JUDGMENT

Deepak Verma, J. —

1. Following questions of law projected, are required tobe adjudicated by this Court in the aforesaid Appeal:-

(i)Whether import of MS Pipes by Appellants was pursuant to a term of contracts between Appellant No.1 and National Thermal Power Corporation Limited (for short ‘N.T.P.C.’).

(ii)Whether import of said MS Pipes and supply thereof by the Appellant No. 1 to N.T.P.C. Constitutes an integral and inseparable part of the Contracts between them.

2. Brief history of the case is as under:-

Appellant No. 1 is a Limited Company duly incorporated under the provisions of Companies Act, 1956, engaged in the business of Works contract. Appellant No. 2 was working for gain as Senior Manager of Appellant No. 1 (hereinafter referred to as ‘the Company’).

3. Tenders were invited by N.T.P.C on 08.01.1988 for submitting bids for Ash Handling Plant Package for its Farakka Super Thermal Power Project, Stage-II, by way of International Competitive Bidding, popularly known as Global Tender.

4. The scope of work involved in such package included designing and engineering, manufacture, inspection and testing at suppliers works, packing, transportation to site, unloading, storage and handling at site, erection, testing and commissioning of complete Ash Handling Plant for 2 x 500 MW Steam Generating Units (for short ‘the plant’). Such type of works contract is known as ‘On Turnkey Basis’. Bids made by bidders were to cover whole of the work as abovementioned. Bid made by any person not covering the entire scope of work was liable to be treated as incomplete and could be rejected on that ground only. The bidder was required to quote a lump sum price in its proposal for the entire scope of work covered under the bid documents. It further required that bidders shall indicate the bid price in their home currency or in US dollars.

5. The aforesaid project of Ash Handling Plant for 2 x 500 MW Steam Generating Units was to be partially financed by a credit/loan from International Bank for Reconstruction and Development (for short ‘IBRD’) or by International Development Association (for short ‘IDA’).

6. Pursuant to issuance of notice to invite tender, the Company submitted its bid furnishing therein all the information as required by the aforesaid notice and also indicated its bid price inclusive of foreign expenditure.

7. Thereafter, a meeting was convened between the officials of N.T.P.C. and authorized representatives of the Company, at N.T.P.C’s Office on 21.07.1988, wherein various terms and conditions were discussed between the parties regarding erection of plant for which the Company had submitted its bid.

8. Since project was partially financed by credit/loan from IDA or IBRD and in view of the terms of Import Export Policy, Volume-I (April, 1988 to March, 1991) supplies made in such project under the procedure of International Competitive Bidding were to be treated as ‘deemed exports’. Suppliers to such project enjoyed benefit of customs duty exemption for import and unless the part of the contract involving importation of equipments and accessories for use in such project is not separately treated as a supply contract such benefit cannot be availed of at all by the importer on such importation.

9. The total contract was agreed to be divided into two separate contracts, (i) Supply Contract, and (ii) Erection Contract, with a cross fall breach clause wherein breach of either of the contracts would entitle the owner/ contractee (N.T.P.C) to cancel the other contract also.

10. In the said meeting itself, it was agreed between the Company and N.T.P.C that separate formulae shall be applicable in respect of calculation of price adjustment for indigenous supplies and imported supplies. It was, further, agreed that if Sales Tax on imported items is leviable due to future enactment of sale/interpretation of law/ interpretation of law by court, the same will be reimbursed by N.T.P.C to the Company at actuals against documentary ev