K.S. Venkataramani, Member (T)

1. This appeal is directed against the order dated 15-3-1988 passed by the Collector of Customs, Bombay by which he had confirmed the demand of Customs duty amounting to Rs. 2,54,15,846/- as being payable by the appellants. The facts briefly are that the appellants were granted an industrial licence in June, 1981 for setting up a DMT plant. The licence envisaged the purchase of a 2nd hand DMT plant situated in Burlington, New Jersey, USA owned by Her-cofina. On 12-7-1982, the appellants applied to the Bombay Customs House for registration of their Project contract with Hercofina, USA for the import of Second hand DMT plant for assessment under Heading 84.66 of the Customs Tariff Act, 1975 under Project Import Regulations. Under this Heading in the Customs Tariff Act, 1975, all items of machinery, instruments, apparatus and appliances, control gear and transmission equipment, auxiliary equipment or raw materials required for the initial setting up of a unit or the substantial expansion of an existing unit of a specified industrial plant, irrigation project, power project, mining project, project for the exploration of oil or other minerals and such other projects as may be notified by the Govt. are to be assessed at 40% ad valorem. The Heading also contains a proviso to the effect that provided these are imported, whether in one or more than one consignment against one or more specific contracts, which have been registered with the appropriate Custom House in the manner prescribed by regulations under Section 157 of the Customs Act, 1962 and that such contract has been so registered before the goods are cleared out of the Customs charge. The Heading also includes for such assessment all spare parts, other raw materials or consumable stores as a part of a contract registered with the Custom House provided, the total value of such spare parts etc. does not exceed 10% of the value of the goods covered by the main contract. Accordingly, the appellant's contract was registered by the Custom House for a value of US $ 17 millions of capital goods, spares, repairs, replacements, new equipments etc. as per import licence P/CG/12083613 dated 21-1-1982 for the value of US $ 16 millions equivalent to Rs. 15,66,82,100/- at the exchange rate US $ 10.85 = Rs. 100/-. The appellants also executed a continuity bond, in terms of which, all assessments were provisional and were to be finalised on submission of reconciliation statement with supporting documents. During the course of imports, the department in a letter dated 9/15-12-1982 informed the appellants that dismantling, packing and forwarding charges formed a part of assessable value and the department also started debiting these charges to the import licence. The appellants resisted this and obtained a clarification from the licensing authority to the effect that dismantling charges were not taken into account while issuing the licence. The department thereupon recredited the earlier debited dismantling charges to the licence. On 16-12-1986, a less charge demand was issued by the Custom House to the appellants for Rs. 1,67,60,323/-being duty towards dismantling charges in respect of nine Bills of Entry. They we're also asked to submit a reconciliation statement which they were required to submit within 3 months of the last import consisting of the Project which took place in Feb. 1985. Such a statement was submitted by the appellants in which they informed that out of total value of the capital goods licence, US $ 17 million, they imported goods worth US $ 16,159,348.24. The Custom House, however, was of the view that the appellants had not furnished a complete accountal of the remittances made towards the value of capital goods, dismantling charges, fee for technology and technical assistance which were called for and duly furnished by the appellants in which they gave, the following expenditure were actually incurred and remitted:-

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