1998(09)LCX0046
IN THE CEGAT, EASTERN BENCH, KOLKATA
Shri P.C. Jain, Member (T) and Smt. Archana Wadhwa, Member (J)
GENERAL METAL TRADING CO.
Versus
COMMISSIONER OF CUSTOMS, KOLKATA
Order No. A-806/98/Cal, dated 8-9-1998 in Appeal No. C(SB)514/91
CASES CITED
Collector v. S.S. Enterprises 1994(08)LCX0098 Eq 1994 (074) ELT 0794 (S.C.) Referred............................. [Para 2.3]
Hindustan Ferodo Ltd. v. Collector 1987 (089) ELT 0016 (S.C.) Referred.................. [Para 2.3]
National Organic Chemical Industries Ltd. v. Collector 1997(01)LCX0172 Eq 1997 (092) ELT 0629 (Tribunal) Referred [Para 3]
Reliance Cellulose Products Ltd. v. Collector 1997(07)LCX0045 Eq 1997 (093) ELT 0646 (S.C.) Referred.... [Para 3]
U.O.I. v. Garware Nylons Ltd. 1996(09)LCX0005 Eq 1996 (087) ELT 0012 (S.C.) Referred.......................... [Para 2.3]
REPRESENTED BY : Shri S.K. Bhagaria, Advocate, for the Appellant.
Shri T. Premkumar, SDR, for the Respondent.
[Order per : Archana Wadhwa, Member (J)]. - The brief facts of the case, as on record, are as under :-
1.1 The appellants entered into a contract with M/s. Metramet, Middlesex for supply of 18-20 M.T. of brass waste. In terms of the said contract, an irrevocable Letter of Credit was opened by the appellants in favour of their foreign suppliers on August 23, 1989. Thereafter, a quantity of 19.097 M.T. of brass waste under the Invoice dated 27-12-1989 was shipped. The appellants accordingly filed a bill of entry on 29-1-1990 through their Customs Clearing Agents for clearance of the said quantity of goods declared by them as brass waste and scrap. As the Department entertained a doubt as regards the value of the goods declared by the appellants at US $ 0.52 per lb. (CIF) and as the goods were without declaration of any grade as per NARI specification, representative samples were drawn from the goods and were sent to Custom House Laboratory for chemical examination. On receipt of the result of the test report, the Department entertained a view that the goods in question were not brass waste classifiable under Tariff Heading 74.04 of the Customs Tariff Act, 1975. But the same was brass powder classifiable under Heading 74.06 and the residue classifiable under Heading 2620.90. Accordingly, a show cause notice was issued by the Assistant Commissioner on 23-5-1990 alleging that the consignment in question consisted of materials other than brass waste and scrap, as declared by the appellants and proposing its confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962 and penalty under Section 112 of the Customs Act, 1962.
1.2During adjudication, the appellants contested the allegations vigorously and produced on record expert opinion in the shape of certificates of various authoritative persons. Test report of the tests conducted by the appellants from the representative samples given to them by the Custom House itself were also placed on record. Various submissions were made that the consignment in question is not brass powder in as much as the waste and scrap imported by the appellants has arisen from the manufacture or mechanical working of brass metal/components in various industries. Such waste and scrap arises in brass plumbing and pressure valve industries and other industries manufacturing brass articles. Such waste and scrap arises in the process, such as removing the core of sand by fettling the brass castings, removing scratches and other defects during the manufacture of brass articles, grinding, polishing and finishing of brass articles etc. Such waste and scrap arising during the aforesaid processes also at times gets mixed up with certain amount of burnt sand and carbon. The appellants also contended that merely because the waste and scrap in question is in the powdered form, the same cannot be considered as brass powder. The emergence of copper powder and the waste and scrap is dependent upon the process in which the same has arisen. The appellants contended that the brass powders covered by Heading 74.06 are completely different products manufactured by completely different processes and are having completely different characteristics and uses. In support of their submissions, lot of literature and evidence was produced on record by the appellants.
