeals), Bombay.

2. The appellants imported two D.G. Sets along with spare parts and accessories and claimed benefit of assessment under Accessory (Condition) Rules, 1963. The lower authorities denied this benefit on the ground that the import of such spare parts and accessories was optional. Hence, this appeal.

3. Arguing for the appellants, the Learned Advocate submits that these spare parts have been imported alongwith D.G. sets and their suppliers specifically informed them that spare parts and accessories are specially designed and tailor-made for D.G. sets and that suppliers would not be responsible for atleast for two years [if the] spare parts and accessories other than those supplied by them are used with D.G.sets. These spare parts are not for general use but specially made to work with the impugned goods. In fact, the invoice also indicates the composite price for D.G. sets and the parts. In order to indicate that the value of spares is included in the value of the machine they had also requested the supplier to indicate the breakup of price of D.G.sets as also the spares.

4. The Learned DR submits that they have not produced any contract to indicate that these spare parts were supplied compulsorily. While conceding that the letter from the supplier indicates that these spare parts are specially designed for use specifically with D.G. sets as imported, he submits that the appellants have to produce an order and a contract to indicate that the order was for supply for both of D.G.sets as well as accessories and spare parts.

5. We have heard both sides. Spare parts and accessories of any article, when imported with that article are chargeable at the same rate of duty as that article if the proper officer is satisfied that in the ordinary course of trade :- (i) such accessories, parts and implements are compulsorily supplied alongwith that article; and (ii) no separate charge is made for such supply, their price being included in the price of the articles.

6. In the letter dated July 1,1987 from the supplier in Annexure 'G' in the appeal papers to which our attention has been specifically drawn by the Learned Advocate the spare parts and accessories are specially designed and tailor-made for D.G. sets imported by the appellants. The suppliers have also clarified that since these spares are not of general use, these spare parts are not available in the open market.

The suppliers have also confirmed that they always recommend the buyer that for smooth running of diesel engine they should import the spares and accessories from them alongwith the machine for atleast two years normal operation of D.G. sets. The suppliers also indicated that they would not entertain any claim if the buyer operates their D.G. sets on indigenous spares.

7. From this it would be clear that these spare parts specially designed to work with a D.G. sets as imported have to be taken as if these were compulsorily supplied. Since the suppliers clearly absolved themselves from any obligation to compensate the appellants for anything if the D.G. sets were used with accessories and spares other than those supplied an element of compulsion can be clearly read in the arrangement. In view of this we are satisfied that such accessories and spare parts were compulsorily supplied alongwith the D.G. sets. In regard to composite price of these out attention has been drawn to invoice placed in Annexure 'E' in the paper book. This invoice indicates the composite price and on the second page indicates the price of D.G. sets and prices of spare parts separately. There is a lot of force in the argument of the Learned Advocate that while placing order at the supplier they asked them also to indicate, in addition to composite price, the price breakup to satisfy the customs authorities, should they entertain any doubt, that the composite price of the D.G.sets also include the price of the spare parts. In view of this we are also satisfied that since the composite price includes the price of the spare parts no separate charge was made for supply their price being included in the prices of the articles.

8. In the result, for the reasons mentioned herein before, we allow the appeal and set aside the impugned order. The appellants would be entitled to consequential relief in accordance with law.