1993(04)LCX0077

BEFORE THE CEGAT, SPECIAL BENCH `D’, NEW DELHI

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

HARIRAM GOEL & CO.

Versus

COLLECTOR OF CUSTOMS, VISAKHAPATNAM

Order No. C/130 to 134/93-D, dated 2-4-1993 in Appeal Nos. C-1948/89-D, 1950/89-D, 2025/89-D, 2032/89-D and 1949/89-D

Cases Quoted

Soni Enterprises v. Collector — Order No. 161-162/89-D, dated 21-6-1989                [Paras 9, 23]

Hicks Thermometer v. Collector — 1987 (027) ELT 453                                                     [Para 10]

Atul Glass Industries v. Collector — 1987 (025) ELT 0473 (SC)                                          [Para 10]

UOI v. Delhi Cloth & Gen. Mills — 1977 (001) ELT 199                                                       [Para 11]

Akbar Badruddin v. UOI — 1990(02)LCX0057 Eq 1990 (047) ELT 0161 (SC)                                                       [Para 11]

Kutty Flush Doors v. Collector — 1988(03)LCX0021 Eq 1988 (035) ELT 0006 (SC)                                                   [Para 11]

Hansur Plywood Works Ltd. v. Collector — 1988 (034) ELT 393                                      [Para 23]

Advocated By : Shri V. Lakshmi Kumaran, Advocate, for the Appellants.

 Shri J.N. Nair, DR, for the Respondents.

[Order per : S.L. Peeran, Member (J)]. - The Misc. applications for change of respondents’ name as Collector of Visakhapatnam are allowed.

2. In all these appeals, common question of law and facts is involved. Hence they are taken up together for disposal as per law.

3. C-1948/89-D - This appeal is directed against the order-in-original dated 29-5-1989 passed by the Addl. Collector of Customs, Visakhapatnam. The importers had declared the goods namely timber as `wood in rough half squared with bark (Balau Group)’ as falling under sub-heading 4403.90 of the Customs Tariff Act, 1975 and also claimed the benefit of the Customs Notification No. 62/85 and Notification No. 107/89. On examination by the Asstt. Collector of Customs (Appraising) and Appraiser (Docks), it was found that the cargo is mixture of both `wood roughly squared’ and `sawn wood’ like beams etc. According to the examination report, pieces with dimensions 10" x 10" and 10" x 12" can be considered as wood roughly squared. The rest of the cargo consisting of pieces of varying lengths with dimensions 6" x 10", 7" x 10", 8" x 10", 9" x 10" as sawn timber in the shape of beams and the sap wood is visible only on one side of the logs. Therefore, the importers were charged with mis-declaration of the description of the goods attracting action under Section 111(m) of the Customs Act, 1962. The Addl. Collector has also inspected the cargo and has recorded in the order, his examination, as follows -

“All the pieces were having rectangular/square sections. They were cut to various dimensions. The ends of the pieces were painted black with metal plates fixed at the centre. In some of the pieces, sap wood was visible on all sides.”

The Addl. Collector had requested Shri P. Somasekhara Reddy, IFS, District Forest Officer, Visakhapatnam to inspect the goods and give his report. In his report, he has stated that -

“The material seen by me is a completely processed sawn wood. All the faces of the wood have been smoothly cut on a band saw and the material was cut to regular dimensions. The material in question clearly falls into the category of sawn wood. It does not fall into rough wood. The presence of the smooth surface and the saw dust sticking to the surface is a clear indication of fully processed (clearly sawn) wood. The presence of the sap wood and the presence of the heart rot is in no way coming in the way of classifying the wood as sawn or roughly sawn. The wood in question is a clearly sawn and processed wood.”

At the request of the Importers, the Addl. Collector took the second opinion from Shri P.K. Verghese, Regional Manager, Madhya Pradesh Export Corporation, who has given his observations as follows -

“01. The timber in question are almost the same length and have been bundled together.

02. The timber has been sawn at site of origin.

03. They contain bark, sap and wanes.

04. They all have a rough surface, centre heart, box heart etc.

In my opinion, this timber is considered as a roughly squared which is not fit for any ready use. They have to be taken to saw mills for further sawing for commercial purpose."

The learned Addl. Collector has held that,

“on inspection of the goods, it is clear that the wood in question has been sawn by machine. It is very difficult to accept the contention of the importers that the wood is coarse sawn”.

