2004(09)LCX0098

IN THE CESTAT, SOUTH ZONAL BENCH, CHENNAI

S/Shri P.G. Chacko, Member (J) and Jeet Ram Kait, Member (T)

TOWER STEELS (I) LTD.

Versus

COMMISSIONER OF CUSTOMS, MADURAI

Final Order No. 842/2004, dated 10-9-2004 in Appeal No. C/263/2002/MAS

CASES CITED

Jai Hind Wire Rod Mills Ltd. v. Commissioner — 2000(05)LCX0306 Eq 2000 (121) ELT 0159 (Tribunal) — Relied on [Para 6]

L.M.L. Ltd. v. Collector — 1997(08)LCX0066 Eq 1997 (094) ELT 0273 (S.C.) — Relied on.................................................... [Para 6]

REPRESENTED BY :        Shri Venkatachalam, Advocate, for the Appellant.

Smt. R. Bhagya Devi, SDR, for the Respondent.

[Order per : P.G. Chacko, Member (J)]. - The appellants imported a consignment of goods declared as “Light Melting Scrap - Misprint sheets, sheet cutting scrap” weighing 193.935 M.Ts., shipped in 7 containers from Malaysia. The Directorate of Revenue Intelligence, on examination of the goods and perusal of the connected documents, found that the goods were described only as “Light Melting Scrap” (LMS) in the Bill of Lading, Invoice, and related documents except the Bill of Entry. The Bill of Entry classified the goods under sub-heading 7204.49 of the First Schedule to the Customs Tariff Act and claimed the benefit of concessional rate of duty in terms of Sl. No. 158 in the Table annexed to Notification No. 16/2000-Cus., dated 1-3-2000. The appellants, on the basis of this claim, worked out their duty liability at Rs. 1,57,420/-. Detailed examination of the goods revealed the contents of the 7 containers as under :-

It was further observed that the goods mentioned at Sl. Nos. 1 to 4 above, totally weighing 126.074 M.Ts. were imported in the guise of importing Light Melting Scrap and hence liable to confiscation on account of misdeclaration of description of the goods. These goods were, therefore, seized under Section 110 of the Customs Act, 1962. Insofar as the goods mentioned at Sl. Nos. 5 and 6 above are concerned, the same were believed to have been used for concealing the above items (at Sl. Nos. 1 to 4) and they were seized. Representative samples were drawn from the seven containers and sent to the Chemical Examiner, Custom House, Chennai, who furnished her test report on 18-4-2001. Statements were recorded from the Managing Director of the Company and one Shri D. Pugalendi, Manager. On the basis of these statements and other investigative results including Chemical Examiner’s test Report, the department concluded that the items mentioned at Sl. Nos. 1 to 5 had been wrongly classified by the party and were not scrap. The department classified these items under various sub-headings of Headings 72.10 and 72.12 and took the view that these goods were illicitly imported in the guise of scrap. As regards the value of the goods, a view was taken that the CIF value mentioned in the invoice issued by the supplier did not represent the real transaction value under Section 14 of the Customs Act and that, for want of transaction value of identical or similar goods, the assessable value could only be arrived under Rule 8 of the Customs Valuation Rules, 1988. Accordingly, on the basis of EDI data relating to certain contemporaneous imports, the authorities arrived at CIF values for the various items in question, after rejecting the invoice value. Alleging misdeclaration, concealment, etc., the authorities held all the goods to be liable for confiscation. The claim for the benefit of concessional rate of duty was also opposed and a demand of differential duty was sought to be raised on the party, on the basis of the investigative results. Thus a show-cause notice was issued to the party. The allegations in the show cause notice were denied and the proposals contained therein for demanding duty, confiscating the goods and imposing penalty were contested. The Commissioner of Customs who adjudicated the dispute passed an order, the operative part of which reads as under :-

“(i) The items tin plain sheets, misprint sheets (with more than 600 mm), misprint sheets (with less than 600 mm), tin sheet coils (strip rolls) and circular plain sheets are ordered to be classified under Heading 7212.30, 7210.11, 7212.10, 7210.11 and 7212.30 of the First Schedule to the Customs Tariff Act, 1975;

(ii) The value for assessment is re-fixed at Rs. 27,84,501.00 including light melting scrap and the value declared by the importer is rejected;

(iii) The benefit of Customs Notification No. 16/2000, dated 1-3-2000 is denied to light melting scrap imported for 49.201 M. Ts.