1.3 The Additional Commissioner of Customs, Calcutta, however, did not find favour with the appellants submissions and vide his Order dated 14-2-1991, ordered for confiscation of the goods with an option to the appellants to redeem the same on payment of redemption fine of Rs. 4.00 1akhs. Personal Penalty of Rs. 25,000.00 was also imposed upon the appellants. The said Order of the Additional Commissioner is impugned before us.
2. Shri S.K. Bagaria, learned Advocate, for the appellants raised the following points before us, during the course of hearing :-
2.1 The goods imported in the present case were Brass Waste falling under Heading 74.04 of the Customs Tariff.
(a) The goods imported by the appellants in the present case were Brass Waste. The contract (page 22), Letter of Credit (page 23), Invoice (page 24) and Packing List (page 25) all related to Brass Waste.
(b) Simply because the said Brass Waste was in powdery form, it did not and could not cease to be Brass Waste. The said Brass Waste had arisen during grinding process undertaken for manufacture of various Brass articles. This position has been certified by the foreign supplier in its certificates at pages 35 to 37 of the paper book.
(c) The fact that such material in powdery form arising during different manufacturing processes is known, dealt with and regarded in the market as Brass Waste and Scrap had also been certified by The East India Metal Association in its certificate dated 18-9-1990 (page 34).
(d) Note 6 (a) of Section XV of the First Schedule to the Customs Tariff Act, 1975 (in short the 1975 Act) defines the expression Waste and Scrap to mean 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 said definition of waste and scrap given in the Customs Tariff is fully satisfied in respect of the said goods. The said goods imported by the appellant have got only one use, namely, being melted for recovery of metal. This position is also quite clear from the following certificates :-
(i) Certificate dated 12-9-1990 from Intalab Pvt. Ltd., Industrial Testing & Analytical Laboratory (page 31).
(ii) Certificate dated 15-9-1990, from Shri T.K. Biswas, Ex-Senior Scientific Officer, Defence Science Services, Ministry of Defence, Government of India (page 32).
(iii) Certificate dated 18-9-1990 from the East India Metal Association, Calcutta (page 34).
(iv) Certificate dated September 1, 1990 from the Inspection Survey & Surveillance (India) Pvt. Ltd., recognised by the Export Inspection Council of India, Ministry of Commerce, Government of India (page 33).
(v) Certificate dated April 26, 1990 and a detailed report given by the foreign suppliers as regards the various processes during which the said waste and scrap arose (page 35-37).
(e) The Additional Collector has not found anything wrong in the said certificates given by various experts on the subject. No enquiries were made by the Additional Collector from any of the said experts nor the correctness of the findings given and/or opinions expressed in the said certificates has been disputed by the Additional Collector.
(f) At the time of drawing of the samples by the Customs Authorities from the consignment in question, representative samples were also allowed to be taken from the said consignment by the appellants representatives. Such representative samples were got tested by the appellant from the said independent experts and their reports certificates were relied upon by it in support of its submissions and there was nothing wrong or illegal about the same. If the Additional Collector wanted to dispute the said certificates and/or reports produced by the appellant, it was incumbent upon him to inform the appellant about the same and then to allow the appellant to draw fresh samples and get the same tested under the supervision of the Customs Authorities. However, such a course of action was not at all followed by the Additional Collector. The said certificates were filed by the appellant alongwith its reply dated September 21, 1990 and the order was passed by the Additional Collector several months thereafter. During this period if the Additional Collector so wanted, fresh samples could have been easily drawn from the consignment for being tested by independent laboratories and experts.
(g) In so far as the certificate given by the foreign supplier is concerned, the Additional Collector had ignored the same simply by alleging that it was obtained after the proceedings were initiated by the Customs Authorities. The Additional Collector failed to appreciate that obviously this was bound to be so in as much as the occasion to get the said certificate arose only in view of the objections raised by the Customs Authorities.
(h) It is submitted that the fact that Brass Waste and Scrap may be in powdery form has also been recognised in the Explanatory Notes below Heading No. 74.04 in the Harmonised Commodity Description and Coding System (in short HSN). The Additional Commissioner has ignored the Explanatory Notes in HSN simply by alleging that there was no presence of any lubricants in the goods in question. It is submitted that the said reason given by the Additional Commissioner is totally misconceived. The presence of lubricants in such waste depends on the process from which the waste arises and due to presence or absence of lubricants the waste cannot cease to be waste.