He has further held that -

“In my opinion the imported goods strictly conform to the description given in the Tariff Item 44.07. Both the authorities have given the opinion and have stated that the timber has been sawn. Sh. P.K. Verghese in the last para of his report has stated `considering the origin of the timber, the question of processing by country made equipments like axes etc. are not possible for such large products.” From the opinion of both the experts, as well as my own inspection, I hold that the wood imported has been sawn by machines. When it has been sawn by machine, there is no reason to hold that the item is a roughly squared wood. If there has been any error in the classification of the same goods in the past, nobody can argue that the mistake should be continued. I also reject the contention of the importer that the item should not be classified as sawn wood because the same is not capable of direct use. The direct use has not been made as a criterion for classifying a product as sawn wood in the Customs Tariff. It is worth quoting the Encyclopedia Britannica, Volume 12, page 746, 1988 Edition. “After a tree is felled, the wood is processed for round wood products (such as poles and posts) or as sawn wood (sawed lumber).. Sawn wood is treated and cut at a saw mill and then transported to other manufacturing facilities to be fashioned into particular wood products.”

From the above, it is very clear that sawn wood itself is again used in saw mills. I also hold that the presence of heart box is not very relevant for the classification of this item."

           Order

In view of the above, I hold that the imported goods are correctly classifiable under Customs Tariff Item No. 4407/99. The goods are liable for confiscation under Section 111(m) of the Customs Act, 1962. Accordingly, I confiscate the goods but give the importers an option to redeem the goods on payment of a fine of Rs. 5,00,000/- (Rupees five lakhs only) within one month from the date of issue of this order.

I also impose a penalty of Rs. 1,00,000/- (Rs. one lakh only) under Section 112(a) of the Customs Act, 1962."

4. The importers in the appeal had contended that the impugned order is a non-speaking order inasmuch as there is no discussion about the applicability of the notification in question. That the Addl. Collector has also not considered the various documents including the certificate from the Agricultural Department of Malaysia describing the product as `wood in the rough and wood roughly shaped and half squared’. They have relied on the Explanatory notes under Heading 44.03 of the HSN as well as the one appearing under Heading 44.07 and contended that the reading would disclose that the goods are roughly squared only. They have also relied on ISI specification No. IS-1331 of 1971 for cut sizes of timber and also to ISI Glossary of terms applicable to Timber technology and utilisation - IS-707 of 1976. Reliance is also placed on the decided cases of this Tribunal in the case of Hunsur Plywood Works Ltd. v. Collector of Customs, Bangalore - 1988 (034) ELT 393 and that of M/s. Soni Enterprises and Another v. Collector of Customs, Bombay as rendered in Order No. 161-162/89-D.

5. C/A No. 1949/89-D. - This appeal arises from order-in-original No. 65/89 dated 29-5-1989 on similar facts and circumstances. The learned Addl. Collector has passed similar order on the same reasonings, however, imposed confiscation fine of Rs. 3 lakhs and penalty under Section 112(a) of Rs. 60,000/- on the importers.

6. C/A No. 1950/89-D. - This appeal arises from order-in-original dated 29-5-1989 passed by the same Addl. Collector. He has imposed fine of Rs. 1.5 lakhs and penalty of Rs. 30,000/-.

7. C/A No. 2025/89-D and Cross 465/89-D. - This appeal arises from order-in-original dated 29-5-1989 passed by the same Addl. Collector. He has imposed redemption fine of Rs. 1.30 lakhs and penalty of Rs. 25,000/-.

8. C/A No. 2032/89-D and Cross 467/89-D. - This appeal arises from order-in-original No. 67/89 dt. 29-5-1989 passed by the same Addl. Collector and he has imposed redemption fine of Rs. 2 lakhs and penalty of Rs. 40,000/-. All the orders are identically worded.

