JUDGMENT

FATHIMA BEEVI, J.:- The appellant is a federation of glass manufacturers in India. The Federation entered into a contract with M/s. Magadi Soda Company Ltd., Kenya, for supply of 5000 metric tonnes of soda ash dense at the rate of US $155 per metric tonne c.i.f. Bombay. The consignment arrived from Mombasa, Kenya on 28-12-1981. The goods were cleared on payment of customs duty of Rs. 32,15,904.21 from Bombay. The appellant on distribution of the goods to various members of the federation, received complaints that the soda ash which had been supplied was of sub-standard quality. The seller M/s. Crescent Dyes & Chemicals as well as their agents were approached. They sent a team of experts to examine the goods. The inspection confirmed that the goods were defective. As per agreement dated 9-2-1982, M/ s. Crescent Dyes & Chemical sent a credit note of US $2,40,000/- as compensation on account of the defective goods sent by M/s. Magadi Soda Company Ltd. The amount remitted on account of the import made was only US $5,35,000/-as against the earlier contracted amount of US $7,75,000/-.

2. In view of such reduction, the appellant filed a refund application before the Customs Department to the tune of Rs. 9,95,892.65. The Assistant Collector was not satisfied as to the extent of deterioration of the goods before clearance as provided by S. 22 of the Customs Act and rejected the refund application vide order dated 19-7-1982.

3. The appeal preferred against the order dated 19-7-1982,was rejected by the Collector of Customs on 23-12-1982 on the reasoning that the damage was discovered after the goods were out of customs control. The further appeal to the Tribunal was also unsuccessful. The Tribunal by the order dated 26-10-1989 held that the alleged inferior nature of goods was discovered after clearance.

4. This appeal is filed under S. 130E of the Customs Act, 1969 against the order of the Tribunal dated 26-10-1989.

5. The question involved in the present appeal is whether the appellant is entitled to the refund of customs duty on account of the compensation given by the seller to the appellant on supply of goods. The appellant who imported the goods detected defects and the foreign supplier accepted the defects and damages and agreed for payment of compensation. According to the appellant, goods supplied were not in accordance with the contractual specification. The defects being inherent in nature resulted in diminution in the real value of the goods and what had been agreed upon by the foreign seller is reduction in price on account of these defects. The appellant claimed that it would be entitled to refund of customs duty under S. 22 of the Act for reasons set out thus. The value to be assessed under S. 14 of the Act is the real price at which goods imported are ordinarily sold at the time and place of importation and not the price erroneously indicated by the seller at the time of filling the bill of entry. The buyer who successfully sets up diminution of price on account of breach of warranty, which claim is accepted by the seller, can seek refund or adjustment in the customs duty payable where the duty has been paid erroneously on the full price prior to such diminution The claim under S. 22 of the Act would be maintainable where imported goods were defective and had deteriorated in quality even prior to the import when the assessment has to be on the basis of the real value of goods.

6. The contract dated 30-9-1981 is for the supply of 5000 metric tonnes of soda ash dense. The complaint was that the sodium carbonate content was less than the specified 97%, that there was moisture in the soda ash dense supplied and hence it had turned lumpy.M/s. Crescent Dyes & Chemicals Ltd. was the agent of the seller M/ s. Magadi Soda Company Ltd. The consignment arrived in Bombay sometime in December, 1981. The appellants filed their bill of entry with the customs and the goods were cleared on payment of customs duty of Rs. 32,15,904.21, o