Ponneri Steel Industries Versus Commissioner of Customs, Chennai>2007(06)LCX0060

2007(06)LCX0060

IN THE CESTAT, SOUTH ZONAL BENCH, CHENNAI

S/Shri P.G. Chacko, Member (J) and P. Karthikeyan, Member (T)

Ponneri Steel Industries

Versus

Commissioner of Customs, Chennai

Final Order Nos. 816 & 817/2007, dated 29-6-2007 in Appeal Nos. C/111 & 112/2007

Cases Quoted -

Electrosteel Castings Ltd. - 1978(10)LCX0008 Eq 1982 (010) ELT 0485 (G.O.I.) - Referred [Paras 3,4, 5]

Steel Authority of India Ltd. v. Commissioner - 2005(01)LCX0366 Eq 2006 (197) ELT 0097 (Tribunal) - Referred [Paras 3, 5]

Texmaco Limited - 1980(08)LCX0013 Eq 1982 (010) ELT 0628 (G.O.I.) - Referred [Paras 3,4,5]

Advocated By -

S/Shri S. Krishnanandh, Consultant and B. Satish Sundar, Advocate, for the Appellant.
Shri T.C. Rajadas, SDR, for the Respondent.

[Order per : P.G. Chacko, Member (J)]. -

M/s. Ponneri Steel Industries (appellants in Appeal No. C/111/2007) had purchased 172.54 MTs. of "non-alloy steel melting scrap consisting of skull", at the highseas, from M/s. Shree Ganesh Steel Rolling Mills Ltd. (appellants in Appeal No. C/112/2007) and filed a bill of entry dated 10-11-2006 for clearance of the goods on payment of duty as applicable to Heading 7204 49 00 of the First Schedule to the Customs Tariff Act. The bill of entry described the goods as above. The department got samples of the goods tested at the National Metallurgical Laboratory (NML, for short). The NML report reads thus : "based on visual examination and chemical analysis, the material can be considered as non-alloy steel skull scrap suitable for melting. The percentage of recovery of iron from the scrap is about 80% by weight". The report also observed that the skull scrap was found with some amount of slag. Taking this fslag' content into account, the department alleged mis-declaration of description and mis-classification by the importer and accordingly confiscation of the goods and imposition of penalty were proposed. These proposals were contested. The original authority upheld the above allegations and confiscated the goods under Section 111(d) and (m) of the Customs Act with option for redemption on payment of fine of Rs. 4 lakhs. It also imposed penalties of Rs. 40,000/-each on the appellants under Section 112(a) of the Act. Pending adjudication, however, the Customs authorities had allowed provisional release of 80% of the consignment. The appeal filed by the parties against the decision of the original authority did not succeed. The present appeals are against the decision of learned Commissioner (Appeals).

2. After examining the records and hearing both sides, we note that the dispute is essentially one relating to classification of the goods covered by the bill of entry. The importer wants to get it classified under Heading 72.04 and sub heading 7204 49 00 of the CETA Schedule. Heading 7204 covers "Ferrous waste and scrap; remelting scrap ingots of iron or steel". This Heading has been mainly subdivided into two viz. 'waste and scrap of alloy steel' and 'other waste and scrap,' which are '-' entries under the above Heading. There are two subdivisions under 'other waste and scrap,' which are '- -' entries viz. 7204 41 00 and 7204 49 00. The first of these sub-divisions stands for 'turnings, shavings, chips, milling waste, saw dust, filings, trimmings and stampings, whether or not in bundles'. The second sub-division is 'Other' - residuary entry under the category of other waste and scrap'. According to the Revenue, the subject item would fall under Heading 2619 and sub-heading 2619 00 10. The Heading covers 'slag, dross (other than granulated slag), scalings and other waste from the manufacture of iron or steel'. The entry 2619 00 reads identically. There are two sub divisions under this entry, the first of which covers 'converted slag (scull) of blast furnace'. The remaining sub-heading is residuary ('Other').