9. We have heard Shri V. Lakshmi Kumaran, learned Advocate for the appellants and Shri J.N. Nair, learned DR for the Revenue. Shri Lakshmi Kumaran referred to the inspection report in respect of lot Nos. 9, 10, 11 and has stated that the item could be treated as wood roughly square but not further manufactured, sap wood on the four sides of the logs are visible, rest of the cargo is sawn timber in the shape of beams etc. and sap wood is visible only on the one side of the log and not on all sides. He also pointed out to the report of Shri Verghese who has stated that the goods were required to be taken to saw mills for further sawing for commercial purpose. He contended that Notification No. 107/89-Cus., dated 1-3-1989 granted exemption to auxiliary duty for items falling under Chapter 44 which are in the nature of (i) wood in rough and (ii) wood roughly squared and half squared but not further manufactured. The description given in the notification refers to the description under sub-heading 4403 and if the item satisfies the description, then the exemption cannot be denied. It is his contention that the wood by merely sawing would not by itself go outside the category of 44.03, which the importers are claiming. The square or half square in the present case had been done only for the purpose of transportation and that the dimensional criteria is not relevant. Only if the wood is cut in the form of planks, beams etc. are not covered under sub-heading 4403 but fall under 4407 and for items to come under sub-heading 4407, dimensional accuracy is necessary. In this context, he referred to the extracts from “A manual of Forest Utilisation and extracts from pages 855, 866 on wood ‘Materials, Handbook’ and extracts from ‘McGraw Hill Encyclopedia of Science and Technology’ and terms appearing in IS 1331-1971, IS Specification for cut sizes of timber (second revision) and terms from IS 707-1976 Glossary of Terms applicable to Timber Technology and Utilisation (Second revision). Extremely relying on this literature, he submitted that the presence of sap wood and heart wood is essential for the item to be considered as ‘wood in rough’ and the report of Sh. Reddy confirms the presence of both the sap wood and heart wood in the imported item. He argued that when the item is sawn by machines then it could not be referred as roughly squared wood. Sawn wood is one in which heart wood is removed, while in the items in question, undisputedly heart wood is present and the presence of bark traces and sap wood has also been noted by the Asstt. Collector. He contended that for the understanding of sawn wood, the definition given in ISI and the description given in HSN is relevant. He further argued that ‘Chipping’ has to be done to the extreme accuracy and dimensions and subsequent planing would also be necessary and hence the words appearing in sub-heading 4407. ‘Wood sawn’ would refer to the description as given in ISI only and it does not refer to the type of sawing done in the present case. This sawing has been done only for the purpose of transportation and hence sub-heading 4407.99 is not attracted. He further argued that ‘wood in rough’ would mean wood cut by axe, adze or by saw. By sawing, the wood has continued to remain as rough wood as there is still the presence of bark traces, rough areas, central heart wood and sap wood. These features would not be found in ‘wood sawn’. He argued that the decision in the case of Soni Enterprises and Another v. Collector of Customs in Order No. 161-162/89-D has clearly laid down the ruling and the ratio fully covers the facts of the case. He contended that cross objection of the Revenue is more in the nature of comments and therefore, he prayed for setting aside the impugned order.

10. Shri J.N. Nair arguing for the Revenue, contended that the certificate of Malaysian Government and other certificates relied by the importer had not been examined by the Addl. Collector. He has relied on the opinion given by Shri Reddy, who had given a clear opinion that the item is not wood in rough and his opinion is in favour of the department. He further submitted that the ISI specifications and glossary of terms is not conclusive on the facts of the present case. The item has been sawn to such an extent that it has to be taken out of the sub-heading 4403 which gives the heading - ‘wood in rough’ whether or not stripped of bark or sap wood and roughly squared. He argued that only wood of rough condition could be brought under this sub-heading. The sawing could be done only to the extent of facilitating transportation and to prevent delay as could be gathered from the reading of chapter notes of HSN under the Heading 4403. The item in the present case has been sawn to such an extent that it goes out of the parameters laid down in the sub-heading 4403 as the sawing has been done to specific dimensions and that they are also not roughly squared. The parties’ plea that only course sawing has been done is not acceptable, as coarse sawing does not produce such results as seen in the present case. The Chapter note reading under Heading 4407 of HSN indicates that if the timber is cut to specific dimension, then it would fall under this heading. The report of Shri Reddy clearly indicates that the item has been cut to dimensions. The presence of the smooth surface and the saw dust sticking to the surface is a clear indication of the fully processed sawn wood. Shri Nair pointed out that the certificate issued by Shri Reddy clearly stated that the presence of sap wood or heart wood would in no way come in the classification of the item as sawn wood. The report of Shri Verghese also states that the wood is of same length and had been bundled together, therefore, it makes it clear that the process of sawing had taken place. He contended that sub-heading 4403 covers only coarse sawing, which would not result in regular dimensions or smooth surface, while sub-heading 4407 covers items which have undergone further sawing to bring in regular dimensions and smooth surface. Therefore, the item in dimensions, smooth and planed would be fully covered under sub-heading 4407. The presence of bark does not make by itself ‘wood in rough’. Shri Nair submitted that the portion quoted by Addl. Collector in his order from ‘Encyclopedia Britannica’ on verification is not found in Vol. 12 page 746 of the said book and therefore, the same need not be relied. He argued that in Hunsur Plywood’s case, the Chapter headings were different and hence the ratio would not apply to the facts of the present case. He submitted that the entries in the notification would cover for items which are ‘sawn wood’. Hence, items ‘wood sawn’ are different and they do not get the benefit of the notification. He contended that for the purpose of interpretation of Customs Tariff, conclusive support from ISI specifications cannot be taken and in this context relied on the ruling of Hicks Thermometer v. Collector of Customs, Calcutta as reported in 1987 (027) ELT 453 and that of Atul Glass Industries [1987 (025) ELT 0473 (SC)] which laid down the ruling that ISI cannot have overriding effect on the explanatory notes. Shri Nair contended that only if the tariff heading and its reading is unclear, only then ISI specifications could be looked into.

