2009(05)LCX0491

IN THE CESTAT, SOUTH ZONAL BENCH, BANGALORE

S/Shri T.K. Jayaraman, Member (T) and M.V. Ravindran, Member (J)

Triveni Steels Pvt. Ltd.

Versus

Commissioner of Customs, Cochin

Final Order Nos. 676-677/2009, dated 28-5-2009 in Appeal Nos. C/18-19/2006

Cases Quoted -

Banshi Dhar Lachhman Prasad v. UOI -1978 (002) ELT 385) - Reffered [Para 5]

Eicher Tractors Ltd. v. Commissioner-2000(11)LCX0436 Eq 2000 (122) ELT 0321 (S.C.)-Referred [Para 5]

Rasoi Vanaspati v. Collector -1982(12)LCX0019 Eq 1983 (012) ELT 0169 (CEGAT) - Referred [Para 5]

Ritu Minerals v. Collector -1998(11)LCX0244 Eq 1999 (113) ELT 1005 (Tribunal) - Referred [Para 5]

Smt. Pushpa Devi Kabra -1979 (004) ELT J622 (GOI) - Referred [Para 5]

Travancore Rayongs Ltd. v. UOI -1978 (002) ELT 378) (S.C.) - Referred [Para 5]

Vamamada Jagdas v. Dy. Commissioner of Customs - 2001 Cri.L.J. 1590 - Referred [Para 5]

Advocated By -

Shri K. Balasubramaniamn, Advocate, for the Appellant.
Ms. Joy Kumari Chander, JCDR, for the Respondent.

[Order per: T.K. Jayaraman, Member (T)]. -

This appeal has been filed against OIO No. 47/05 dated 28-10-05 passed by the Commissioner of Customs, Cochin.


2. We heard both sides.


3. This is the second round of litigation. This Bench in the Final Order No. 1241-1242/02 dated 23-9-02 remanded the issue to the adjudicating authority with the following directions:

"We have carefully considered the submissions made by both sides. When once the item is classified as HMS scrap, it was not correct on the party of the assessing authority to determine the value as that of reusable used pipes. Furthermore, it was submitted by the Counsel that the issue involved herein has been considered by the Tribunal in the case of Global Ship Trade (P) Ltd. v. CC, Kandla reported in 2002 (050) RLT 635. In the impugned order the adjudicating authority has also held that the very item is sold on higher price abroad and in India and the same has not been substantiated nor was disclosed to the party. In view of these discrepancies, we are of the view that the matter requires to be re-examined by the adjudicating authority. In the view we have taken, we are remanding the matter to the concerned adjudicating authority to examine the issue afresh and to pass an order in accordance with law on providing an opportunity to the party. All connected issues are kept open. Thus these appeals are disposed off in the above terms."

Consequent to the remand order, the impugned order has been passed. The brief facts of the case are as follows :-

The appellants filed a bill of entry No. 340 dated 22-1-01 for clearance of 218.210 Mt of non-alloy steel re-melting scrap imported in containers at Cochin. The declaration was "non-alloy steel re-melting scrap falling under Customs Tariff Heading 7204.49." The benefit of Customs Notification No. 16/00 dated 1-3-2001 and Customs Notification No. 34/97 dated 7-4-97 was claimed. There was some intelligence and the DRI officers examined the cargo. On examination, the goods were found to be pipes of various dimensions of length 20 ft. The said goods were seized on the reasonable belief that they are liable for confiscation. De-tailed investigation was conducted. The appellants factory was at Cud-dapah. On the request of the DRI, the goods were examined by the Man-ager Kerala Electrical and Allied Engineering Company, Cochin. Accord-ing to him, the goods are pipes cut into pieces of 20 ft and can be used in industrial sewerage oil and water pipelines and structural fabrication. He also opined that the pipes as such cannot be used in electric furnaces or induction furnaces by melting in the hot cupola and the pipes will fetch a value of Rs. 30,000/- per Mt in the domestic market. The goods were examined by the surveyors also. Their opinion was also similar to that of the Manager mentioned above. Prior to this import also, the appellants had effected import under the following bills of entry (1) 079 dated 4-1-01 (2) 177 dated 10-1-01. Thus in all, three bills of entry had been filed including the one pertaining to the goods seized. The appellant had filed end-use bonds with customs for the clearance of the goods in terms of customs Notification No. 16/00 dated 1-3-00. The goods were assessed at concessional rate of 5% as per the declaration by the importer. The importer had requested for house destuffing of the cargo under Central Excise supervision at the importers factory premises at Mandalur range A.P. for the three consignments. In respect of the goods cleared from Cochin port to the factory premises, the Customs sealed the containers with Customs seal to be opened by Central Excise Officials at Cuddapah for house de-stuffing. Investigations revealed that no advance 'intimation was sent to the Divisional Central Excise Officers about the dispatch or arrival of the import cargo. Iri any case, de-stuffing of cargo covered by bills of entry 79 and 177 was not done under Central Excise supervision. Further it was revealed that the consignments covered by the above two bills or entry were destuffed in Bangalore as per the instructions of one Shri Shariff of Bangalore. Thus it was revealed that the consignments were unloaded at Bangalore not at A.P. Further investigations are conducted with the following persons:

