MCLLOYDS & COMPANY Versus Commissioner of Customs, Ahmedabad>2014(09)LCX0060

2014(09)LCX0060

IN THE CESTAT, WEST ZONAL BENCH, AHMEDABAD

S/Shri M.V. Ravindran, Member (J) and H.K. Thakur, Member (T)

MCLLOYDS & COMPANY

Versus

Commissioner of Customs, Ahmedabad

Final Order Nos. A/11691-11692/2014-WZB/AHD, dated 24-9-2014 in Appeal Nos. C/60-61/2009

Cases Quoted -

Collector v. East West Exporters - 1990(10)LCX0015 Eq 1991 (052) ELT 0066 (Tribunal) - Relied on [Paras 4, 6, 8]
Finolex Cables Ltd. v. Collector -1995(04)LCX0006 Eq 1996 (086) ELT 0418 (Tribunal) - Referred [Para 4]

Departmental Clarification Quoted-

DGFT Public Notice No. 392(PN)/92-97, dated 1-1-1997 [Para 5]

Advocated By -

Shri R. V. Shetty, Advocate, for the Appellant.
Shri J. Nair, (AR),for the Respondent.

[Order per : M.V. Ravindran, Member (J)]. -

These two appeals are directed against OIA No. OIO No. 25/JT.COMMR/2003, dated 31-12-2003, As the issue involve in these two appeals are arising out of the impugned order they are being disposed of by a common order.

2. The relevant facts that arise for considerations are :

The appellant, a manufacturing unit registered and established at SEZ., Surat under LOP No. KFTZ/IA/1679/97/5926, dated 15-10-1997, was allowed to import Plastic Waste and Scrap subject to DGFT PN No. 392(PN)/92-97, dated 1-1-1997 and export the finished products such as all type of Plastic Bags, Household Items and Plastics, Granules, shredding, Grinding, piece crushing sheets, extruded and moulded articles.
The appellant No. 1 filed Bill of Entry No. 15/2002-03, dated 6-5-2002 for import of Mixed Plastic Scrap generated from manufacturing process under CTH 3915.90. The goods were examined and samples were sent for testing to Central Excise & Customs Laboratory, Vadodara. The test result showed that the import goods were "Carpet of which pile are made of Polyamide Yarn. These yarns are woven with a woven based fabric made of polypropylene yarn and adhesioned on woven fabric of jute/polypropylene. It is not a plastic scrap. The article is not a plastic material therefore, the Public Notice
No. 392/(PN)/92-97, dated 1-1-2007 is not applicable for the article under reference." The Chemical Examiner further opined that "the result of chemical analysis indicates that the article under reference cannot be classified under SH 3915.90 of Customs Tariff and on the basis of the result of analysis the article under reference should be classified under the category of carpet under SH 5702.32 of the Customs Tariff Act, 1975."

On physical verification and measurement of the imported goods, 894 mtrs of cut pieces of used/defective (seconds) Carpets was found. Shri i larshadbhai Vadodaria, Authorised Signatory of the Appellant No. 1 (herein referred to as the appellant No. 2) agreed that the imported cargo was in the form of cut pieces of used/defective (seconds) carpet and also confirmed the measurements. Assessing the market value of the imported goods as Rs. 98/- per sq mtrs (excluding all taxes and other expenses), the assessable value was worked out to Rs. 8,76,610/-. He also agreed to classification of the Carpet under CTH 5702.32. Accordingly, the impugned cargo was seized and the same was handed over to the appellant No. 2 under Supratnama dated 24-5-2002, for safe custody.
The appellants vide their letter dated 3-6-2002, requested for waiver of written show cause notice and requested to decide the matter. The Adjudicating Authority vide Order-in-Original No. 25/Jt.Commr/2008, dated 31-12-2003, passed the following order :

o Denied the benefit of exemption Notification No. 137/2000-Cus., dated 19-10-2000, while classifying the imported goods under CTH 5702.32 chargeable to duty as leviable at time of import;
o 8945 sq mtrs of used and defective Carpet v/a Rs. 8,76,610/- under seizure were confiscated u/s 111(d), (m), (n) and (o) of the Customs Act 1962 with option to redeem the goods on payment of fine of Rs. 1,00,000/-.
o Confirmed demand of customs duty Rs. 4,98,855/- u/s 28(1) of the Customs Act 1962;
o Imposed penalty of Rs. 4,98,855/- on appellant No. 1 u/s 114A of the Customs Act 1962;
o Imposed personal penalty of Rs. 50,000/- on appellant No. 2 u/s 111 (b) of the Customs Act 1962.

3. Aggrieved by such an order, appellant filed an appeal before the First Appellate Authority; was dismissed/rejected the appeals which was taken further to the Tribunal and the Tribunal remanded the matter back to the First Appellate Authority to reconsider the issue. The current impugned order is passed in de novo proceedings.