11. Shri V. Lakshmi Kumaran, the learned Advocate, countering the arguments of Shri Nair, submitted that all the certificates were in favour of the importers. In Shri Reddy’s report, it has been clearly stated about the presence of bark and sap wood. The bill of entry also clearly described the goods. The items of same size bundled together by itself does not mean that the item is wood sawn. He contended that ratio of Hunsur Plywood’s case would squarely apply to the facts of the case. He contended that ISI specification and Glossary of Terms threw light on trade understanding and in this context, relied on the ruling rendered in the case of Union of India & Others v. Delhi Cloth & General Mills Co. Ltd. & Others [1977 (001) ELT (J 199)]; Akbar Badruddin v. Union of India [1990(02)LCX0057 Eq 1990 (047) ELT 0161 (SC)]; Kutty Flush Doors v. Collector of Customs [1988(03)LCX0021 Eq 1988 (035) ELT 0006 (SC)].

12. We have carefully considered the submissions made by both the sides, perused the records, literature and citations relied by both the sides. The question that arises for our consideration is as to -

(i) whether the goods described in the Bill of Entry as ‘wood in rough’ half squared with bark, Badau group (Fox worthy)" is classifiable under sub-heading 4403.99 as - “Other” under the sub-heading 44.03 which reads ‘wood in rough, whether or not stripped of bark or sap wood, or roughly squared" as prayed by the importer?

or

under sub-heading 4407.99 - ‘Other’ under the sub-heading 4407 which reads -

“wood sawn or chipped lengthwise, sliced or peeled whether or not planed, sanded or finger-jointed of thickness exceeding 6 mm” as classified by the Revenue

(ii) Are the appellants entitled for the benefit of the Notification No. 107/89-Cus., dated 1-3-1989?

(iii) Whether the importers have misdeclared the description of the goods attracting action under Section 111(m) of the Customs Act, 1962 and as a consequence, is the fine and penalty imposed justified?

13. The appellants’ contentions are that the goods are ‘wood in rough’ and in support of their contention, they are relying on the technical literature, Glossary of terms as appearing in ISI specification for cut sizes of timber IS 1331 - 1971 second revision’ and from Glossary of Terms applicable to Timber technology and Utilisation (IS : 707-1976 Second revision). They have also relied on the two rulings of this Tribunal. It is their further contention that the HSN Notes under the relevant sub-headings support their case. They have also stated that the reports of two experts as well as the examination reports of the Appraiser, Assistant Collector and the Collector are in their favour and they have also drawn support from the certificates issued by the Department of Agriculture, Malaysia besides, placing reliance on the liner bill of lading and the details given in packing list on the letter head of Laurel Trading Co. (P) Ltd. The learned Collector has drawn his support from the report of Shri Somasekhara Reddy, IFS, District Forest Officer; Shri P.K. Verghese, Regional Manager, Madhya Pradesh Export Corporation Ltd. as well as on his own observation of the goods and on that basis, has held that it is very difficult to accept the contention of the importer that wood is coarse sawn. The learned Collector has held that the wood imported has been sawn by machines and hence, there is no reason to hold that the item is roughly squared wood. We have to appreciate the controversy in the background of these submissions. Before we advert to the opinion of Mr. Somasekhara Reddy and Shri P.K. Verghese it is necessary for us to understand as to what is the difference between ‘wood in rough’ and ‘wood sawn’. The contention of the appellants is that in the case of ‘wood in rough’ sap wood on four sides of the logs is visible and that the wood is sawn only for the purpose of transportation and while so sawing, the peal is clearly removed and also fresh sap wood and therefore, the heart wood is retained. There is no planing to extreme accuracy and dimensions. It is their contention that in the case of sawn wood, the sap wood is removed by accurate chipping and chipped to extremely accurate dimensions which renders subsequent planing unnecessary.

14. We have now to examine these contentions in the light of the technical literature and ISI Glossary of Terms so as to find out whether the imported goods would continue to fall within the definition ‘wood in rough’ despite smooth surface and the saw dust sticking to the surface as observed by Sh. Reddy and whether the goods would fall under sawn and processed wood.