(1) Dy. Commissioner of Central Excise, Cuddapah Division who visited the factory.

(2) Shri A.V. Subba Reddy, Managing Director M/s. Triveni Steels Pvt. Ltd., (Visak).

(3) Shri Rajiv P.M. Driver of the lorry which transported the container to Bangalore from Cochin (Port).

(4) Shri Augustine, Driver of lorry which transported the container to Bangalore.

(5) Shri Sugunan, Driver of the lorry which transported the goods to Bangalore.

The examination report in both the bills of entry have been done by the Examiner Customs. In terms of the examination report the cargo is steel scrap. But the said examination was only superficial. The appraiser has specifically directed that the Central Excise Authorities supervising the destuffing should confirm that the goods are scrap only.


4. In view of the above, show cause notice was issued in respect of goods covered by all the three bills of entry. The show cause notice dated 19-7-01 was issued by the Addl. Director (General), Directorate of Revenue Intelligence Chennai. Penalties were also proposed on both the main appellants M/s. Triveni Steels Pvt. Ltd., and Shri A.V. Subba Reddy, Managing Director. The adjudication proceedings were completed and the Commissioner passed OIO No. 9/02 dated 30-3-02. Aggrieved over the above order, the appellant approached the Tribunal Bangalore. The Tribunal passed the above mentioned Final Order Nos. 1241 & 1242/2002 dated 23-9-02. Consequent to the Tribunal's Order the Com-missioner took up the matter for de novo adjudication and passed the impugned order.


5. In the above said order, the Commissioner classified the goods covered by the Bills of entry 79,177 and 340 as pipes coming under Tariff Heading No. 7304.39. The following demands were confirmed in respect of each bill of entry.

Interest has been demanded under Section 28AB of the Customs Act, 1962. The concessional rate of duty has been denied under the Notification as the goods had been assessed as pipes and not as scrap. The goods under seizure were confiscated under Section 111(1), 111(m) and 111(o) of the Customs Act, 1962. A redemption fine of Rs. 10 lakhs was imposed in terms of Section 125 of the Customs Act, 1962. A penalty of Rs. 57,93,332/- was imposed on the main appellant M/s. Triveni Steels under Section 114A of the Customs Act, 1962. An amount of Rs. 1,00,000/- was imposed on Shri A.V. Subba Reddy as penalty under Section 112 of the Customs Act. The appellants are highly aggrieved over the impugned order. The following submissions were made before the Tribunal:

(1) The adjudication order has not considered the various contentions urged in reply to the show cause notice.

(2) The following case laws are relied on:

(i) Travancore Rayongs Ltd. v. UOI - (1978 (002) ELT J 378 (S.C.)

(ii) Smt. Pushpa Devi Kabra-1978(04)LCX0007 Eq 1979 (004) ELT 0622 (GOI)

(iii) Rasoi Vanaspati v. Collector -1982(12)LCX0019 Eq 1983 (012) ELT 0169 (CEGAT)

(3) Having accepted the submission of the importer that the cargo is only a melting scrap and classifiable under Customs Tariff Heading 7204.49, the adjudicating authority should not have enhanced the value which is applicable only for new pipes/tubes and not for scrap.

