1998(05)LCX0091

IN THE CEGAT, SOUTH ZONAL BENCH, MADRAS

S/Shri S.L. Peeran, Member (J) and V.K. Ashtana, Member (T)

STEEL INDUSTRIALS KERALA LTD.

Versus

COMMISSIONER OF C. EX., COCHIN

Order No. 867/98, dated 14-5-1998 in Appeal No. E/SB/1351/91

CASES CTED

Collector v. Indian Oxygen Ltd. — 1991 (051) ELT A36 — Distinguished                            [Para 3]

Collector v. Bhiwani Textile Mills — 1996(10)LCX0058 Eq 1996 (088) ELT 0639 (S.C.) — Distinguished                  [Para 3]

Ballarpur Industries Ltd. v. Assistant Collector — 1995(01)LCX0139 Eq 1995 (076) ELT 0499 (S.C.) — Relied on       [Para 4]

Advocated By : Shri C. Chidambaram, Consultant, for the Appellant.

Shri R. Saroop, JDR, for the Respondent.

[Order per : V.K. Ashtana, Member (T)]. - This is an appeal against the Order-in-Appeal No. 90/91(C), dated 27-3-1991 of the Collector of Central Excise (Appeals). The issue involves classification of Ferrous waste and scrap obtained by ship breaking.

2. Briefly the facts are that the appellant submitted a classification list effective 15-3-1989 to the Assistant Collector in which at Sr. No. 2 such scrap sought to be classified under Heading 72.30 and claiming exemption from duty under Notification No. 171/88. The Assistant Collector approved the same on 29-3-1989 granting `nil’ duty i.e. full exemption under the said Notification, though classifying the product under Heading 72.30. A show cause notice was issued on 6-9-1989 i.e. within six months from the date of approval of the classification, asking the appellants to show cause why the duty involved should not be demanded as the exemption under the said Notification was not available to them. The show cause notice also alleged that even if, the goods were to fall under Heading 72.04, since the scrap arises from ship breaking therefore, the Notification No. 171/88 as amended would not be applicable even in that case. The learned Assistant Collector confirmed the said duty amount vide Order-in-Original No. 75/90, dated 29-6-1990. In the impugned order, the learned Collector (Appeals) has held in para 7 thereof :

(a) that the said goods would fall in Classification under the Heading 72.30 and there is no exemption under Notification No. 171/88 would be available to them. This conclusion has been arrived at on two grounds :-

(1) The Heading 72.30 specifically covers goods and materials obtained by breaking of ships etc. and is more specific; and

(ii) Notification 171/88 excludes waste and scrap arised from goods and materials obtained by breaking of ships etc.

3. Heard the learned Consultant, Shri C. Chidambaram, who argued that since a no due certificate from Customs was given to the Cochin Port Trust (page 2 of paper book), therefore, it is very clear that there were no dues of Customs duty involved in the said Dredger, when it was purchased by the appellants from the Cochin Port Trust. He, therefore, argued that the condition if the ship which is to be broken is an imported one, then it should pay duty was squarely met. Secondly, he traced the history of the said Dredger from the Cochin Port Trust, the approval of the classification list filed and steps resulting in the Order-in-Original and the final impugned order. He claimed classification under Heading 72.04 and also exemption under Notification 171/88 by pointing out the serial number 3 of the said Notification. He argued that his case was covered under the condition that the ship which was subjected to ship breaking was imported and no customs dues were outstanding against it, as is evident from the letter of the Customs authorities of Cochin Customs House to the Cochin Port Trust. According to the show cause notice, the only allegation against the appellants is that there was no evidence to show that the Dredger has been imported on payment of duty from Scotland and it was only on that ground the benefit of Notification No. 171/88 was said to be denied. He further argued that the department cannot state any new ground which is not set out in the said show cause notice. Another argument submitted was since the classification list has already been approved and the said exemption approved therein, therefore, it could not be re-opened with retrospective effect within six months in the light of the judgment in the case of Indian Oxygen Ltd. reported in 1991 (051) ELT A36 and in the case of Bhiwani Textile Mills reported in 1996(10)LCX0058 Eq 1996 (088) ELT 0639 (S.C.).

