2009(11)LCX0134

IN THE CESTAT, WEST ZONAL BENCH, AHMEDABAD [COURT NO. II]

S/Shri Ashok Jindal, Member (J) and B.S.V. Murthy, Member (T)

M.U. Traders

Versus

Commissioner of Customs (P), Jamnagar

Final Order Nos. A/2359-2360/2009-WZB/AHD, dated 12-11-2009 in Appeal No. C/1151/2005 and Cross Objection No. C/CO/432/2005

Cases Quoted -

Commissioner v. CEAT Tyres of India - 2001(12)LCX0015 Eq 2002 (140) ELT 0273 (Tribunal-LB) - Referred [Para 3]

Galaxy Pet Packaging Syntex v. Commissioner - 2007(12)LCX0301 Eq 2009 (233) ELT 0358 (Tribunal) - Distinguished [Para 6]

Namaskar Enterprises v. Commissioner -2003(09)LCX0325 Eq 2003 (158) ELT 0235 (Tribunal) - Referred [Para 5.2]

Parshwanath Traders v. Commissioner - 2002(11)LCX0291 Eq 2002 (149) ELT 1085 (Tribunal) - Referred [Para 5.2]

Royal Tyre Co. v. Commissioner - 2005(10)LCX0365 Eq 2006 (205) ELT 0321 (Tribunal) - Referred [Para 5.2]

Advocated By -

Shri. P.M. Dave, Advocate, for the Appellant
Shri R. S. Srova, JDR, for the Respondent.

[Order per: B.S.V. Murthy, Member (T)]. -

The appellants imported old and used rubber tyres ("the goods" for short) at the port of Old Mundra as per following details:

2. Proceedings were initiated and on examination of the goods, the tyres were found to be in good condition and could be used as such in different types of motor vehicles in India, contrary to the declaration made by the importer declaring the tyres as "old and used, discarded rubber tyres for ADV tractor trolley." Department also took a stand that the value was found to be too low.

Thereafter, the investigations were conducted, show cause notice was issued and the impugned order has been passed by the Commissioner, confiscating the tyres and allowing the same on payment of fine of Rs. 10 lakhs in lieu of confiscation, rejecting the transaction value declared by the appellant determining the same as Rs. 34, 77,937/- as against Rs. 10,05,258/- declared and imposition of penalty of Rs. 3 lakhs against the appellant.


3. Shri P.M. Dave, learned Advocate on behalf of the appellant submitted that the appellants had claimed classification of tyres under heading 40122090. This was on the ground that the tyres were old and used, discarded and therefore they could not have been used for motor vehicles and therefore could not have been classified under 40122010 or 40122020 of Customs Tariff. The Commissioner has rejected the classification claimed on the ground that except for the fact that the tyres are used ones, the importer did not submit any proof or evidence in support of the contention that the tyres being dried up, and having cracks, cuts, wear and tears and therefore are unsuitable for fast moving vehicles. He also observed that as per panchnama and information of the re-treader, 33,186 tyres could be used in passenger/commercial vehicles and 2457 tyres can not be used in motor vehicles. On this basis, the Commissioner came to the conclusion that 331, 86 tyres are to be classified under headings claimed by the Department. He also discarded the contention of the appellant that the actual use of the tyres could decide the classification as held by the Larger Bench of the Tribunal in the case of CEAT Tyres of India - 2001(12)LCX0015 Eq 2002 (140) ELT 0273 (Tri.-LB) = 2002 (048) RLT 0499 (CEGAT-LB). Ld. Advocate also relied upon several decisions of the Tribunal in addition to the decision in CEAT Tyres of India Ltd. case, in support of his contention that the tyres imported by the appellant could not be used in motor vehicles and classification claimed was correct.


4. Learned JDR, on the other hand, submitted that the classification made by the Commissioner is appropriate and he relied upon the BIS specifications for this purpose.

