2012(10)LCX0180

IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI

Ms. Archana Wadhwa, Member (J) and Shri Mathew John, Member (T) Third Member on Reference : Rakesh Kumar, Member (T)

Commissioner Of Cus., Icd, Tkd, New Delhi

Versus

INDUSTRIAL IMPORTERS

Final Order Nos. C/A/275-276/2012-Cus.(PB) and Misc. Order No. C/M/3/2012-Cus.(PB), dated 5-10-2012 in Appeal Nos. C/656 and 678/2007

Cases Quoted -

Collector v. Metrowood Engineering Works - 1989(02)LCX0063 Eq 1989 (043) ELT 0660 (Tribunal)
- Relied on [Para 30]
Eicher Tractors Ltd. v. Commissioner - 2000(11)LCX0436 Eq 2000 (122) ELT 0321 (S.C.) - Noted [Para 11]
Saurashtra Chemical v. Collector - 1997(09)LCX0021 Eq 1997 (095) ELT 0455 (S.C.) - Relied on [Para 30]
Saurashtra Chemicals v. Collector - 1985(08)LCX0017 Eq 1986 (023) ELT 0283 (Tribunal-LB) - Relied on [Para 30]

Advocated By -

Shri Sonal Bajaj, SDR, for the Department.
Shri Piyush Kumar, Advocate, for the Assessee.

[Order per : Archana Wadhwa, Member (J)]. -

1. Both the appeals one by the importer and other by the Revenue are being disposed of by a common order as they arise out of the same impugned order passed by the Commissioner (Appeals).

2. As per facts on records, the respondents imported a consignment of Nickel Silver Turning from Italy under invoice dated 9-11-2006 and bill of lading dated 18-11-2006. In the invoice as also in the bill of lading, the goods were described as nickel silver turning, which in fact fall under the description of ISR1 grade 'Niece'. However, at the time of filing of bill of entry, the appellant's CHA inadvertently described as nickel silver Malic (Turning). Inasmuch as the two grades are defined separately as two different types of nickel silver scrap, the Revenue examined the goods and found the same to be 'Niece' grade. The respondent vide its letter dated 22-1-2007 explained that the term 'Malic' was declared inadvertently by the CHA and the goods were actually nickel silver turnings, as found by the customs officers during the course of examination. However, the respondent drew attention of the officer to the fact that the goods stands described in the invoice, packing list as also in the bill of lading as Nickel Silver Turning.

3. It is seen that the goods were subsequently sent to CRCL for examination of the respondents' claim of benefit of Notification No. 21/2002 dated 21-3-2002. CRCL, vide its test report dated 2-2-2007 opined that 'The sample is in the form of a heterogeneous mixture of the turnings, shearing of different weight of length. It contains 60.6 by weight of copper, 13.90 by weight Nickel and rest being mainly Zinc. It does not answer test for Tin and Lead.'


4. On the above basis, the Revenue entertained a view that the benefit of notification is not available to the respondent, inasmuch as the goods cannot be held to be nickel or article of nickel. The value of the goods as declared by the respondent was doubted and accordingly the proceedings were initiated against the assessee for denying the benefit of notification as also for enhancement of value. The notice culminated into an order passed by the Assistant Commissioner, ICD, New Delhi, holding as under :-

(b) That the description of the goods as per examination report and CRCL report is 'Nickel Silver Turning Niece' and not 'Nickel Silver Turning Malic' as declared in the Bills of Entry;

(ii) The transaction value declared under Rule 4 read along with Section 14 of the Customs Act, 1962 do not represent the value of the imported goods, hence, the same is rejected, and the assessable value is re-determined under Rule 8 of Customs Valuation Rules as USD-4346 PM/T; and
(iii) That the imported goods would not fall within the ambit Article of Nickel, hence, the benefit of concessional rate of duty sought vide SI. No. 438 under Customs Notification No. 21/2002 dated 1-3-2002 is denied and BCD @ 12.5% is to be charged.

5. The said order of the Assistant Commissioner was challenged before the Commissioner (Appeals) who held in favour of the assessee on the point of valuation but denied the benefit of Notification No. 21/2002. Hence, the said order of the Commissioner (Appeals) has been challenged by both .sides.

6. As regards assessee's claim of benefit of SI. No. 438 of Notification No. 21/2002, dated 1-3-2002, we find that the said notification granting concessional rate of duty, in respect of import of nickel and articles of nickel. For better appreciation, we reproduce the relevant paragraph :-


S. No.

Chapter or Head-ing No. or Sub-heading No.