4. Ld. Counsel would submit that the First Appellate Authority has while coming to the conclusion of classification of the goods imported, confirmation of the demand as also imposition of interest and penalties has erred. He would also submit that the main appellant M/s. Mclloyds and Company had imported Plastic Scrap of Carpet for conversion into plastic granules and the same was seized by the Customs authorities as being classifiable under Carpels under Chapter Heading No. 5702.32 and not under Chapter No. 3915.00 as classified by the appellant. It is his submission that the First Appellate Authority has accepted the fact as to the exporter having stated in a certificate that the material to be shipped to the main appellant is processed industrial material, but has wrongly come to the conclusion of classification of the product under Chapter 57 of Central Excise Tariff Act going only by the findings of the Dy. Chief Chemist. He would submit that Dy. Chief Chemist has to give only findings and could not have classified the products, which is the case. It is his submission that the appellant had imported the goods for the purpose of converting them into plastic granules and re-export to the person. He would draw our attention to the certificate issued by such exporter. It is his further submission that the appellant being a 100% EOU, no duty liability arises and the seized goods are still lying with the appellant despite their being communication from the appellant to take back such goods. He would rely upon the decision of the Tribunal in the case of Collector of Customs v. East West Exporter - 1990(10)LCX0015 Eq 1991 (052) ELT 0066 (Tri.) for the proposition a chemical examiner has to give only his findings and not enter into dialogue expressing the opinion of classification of goods. He also relied upon the judgement of the Tribunal in the case of M/s. Finolex Cables Ltd v. CCE -1995(04)LCX0006 Eq 1996 (086) ELT 0418 (Tri.) scrap of PVC compound is classifiable under Chapter Heading No. 3915.00 of the Central Excise Act, 1985 waste bearing and scrap of plastics, that the products imported by, the appellant are of the nature of plastic is cleared from the Dy. Chief Chemist's report which indicates that the said product is made of polyamide Yarn.

5. Ld. Dep. Representative on the other hand would submit that the appellant had imported plastic waste/scrap without the permission or license. He would draw our attention to DGFT Public Notice No. 392(PN)/92-97, dated 1st Jan., 1997. He would submit what the plastic waste/scrap constitute those fractions generated by various plastic processing operations or those fractions generated in the production process of plastic in a plant. He would submit that both the lower authorities have come to the conclusion that imported goods in the form of carpet and hence correctly classified under Chapter Heading No. 5702.32.

6. We have considered submissions made at length by both sides and perused the records.

7. There is no dispute as to the fact that the appellant is a 100% EOU; that they had imported and filed Bill of Entry as "Mix Plastic Scrap, generated from manufacturing process" and sought clearance for using the same in their factory which is situated in an Export Processing Zone (Special Export Zone). Undisputedly, the appellant had LOP for processing of plastic waste. Such LOP as granted by DGFT authorities was in operation.

8. We are of the view that the impugned order is liable to be set aside for more than one reasons.
Firstly, the First Appellate Authority has come to the conclusion that the products imported by the appellant falls under the category of 5702.32 based on the Chemical Examiner report which reads as under :

"Carpet of which pile are made of Polyamide Yarn. These yarns are woven and woven based fabric made of Polypropylene Yarn and adhesioned on woven fabric of Jute/Polypropylene. It is not a plastic scrap. The article is not a plastic material therefore, the Public Notice No. 392(PN)92-97, dated 1-1-2007, is not plastic for the article under preference.

As a result of chemical analysis indicates that the article under reference cannot be classified under sub heading No. 3915.50 of Customs Tariff and on the basis of analysis the article under preference should be classified under the category of Carpet under SG 5702.32 of Customs Tariff Act, 1975."

From the above reproduced test report, of Chemical Examiner, Central Excise & Customs Regional Laboratory, Vadodara, it can be noticed that the Dy. Chief Chemist has held that the Carpet is made of Polyamide Yarn and they are woven with Polypropylene Yarn. He has given views or clear cut observation that the said product should be classified under Sub Heading 5702.32 of CTA 1975, which in our considered view, is exceeding the brief. Dy. Chief Chemist is only required to do the chemical testing and submit the findings to the authorities and is not empowered to classify the product. In the case in hand, the Dy. Chief Chemist has categorically stated that the product imported would fall under 5702.32 which itself indicates that the Dy. Chief Chemist's report is travelling beyond the duty and cannot be relied upon by the Adjudicating Authority or the First Appellate Authority to classify the product imported by the appellant. This is the ratio of the decision of the Tribunal in the case of M/s. East West Exporter (supra).

Secondly, we find that the appellant had produced certificate from the exporter which indicates that the material shipped to the main appellant is post processed industrial material from manufacturing process which is rejected. Such a certificate is accepted by the First Appellate Authority to come to a conclusion that the Carpet is sent to appellant for conversion into granule form for reuse in USA. If the certificate given by the exporter is accepted and the appellant being a unit situated in a SEZ, the question of duty liability, if any, may not arise.

Thirdly, on perusal of the LOP No. KFTZ/IA/1679/97/5926, dated 15-10-1997, we find that the said LOP permits the appellant to import various plastic materials for conversion and re-exporting. The said LOP also indicates that they can import any other category of plastic/wastes like flake, powders, pieces of irregular sheets. As we have already reproduced above, the chemical analysis of the sample sent to Dy. Chief Chemist specifically indicates that the sample is made of Polyamide yarn. This would indicate that the basic material of the so called carpet is nothing but plastic and the said wastes and scrap is consumed by the appellant for crushing them into granules for re-exporting. In our view, the goods which are imported cannot be classified under 5702.32 but can be classified under Chapter 3915.00 only.

8. In our considered view, the appeal of the appellant succeeds on merits itself and has to be held that the products which are imported by the appellant are not classified under Sub-heading No. 5702.32 but are correctly declared as falling under Chapter 3915.00 of the Customs Tariff Act 1975.

9. In view of the foregoing, the impugned order is set aside and the appeals are allowed.
(Pronounced in the Court on 24-9-2014)

Equivalent 2014 (310) ELT 0929 (Tri. - Ahmd.)