Customs, Excise and Gold Tribunal - Delhi
N.J. International vs Collector Of Customs on 5 June, 1995
Equivalent citations: 1995(79)ELT665(TRI-DEL)
ORDER P.K. Kapoor, Member (T)
1. Since the issues involved in the above-captioned appeals are similar, they are disposed of by this common order.
Appeals filed by M/s. N.J. International
2. Briefly stated the facts in these cases are as under :
The following Bills of Entry in respect of goods declared as "Brass Ash/Dross" were filed by M/s. N.J. International in Kandla Custom House.
____________________________________________________________
Sl. Bill of Entry No. & Description Qty. Assessable Duty
No. date (as per (MT) value (Rs.) (Rs.)
B/E)
______________________________________________________________
1 F-4056/01-09-88 Brass Ash 60.109 4,72,474 6,85,088/-
Dross
2 F-4024/30-08-88 " 40.000 3,14,412 4,55,897/-
3 F-4081/05--9-88 " 60.000 4,71,617 6,83,845/-
4 F-4214/13-09-88 " 40.000 3,14,412 4,55,897/-
5 F-1127/07-03-88 " 20.000 1,43,327 2,07,824/-
6 F-1128/07-03-88 " 20.000 1,43,327 2,07,824/-
________________________________________________________________ The value of the goods was declared on the basis of the invoice price at US Cent 25 lb CIF Kandla. The importers claimed clearance of the goods under Tariff Heading 2620.30 as "Brass Dross". The goods were assessed provisionally, However, in view of the suspicion that the goods were actually: Brass Scrap" a representative sample from the consignments was sent for test to the Custom House Laboratory, Kandla. The Chemical Examiner in the relevant test reports inter alia stated that the goods were similar to the sample tested under Lab. Report Nos. (1) KCL/MP/1159 and 1160, dated 9-7-1987; (2) KCL/IMP/1107, dated 1-7-1987; (3) Test Memo Nos. 877 & 878, dated 9-7-1987 and (4) 838, dated 1-7-1987 respectively which were forwarded to the Chief Chemist by D.R.I. for test and in respect of which the Chief Chemist had reported that the goods were Brass Waste/Scrap. In view of the aforesaid test result a show cause notice was issued to the appellants - M/s. N.J. International on 3-8-1991 requiring them to show cause as to why the goods declared as "Brass Dross" should not be treated as "Brass Scrap" and assessed as such on the basis of the prevailing, contemporary price of Brass Scrap at US Cent 41 to 51 per lb and the goods not be confiscated on account of mis-declaration under Section lll(m) of the Customs Act, 1962. The importers were also asked to show cause why penalty should not be imposed on them under Section 112 of the Customs Act, 1962. The importers in their reply dated 22-1-1992 to the show cause notice denied the allegation in the show cause notice and claimed that the goods were Brass Dross as declared.... However, by the impugned order dated 10-4-1992 the Collector held that having regard to the specific finding of the Custom House Laboratory on chemical test of the samples according to which the metallic content i.e. zinc plus copper in the representative samples drawn from the imported consignments was between 93.8% and 96.4% the goods had to be treated as "Brass Scrap/Waste". He therefore upheld the charge of mis-declaration of the value of the goods and ordered that the provisional assessment should be finalised by taking CIF, value as 41 Cents per lb for the recovery of the differential duty. He also imposed penalties on the importers in respect of each consignment under Section 112(a) of the Customs Act, 1962, aggregating to Rs. 9 lakhs.