15. The learned Advocate has relied on a paragraph appearing at pages 12, 14 of “A Manual of Forest Utilisation” by H.C. Watts in respect of Classification of Timber and Square Timber, which is noted below -

“Section 1 - Classification of Timber

     A - Timber

The details of classification vary greatly according to local custom and in almost every division there are special trade names for various classes and sizes of timber. Timber may be broadly divided into the following general classes -

(a) Round timber, that is timber obtained by felling trees, removing the branches and cutting the bole into sections of convenient length. Before extraction the bark is usually removed to reduce the cost of transport and to prevent the attacks of insects, many of which lay their eggs on the bark of felled trees. Timber in the round is used for a large number of purposes such as masts, telegraph poles, piles for bridges, building construction, fence posts and pit props.

(b) Squared timber - Such timber is roughly squared with the axe, adze or saw : squared logs are sometimes known as balks. A great advantage of roughly squared timber over timber in the round is that it is much more convenient and cheaper to transport. In the departmental operations in the Nimar, Hoshangabad and Melghat divisions, the teak timber is usually rough squared in the jungle or at a parao outside the coupe, before being carried to the depot. Squaring with the adze is generally cheaper than squaring with the saw, but is somewhat wasteful as the side planks which are yielded by conversion with the saw are generally saleable.

The following terms are used in Nirmar, Hoshangabad and elsewhere for various classes of squared timber, according to size. As with round timber, the sizes of each class vary locally

16. The description of Heart and sap wood appears at pages 885 and 886 of Materials Handbook by George S Brady - Henery R Clauser. The same is noted below -

“Wood - A general name applied to the cut material derived from trees. A tree, as distinguished from a bus, is designated by the US Forest Service as a woody plant with a single erect stem 3 inches (7.6 cm) or more in diameter at 4 1/2 ft. (1.4 m) above the ground, and at least 12 ft. (3.7 m) high. But this definition is merely empirical since in the cold climate of Northern Canada, perfect, full grown trees 10 to 15 years old may be only 6 inches (15 cm) high. Timber in general, refers to standing trees while lumber is the sawed wood used for construction purposes. In construction work the word timber is often applied to large pieces of lumber used as beams.

Wood is an organic chemical compound composed of approximately 49% carbon, 44 oxygen, 6 hydrogen and 1 ash. It is largely cellulose and lignin. The wood of white pine is about 50% cellulose, 25 lignin, and the remainder sugars, resin, acetic acid and other materials. Wood is produced in most trees by a progressive growth from the outside. In the spring, when sap flows rapidly, a rapid formation of large cells takes place, followed by a slower growth of hard and close cells in the summer. In some woods, such as oak, there is a considerable difference in quality and appearance between the spring and summer woods. In some long lived trees, such as Douglas fir, there is a decreasing in strength between the outside wood with narrow rings and the wide ringed wood of the interior. Heartwood is the dark center of the tree which has become set, and through which the sap has ceased to flow. Sapwood is the outer, live wood of the tree; unless treated, it has low decay resistance. The grain of sawed lumber results from sawing across the annual growth rings, varied to produce different grains."

The learned Counsel has referred to the following terms from Indian Standard Specification for Cut Sizes of Timber IS : 1331-1971. They are noted below -

“0.2 The need for an Indian Standard specification for cut sizes of timber in the interests of both producers and stockists on the one hand and consumers on the other. Every saw mill would produce a certain amount of timber in odd sizes, by way of salvage from what would otherwise be wasted in the course of normal timber conversion. While these odd sizes may find a use, this standard would refer only to those sizes which experience has shown to be in general demand for use in building and other purposes. The object of this standard is to channelize the demand for timber and thus help in timber being stocked in suitable sizes and in making it readily available to the consumer for the use both for structural and non-structural purposes.

3.5 Tolerance

3.5.1 Permissible tolerances on cut sizes of timber shall be as follows -

(a) For width and thickness -

(1) Upto and including 100 mm        +3

                      –0 mm

(2) Above 100 mm              +6

                       –3 mm

(b) For length                     +25

                           –0 mm"

17. The following terms have been referred from Indian Standard - Glossary of Terms Applicable to Timber Technology and Utilisation IS : 707-1976 -

“All Heart - Timber containing heartwood only and completely free from sapwood.

Boxed Heart - A piece of timber so sawn or hewn that the pith or the centre heart falls entirely within the four surfaces throughout its length.

Sap wood - The outer layers of the log, which in the growing tree contain living cells and food material. The sap wood is usually lighter in colour and is readily attacked by insects and fungi.

Square - Timber formed by slabbing along on four sides."