(i) The fact that brass waste and scrap can be in powdery form has also been recognised in NARI Circular (Standard Classification for non-ferrous scrap metals) issued by National Association of Recycling Industries Inc. New York. The said fact has also been recognised in IS : 2066-1962 (Coding & Classification of Non-ferrous Scrap Metals and Residue) published by Indian Standards Institution.
2.2 The said Brass Waste in powdery form can never be classified as Copper Powers and Flakes falling under Heading No. 74.06 of the Customs Tariff.
(a) In HSN, the following Explanatory Notes appear below Heading No. 74.06 :
This heading covers copper powders as defined in Note 8(b) to Section XV and copper flakes other than cement copper (precipitated copper) which is a black powder of Heading 74.01. Subject to the provisions of Note 7 to Section XV, it also covers copper powders mixed with other base metal powders (e.g. bronze powder consisting of a simple mixture of copper and tin powders).
Copper powders are mainly produced by electro deposition or by atomisation (i.e., by injecting a thin stream of molten metal into a high-velocity cross-jet of water, steam, air or other gases).
In addition to the above two main processes, copper powders may also be produced on a smaller scale by gaseous reduction of finely divided oxides, precipitation from solutions or by combination of solids. Powders of lamellar structure and flakes are normally produced by grinding foil. The lamellar shape can be seen by the naked eye or through a magnifying glass in the case of flakes, but a microscope is needed for true powders.
The method of manufacture determines such characteristics as the particle size and shape (which may be more or less irregular, globular, spherical or lamellar). Powders with a lamellar structure are often polished and may retain traces of greasy or waxy substances (e.g. stearic acid or paraffin wax) used in the course of their preparation.
The powders are used for compacting and sintering into bearings, bushings and many other technical components. They are also used as chemical or metallurgical reagents, for soldering and brazing, in the manufacture of special cements, for coating non-metallic surfaces as a basis for electroplating, etc. The flakes are mainly used as a metallic pigment in the manufacture of inks and paints. The flakes are used directly as metallic colouring matter by blowing them e.g., on to a varnished surface to which they adhere.
(b) The tests laid down in the aforesaid Explanatory Notes of HSN are not at all satisfied in respect of the said Brass Waste. The said Brass Waste imported by the appellant was not produced by any of the processes mentioned in the said Explanatory Notes nor it has got the characteristics of powders as mentioned in the said Explanatory Notes nor it is capable of being used for any of the purposes mentioned in the said Explanatory Notes. Obviously there can be no scope to classify the said waste as powders.
(c) The fact that Brass Powders covered by Heading No. 74.06 are completely different products, manufactured by completely different processes, have completely different characteristics and completely different uses and functions will also be fully clear from the following literature/evidence relied upon by the appellant before the Additional Collector :
(i) An article types, properties and uses of copper powder presented by Shri S.C. Jain (page 38).
(ii) An article presented by Shri G.M. Krishnamurthy and Shri M.K. Rao during the seminar on Copper & Copper Alloy Powders organised by the Indian Institute of Metals and Indian Copper Information Centre (page 41).
(iii) An article titled bronze powders presented by Shri M. Dhanaskerapandian (page 44).
(iv) An article titled Atomized Copper & Copper Based Powders (page 47).
(v) An article titled Copper & Copper Alloy Powder Metal Components presented by Shri L.R. Vaidynath (page 52).
(vi) Relevant pages from Tooling for Metal Powder parts published by Mcgraw Hill Book Company, London (page 56).
(d) The aforesaid submissions of the appellant are also fully supported by one of the most important authoritative books on the subject, namely, Mcgraw Hill Encyclopedia of Science and Technology (Volume 14). As would be evident from the said Encyclopedia (pages 221 to 224), following are some of the relevant aspects relating to Metal Powders :
(i) Metal Powders are highly engineered materials of specific shapes and sizes. These range from 0.1 to 1000 Micro Metres in size with shapes that are spherical, acicular, irregular, dendritic, flake, angular or fragmented.