(iv) An amount of Rs. 16,64,505.00 (Rupees sixteen lakhs Sixty four thousand five hundred and five only) is demanded as Customs duty from M/s. Tower Steels (India) Limited under Section 28 of the Customs Act, 1962 (as per details shown in the Annexure);

(v) The 144.114 M.Ts. comprising tin plain sheets, tin sheets coils circular plain sheets valued at Rs. 24,47,033.00 are confiscated under Section 111(f), 111(i) and 111(m) of the Customs Act, 1962. However, M/s. Tower Steels (India) Limited are extended an opportunity to get them redeemed on payment of a fine of Rs. 10,00,000.00 (Rupees ten lakhs only);

(vi) The 49.201 M.Ts. of light melting scrap valued at Rs. 2,37,468.00 are confiscated under Section 119 of the Customs Act, 1962. However, M/s. Tower Steels (India) Limited are extended an opportunity to get them redeemed on payment of a fine of Rs. 75,000.00 (Rupees seventy-five thousand);

(vii) I impose a penalty of Rs. 10,00,000.00 (Rupees Ten lakhs only) on M/s. Tower Steels (India) Limited under Section 112(a) of the Customs Act, 1962;

(viii) The amounts paid already are adjusted towards the liability due in terms of this order; the Bank Guarantee furnished shall be enforced; and M/s. Tower Steels (India) Limited shall pay the balance amount due forthwith or else the personal bond executed for a sum of Rs. 1.35 crores shall be enforced to realise the amount due.”

2. The present appeal is against the above order. It is stated in this appeal that the imported goods were correctly declared in the Bill of Entry and there was no misdeclaration. It is also contended that the entire goods were actually melted in furnace and, therefore, the benefit of the Notification was not liable to be denied. The appellants have also relied on the Chemical Test Report to the extent of claiming that most of the goods were in rusted condition and not usable otherwise than as scrap. With regard to the valuation of the goods, the appellants have challenged the reliance placed by the adjudicating authority on EDI data on contemporaneous imports. It is submitted that the prices shown in EDI data pertained to much smaller quantities of goods compared to the subject goods and that the descriptions of goods in EDI, data were at variance with the description of the subject goods. The country of origin was also different. Therefore, EDI data were not to be relied on. According to the appellants, the invoice value of the subject goods represented the correct transaction value for the purpose of Section 14 of the Customs Act. These grounds have been reiterated by ld. Counsel. He has filed a synopsis today, which gives a break-up of the goods into those which could be considered as scrap and those which could not. It admits that apart from 49.201 M.Ts. of scrap already accepted as a scrap in the impugned order, a further quantity of 41.34 M.Ts. from the rest of the consignment could also be treated as scrap on account of the rust found therein. It is argued that the benefit of the Notification is admissible at least in respect of 49.201+41.34 = 90.541 M.Ts. of scrap. It is further argued in the synopsis that there is no evidence of contemporaneous imports of identical or similar goods of the same quantity from the same country and, therefore, rejection of the transaction value is without any basis. The goods mentioned in the EDI data were imported from countries other than Malaysia, their description was not the same as that of the goods in question, their quantities were much lower than the quantities imported by the appellants. Counsel has also challenged the confiscation of 49.201 M.Ts. of scrap by relying on the mahazar drawn in this case. English translation of the mahazar has been produced by him. In this Mahazar, the witnesses have stated what they witnessed upon opening of the seven containers. The scrap was found along with circles in one of the containers only. Therefore ld. Counsel submits that the finding of the adjudicating authority that the scrap was used for concealing the rest of the consignment is incorrect. Moreover, the scrap had been correctly declared in the Bill of Entry. Therefore, Counsel argues, the confiscation of the above scrap under Section 119 of the Customs Act is bad. The classification of the remaining items under entries other than Heading 72.04 of the Customs Tariff has been questioned by ld. Counsel on the basis of the definition of “waste and scrap” under Note 8 (a) to Section XV of the Tariff Schedule. The quantum of redemption fine and penalty have also been challenged. Counsel has relied on case law on various points.