5.1 As rightly submitted by the learned Advocate the figure of 33,186 tyres being suitable for passenger/commercial vehicles, does not seem to be emerging from any of the records of the case. From the panchnama drawn, it is noticed that in respect of each and every tyre, the size of the tyre was mentioned. The suitability of the tyre and type of the vehicle was also given. Thereafter, whether the same tyre could be used directly in motor vehicle for which it is meant or not was also indicated. Panchnama also clearly stated that: for classifying tyres in this manner, the officers relied upon the information given by two firms viz. M/s. Ajanta Tyre Works, M/s. Star Tyre Retreaders. At the time of drawing Panchnama, representative of M.U. Traders, importer was also present One of the sample tables as per the Panchnama is reproduced below:

5.2 Learned Advocate also submitted that he has made a detailed calculation and found that according to the Panchnama, out of the 35,643 tyres, the tyres which can be used directly according to the Panchnama are 3142. As regards classification, the main heading is 40121020 which covers used pneumatic tyres. 40121090 covers others. In EXIM policy, import of used tyres for bus lorries, light commercial vehicles, passenger motor vehicles including two wheelers, three wheelers and personal type vehicles, is restricted. Therefore, the question that was to be determined in this case is whether the tyres imported can be one which can be used for motor vehicles. The Tribunal decision cited by the learned Advocate supports his contention that unless the tyres imported can be directly used without any re-treading, the same cannot be classified under Chapter 401220. Therefore, Department cannot classify the 32501 tyres which are identified as not usable in motor vehicles directly under heading 401220. As regards 3142 tyres which were identified as usable, learned Advocate has contended mat Tribunal's decision cited by him show clearly that opinion/information of ret readers cannot be relied upon. In this connection, he relied upon the decision of the Tribunal in the case of M/s. Parshwanath Traders, 2002(11)LCX0291 Eq 2002 (149) ELT 1085 (Tri.-Del.) wherein the evidence of re-treaders was rejected with the following observations:

"5. These cases relate to import of used automobile tyres. The examination has confirmed that the goods are as per declaration i.e. they are old and used tyres. According to Panchanama also the goods are old and used. The appellant's contention is that because of their being old and used, their residual use would be on animal driven vehicle, trolley etc. The evidence is partly in support of this contention as part of the consignments were opined the witnesses also as for A.D.V. The appellants' contention that the findings in the impugned orders lack sufficient and credible evidence merits acceptance. The witnesses are engaged in retreading of tyres. 'They have no knowledge about the imported tyres. The credibility of purported evidence also is quite doubtful. One witness has disowned the statement. Another was not made available for cross-examination. In these circumstances, the impugned orders are required to be set aside as they lack sound basis in evidence. These cases are also similar to the appeals allowed by us under Final Order Nos. 425 to 429/2002 -A, dated 3-9-2002."

In this case, in addition to the contention that witnesses were only re-treaders, it was found that their credibility itself was doubtful and hence it was rejected. In the case of M/s. Royal Tyre Company, 2005(10)LCX0365 Eq 2006 (205) ELT 0321 (Tri.-Del), the proprietor and the employee had stated that the imported tyres after retreading can be used for motor vehicles. In that case also, Revenue had relied upon the information of re-treaders. The Tribunal rejected it on the ground that in the earlier cases, such expert information was discarded. Tribunal had relied upon the decisions in the case of M/s. Namaskar Enterprise [2003(09)LCX0325 Eq 2003 (158) ELT 0235 (T)], and in the case of M/s. Parshwanath Traders for this purpose.