(4) The appellant has submitted the end-use certificate from the juris-dictional Dy. Commissioner of Central Excise. This is binding on the Original Authority. He cannot suspect or question the validity of the same based on extraneous materials which never figured as issues in the show cause notice especially the letter dated 19-2-02 from the Commissioner of Central Excise, Hyderabad which is not made available to the appellant. The Notification No. 16/2000-Cus., does not prescribe any condition that the certificate issued by the Assistant Commissioner of Central Excise/Dy. Commissioner of Central Excise should be approved by Commissioner of Central Excise.

(5) The jurisdictional Dy. Commissioner of Central Excise had not only issued the end-use certificate but also verified and signed the relevant stock records of the appellant which were at the custody of the Anti-evasion wing of Central Excise, Hyderabad. This was also brought to the notice of the Original Authority on 14-3-02.

(6) It is not the case of the Original Authority that they have forged the signature of the jurisdictional Dy. Commissioner of Central Excise to obtain the end-use certificate. For the first time, it is alleged in the impugned OIO that certain internal formalities were not complied with which are beyond the cannot of the appellant.

(7) As the end-use certificate has been issued by the jurisdictional Dy. Commissioner, the condition contemplated under Notification No. 16/2000-Cus. is fulfilled and the appellant would be entitled for the concessional rate of duty and hence exemption cannot be denied.

(8) Having accepted the goods as melting scrap, the lower authority ought to have accepted the transaction value inasmuch as the transaction does not fall within any of the exceptions provided under Rule 4(2) of the Customs Valuation Rules in terms of Apex Court decision in Eicher Tractors v. CCE - 2000(11)LCX0436 Eq 2000 (122) ELT 0321 (S.C).

(9) The lower authority has failed to appreciate the submission of the appellant that the containers would not be directly moved from Cochin to the factory of the appellant at A.P. in view of the single track Ghat road for a distance of 26 kms in one direction and railway sub-way at Tirupathi and Renigunta in which trailers cannot go with containers in view of the lack of proper passage namely the height. Under these compelling circumstances, the appellant had to unnecessarily unload the cargo and transport the same by lorries to the factory which was also entered in the stock registers verified by the central excise authority and end-use certificates have been issued.

(10) The respondent Commissioner only suspects that the imported scrap would not have reached the factory since it was unloaded at Bangalore from the containers. It is well settled that suspicion however, grave cannot take the place of evidence. Several case laws were relied on. There is not even an iota of evidence produced by the lower authority as to whom, when and how much quantity of scrap has been sold in clandestine manner. The onus is on the Revenue to prove that the imported goods had been diverted in between but not consumed as per the end-use certificate produced from Dy. Commissioner of Central Excise. In view of the above, demand on differential duty involved in the melting scrap and the imposition of huge penalties of Rs. 57,93322/- on the company and Rs. 1,00,000/-on its Managing Director are fully unwarranted and liable to be set aside. The imposition of redemption fine and appropriation of bank guarantee for a sum of Rs. 5,25,000/- in view of confiscation is also not sustainable for the above grounds and requires to be refunded.

(11) . The show cause notice dated 19-7-01 proposes to invoke Section 28 for demanding duty. The first order dated 30-3-02 at para 6 of the order had considered the demand of duty under Section 28(1), interest under Section 28AB and penalty under Section 14A and held that these provisions are not applicable as permitting clearances under Section 47 for home consumption is not made. Whereas in the present order, dated 27-10-05, not only Section 28(1), 28AB, Section 111 A are invoked but also confiscation of goods which are not available for confiscation is ordered. Hence, order is not as per law.

(12) The appellant had sought for cross-examination of the drivers who had brought the containers to Bangalore and alleged to have given statement that the company had destuffed the goods at Bangalore. The appellant wanted to cross-examine the drivers as they refused to take their vehicles from Ghat Section as shown in the road map and the appellant had to make alternative arrangement to transport the said goods to Rajampet. Cross-examination was denied thereby violating principles of natural justice.

(13) Further the cross-examination of the Dy. Commissioner of Customs Cuddapah, Surveyor who has inspected and given the valuation certificate and the investigation officer who conducted the investigation was negatived by the respondent which again violated the principles of natural justice. The learned advocate compared the first adjudication order with the impugned order and stated that when the matter is remanded the litigant cannot be subjected to a higher burden than the one imposed under the Original Order. He relied on the following decisions:

(1) 1978 (002) ELT (J 385) - M/s. Banshi Dhar Lachhman Prasad and another v. UOI

(2) 1998(11)LCX0244 Eq 1999 (113) ELT 1005 (Tribunal) = 1998(11)LCX0244 Eq 1999 (030) RLT 0506 (CEGAT) - Ritu Minerals & Others v. Collector of CE

(3) 2001 Cri.L.J. 1590 - Vamamada Jagdas v. Deputy Commr. of Cus-toms, Hyderabad.