Description of goods

Stand-ard Rate

Addi-tional duty rate

Condi-tion No.



%
438

75

Nickel and arti-cles of nickel

D7o



7. The benefit of the notification stands denied to the assessee on the sole ground that as per chemical examiner's report, the copper is predominant element and in terms of chapter notes 1(a) and 1(b) of Chapter 75, the goods cannot be treated as nickel non-alloy or alloy. The said reasoning adopted by the lower authorities stands agitated by the learned Advocate, Shri Piyush Kumar appearing for the assessee on the ground that the said chapter notes are in respect of nickel non-alloyed and nickel alloy. The same cannot be picked up for deciding the assessee's claim of classification under the above notification. He draws our attention to the finding of the Assistant Commissioner holding that as per examination report and CRCL, the goods are Nickel Silver Turning Niece. If that be so, he submits that benefit of notification cannot be denied to them inasmuch as the same applies to nickel falling under Chapter 75. As such, he submits that the claim of availment of notification is required to be allowed.

8. Learned SDR appearing for the Revenue submits that as the predominant factor in the goods was of copper, by applying the said chapter notes, the goods being held to be as non-nickel alloyed or article of nickel so as to earn benefit of notification.


9. We have considered the submissions made by both sides and have examined the chapter notes 1(a) and 1(b) of Chapter 75 relied upon the lower authorities. The said chapter notes are relevant in respect of nickel non alloy and nickel alloy. The reference to weight content and predominance of the weight is relevant for holding nickel items to be of nickel alloy or nickel non-alloyed. As rightly contended by the learned Advocate, that the said chapter notes are not relevant for the purpose of deciding the applicability of notification.


10. Admittedly the Assistant Commissioner of Customs has held that the goods to be nickel silver turning niece falling under Chapter 75 of the tariff. If that be so, we really fail to understand as to how nickel silver turning which admittedly falls under Chapter 75 would not earn the benefit of concessional rate of duty as per serial no. 438 of Notification 21/2002. As such, we set aside the impugned order denying the benefit of notification and allow the appeal.

11. As regards Revenue's appeal, the same is against that part of the impugned order, vide which he has held in favour of the assessee on the point of valuation by following the judgment of Hon'ble Supreme Court in the case of Richer Tractor - 2000(11)LCX0436 Eq 2000 (122) ELT 0321 (S.C.). Inasmuch as there is no evidence of rejection of transaction value and no evidence of contemporaneous import, he h;-s held that the transaction value has to be accepted as assessable value.


12. We find that even in their memo of appeal, the Revenue has not placed any evidence on record to reject the assessee's transaction value. In such situation, we find no reason to interfere with the impugned order of the Commissioner (Appeals). Accordingly, Revenue's appeal is rejected.

13. Both the appeals are disposed of in the above terms.

(Pronounced in the open court on )

Sd/-
(Archana Wadhwa)
Member (Judicial)
14. [Per : Mathew John, Member (J)]. - I have gone through the records of the case and the order recorded by the Id. Member Qudicial). This matter involves both classification dispute as well as valuation dispute. It appears to me that the classification is being decided without considering all the Section Notes and Chapter Notes of Customs Tariff and there is a need for closer examination of the issue in view of the precedent value the decision may have.

15. The meaning of 'Nickel Silver' is explained in Wikipedia as under :
"Nickel silver, also known as German silver, Argentann, new silver, nickel brass, albata, or alpacca, is a copper alloy with nickel and often zinc. The usual formulation is 60% copper, 20% nickel and 20% zinc. Nickel silver is named for its silvery appearance, but it contains no elemental silver unless plated. The name 'German silver' refers to its development by 19th century German metalworkers in imitation of the Chinese alloy known as paktong All modern, commercially important nickel silvers (such as those standardized under ASTM B122) contain significant amounts of zinc, and are sometimes considered a subset of brass"

16. Thus Nickel Silver is neither nickel nor silver. It is an alloy in which copper predominates in weight and contains nickel up to 20%. This position is applicable for waste and scrap of Nickel Silver too, whether it is Malic grade or Niece grade. The testing done on the impugned goods showed 60.6% of copper by weight.

17. "Nickel Silver Malic Grade" is waste of Nickel Silver consisting of old nickel silver in the form of sheet, pipe, rod, tubes, wire, screen, soldered or unsoldered.