6. In the present case before us, the statements of the appellants were recorded. The appellant had agreed that in respect of 3142 tyres, the same tyres could be used directly without re-treading by the purchaser. In fact, he had submitted that it is the purchaser who decided whether all imported tyres can be used directly or not. It was also submitted by the appellant that they were simply selling tyres. It is for the customer to decide whether the same requires retreading before use or not. Therefore, on facts, we find this case is not exactly comparable with other cases cited before us. In M/s. Galaxy Pet Packaging Syntex's case - 2007(12)LCX0301 Eq 2009 (233) ELT 0358 (Tri.-Ahmd.), the appeal was allowed on the ground that the expert opinion given by M/s. MRF Ltd. alone cannot be the basis. In that case, L.D. Engineering College, Ahmedabad had given the opinion that the tyres did not have any transportation life left. In that case, the Commissioner had taken a view that tyres in question were not capable of rise for transportation and they cannot be said to be classifiable as animal drawn vehicle tyres. Therefore, Galaxy Pet Packaging Syntax case was totally against the Department, Further, we also take note of the fact that in this case, re-treader's opinion as regards suitability of tyre before re-treading or after re-treading would be definitely appropriate since the re-treaders have long experience in their field and they would know the type of tyre which come to them for re-treading. Therefore, unless it is shown otherwise, it has to be held that they would be competent to decide whether particular tyre can be used directly or not. It has to be noted that we are not relying on their expertise as regards value else since even though they may have an idea about secondhand tyre market, it cannot be said that they have the expertise. But as regards condition of the tyre and its usability, definitely re-treader would know whether the tyre is usable directly or not. Therefore, it will not be appropriate to reject the opinion of the re-treader as regards usability. As regards classification, once the tyres are held to be usable directly without re-treading in particular type of motor vehicles, the classification has to be made under heading claimed by the Department. It has to be noted that in this case each and every tyre has been inspected and each and every tyre has been examined regarding its usability or otherwise. Therefore, we have to uphold the classification of 3142 tyres as claimed by the Department. As regards remaining tyres, admittedly they cannot be used directly and therefore they cannot be classified under heading claimed by the Department.


7. Next contention was regarding value enhancement of value by the Commissioner. We find ourselves in agreement with the contention of the learned Advocate that enhancement of the value without giving details of contemporaneous import from the same country and the same size etc. cannot be upheld. In this case, valuation and enhancement has been done on the basis of information given by the expert re-treaders. This is totally against the procedure contemplated under the Customs Act. The transaction value was rejected on the ground that experts gave their opinion that the vehicles can be used directly. This cannot be the basis for enhancement of value. For enhancement of value, first of all, the transaction value has to be rejected and as already observed by us, it cannot be said that re-treaders have expertise as regards determination of value of secondhand tyres. On the basis of records, impugned order and submissions made by the leaned Advocate, we find that no case has been made out by department for enhancement of value. We are also conscious of the fact that less than 10% of the tyres have been found to be usable and on this ground also, enhancement of value cannot be upheld.


8. Since a small quantity of less than 10% has been found to he usable, it cannot be said that the appellants have intentionally misdeclared the classification. What has been purchased apparently is a stocklot and in such purchase, some good quality tyres would always be found. Therefore, finding of mis-declaration cannot be upheld. Therefore, penalty imposed on the appellant also cannot be upheld.


9. From the above discussion, it is quite clear that except 3142 tyres which we have found classifiable as used tyres and therefore are restricted as per EXIM policy, in respect of remaining quantity, the impugned order cannot be upheld. Further, redemption fine in lieu of confiscation on the ground of misdeclaration of classification also cannot be upheld and no penalty under Customs Act on this ground, can be upheld. However, in respect of 3142 tyres, violation of EXIM Policy provisions has to be upheld. Therefore, a very nominal penalty and fine, if at all is required to be imposed, may be imposed. Accordingly, we set aside the impugned order and remand the matter to the original adjudicating authority who shall decide the duty payable on 3142 tyres. Further, exact number of tyres which are found to be usable as per panchnama is required to be verified by the Commissioner since our observations are based on the submissions made during the hearing.


10. Accordingly, we remand the matter to the Commissioner to verify the correct number of usable tyres, determine the duty liability thereon and consider whether penalty is required to be imposed for violation of provisions of foreign trade policy.

(Pronounced in Court)

Equivalent 2010 (252) ELT 0574 (Tri. - Ahmd.)

Equivalent 2010 (096) RLT 0725 (CESTAT - Ahmd.)