4. Heard the learned D.R., Shri R. Saroop. He reiterated the reasons contained in the Order-in-Appeal. He argued that the goods had rightly been classified under 72.30. He further submitted that Notification No. 171/88 did not mention in its schedule Heading 72.30 at all and therefore, this exemption could not be available. As far as the Sr. No. 5 of the Schedule was concerned, though the notification mentioned Heading 72.30 the conditions specified therein restricted to only Ordnance Factory etc., which was not the case here. He further submitted that the appellants had sought in the C.L. approval of the classification under 72.30 and therefore, it should have continued to pay duty. He cited the decision in the case of Ballarpur Industries Ltd. reported in 1995(01)LCX0139 Eq 1995 (076) ELT 0499 (S.C.), wherein it was held that the approved classification list can be re-opened and duty was recoverable, if erroneously not levied for the past six months.

5. We have considered the arguments of both sides and records of the case. We find that the show cause notice dated 6-9-1989 issued by the Superintendent of Central Excise to the appellants reads as under :-

“72.30.00 is `goods and materials of Chapter 72 obtained by breaking up of ships, boats and other floating structures’.

73.27.00 is `goods and materials of Chapter 73 obtained by breaking up of ships, boats and other floating structures’.

On a detailed examination of the Tariff description and exemption Notification cited above, it appears that there is no exemption for ferrous waste and scrap 72.30/73.27, since the same being goods and materials of Chapter 72/73 obtained by breaking up of ships, boats etc.’

Even if the ferrous waste and scrap obtained by breaking up of the ship, boats etc., is classifiable under Heading No. 72.04, then also the exemption is not available in this case, since ferrous waste and scrap under Heading No. 72.04 is also `goods and materials of Chapter 72 obtained by breaking up of ships’ and is correctly classifiable under Heading No. 72.30 and dutiable at the Tariff rate.

Exemption under Notification No. 171/88-C.E., dated 13-5-1988 as amended by Notification No. 66/89-C.E., dated 1-3-1989 is available to ferrous waste and scrap of Heading No. 72.04 only if such goods and materials of Chapter 72/73 is obtained by breaking up of ships, boats and other floating structures.

(a) manufactured or produced in India, or

(b) imported into India on payment of duty leviable under the said Customs Tariff.

The vessel `Lady Willington’ is made in Scotland and there is no document to prove, that it is imported on payment of duty."

6. A plain reading of the said show cause notice shows that Heading 72.30 would be applicable to goods and materials of Chapter 72 obtained by breaking up of ships and other structures. Thereafter, in the next para, it states that “there is no exemption for ferrous waste and scrap 72.30, since the same being goods and materials of Chapter 72/73 obtained by breaking up of ships, boats etc.”. On a plain reading, it is clear that the exemption claimed approved in the said classification list under Notification 171/88 is now held to be not available. In fact, no exemption of any kind is available for the goods falling under 72.30 as per this para.

7. The show cause notice further goes to set a proposition that even if, the said goods were classifiable under Heading 72.04, “then also the exemption is not available in this case, since ferrous waste and scrap under Heading No. 72.04 is also goods and materials of Chapter 72 obtained by breaking up of ships”.

8. The aforesaid proposition is further clarified in the next para, wherein the show cause notice states that exemption under Notification 171/88 is available to ferrous waste and scrap of Heading No. 72.04, only if such goods and materials of Chapter 72/73 is obtained by breaking up of ships etc., which are either manufactured or produced in India or imported into India on payment of duty leviable under the said Customs Tariff. The last para of the show cause notice reproduced above is to be read in conjunction namely, there is no documentary proof to show that the said Dredger was imported on payment of duty.

9. We proceed to examine each of the proposition contained in the show cause notice, one by one.

10. As far as the proposition that the goods under question would be covered by Heading 72.30 is concerned, we find that there is nothing on record which compels us to interfere with the findings of the learned Collector (Appeals) in the impugned order for the simple reason that the Heading No. 72.30 is specifically designed for waste and scrap of ferrous nature arising out of ship breaking, whereas Heading No. 72.04 is basically for waste and scrap arising out of other activity. It is an accepted proposition of classification of goods that specific supersedes the general. Therefore, the impugned order rightly holds the goods to be classifiable under Heading No. 72.30. The same was declared by the appellants in the classification list and so approved.