(ii) Particle shape has a direct influence on the density, surface area, permeability and flow characteristics of powder.
(iii) Porosity of the powder particle varies with the method of production and influences the density of the particle and the final product.
(iv) Metal powders are mainly manufactured by atomization process in which a stream of molten metal is broken up into droplets that freeze into powder particles. Other methods are chemical and mechanical.
(v) The single most important feature of Powder Metallurgy Materials is controlled density.
(vi) Such Metal Powders are used for various functions and uses as mentioned in detail at pages 222 and 223 of the said Encyclopedia.
(e) The said waste has neither been manufactured by any of the processes mentioned in the aforesaid authoritative books and literature nor it has got the characteristics of powders nor it is capable of being used for the functions and uses as mentioned above. In none of the said authoritative books and literature, such waste arising during grinding process for manufacture of Brass Articles has been treated as Brass Powder. From the said authoritative books, documents and evidence produced by the appellant it was quite clear that copper and copper alloy powders, as known, dealt with and regarded in commercial parlance are manufactured by definite manufacturing process. Insofar as the said waste imported by the appellant is concerned, it was not manufactured by any such process by which brass powders are manufactured but just arose as a waste material during the manufacture of brass articles. Furthermore, copper and copper alloy powders are manufactured for different uses and the process of manufacture is selected depending upon the type of powder desired and the properties required. There is no such thing in the case of the said material imported by the appellant which just arose as a waste during the manufacturing process of brass articles. Furthermore, brass powders are normally produced by atomisation which method results in uniform powder with particles of uniform composition and such powder is readily compressible and excellent for sintering. These tests are not satisfied in respect of the said materials imported by the appellant. Apart from this, the main use of atomised brass powder is in electronics and machine part industries. The waste imported by the appellant, however, is not capable of being put to any such use and the only use thereof is for recovery of metal by the process of remelting. Furthermore, brass powders are supplied to specifications to ensure uniform properties in the fabricated product. Specifications mostly limit the composition, flow, bulk density, screen analysis, compressibility and green strength. Insofar as the said waste material imported by the appellant is concerned, there is no uniformity therein and it consists of various shapes, sizes, composition, silicious matters and metallic oxides.
(f) In commercial parlance also, the said materials imported by the appellant are known and dealt with only as waste and scrap and never as brass powder. Brass powder or any other metallic powder as known and dealt with in the market, both nationally and internationally, has distinct and definite characteristics such as size, geometry, purity etc. Such powders must be extremely pure, must have well defined size and geometric shapes of the particles and must have a uniform chemical composition. None of these tests are satisfied in respect of the said goods imported by the appellant nor this fact has been disputed by the Additional Collector also. In such circumstances, the question of classifying the said goods under Heading No. 74.06 did not and could not arise.
(g) Reliance placed by the Additional Collector on the Rules of Interpretation of the Customs Tariff is wholly mis-conceived and untenable. When there was no scope to classify the said goods as brass powders inasmuch as the said goods are not brass powders at all, the question of invoking the Rules of Interpretation did not and could not arise. It is not as if the said goods can reasonably be classified under two different headings of the Customs Tariff. The said goods are brass waste and scrap and are classifiable only as such.
2.3 Burden to prove that the goods in question are classifiable under any particular Heading or sub-heading is on the Department. The said burden has not at all been discharged in the instant case. It is submitted that the burden to prove that the goods in question are classifiable under a particular Heading or sub-heading is on the Department and the same has to be discharged by adducing proper evidence. In the instant case the said burden has not at all been discharged by the Department. There is not even an iota of evidence to show that the goods in question were Brass Powders or that the same were classifiable under Heading No. 74.06. In support of this submission, reliance is being placed on the following decisions :
(i) 1996 (087) ELT 12 = 1996 (016) RLT 0619 (S.C.) [UOI v. Garware Nylons Limited]
(ii) 1997 (089) ELT 16 = 1996 (017) RLT 0807 (S.C.) [Hindustan Ferodo Limited v. CCE]
(iii) 1994 (074) ELT 794 [CC v. S.S. Enterprises]