18. "Nickel Silver Niece Grade" consists of turnings of Nickel Silver.

19. Section Notes 3, 5, 6 and 7 of Section XV of the Customs Tariff read
as under:

"3. Throughout this Schedule, the expression 'base metals' means :
Iron and steel, copper, nickel, aluminium lead, zinc, tin tungsten (wolfram) molybdenum, tantalum, magnesium cobalt, bismuth cadmium, titanium, zirconium, antimony, manganese, beryllium, chromium, germanium vanadium gallium, hafnium, indium, niobium (columbium), rhenium and thallium.'
5. Classification of alloys (other than ferro-alloys and master alloys
as defined in Chapters 72 and 74):
(a) an alloy of base metals is to be classified as an alloy of the metal which predominates by weight over each of the other metals;
(b) an alloy composed of base metals of this section and of elements not falling within this section is to be treated as an alloy of base metals of this section if the total weight of such metals equals or exceeds the total weight of the other elements present;
(c) in this section, the term 'alloys' includes sintered mixtures of metal powders, heterogeneous intimate mixtures obtained by melting (other than cermets) and intermetallic compounds.

6. Unless the context otherwise requires, any reference in this Schedule to a base metal includes a reference to alloys which, by virtue of Note 5 above, are to be classified as alloys of that metal.
7. Classification of composite articles :
Except where the headings otherwise require, articles of base metal

(including articles of mixed materials treated as articles of base metal under the Interpretive Rules) containing two or more base metals are to be treated as articles of the base metal predominating by weight over each of the other metals.
For this purpose :

(a) Iron and steel, or different kinds of iron or steel, are regarded as one and the same metal;
(b) An alloy is regarded as being entirely composed of that metal as an alloy of which, by virtue of Note 5, it is classified; and
(c) A cermet of heading 8113 is regarded as a single base metal."

20. The above notes are applicable for all goods falling under Chapters 72 to 83 of the Customs Tariff. Sub-heading Note 1(a) and (b) of Chapter 75 with title "Nickel and Articles thereof" is subordinate to the above Section Note. There is nothing conflicting between the Section Note and the sub-heading Note in Chapter 75. This sub-heading Note which is discussed in this order is reproduced below:

"In this Chapter, the following expressions have the meaning hereby assigned to them :
(a) Nickel, not alloyed
Metal containing by weight at least 99% of nickel plus, cobalt, pro-vided that
(i) The cobalt content by weight does not exceed 1.5%;
and
(ii) The content by weight of any other element does not exceed the limit specified in the following Table;

TABLE - OTHER ELEMENTS

Elements Limiting content % by weight
Fe Iron 05
O Oxygen 0.4
Other elements, each 0.3

(b) Nickel alloys
Metallic substances in which nickel predominates by weight over each of the other elements provided that:
(i) The content by weight of cobalt exceeds 1.5%
(ii) The content by weight of at least one of the other elements is greater than the limit specified in the foregoing table, or (iii) The total content by weight of elements other than nickel plus cobalt exceeds 1%."

21. The difficulty in this case or rather with the Tariff entries itself is that "Nickel Silver Malic Grade" and "Nickel Silver Niece Grade" are specifically included in Tariff Item 75030010 of the Customs Tariff. Thus the entry itself appears to be in conflict with Section Notes 3, 5, 6 and 7 of the Customs Tariff. Thus position has come about since 2006 when amendments were made in Customs Tariff to introduce eight digit level tariff items.

22. To deal more specifically with the dispute at hand the importer has claimed exemption at S. No. 438 of Customs Notification No. 21/2002-Cus. To be eligible for this notification, the goods have to satisfy two criteria. Firstly it should be classifiable under Chapter 75. This is satisfied in view of the entry at 75030090. Then it has to fit into the description of the goods in the notification that is 'Nickel or Articles of Nickel'. The item is not nickel in view of the fact it contains only 13.90% of Nickel and in view of the express provisions of Section Notes 3, 5, 6 and 7 of Section XV of Customs Tariff. If the material is not nickel, it cannot be articles of nickel either. Interpretative Rule 1 of Customs Tariff states as under.


"Titles of Sections, Chapters and sub-chapters are provided for ease of ref
erence only : for legal purposes, classification shall be determined accord
ing to the terms of headings and any relative Section or Chapter notes and
provided '.

