1991(09)LCX0001

BEFORE THE CEGAT, SPECIAL BENCH ‘C’, NEW DELHI

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

COLLECTOR OF CUSTOMS

Versus

SHANKAR METAL TRADING CO.

Order No. 736/91-C, dated 30-9-1991 in Appeal No. C/2378/89-C

CASE CITED

COLLECTOR v. ATUL PRODUCTS - 1985(01)LCX0021 Eq 1985 (020) ELT 0147 (TRIBUNAL) [PARA 3]

Advocated By: Shri K.K. Bhatia, Jt. CDR, for the Appellant.

Shri N. Ramanathan, Consultant, for the Respondent.

[Order per: K.S. Venkataramani, Member (T)]. - The brief facts relating to this appeal directed against the Order dated 8-6-1989 passed by the Collector of Central Excise (Appeals), Calcutta are as follows :-

The respondents herein imported a consignment declared as Brass Ash which was cleared provisionally subject to the result of chemical test. The test result showed the goods to be in the form of brown coloured powdery material, essentially containing Brass Powder, Metallic Compound & Silicious matter. The Customs House took the view that the goods were other than brass ash, and appeared to have characteristics of brass powder in the form of brass waste assessable to duty under Heading 7404.00 CTA, 1975 as brass waste as against original assessment as brass ash under Heading 2620.90 CTA. A demand notice under Section 28(1) of the Customs Act for duty of Rs. 1,40,688.70 was issued to the respondents on 18-12-1986. The Assistant Collector held by his order dated 11-1-1989 that Brass Powder (BP) appearing in the test report did not mean brass ash since it is not essentially metal oxides. He observed that brass waste/scrap in form of powder is a known commodity and as such the Asstt. Collector confirmed the demand. As the goods were correctly held to be classifiable under Heading 7404.00 read with a Notification No. 252-Cus., dated 16-11-1982 and Central Excise Tariff Heading 7402.00. The Assistant Collector’s order was challenged in appeal. The Collector (Appeals) allowed the appeal of the respondents. He found that the Assistant Collector’s order had not interpreted and quoted the test report correctly in his order. The Collector (Appeals) observed that the presence of Silicious metal would perhaps play an important role in coming to a decision. As regards the classification, he had referred the Section Note 6(a) of Section XV of Customs Tariff Act which defined waste and scrap as Metal waste and scrap from the manufacture or mechanical working of metals and metal goods definitely not usable as such because of breakage etc. He agreed with the respondents’ contention that there will be no Silicious metal presence in scrap obtained during mechanical working of metal. The Collector (Appeals), therefore, held that there was no sound basis for confirming the demand and set aside the Assistant Collector’s order.

2. Shri K.K. Bhatia, learned Jt. Chief Departmental Representative appearing for the appellant Collector argued that the test report of the consignment clearly indicates that the goods imported is not brass ash, therefore, classification under Chapter 26 of Central Excise Tariff Act, 1975 is ruled out. The learned Jt. Chief Departmental Representative further contended that the Collector (Appeals) has set aside the Assistant Collector’s order only on the ground of the presence of a small percentage of Silicious matter which according to the Department is not sufficient justification for setting aside the demand in the face of unambiguous report on testing of the samples saying that the goods are other than brass ash. Shri N. Ramanathan, the learned Consultant appearing for the respondents contended that the goods have been released after due inspection in the docks by the Asstt. Collector and the consignment was also examined by the Appraiser, in the presence of Asstt. Collector (Docks). The Officer of Special Investigation Branch of the Custom House, Calcutta was also present at the time of examination. All these officers had confirmed that the goods were brass ash. The learned Consultant also pointed out that in this case although the Assistant Collector had passed his order on the test report of the sample and had said that the test report showed that the goods were other than brass ash, yet in point of fact, in the copy of the test report given to the respondents, there was no such sentence saying that the sample was other than brass ash. Even the copy of the report was not initially supplied to them but was given to them only after repeated requests. Therefore, there was a denial of full opportunity to the appellant because the Department had held back the full report of the chemical examiner. The Assistant Collector’s observation in his order that the goods is brass waste in the form of powder is very vague. He has also referred to certain literature to say that brass waste/scrap in the form of powder is a known commodity in commercial parlance. But this literature has not been supplied to the respondents. The learned Consultant further urged that the presence of silicious matter would show that the goods cannot be brought under Chapter 74 which covers only metal waste and scrap as mentioned in Section Note 6(a) of Section XV as has been rightly relied upon in the order of the Collector (Appeals) which, according to the respondents, needs no modification.

3. The submissions made by both the sides have been carefully considered. The records show that the goods were subjected to test. One of the contentions of the respondents is that the full text of the report has not been given to them. A copy of the test report was communicated to the respondents by the Appraiser in his No. S-43-785/1/86A dated 25-7-1986 (S-41-259/86A). This communication does not contain the full text of the report. The two sentences, “It is other than brass ash Remnant Returned”, appearing in the original test memo are not reproduced. Therefore, there is substance in the contention of the respondents that they were not given adequate opportunity to put forth their case with reference to the test report of the goods imported by them. The Collector (Appeals), however, has relied upon the presence of Silicious matter in the material imported and has also relied upon the Section Note 6(a) to Section XV to Central Excise Tariff Act. This Section Note is reproduced below:

“6. In this Section, the following expressions have the meanings hereby assigned to them:

(a) Waste arid scrap

Metal waste and scrap from the manufacture or mechanical working of metals, and metal goods definitely not usable as such because of breakage, cutting-up, wear or other reasons."