11. We then proceed to examine whether any exemption and if so, of what kind, from excise duty is available as set forth in the show cause notice. Notification No. 171/88 as amended is the only Notification claimed for exemption, which reads as follows :

Exemption to specified goods of Chapters 72, 73 and 84. - In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 91/88-Central Excises, dated the 1st March, 1988, the Central Government hereby exempts goods of the description specified in column (3) of the Table hereto annexed and falling under heading Nos. or sub-heading Nos. of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as are specified in the corresponding entry in column (2) of the said Table, from so much of the duty of excise leviable thereon which is specified in the said Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table, subject to the intended use, or the conditions, if any, laid down in the corresponding entry in column (5) thereof.

THE TABLE

[Notification No. 171/88-C.E., dated 13-5-1988 as amended by Notification No. 66/89-C.E., dated 1-3-1989.]

12. On a plain reading of the said Notification, it is clear that under column 2 thereof for Sr. Nos. 1, 2, 3 and 4, no exemption is available to any goods falling under 72.30. Since it is waste and scrap of ferrous nature and the subject goods fall under Heading No. 72.30 therefore, in these serial numbers, the exemption is not available. However, it is also noticed that in Sr. No. 5 the sub-heading 72.30 figures. But we find that the condition in the Table of the Notifiction in Column 5 provides that such goods should be produced in Ordnance factories of the Central Government or such goods are intended for consumption in such factories. It is nobody’s case that in this case that goods arising out of ship breaking are satisfying either of these conditions. Therefore, Sr. No. 5 of the said Notification also does not help the appellants. Since exemption has not been claimed under any other Notification, therefore, it is clear that no exemption is available to these goods under Heading No. 72.04 or 72.30.

13. We further proceed to consider the next argument of the learned Consultant regarding the historic import of the said Dredger and the allegation in the show cause notice that the same was not cleared on payment of import duty and therefore, the exemption should be denied. On this ground, we find that in view of the letter of Customs House, Cochin addressed to the Cochin Port Trust, the benefit of doubt would go to the appellants, inasmuch as the duty paying character of the ship, which has been subjected to ship breaking is concerned. However, we find since the Notification No. 171/88 just does not apply to goods classifiable under Heading No. 72.30, therefore, his argument in any case does not give the duty exemption to the appellants.

14. In view of the aforesaid discussions, we do not find it possible to accept the contention of the learned Consultant that the last ground, as discussed above, is the only ground on which exemption has been denied.

15. The classification list under question was approved granting exemption from duty under Notification No. 171/88 to these products. When the department found specifically that the said exemption had been wrongly given, they resorted to the issue of the subject show cause notice demanding duty by pointing out that such exemption was not available to their products, which had already been approved under Heading No. 72.30.

16. In view of the analysis above, we find that this allegation in the show cause notice of non-availability of duty exemption under Notification No. 171/88 is sustained. Therefore, this is a case where non-levy of duty was due to human error. In such cases, it has been clearly laid down in the decision of the Hon’ble Supreme Court in the case of Ballarpur Industries Ltd., cited supra, that six months time under Section 11A is available to the Revenue for demand of its duty. It is nobody’s case that show cause notice is barred by limitation in this respect. This is also not a case where re-classification of the goods under other sub-headings is involved and the heading remains 72.30. It is purely a case where the duty has not been levied due to human error. In these circumstances the case laws cited by the learned Counsel stand distinguished on the facts.

17. In view of the aforesaid discussions and taking into consideration all the facts and circumstances of the case, we come to the conclusion that there is nothing which compels us to interfere with the impugned order. The appeal is, therefore, dismissed.

18. This is to clarify that the appellants have come to this Tribunal only in appeal against the show cause notice dated 6-9-1989 and not the other show cause notice which was dealt with in the impugned order and wherein the impugned order has remanded the matter. It is clarified that the said remand order in the Order-in-Appeal is in no way concerned with this order.

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Equivalent 1998 (103) ELT 281 (Tribunal)