18. The Explanatory Notes under sub-heading 44.04 of HSN are noted below -

“This heading includes timber in the natural state as felled, usually with the branches lopped off, and such timber stripped of its outer or both its outer and inner bark or from which merely the rough protuberances have been removed. It also includes wood from which the waste outer layers, consisting of the most recent growths (sapwood) have been removed for economy in transport or to prevent decay.

The principal products classified here, when the above description, include : timber for sawing; poles for telephone, telegraph or electrical power, transmission lines; unpointed and unsplit piles, pickets, stakes, poles and props; round pit props; logs, whether or not quarter split, for pulping; round logs for the manufacture of veneer sheets, etc.; logs for the manufacture of match sticks, woodware etc.

Telegraph, telephone or electrical power transmission poles are also to be classified in this heading when further trimmed with a draw knife or peeled with a mechanical peeler to a smooth surface ready for use. These poles are often painted, varnished or impregnated with creosote or other substances, for the purpose of preservation.

Tree stumps and roots of special woods, and certain growths such as those used for making veneers or smoking pipes, also fall here.

The heading also includes roughly squared wood which consists of trunks or sections of trunks of trees, the round surfaces of which have been reduced to flat surfaces by means of axe or adze, or by coarse saw; sawing, to form wood of roughly rectangular (including square) cross section; roughly squared wood is characterised by the presence of rough areas of bark traces. Half squared wood, which is wood prepared in this manner on two opposite faces only is also classified here. Timber is prepared in these forms for sawmills or may be used as such e.g. as roofing timber.

Certain kinds of timber (e.g. teak) are split by wedges or hewn into baulks along the grain; such baulks are also regarded as falling in this heading. The heading excludes -

(a) Roughly trimmed wood suitable for the manufacture of walking sticks, umbrellas, tool handles or the like (Heading 44.04);

(b) Wood cut into the form of railway or tramway sleepers (cross ties) (Heading 44.06);

(c) Wood cut into the form of planks, beams, etc. (Heading 44.07 or 44.18)."

The Explanatory Notes of sub-heading 44.07 of HSN are noted below -

“With a few exceptions, this heading covers all wood and timber of any length but of a thickness exceeding 6 mm. sawn or chipped along the general direction of the grain or cut by slicing or peeling. Such wood and timber includes sawn beams, planks, flitches boards, laths etc. and products regarded as the equivalent of sawn wood or timber, which are obtained by the use of chipping machines and which have been chipped to extremely accurate dimensions, a process which results in a surface better than that obtained by sawing and which thereby renders subsequent planing unnecessary. It also includes sheets of sliced or peeled trotary cut wood and strips and friezes for parquet flooring, other than those which have been continuously shaped along any of their edges or faces (Heading 44.09).

It is to be noted that the wood of this heading need not necessarily be of rectangular (including square) section nor of uniform section along the length.

The products of this heading may be planed (whether or not the angle formed by two adjacent sides is slightly rounded during the planing process), sanded or end-jointed e.g. finger jointed (see the General Explanatory Note to this Chapter).

The heading also excludes -

(a) Chipwood and the like (Heading 44.04)

(b) Veneer sheets and sheets for plywood and other wood (not elsewhere specified or included) of a thickness not exceeding 6 mm (Heading 44.08)

(c) Wood continuously shaped along any of its edges or faces of Heading 44.09

(d) Strips of plywood or veneered wood for parquet flooring (Heading 44.12)

(e) Builders’ joinery and carpentry (Heading 44.18)

This heading covers panels of wood marquetry and inlaid wood, including those partly of material other than wood.

It also covers a wide variety of articles of wood (including those of wood marquetry or inlaid wood) generally of careful manufacture and good finish, such as; small articles of cabinet work (for example, caskets and jewel cases); small furnishing goods; decorative articles. Such articles are classified in this heading, even if fitted with mirrors, provided they remain essentially articles of the kind described in the heading. Similarly the heading includes articles wholly or partly lined with natural or composition leather, paperboard, plastics, textile fabrics, etc. provided they are articles essentially of wood.

The heading includes -

(1) Boxes of lacquered wood (of the Chinese or Japanese type); cases and boxes of wood, for knives, cutlery, scientific apparatus etc.; snuff boxes and other small boxes to be carried in the pocket, in the handbag or on the person; stationery cases, etc.; needlework boxes; tobacco jars and sweetmeat boxes. However the heading excludes ordinary kitchen spice-boxes, etc. (Heading 44.19)

(2) Articles of wooden furniture, other than those of Chapter 94 (see the General Explanatory Note to that Chapter). This heading therefore covers such goods as coat or hat racks, clothes brush hangers, letter trays for office use, ash-trays, pen-trays and ink-stands.

