2018 (3) TMI 1504 - AT - Customs

Tribunal remands dispute over purchase order cancellation for arbitration, stresses duty liability await arbitration outcome

The Tribunal allowed all three appeals by remanding the matter to the Original Authority due to ongoing arbitration proceedings between the appellant and ... Benefit of N/N. 39/1996 (Sl. No. 10) (vi), (viii) dated 23.07.1996 - denial on the ground that the original purchase order issued by DRDO has later been cancelled - Held that: - though at the time of import, the appellant claimed the exemption and were supported by due documents provided by DRDO, the later development created situation for dispute regarding the eligibility of the appellant for such exemption - the arbitration proceedings are yet to be concluded. In such situation, the matter regarding the validity of purchase order placed by RCI is still to be resolved by a due process. The present proceedings confirming the duty liability is pre-mature - matter remanded to the Original Authority to decide afresh after the outcome of the arbitration as ordered by the Defence Ministry - appeal allowed by way of remand. Issues:1. Claim of exemption under Notification No. 39/1996 for import of components for vibration system assembly for Defence Research & Development Organisation (DRDO).2. Denial of exemption and duty recovery due to cancellation of purchase order by DRDO.3. Dispute between appellant and DRDO regarding specifications and cancellation of purchase order.4. Validity of exemption based on DRDO approval and authority for defence equipment supply.5. Arbitration proceedings initiated by Ministry of Defence regarding dispute between appellant and DRDO.Analysis:1. The appellant imported components for a vibration system assembly under a purchase order from DRDO, claiming exemption under Notification No. 39/1996. The exemption required a certificate from DRDO, which the appellant provided at the time of import.2. The Revenue sought to deny the exemption and recover duty due to the cancellation of the purchase order by DRDO after the appellant had already used the imported items for the intended purpose.3. The dispute arose from differences in specifications between the tender and the purchase order, leading to the cancellation of the purchase order by DRDO. The matter was referred to arbitration by the Ministry of Defence, DRDO, Directorate of Material Management.4. The Revenue argued that the exemption was contingent on the approval and authority of DRDO, specifically for defence equipment supply. As the equipment was not supplied to Defence Authorities and the purchase order was cancelled, the supporting certificates were deemed invalid.5. The Tribunal noted that while the appellant initially met the conditions for exemption and provided necessary documents from DRDO, the subsequent dispute with DRDO raised questions about the eligibility for exemption. The ongoing arbitration proceedings were crucial in determining the validity of the purchase order and resolving the dispute.6. Considering the unresolved arbitration proceedings and the premature nature of confirming duty liability, the Tribunal set aside the impugned order and remanded the matter to the Original Authority to decide afresh after the arbitration outcome as ordered by the Defence Ministry.7. Consequently, all three appeals were allowed by way of remand, emphasizing the need to await the arbitration conclusion before making a final determination on the duty liability and exemption status.