JUDGMENT

S.P. Bharucha, J.-Under appeal is the judgment and order of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi. The Tribunal allowed the appeal of the Revenue setting aside the order of Central Board of Excise & Customs and restoring the order of the Collector of Customs, subject to the modification of reducing the quantum of penalty.

2. The appellants were setting up a plant for the manufacture of tyres. They entered into an agreement for the supply of technical know-how, documentation and the like. On the same day they entered into a second agreement which noted that the second party to the agreements, General Tyre International Company, had for many years been engaged and had acquired vast experience in the manufacture of tyres as well as the design, engineering and equipment of plants for the same. The agreement in Article 5 stated, so far as is relevant;

Optional Procurement Services :

5.1 ATL shall have the option and right to call for the services of GENERAL for procurement of any one of more items of equipment, machinery, spares, accessories and raw materials required for the PLANI, which ATL may elect to purchase, and GENERAL shall arrange for obtaining quotations and for rendering of all the related services, including inspection at the supplier s manufacturing site, furnishing for such supply of all necessary documentation, guarantees, data and manuals relating to and customarily supplied with, for installing, testing, operating and maintaining such equipment and machinery and the details as to the needs and procurement of spare parts and accessories therefore. Prior to placing of any firm order for purchasing any equipment, machinery, spares, accessories, or raw materials, GENERAL shall obtain quotations from responsible qualified suppliers thereof and shall submit quotations and GENERAL S recommendations to ATL for final approval and authorization to place such orders but no orders shall be placed by GENERAL unless approved and authorised in writing by ATL.

5.2 Unless otherwise mutually agreed in any given transaction, all equipment, machinery, spares, accessories, and raw materials purchased by GENERAL in pursuance of ARTICLE 5.1 for ATL, shall be purchased by General directly in the name of ATL, and ATL shall pay for the same including shipping, transportation charges and insurance premiums.

Conditions of procurement services:

5.3 GENERAL agrees to observe the following norms in respect of procurement services to be rendered under this Article :

(c) For the obligations concerning optional procurement services referred to in this Article, ATL agrees to pay GENERAL, in U.S. $ three per cent (3%) on the FOB value of such imported equipment, machinery, and/or raw materials for which GENERAL has rendered procurement services to ATL against ATL specific written request.

(d) The amount payable under Article 5.3 (c) shall be paid against a quarterly consolidated invoice to be submitted by GENERAL after having taken into accounts such invoices of supplies (with two copies thereof) in respect of which dispatches have been completed by GENERAL and goods received and approved at ATL s PLANI. This payment shall be effected within ninety (90) days from the date of receipt of the consolidated invoices by ATL from General.

3. The appellants procured through the instrumentality of General ten items of equipment. The same were cleared on the basis of their invoice value. Thereafter a notice was served upon the appellants asking them to show cause why the assessable value of these items of equipment should not be recomputed and enhanced so as to add to the invoice values thereof the procurement charges thereof, that is to say, to add 3% of the FOB value of each item of equipment. The show cause notice was confirmed. The appellants appeal to the Central Board succeeded, and therefrom the Revenue went in appeal to the Tribunal.

4. Paragraph-4 of the Tribunal s order records its r