(3) Statuettes, animals, figures and other ornaments.

Wooden parts of the articles of this heading are excluded (Heading 44.21)

The heading also excludes -

(a) Cases for musical instruments or for guns, of wood, and sheaths, cases, boxes and similar containers covered with leather or composition leather, paperboard, vulcanised fibre, sheeting of plastics, or textile materials (Heading 42.02)

(b) Imitation jewellery (Heading 71.17)

(c) Clock cases and parts thereof of Chapter 91

(d) Musical instruments and parts thereof of Chapter 92

(e) Scabbards and sheaths for side arms (Heading 93.07)

(f) Articles of Chapter 94 (for example, furniture, lamps and lighting fittings)

(g) Smoking pipes and parts thereof, buttons, pencils and other articles of Chapter 96.

(h) Works of art or antiques of Chapter 97."

19. As can be seen from the above description, sap wood is outer, live wood of the trees. The said sap wood unless treated, it gets decayed and for the purpose of transportation of the wood logs to the saw mills, the sap wood and the outer chips are removed either by sawing by means of axe or adze, or by coarse sawing to form wood of roughly rectangular (including square, cross section). The HSN Explanatory Notes further state that roughly squared wood is characterised by the presence of rough areas or bark traces. While the explanatory notes for wood sawn under sub-heading 44.07 as noted above, has clearly stated that the wood and timber falling under this heading would have been sawn or chipped alongwith the general direction of the grain or cut by slicing or peeling. The wood is obtained by the use of chipping machines and which has been chipped to extremely accurate dimensions - a process which results in a surface better than that obtained by sawing and thereby renders subsequent planing unnecessary. Therefore, it has to be seen whether the impugned goods have fulfilled the specified criteria laid down under the HSN Explanatory Notes for sawn wood which has got the persuasive value for the purpose of classification. The Inspection report produced before us, is noted below -

“To

    The Plant Quarantine Department for clearance please. Cargo

    submitted for examination please.

Inspect S/20 pcs. of each item verify the sizes with respect to packing list. Verify whether the maximum size of the log should be 10 C.M. x 10 M x 2 M for licence purpose. Verify whether the sawn timber is wood roughly squared or half squared but not further manufactured for CN 88/88. Verify plant quarantine certificate before release of the cargo. Also verify the size of the log ends with respect to packing list please.

dated 27-5-1988.

Open shed OPP - EQ-5-75

Inspected S/20 pcs of each item. Verified sizes w.r.t. price list. Sizes of sawn timber are as per price list for licence purpose. Sawn timber is wood sawn lengthwise falling under 44.07 (squared and rectangular) (Teak scantlings). Sizes of log-ends verified as per packing list. Verified quarantine department. Certificate No. 4-1/87 Tech. dated 26-5-1988. Please see file S8(a)/128/88. Teak posts are the wood roughly squared, but not further manufactured.

Open for AO(a)

Inspection

                        Sd/- 31-5-1988”

20. The above Inspection report has stated that the sawn timber is wood sawn length-wise (rectangular and square). Teak posts are the wood roughly squared but not further manufactured. As has been noted in the impugned order, the report of Shri Reddy states that the material is completely processed, sawn wood and all the faces of the wood have been simultaneously cut on a band saw and the material was cut to dimensions. He has opined that the presence of smooth surface of the saw dust sticking to the surface is a clear indication of fully processed (clearly sawn) wood. His further opinion is that the presence of wood or not and the presence of heart rot is in no way coming in the way of classifying the wood as sawn or roughly sawn. On the other hand, Mr. P.K. Verghese who is belonging to MP State Forest Corporation, has reported that the timber has been sawn at site of origin and contain bark, sap and wanes and that they have a rough surface with centre heart box heat and in his opinion, the timber is a roughly square, which is not fit for any ready use and they have to be taken to the saw mills for further sawing for commercial purpose. It is from these details, it has to be gathered as to whether the imported timber has been sawn or chipped to extremely accurate dimensions so as to make the timber wood sawn to fall under sub-heading 4407.99.