The Collector (Appeals) has held that the presence of Silicious matter would show that the material was obtained during solidification of metal or manufacture of metal from ore. The Collector in the appeal memorandum has, however, contended that powder also would be covered by the expression “Metal goods definitely not usable as such because of breakage etc.” In coming to the decision in this regard, it may be useful to look into the Explanatory Notes to the HSN as the Customs Tariff Act, 1975 broadly follows HSN and, as observed by the Tribunal in the case of Collector of Customs, Bombay v. Atul Products - 1985 (020) ELT 147, CCCN is itself authority that is reliable and widely respected especially in the context of the fact that the Customs Tariff is patterned on that work and its classification and headings follow the Nomenclature (Now the HSN). Under Heading 7404 of HSN relating to Copper waste and scrap it has been stated in the Explanatory Note that provisions concerning waste and scrap in the Heading 72.04 will apply, mutatis mutandis to this heading except that ash and cuprous residues fall in Heading 26.20. It also says that copper waste of this heading includes drawing sludge, derived from the drawing of copper and consisting mainly of copper powder mixed with the lubricants used for the drawing process. Under Heading 72.04 it has been indicated as follows :

“The heading covers the waste and scrap of iron or steel, as defined in Note 6(a) to Section XV (which is identical with the one of the Customs Tariff). Such waste and scrap of iron or steel is of a miscellaneous nature and generally takes the form of:

(1) Waste and scrap from the manufacture of mechanical working of iron or steel (e.g. crop ends, fillings and turnings).

(2) Articles of iron or steel, definitely not usable as such because of breakage, cutting-up, wear or other reasons; iron or steel waste and scrap is usually prepared by means of the following processes, in order to adapt it to the dimensions and qualities required by the users :

(a) Shearing or flame-cutting of heavy and long pieces.

(b) Compression into bales, particularly in the case of light scrap, using for example a hydraulic press.

(c) Fragmentation (shredding) of-motor vehicle bodies and other light scrap, followed by separation (which may be magnetic) with a view to obtaining a high density product that is fairly clean.

(d) Crushing and agglomeration into briquettes of iron and steel fillings and turnings.

(e) Breaking up of old iron articles.

Waste and scrap is generally used for the recovery of metal by remelting or for the manufacture of chemicals. But the heading excludes articles which, with or without repair or renovation, can be refused for their former purposes or can be adapted for other uses; it also excludes articles which can be refashioned into other goods without first being recovered as metal. Thus, it excludes, for example, structural steel work usable after renewal of worn out parts; worn railway lines which are usable as pit-props or may be converted into other articles by rerolling; steel files capable of re-use after cleaning and sharpening.

The heading also excludes :

(a) Slag, dross, scalings or other waste from the manufacture of iron or steel, even if suitable for the recovery of the metal (Heading 26.19).

(b) Waste and scrap not usable directly in the iron or steel industry, since it is radioactive (Heading 72.01).

The HSN Explanatory Notes, as above, give a broad indication of the nature of scrap which is covered under Chapter 74. The wording of Section Note 6(a) to Section XV in the HSN as well as in the Customs Tariff Act on waste and scrap is identical. Therefore, indication in the HSN for the classification of scrap can be regarded as a useful guide. As per this Note copper waste under Heading 7404 includes drawing sludge, derived from the drawing of copper and consisting mainly of copper powder mixed with the lubricants. In the present case the test report does not show that the powder shows any signs of being mixed with any lubricants. The Bill of Entry description of the articles also indicates that the brass ash is free from oil. The test report of the chemical examiner shows that the goods are powdery material essentially containing brass powder metallic compound and silicious matter. Percentage of metallics 80.7%, of copper content in the sample as such 51.7% by weight, rest mainly zinc. There is no indication in the Chemical Examiner’s report whether there was any admixture of metallic pieces which can be identified as waste derived from mechanical working of metals. In such a context the Chemical Examiner’s comment that the goods is other than brass ash remains unsubstantiated. The goods imported being in the form of powdery material also does not answer to the form of waste and scrap such as crop ends, fillings and turnings. The Department while contending in the appeal memorandum that the powdery form would be covered by the expression ‘metal goods definitely not usable as such’ had not elaborated it so that it can be examined in the light of examples of such goods which are definitely not usable as such given in the HSN Heading 7204 reproduced above. In such circumstances, the reliance placed by the Collector (Appeals) on Section Note 6(a) of Section XV Central Excise Tariff Act and his finding that the goods imported as brass ash will not fall for classification under Chapter 74 has a lot of force. In this view of the matter, there is no need to interfere with the order passed by the Collector (Appeals). The appeal is rejected.

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Equivalent 1992 (60) ELT 154 (Tribunal)