3. We have heard ld. SDR also, who has argued in support of denial of the benefit of the Notification, by submitting that no part of the consignment, barring the scrap weighing 49.201 M.Ts., was classifiable under Heading 72.04 of the Customs Tariff and hence not eligible for the benefit of concessional rate of duty under the Notification. She has also argued in support of the classification ordered by the Commissioner. Ld. SDR has also relied on case law. As regards confiscation and penalty, she has reiterated the findings of the adjudicating authority.

4. We have carefully considered the submissions. We find that a quantity of 49.201 M.Ts. of scrap contained in the imported consignment has been accepted as scrap by the adjudicating authority. Its classification under Heading 72.04, claimed by the importer, has not been disputed in the impugned order. Thus the department’s charge of misdeclaration stands rejected in respect of this part of the consignment. Yet this quantity of scrap has also been confiscated by the Commissioner under Section 119 of the Customs Act. This confiscation is based on the finding of the scrap having been used for concealing the other materials in the consignment. On a close perusal of the impugned order, we find that ld. Commissioner has not categorically found that the 49.201 M.Ts. of scrap were used for physically concealing the remaining goods. The concealment found by the Commissioner appears to be in a sense other than physical. But Section 119 of the Customs Act requires physical concealment to be established before imposition of penalty. This requirement is not met in this case. Apart from this, we find from the mahazar that the scrap was contained only in one container, along with circles. There was no scrap in any of the remaining six containers. Hence no part of the scrap imported by the appellants could have concealed the material contained in the said six containers. Thus we find no basis for the confiscation ordered under Section 119 of the Customs Act in respect of 49.201 M.Ts. of scrap. This confiscation is set aside. Consequently, redemption fine in lieu of this confiscation stands vacated.

5. The impugned order denied the benefit of the Notification to the above quantity of scrap. This material has been accepted as scrap in the impugned order and its classification under Heading 72.04 has also been accepted. The importer’s plea that this scrap was actually used for melting in their furnace has not been rebutted. Ld. Commissioner has denied the benefit of the Notification to the scrap material on the ground that End-Use Certificate from the Assistant Commissioner having jurisdiction over the appellants’ factory was not produced. End-Use Certificate is to establish actual use. Actual use of 49.201 M.Ts. as scrap, claimed by the importer, has not been rebutted and, therefore, no evidence is required to establish the actual use. In these circumstances, we hold that the benefit of concessional rate of duty under the Notification should be allowed to the appellants in respect of 49.201 M.Ts. of scrap and, to this extent, any demand of customs duty on the said goods by denial of the above benefit is not sustainable.

6. Insofar as the classification of the remaining goods is concerned, we would like to peruse the Chemical Examiner’s report, which reads as under :-

“S. No. 1 (L1S1) Lab No. DSM 10

The sample is in the form of cut metallic sheet with shining surfaces on both the sides. It is composed of magnetic steel coated on both sides with zinc (galvanised)

S. No. 2 (L2S1) Lab. No. DSM 10A

The sample is in the form of cut metallic white on one side and shining on the other side. It is composed of magnetic steel coated on both sides with tine and one side being further painted.

S. No. 2 (L2S1) Lab. No. DSM 10B

The sample is in the form of cut metallic sheet white on one side and partly rusted on the other side.

It is composed of magnetic steel coated on both sides with tin and one side being further painted.

S. No. 2 (L2S1) Lab. No. DSM 10C

The sample is in the form of cut metallic sheet coloured and printed on both the sides. It is composed of magnetic steel coated on both sides with tine and further painted and printed.

S. No. 3 (L3S1) Lab. No. DSM 10D

The sample is in the form of cut metallic sheet coloured on one side and shining on the other side. It is composed of magnetic steel coated on both sides with tin and one side being further painted and printed.

S. No. 4 (L4S1) Lab. No. DSM 10E

The sample is in the form of cut metallic strip with shining surfaces on both the sides. It is composed of magnetic steel coated on both sides with tin.