21. The report of Shri Verghese who is also belonging to MP Forest Service, is clearly in favour of the appellants. It is only the report of Shri Somasekhara Reddy and his opinion which has cast the doubt in the mind of the lower authorities. He has noted that there is smooth surface and saw dust sticking to the surface. But however, he also confirms the saw wood and the heart wood in the imported timber. He has stated that all the faces of wood have to be smoothly cut on a band saw. It is now to be seen as to whether the cutting of the face of the wood with band saw by itself would make the timber “sawn wood”. The Inspection report confirms with regard to teak post to be “roughly squared but not further manufactured”. The report on the back of the bill of entry states that lot Nos. 9, 10 and 11 can be treated as wood roughly squared but not further manufactured and also further states that sap wood and all the four sides of the logs are visible. As regards Sr. Nos. 1 to 8 of the timber noted on the back of the entry, the report is “rest of the cargo i.e. from lot Nos. 1 to 8 is sawn timber in the shape of beams etc. and the sap wood is visible on one side of the logs and not on all sides as in the case of Lot Nos. 9, 10 and 11". This inspection report which is noted on the back of the entry in respect of Sr. Nos. 1 to 8 clearly states the presence of sap wood on one side and as regards Sr. Nos. 9, 10 and 11, there is no dispute that the wood is roughly squared. Further, the learned Collector has not taken into consideration the inspection report fully. The Inspection report as well as the opinion of Shri Verghese clearly indicates the presence of sap wood and also the report of Shri Somasekhara Reddy discloses that the wood has been cut on a band saw. The cutting of the wood merely by band saw leaving a smooth surface and the saw dust sticking on the surface by itself will not make the timber as wood sawn for classification under sub-heading 4407.99. The mere sawing of the wood for the purpose of transportation will also not make the timber as ‘wood sawn’. As has been seen from the Explanatory notes, the process of sawing, chipping should be done in a machine to extremely accurate dimensions, a process which should result in a surface better than that obtained by sawing and which thereby render subsequent planing unnecessary. Merely because the wood is in square and they have been cut to sizes, will not make the timber ‘wood sawn’. The Inspection report, the report of Shri Verghese and even the report of Shri Reddy does not disclose that the timber has been chipped in machines to extremely accurate dimensions to leave a surface better than that obtained by sawing. Undoubtedly, there has been some sawing but the wood in rough can be obtained by sawing, as can be seen from the Explanatory notes under Heading 4403. The wood in rough under Heading 4403 includes timber in the natural state as felled usually with the branches lopped off, and such timber stripped of its outer or both its outer and inner bark or from which merely the rough protubesances have been removed. The HSN Note also states that this note includes wood from which the waste outer layers consisting of the most recent growth (sap wood) have been removed for economy in transport or to prevent decay. The note also states that it includes roughly squared wood which consists of trunks of trees, the rough surface of which have been reduced to flat surfaces by means of axe, adze or by course sawing to form wood of roughly rectangular (including square) cross section. The Note 4 states that the roughly squared wood in characterised by the presence of rough areas or bark trances. It further states that half squared wood, which is wood prepared in this manner on two opposite faces only, is classified under this heading.

22. In this case, the Inspection report, as can be noted on the back of the bill of entry, states that ‘Lot Nos. 1 to 8, is sawn wood in the shape of beams etc. and the sap wood is visible on one side of the logs and not on all sides. The certificate issued by the Department of Agriculture, Malaysia, also describes the wood as ‘5578 Pcs. wood in rough half squared with bark". Therefore, after a careful examination of the evidence on record, it is clear that the wood has been sawn in Lot Nos. 1 to 8 on one side, but as there is presence of sap wood which has been confirmed by the Inspection report as well as the certificates of both Shri Verghese and Shri Reddy, the classification of the woods will be under sub-heading 4403.99 of the Customs Tariff Act, 1985.

23. The ruling rendered by the Tribunal in the case of Hunsur Plywood Works Ltd. v. Collector of Customs, Bangalore - [1988 (034) ELT 393] and that of M/s. Soni Enterprises v. Collector of Customs, Bombay [Order No. 161 and 162/89-D, dated 21-6-1989] also supports the plea of the importer in this case. The department has not placed any evidence on commercial parlance in this case and from traders to show that the imported wood is not ‘wood in rough’ but sawn wood. It is for the department to have led the evidence on this issue to show that the imported timber cannot be considered as wood in rough. As has been observed, the Inspection report as well as the report of Shri Verghese is clearly in favour of the importer and the report of Shri Reddy also confirms the presence of sap wood and as has been seen from the literature, the presence of sap wood would make the timber as ‘wood in rough’ and therefore, we have no hesitation in upholding the plea of the appellants by allowing the appeal. As we have upheld the appellants’ plea, the benefit of Notification No. 107/89-Cus., dated 1-3-1989 is available to the appellants. Hence the fine and penalty amounts imposed are set aside. The Cross appeals are in the nature of comments and they are rejected.

Equivalent 1994 (69) ELT 715 (Tribunal)