2.4 The Additional Collectors reliance on the Chemical Test Reports is totally misconceived.
The said Test Reports are at pages 28 to 30 of the paper book. The said Test Reports only mention about chemical composition of the goods and their physical form. In none of the Test Reports it has been stated anywhere that the goods are metal powders within the meaning of Heading No. 74.06 or that the same are not Brass Waste falling under Heading No. 74.04. There is nothing in any of the said Test Reports to indicate that 90% or more by weight of the said goods was passing through a sieve having a mesh aperture of 1 mm. The said reports do not in any way indicate even remotely that the goods in question are not brass waste within the meaning of Heading No. 74.04 but are Brass Powders within the meaning of Heading No. 74.06.
2.5 Insofar as blackish grey coloured powder is concerned, classification thereof under Heading No. 74.04 was totally incorrect in any event even as per the findings given by the Additional Collector.
(a) Further and in any event, insofar as the blackish grey-coloured powder is concerned, even according to the Additional Collector it was classifiable under sub-heading No. 2620.90 of the Customs Tariff. In spite of this, the Additional Collector by alleging that there was no separate weight and value of such material classified the same as brass powder.
(b) Such a course of action was and is wholly illegal and invalid. The consignment is question consisted of 38 drums. Each of the drums had got its own weight and such weight was mentioned in the packing list of the foreign suppliers as well as the drum itself. The drums containing the two types of scrap could be easily separated.
(c) It is submitted that when the goods did not even satisfy the characteristics of Heading No. 74.06 in any manner whatsoever, the Additional Collector had no jurisdiction to classify the same under Heading No. 74.06.
(d) The Additional Collector totally erred in holding that importation of the goods covered by sub-heading No. 2620.90 can be made only by actual users (industrial). The Additional Collector failed to appreciate that under Serial No. 5 of Appendix 6, List 8, Part II of the Import Policy, 1988-91 importation of brass scrap/ash/dross and brass metal scale was at all material times clearly allowed under Open General Licence by all persons for actual use or for stock and sale.
2.6 For the reasons aforesaid and those stated in the appeal petition, the appellants submitted that the goods in question were lawfully and validly imported by the appellant and confiscation thereof under Section 111(d) and 111(m) of the Customs Act and demand of redemption fine of Rs. 4 lakhs and levy of penalty of Rs. 25,000/- was wholly illegal and invalid. Accordingly, learned Advocate prayed that the instant appeal may be allowed with consequential reliefs.
3. We have also heard Shri T. Premkumar, learned SDR for the Revenue, who has reiterated the reasoning of the authorities below and submitted that as per the HSN Explanatory Notes, the goods are to be assessed as Brass Powder under Tariff Heading 74.06. He also drew attention of the Bench to the effect that in all the import papers, grades were mentioned as per NARI specification. Attention was also drawn to the Test Report which clearly shows that the goods were in powdered form. He argued that Section Note 6 (b) is statutory and binding wherein self-contained definition of powder has been given. If the appellants were aggrieved with the Test Report they could have asked for a re-test. In this regard, he places reliance on the Supreme Courts decision in the case of Reliance Cellulose Products v. Collector of Central Excise, Hyderabad reported in 1997(07)LCX0045 Eq 1997 (093) ELT 0646 (S.C.) = 1997 (021) RLT 0117 (S.C.) and on the Tribunals decision in the case of National Organic Chemical Industries Ltd. v. Collector of Central Excise, Bombay reported in 1997(01)LCX0172 Eq 1997 (092) ELT 0629 (Tribunal).
3.1 As regards the blackish coloured powder goods, he admits that the same are admissible under the OGL, but submits that the Comimissioner has rightly confiscated the same as the said goods were not segregable from the yellowish coloured brass powder. In view of his above submission, he prays for rejection of the appeal.
3.2 The dispute in the instant case is as to whether the goods imported by the appellants are waste and scrap classifiable under Heading 74.04 or the same are Brass Powders classifiable under Heading 74.06 of the Customs Tariff Act, 1975. The waste and scrap and the Powders are defined in Section Note 6 of Section XV. For better appreciation, Section Note is reproduced below :-
Waste Scrap
Metal waste & 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.