S. No. 4 (4S1) Lab. No. DSM 10F

The sample is in the form of cut metallic sheet with shining surfaces on both the sides. It is composed of magnetic steel coated on both sides with tin.

Width = 12.5 cm.

S. No. 4 (L4S1) Lab. No. DSM 10G

The sample is in the form of cut metallic sheet with shining on one side and partly rusted on the other side. It is composed of magnetic steel coated on both sides with tin.

Width = 15.0 cm.

S. No. (L5S1) Lab. No. DSM 10H TO 10K

Each of the four samples is in the form of Circular Metallic Sheets with shining surfaces on both the sides. Each is composed of magnetic steel coated on both the sides with Tin. Each of the four samples is having the following diameter.

Remants returned.”

It appears from the above report that most of the goods were cut metallic sheets, with magnetic steel coating on one side or both sides, painted on one or both sides, with metallic lusture on one or both sides, and the like. It is only in a few cases that rust was noted on one side of the sample. This report of the Chemical Examiner has not been challenged by the appellants, nor have the findings in Mahazar regarding the physical appearance of the goods been contradicted by them. It appears from the Commissioner’s order that the Commissioner has correctly appreciated the evidence and classified the goods by correctly relying on the Supreme Court’s decision in LML’s case [1997 (094) ELT 273] and the Tribunal’s decision in the case of Jai Hind Wire Rod Mills [2000 (121) ELT 159]. Hence the classification ordered under Clause (1) of the operative portion of the Commissioner’s order has to be upheld and we do so. The appellants had classified the goods as scrap under Heading 72.04. Obviously, they had misdeclared the goods in the Bill of Entry. Therefore, the confiscation of the goods under Section 111 of the Customs Act cannot be faulted.

7. However, the goods so classified require to be correctly valued for assessment of duty. The Commissioner has invoked Rule 8 of the Customs Valuation Rules, 1988, after giving a go-by to all the preceding rules, to value the goods on the basis of EDI data. In this connection, the submissions made by the Counsel seem to be impressive. He has pointed out that the contemporaneous imports mentioned in the EDI data were of goods of different description, different quantity and from different countries of origin. The subject import was from Malaysia, whereas the ‘EDI imports’ were mostly from the Netherlands and the rest from Canada. The contemporaneous (EDI) imports were of much lower quantities than that of the subject import. The descriptions of the goods mentioned in the EDI data were also at variance with what was declared by the appellants in the relevant Bill of Entry. For these reasons, we have to disapprove the EDI data-based valuation done by the Commissioner and consequently we have to set aside his demand of duty. There being no reason to doubt the correctness of the invoice value, the same requires to be accepted as the real transaction value for the purpose of valuation of the goods in question, imported by the assessee.

8. Though we have upheld the confiscation of the goods other than the scrap weighing 49.201 M.Ts., we are unable to support the quantum of redemption fine imposed by the Commissioner. The impugned order does not disclose the basis of the redemption fine imposed under Section 125 of the Customs Act. Ld. Commissioner might have determined the quantum of fine in view of assessable value of the goods determined by him. But we have set aside this assessable value. In the light of our findings in this case and having regard to the circumstances of the case, we are inclined to slash the redemption fine to Rs. 2.5 lakhs (Rupees two lakhs fifty thousand) and the penalty under Section 112(a) of the Customs Act to Rs. 50,000/- (Rupees fifty thousand).

9. It is up to the Commissioner to requantify the demand of duty in terms of this order in respect of the goods classified by him as per Clause (i) of the operative part of the impugned order and appropriate the duty already paid by the party towards the requantified demand.

10. In the result, clauses (ii) to (iv) and (vi) of the operative paragraph of the impugned order are set aside and clause (i) thereof is affirmed. The confiscation ordered in clause (v) is upheld, but the redemption fine is reduced as above. The penalty imposed in clause (vii) is also reduced as above. The order contained in clause (viii) is set aside subject to Para (9) of this order.

11. The appeal is disposed of as above.

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Equivalent 2004 (178) ELT 1004 (Tri. - Chennai)