6. The learned JCDR took us through the impugned order and stated that there is clear evidence of misdeclaration of the goods. Moreover the appellants are not supposed to unload the goods in Bangalore in terms of the bonds executed therefore, the identity of the goods unloaded at Bangalore is lost. In that view of the matter, the certificate given by the Dy. Commissioner of Central Excise is not acceptable. She requested the Bench to uphold the order-in-original.


7. We have gone through the records of the case very carefully. In this appeal, three bills of entry are involved. The appellants declared the cargo as HMS scrap. When the goods pertaining to bill of entry No. 340 were examined, prima facie, there was misdeclaration as the goods were found to be pipes. In our view as far as these goods are concerned, the misdeclaration of description as well as value has been established. The goods were subjected to detailed examination by Manager, Kerala Electrical and Allied Engineering Company and also by licensed surveyors. Both the reports indicate that the goods imported are only pipes of various dimensions cut to size of 20 ft length. It has also been stated that the said pipes could not be used in electric arc furnace or induction furnace or melting furnace. It has also been stated that they would fetch the market value of Rs. 30,000/- per Mt. In these circumstances, the Commissioner is right in holding the goods covered by bill of entry 340 as pipes falling under 7304.39. The denial of the benefit of exemption notification No. 16/2000 dated 1-3-2000 for the goods covered by the above bill of entry is also legal and proper. It has to be accepted. The Commissioner has determined the valuation of the goods in terms of Rule 8 of the valuation rules. He has taken the market value of the goods to be Rs. 30,000/- per Mt. In these circumstances of the case, the Commissioner has adopted the best judgment method and arrived at the assessable value of Rs. 14,962/- per Mt. by reducing the duty, incidental cost, reasonable profit etc. This appears to be very reasonable. Therefore, as far as the goods covered by BE 340 are concerned we uphold the short levy amounting to Rs. 19,87,356/-, inter-est under Section 28AB is also payable. The goods are liable for confiscation under Section 111(1), (m) and (o) of the Customs Act. However taking into account the facts and circumstances of the case, the fine is reduced to Rs. 2,00,000/- only.


8. With regard to other goods covered by bills of entry No. 79 and 177 they had already been cleared by the Customs. The main allegation is that the said goods ought to have been unloaded only at the final destination in the A. P. and the evidence shows that they had been unloaded at Bangalore. In view of this, it is presumed that the goods received at the factory and certified to be HMS scrap cannot be the same goods which were imported at Cochin. In our view in the absence of sufficient evidence this cannot be accepted. There is no evidence that the imported goods had been diverted from Bangalore. The fact remains that the Dy. Commissioner has given the certificate that the goods covered by the said bills of entry have been received and she has also given the end-use certificate that the said goods have been consumed. In our view, there is no justification for reassessment of the said goods as pipes. Moreover, the Adjudicating Authority has not allowed the cross-examination of the drivers and the surveyor. In our view, this is violation of principles of natural justice. Sufficient opportunity has not been given to the appellant for defending their case. Further the Tribunal also in the remand order has made an observation that "when once the item is classified as MS Scrap it was not correct for the assessing authority to determine the value as that of reusable pipes". In these circumstances, we drop further proceedings in respect of other two bills of entry. We also take note of the appellants contention that the trucks with the containers could not pass through the narrow roads and consequently, they were compelled to unload the goods at Bangalore and carry them to the factory in other lorries. There is also no evidence of the appellant having received the melting scrap from other sources. In view of this lacuna in investigation, we have to give the benefit of doubt to the appellants. Moreover, end-use certificate given by the Dy. Commissioner of Central Excise cannot be brushed aside. Penalty on M/s. Triveni Steels Ltd. is limited to Rs. 19,87,356/-, under Section 114A of the Customs Act, 1962. Penalty on Shri A.V. Subba Reddy is reduced to Rs. 10,000/-. The appeals are disposed of in the above manner.

(Pronounced in open court on 28-5-2009)

Equivalent 2009 (248) ELT 0912 (Tri. - Bang.)