Powders
Products of which 90% or more by weight passes through a sieve having a mesh aperture of 1 mm.
As per General Rules of Interpretation to the schedule of the Tariff Rule 3 (a) - The heading which provides the most specific description shall be preferred to heading providing a more general description. And in terms of Rule 3 (c) when goods cannot be classified by reference to (a) & (b) they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
3.3 The adjudicating authority has relied upon the Test Reports of the Custom House Laboratory. The same are as under :-
(i) The sample is in the form of greyish yellow coloured powder containing 90% by weight of copper zinc alloy (brass) and rest being silicious matter and metallic oxides. Percentage of copper in the sample as such 54.6% by weight, rest being mainly zinc.
(ii) The sample is in the form of greyish yellow coloured powder containing 96% by weight of copper-zinc base alloy (brass) and rest being silicious matter and metallic oxides. Percentage of copper in the sample as such 62.0% by weight, rest being mainly zinc.
Placing reliance upon the above test reports, the adjudicating authority has observed that from the same, it is clear that the goods are covered Powders classifiable under Heading 74.06. However, we find that as per the definition of Powder given in Section Note 6, the products of which there is 90% or more by weight passes through a Sieve, having a mesh aperture of 1 mm. As rightly pointed out by the Advocate that the Test Report does not satisfy the above criteria. The Test Reports do not indicate that the goods are metal powders within the meaning of Heading 74.06. We also find great force in the submission of the learned Advocate that as per the technical literature on record read with the H.S.N. Explanatory Notes and the Heading No. 74.06, the process of manufacture of Brass Powder is completely different than the process through which the Brass Waste emerges. Merely because the Waste and Scrap are in powdered form, the same will not be considered as Waste and Scrap Brass Powders which are produced by highly technical and sophisticated manufacturing process and have their uses in different fields. From the technical literature duly supported by authoritative books on the issue, we find that metal powders are highly engineered materials of specific shapes and sizes. Metal powders range from 0.1 to 1000 micrometres in size with shapes that are spherical, acicular, irregular, dendritic, flake, angular, or fragmented. The metal powders are mainly manufactured by atomizing process in which a stream of molten metal is broken up into droplets that freeze into powder particles. The other methods are chemical and mechanical. The appellants have produced on record a certificate from the supplier of the goods in question, which is to the effect that the material supplied to the appellants under Invoice dated 27-12-1989 is Brass Waste/Brass Grinding arising out of the Brass Industries. This material is used, generally, for recovery of brass metal. The said Certificate of the foreign supplier has not been adverted to by the adjudicating authority on the ground that the same has been issued by the foreign supplier after the proceedings were initiated by the Customs Authorities. This reasoning of the adjudicating authority is not appreciated in as much as the question of the said Certificate would arise only after the start of the proceedings. If the adjudicating authority was doubting the genuineness of the said Certificate, they could have made further enquiries. The representative sample was got tested by the appellants from independent experts, the result of which was also produced before the adjudicating authority, which was also not adverted to by the adjudicating authority. We find from a Certificate of Analysis given by Italab Private Ltd. (Industrial Testing & Analytical Laboratories) that the sample was considered to be of Brass Sweeping Dust. The Report of the Test conducted by the appellants from the Chief Metallurgist of the Defence Science Service, is to the effect that the material in question is process waste containing brass particles, silicous material, graphite & other non-metallic dust and this brass waste contains high percentage of impurities. The same can only be used for remelting to recover brass metal. Sieve Test was also got conducted from Inspection Survey & Surveillance (India) Pvt. Ltd. and found to be not conforming to the definition of powder in Note 6 of Section XV. M/s. The East India Metals Association have also certified the material as waste and scrap and fit for recovery of metal only. In view of this forthcoming evidences produced by the appellants and in view of the technical aspect that metallic powders are different than the brass waste and scrap in powdered form, we are of the view that the goods in question were brass waste and scrap. Accordingly, we set aside the impugned Order and allow the appeal of the appellants with consequential reliefs, if any.
Equivalent 2004 (177) ELT 1096 (Tri. - Kolkata)