23. So the fact that the heading of Chapter 75 reads 'Nickel and Article
thereof is not a sufficient reason to conclude that every item covered by Chapter
75 is Nickel or Article of Nickel. So I am of the view that the imported goods will
not be eligible for the said exemption.
Sd/-Mathew John Member (Technical) POINT OF

DIFFERENCE OF OPINION
24. Having regard to Section Notes 3, 5, 6 and 7 of Section XV of Cus
toms Tariff, whether an Alloy consisting of 60.6% of Copper and 13.90% Nickel
can be considered as "Nickel" or "Articles of Nickel" for the purpose of availing
exemption at SI. No. 438 of Notification No. 21/2002-Cus., dated 1-3-2002.
Sd/- Sd/-
(Mathew John) (Archana Wadhwa)
Member (Technical) Member (Judicial)
The Registry is directed to take steps to resolve the above point of difference.
Sd/- Sd/-
(Mathew John) (Archana Wadhwa)
Member (Technical) Member (Judicial)

25. [Per : Rakesh Kumar, Member (T)J. - M/s. Industrial Importers (hereinafter referred to as the 'Appellant'), imported a consignment declared to be "Nickel Silver Turning, ISRI code 'niece' ". Though a sample drawn from the consignment was tested by the Central Revenue Control Laboratory and on test, it was found to be consisting of 60.60% by weight of copper, 13.90% by weight of nickel, and balance of zinc, the Department classified the same as a nickel scrap in form of "Nickel Silver Turnings covered by ISRI code 'niece' " under sub heading 75030010. The dispute is as to whether these goods are eligible for concessional rate of duty under Notification No. 21/2002-Cus. (Serial No. 438) which covers "nickel & articles of nickel". The original adjudicating authority vide order-in-original dated 14-3-2007 held that since in the goods, in question, though called Nickel Silver Scrap, it is copper which predominates by weight, the same can not be called "Nickel or article of nickel", and hence, the concessional rate of duty under Serial No. 438 of exemption Notification No. 21/2002-Cus., dated 1-3-2002 is not available. This order of Assistant Commissioner was upheld by the Commissioner of Custom (Appeals) vide Order-in-Appeal dated 18-7-2007. Since in the order-in-original passed by Assistant Commissioner, the declared value of the goods had been enhanced and this issue had also been raised in the appeal filed before the Commissioner (Appeals), this issue was also decided in the order passed by the Commissioner (Appeals) and the Commissioner (Appeals) by the above mentioned order set aside, the Assistant Commissioner's order of en-hancement of the declared value. Against this order of the Commissioner (Ap-peals), both the department as well as appellant have filed appeals before the Tribunal. The Department in its appeal has challenged the Commissioner (Ap-peal's order setting aside the enhancement the declared value, the appellant in their appeal to Tribunal have challenged the Commissioner (Appeals order up-holding the denial of exemption Notification No. 21/2002-Cus. The difference between Hon'ble Member (Technical) and the Hon'ble Member (Judicial) is in respect of eligibility of goods for exemption under Notification No. 21/2002-Cus. (Serial No. 438). While according to Hon'ble Member (Judicial), the goods, in question/are eligible for Notification No. 21/2002-Cus. (Serial No. 438), as the same can be considered as nickel, according to Hon'ble Member (Technical), the goods, in question can not be considered as nickel alloy as the copper predomi-nates by weight, and hence are not eligible for exemption.

26. Heard both the sides, in respect of point of the difference.


27. Sh. Piyush Kumar, Advocate, the learned counsel for the appellant, pleaded that there is no dispute about the classification of the goods, in question, under sub-heading 75030010 as "Nickel silver turnings covered by ISRI code word 'Niece' ", that the Assistant Commissioner in the order-in-original has not questioned the classification of the goods under sub-heading 75030010 and has treated the goods as "nickel alloy scrap", that when the goods have been held to be nickel silver scrap of ISRI code niece, the same would have to be treated as 'nickel' and hence would be covered by Serial No. 438 of Notification No. 21 /2002-Cus. as the same in addition to 'articles of nickel' also covers 'nickel', and that once the classification of the goods, in question, has been accepted under sub-heading 75030010 as nickel scrap, for the purpose of exemption notification the issue as to whether the goods are nickel on the basis of predominance can not be raised. He, therefore, pleaded that notwithstanding copper content of 60.60% in the goods, in question, the same have to be treated as nickel alloy and hence nickel and covered by Serial No. 438 of exemption Notification No. 21/2002-Cus.