3. Learned counsel has relied on the NML report, which declared the item to be non-alloy steel skull scrap suitable for melting and reported its composition indicating ferrous content of 80% by weight. It is submitted that the presence of a small amount of slag in the scrap would not make the scrap classifiable under Heading 2619. In this connection, learned counsel has relied on CODE FOR CLASSIFICATION OF PROCESSED FERROUS SCRAP (first revision). Para 10 of this text deals with 'steel skull scrap'. This item has been sub-
classified into four categories :- (a) steel skull scrap (processed), (b) steel skull scrap (semi-processed), (c) steel skull scrap (unprocessed/semi-processed) and (d) cast steel skull scrap. All these categories can contain slag to varying extents, according to Indian Standards. On this basis, it is submitted that the presence of slag in the subject goods, which is mainly composed of iron as found by NML, would not make the item anything other than 'steel skull scrap'. Learned counsel has also relied on the Tribunal's decision in Steel Authority of India Ltd. v. Commissioner of Central Excise, Raipur [2005(01)LCX0366 Eq 2006 (197) ELT 0097 (Tri.-Del.)], wherein 'cast iron skull scrap' was held to be classifiable under sub-heading 7204.10 of the First Schedule to the Central Excise Tariff Act. Learned counsel has also claimed support from two decisions of Government of India (revisional authority) viz. 1978(10)LCX0008 Eq 1982 (010) ELT 0485 (GOI) in the case of Electrosteel Castings Ltd. and 1980(08)LCX0013 Eq 1982 (010) ELT 0628 (GOI) in the case of Texmaco Ltd. In both these cases, 'skull scrap' arising as a waste product, which contained only 5% metal (the rest being waste), was held to be non-excisable. The Government relied on Specification: 1529/1953 (Indian Standards) which required that 'skull scrap' used for remelting should not contain more than 5% slag. Finally, learned counsel urges that the item be classified under Heading 72.04 and the impugned order be set aside.

4. Learned SDR, on the other hand, refers to HSN Notes under Headings 72.04 and 26.19. It is submitted that slag or other waste from the manufacture of iron or steel, even if suitable for the recovery of the metal, is covered by the Heading 26.19 and is expressly excluded from the coverage of Heading 72.04. Relying on the HSN Notes under Heading 26.19, learned SDR submits that what can be classified under Heading 72.04 is 'scrap metal produced during cutting, shaping or metal-working processes' and not goods of the nature imported by the appellants. He has also referred to the term 'skull scrap' as used in S.B. Sarkar's WORDS AND PHRASES OF EXCISE AND CUSTOMS. S.B. Sarkar's note says that 'skull scrap' is a mixture of slag, sand, lime and earth and contains little of the metal (upto 5%). This note relies on Government of India's decision in the cases of Electrosteel Castings Ltd. and Texmaco Ltd. In his rejoinder, learned counsel submits that S.B. Sarkar quoted wrongly from Government of India's judgments.

5. After giving careful consideration to the submissions, we observe, at the outset, that S.B. Sarkar's notings under 'skull scrap' with reference to Government of India's decision in the cases of Electrosteel Castings Ltd. and Texmaco Ltd. are erroneous. The notings are to the effect that 'skull scrap' is a mixture of slag, sand, lime and earth and contains little of the metal (upto 5%), whereas what was found by the Government in the said cases was to the contra. In both the cases, it was held, by relying on IS 1529/1953, that 'skull scrap' used for remelting should not contain more than 5% of slag. The product considered by the Government in the above cases contained 5% metal and 95% waste and accordingly, the item was held to be not chargeable to Central Excise duty. It is on record that the goods in question was composed of about 80% by weight of iron along with some amount of slag as reported by NML. NML considered the goods to be non-alloy steel skull scrap suitable for melting. On account of the presence of a small amount of slag in the subject goods, the Revenue seeks to classify it as 'slag' under Heading 26.19. But the fact is that 'steel skull scrap' of any category can contain slag to varying extents as is seen from "Indian Standards CODE FOR CLASSIFICATION"OF PROCESSED FERROUS SCRAP" (first revision) vide IS 2549:1994- In the case of Steel Authority of India Ltd., this Tribunal classified cast iron skull scrap under Heading 72.04 of the CETA Schedule. It is not in dispute that the Central Excise and Customs Tariffs are aligned in respect of classification of goods. We have also taken note of the data supplied by learned counsel today, which is claimed to have been retrieved from National Informatics Data Base (NIDB, for short) of the Directorate of Valuation under the Central Board of Excise and Customs (CBEC). This statement indicates that mild steel skull scrap covered under Bill of Entry No. 664791 dated 21-2-2007 and Bill of Entry No. 647984 dated 5-2-07 has been classified under sub-heading 7204 49 00 for final assessment. It is submitted by learned counsel that, according to Indian Standards, the 'mild steel skull scrap' covered under the said bills of entry might be containing some amount of slag and that such slag content has been ignored by the Revenue while classifying the items under Heading 7204.

6. In the result, we have found valid reasons to hold that the subject goods is appropriately classifiable under SH 7204 49 00 of the CTA Schedule and not under Heading 2619. Consequently, the finding of misdeclaration and mis-classification of the goods and the imposition of penalties are liable to be set aside.

7. In the result, the impugned order is set aside and these appeals are allowed.

(Dictated and pronounced in open Court)

Equivalent 2007 (215) ELT 0184 (Tri. - Chennai)

Equivalent 2007 (082) RLT 0882 (CESTAT- Che.)