- (1.) The first dispute in this case relates to the question whether the licence fees paid to M/s Midrex International B. V. , Zurich, (Midrex) should be added to the invoice value of the plant bought by M/s Essar Gujarat Limited (EGL). The plant was originally installed at Emden, Germany, in 1981 by a firm which went into liquidation. NORD/lb, a Bank, was appointed receiver of the plant. The bank floated a global tender for the sale of the plant on "as is where is" basis. EGL made an offer of DM 26 million for the plant, but could not obtain clearance of government of India for payment within the stipulated period. The deal, therefore, fell through. The Bank sold the plant to M/s Teviot Investments Limited (TIL). On 24/3/1987, EGL entered into a contract with TIL for purchase of the Direct Reduction Iron Plant on certain terms and conditions. The entire agreement was subject to two conditions - (1 approval of government of India within 30/4/1987 and (2 obtaining transfer of the operation licence from M/s Midrex of Charlotte, USA. The contention before this court, on behalf of the appellant, Collector of Customs, has been that these clearly were the conditions which had to be fulfilled before the sale could take place. As a matter of fact, EGL obtained transfer of the operation licence from Midrex before proceeding with the dismantling of the plant and exporting the plant in semi-knocked- down condition to India. On the other hand, it has been contended on behalfof EGL that the overriding stipulation of obtaining transfer of the operation licence from M/s Midrex only kept an exit door open for EGL to back out of the contract. If for any reason. government of India did not grant permission to go through the deal or the requisite licence from Midrex could not be obtained, it would be permissible for EGL not to go ahead with the contract. These two stipulations were not conditions of sale of the plant but were overriding conditions attached to the contract to enable EGL to back out of the contract in certain contingencies.
(2.) Before going into the merits of the rival contentions, it will be necessary to notice the facts relating to import of the plant and also the three agreements. The agreement between EGL and TIL was entered into on 24/3/19877. The agreement with M/s Voest Alpine AG (V. A. ) and with Midrex International B. V. were both entered into on 4/12/1987. But the plant in semi-knocked-down condition was imported only in September/october 1988. The first bill of entry in respect of 468 packages was dated 29/9/1988 and the second bill of entry in respect of 317 packages was dated 11/10/19888. In other words, even though the agreement to purchase the plant was formally executed by and between EGL and TIL on 24/3/1987, actual importation took place nearly 1 1/2 years thereafter and only after the two agreements with V. A. and Midrex were signed on 4/4/1987 (sic 4/12/1987. These facts go to show that it was essential for EGL to have a licence from Midrex for working of the plant. Mr. Salve has argued that it may have been essential for the EGL to have this licence in order to make the plant fully and effectively operational but it was not a condition of sale of the plant. It was quite an independent contract. From a plain reading of the agreement with TIL, it appears that the overriding clause may have been inserted to protect EGL but nonetheless it was a condition of sale. If this condition was not fulfilled, the sale would have fallen through. Moreover, it appears that the plant without Midrex licence would have been of no value at all. EGL had purchased the plant on "as is where is" basis. But in order to operate the plant, it was essential to have a licence from Midrex.
(3.) The agreement with V. A. starts with the recital that "Egl will set up at Hazira, Gujarat, a gas-based Direct Reduction (DR) Plant which is to be re-engineered for a rated capacity of 8,80,000. 00 tpy of Hot Briquetted Iron (HBI) and for this purpose decided to buy the existing gas-based DR plant of nohddeutsche ferrowerke (MORD FERRD) located at Emden, West Germany, which had a rated capacity of 8,00,000. 00 tpy DRI under the prevailing operating conditions at Emden based on the Midrex Process and to incorporate Hot Discharge and Hot Briquetting facilities. ";