28. Sh. Amresh Jain, the learned 'departmental representative, pleaded that notwithstanding the classification of the goods, in question, under subheading 75030010, the goods can not be treated as "nickel", or "articles of nickel" as predominat constituent of the goods, in question, is copper, which is 60.60% and, therefore, in terms of section note 3 read with section notes 5 & 6 of Section XV of the Customs Tariff, the goods, in question, can not be treated as nickel scrap. He, therefore, pleaded that the goods, in question, are not eligible for exemption under Notification No. 21/2002-Cus. (Serial No. 438).


29. I have considered the submissions from both the sides. Though the goods, in question, are described in the import documents as "nickel silver turnings ISRI code niece" and the department itself has classified the same as nickel scrap under sub-heading 75030010, there is no dispute about the fact that CRCL on testing a sample drawn from the goods, in question, has reported that the goods are in form of turnings and shavings of metal consisting of 60.60% by weight of copper, 13.09% by weight of nickel and the rest mainly zinc. Thus the metal scrap, in question, has copper as the predominate constituent. Since it is the copper which predominate over other constituents, in terms of section note 3 of Section XV, the goods, in question, have to be treated as base metal. In terms of section note 5 of Section XV, an alloy of the base metal is to be classified as an alloy of the metal which predominates by weight of over each of the other constituents on this basis, in this case the metal scrap, in question, has to be treated as scrap of copper alloy and not of nickel alloy, in terms of section note 6, the Section XV, unless the context otherwise requires any reference in the schedule to a base metal includes a reference to its alloys. Since virtue of note 5, the goods, in question, are to be classified as alloy of copper, they are to be classified as copper, under Chapter 74, not nickel.

30. Though the "nickel silver turnings covered by ISRI code word 'Niece' " is mentioned in the Tariff under sub-heading 75030010 pertaining the "Nickel waste and scrap", which would also cover the waste and scrap of Nickel alloy, in term of sub-heading note 1(b) of Chapter 75, in Nickel alloys, nickel has to predominate by weight over each of other constituents and, therefore, a base metal alloy in which copper predominates by weight can not be treated as Nickel alloy. Even in term of Section Note 5 to Section XV, 'Nickel' silver alloy in question, can not be treated as Nickel alloy but has to be treated as copper alloy.There is, thus, conflict between the wordings of the heading 75030010 and the section note and sub-heading notes. Tribunal in the case of the Collector of Central Excise v. Metrowood Engineering Works reported in 1989(02)LCX0063 Eq 1989 (043) ELT 0660 (Tri.) rely ing upon Larger Bench judgment of the Tribunal in the case of Saurashtra Chemi-cals v. Collector of Customs reported in 1986 (023) ELT 283 has held that -

(a) headings of the tariff are to be interpreted in the light of section notes and chapter notes; and
(b) the section notes and chapter notes have over-riding force on the respective headings.
The judgment of the Tribunal in the case of Saurashtra Chemicals v. Collector of Customs (supra), has been upheld by the Apex Court vide Judgment reported in 1997(09)LCX0021 Eq 1997 (095) ELT 0455 (S.C.).

30.1 Therefore the sub-heading 75030010 pertaining to "Nickel waste and scrap", would cover only that scrap of Nickel or its alloy in which Nickel predominates by weight over other constituents. The goods, in question, in which copper predominates by weight over other constituents cannot be classified as Nickel alloy scrap and hence the same cannot be treated as 'Nickel'. In view of this, the goods, in question, are not covered by S. No. 438 of Notification No. 21/2002-Cus., notwithstanding the fact that the goods have been classified under sub-heading 75030010, which in my view, is a mistake.

31. In view of the above discussion, I agree with Hon'ble Member
(Technical) and hold that the goods, in question, being a copper alloy are not
covered by S. No. 438 of the table of the Notification No. 21/2002-Cus.
Sd/-
(Rakesh Kumar)
Member (Technical)

32. In view of the majority order, the order of the Commissioner (Ap
peals) is upheld thus rejecting the appeal filed by the importer as well as the ap
peal filed by Revenue.
Sd/- Sd/-
(Mathew John) (Archana Wadhwa)
Member (Technical) Member (Judicial)

Equivalent 2014 (300) ELT 0584 (Tri. - Del.)