C/287/94-B2- filed by the Revenue M/s N.J. International filed 2 Bills of Entry in respect of goods declared as Brass Ash/Dross weighing 40 MT imported against Bill of Lading Nos. 03218 and 03220, dated 22-1-1988 per M.V. ESTI CLIPPER. They filed Bills of Entry Nos. F-5748 and 5750 both dated 26-12-1988. Total CIF value of the goods was declared as Rs. 3,18,357 at the unit price of US $ 0.25 per MT CIF. The representative samples of the goods were drawn for chemical analysis. In his test report the Chemical Examiner opined that the goods were "Brass Scrap" in view of the high metallic content. The importers were therefore served with a show cause notice dated 18-6-1991 requiring them to explain why the goods should not be considered as "Brass Scrap" and why the value thereof should not be enhanced by taking the unit price as US $ 0.50 per pound CIF. They were also asked to explain why the goods should not be confiscated under Sections lll(d) and lll(m) of the Customs Act and penalty be imposed on them under Section 112(a) of the Customs Act, 1962 for mis-declaration and evasion of the customs duty. The importers denied the allegation in the show cause notice and contended that the imported goods were Brass Ash/Dross. By the impugned order the Collector accepted the importers' contention that the imported goods had to be deemed as "Dross" mainly on account of the finding in the relevant chemical test report that they were in the form of oxidised metal. He held that the goods were in the nature of metallurgical residues arising in the course of metallurgical processing and were correctly classifiable under Heading 2620.30 of the Customs Tariff Act as "Brass Dross". On these considerations the Collector dropped the proceedings initiated in terms of the show cause notice. Being aggrieved by the order passed by the Collector, the Revenue have come up in appeal.
3. Appearing on behalf of the importers M/s. N.J. International, Shri Lachman Dev, Learned Consultant submitted that dross is the scum that forms on the surface of molten metal such as iron, lead, zinc, aluminium etc. due largely to oxidation. He submitted that according to Metallurgical Dictionary by Henderson and the Chemical Dictionary, Tenth Edition by Gessner G. Hawley dross is a fused agglomerate usually high in silicates which separates in metal melting and floats on the surface of the molten metal. He added that according to the Bureau of Indian Standards in IS : 2066-1962 para 13.3 the term "dross" signifies heavy dense metallic lumps comprising mostly of free metals. He added that the Standard also defines the various types of residues, skimmings, slags etc. available in India both by the process in which they arise and their metallic content which could be as high as 85% copper with or without other metal. He stated that the basic determining factor in indemnifying a metallic residue such as dross is the form in which it has been imported. He added that the test report of the Customs House laboratory, Kandla was not furnished to the importers though requested for and only the report of the Chief Chemist was furnished. He added that in reply to the importers' letter dated 10-9-1991 asking for the test report of the Kandla Custom House the customs authorities informed the importers that the document had already been furnished. He added that the test report of the Central Revenues Control Laboratory, New Delhi did not relate to the goods in question since it related to the samples forwarded by the Assistant Director, DRI, Jamnagar under cover of his letter F. No. DRI/BZU/SOP, dated 6-7-1987. He argued that under these circumstances, the impugned order is not sustainable in law. He contended that the Collector had failed to appreciate that the Chief Chemist's opinion was not given after testing the samples from the imported consignments and accordingly his report was not relevant to the goods in question. He added that the Collector had also failed to appreciate the difference between metallic residues classifiable under Chapter 26 and waste and scrap of metals falling under Section XV of the Customs Tariff Act, 1975. He submitted that Note 6 to Section XV defines waste and scrap to mean "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". He submitted that metal and waste arising from the manufacture or mechanical working of metals was distinguishable from metallic waste, slag, dross, etc. which are residues arising in a metallurgical or intermediate metallurgical process. He stated that the HSN on page 210 explained that these residues result from the treatment of ores or intermediate metallurgical products or from electrolytic, chemical or other processes which do not involve the mechanical working of metal. He stated that the Collector had not dealt with the importers' submissions that the goods being, essentially residues arising out of the treatment of ores or from electrolytic, chemical or other processes not involving any mechanical working of metal, they were classifiable under Heading 26.20. He contended that the finding of the Collector that the goods were metal waste and scrap is not sustainable since the Department had failed, to discharge the onus of proving that they had arisen from the manufacture mechanical working of the metal. He submitted that the Collector's order determining the unit price of the goods as 41 Cents per lb was arbitrary since the invoices relied upon by the Department showed a wide variation and apart from the fact that the Department had failed to prove that the goods were metal waste and scrap, the type of scrap to which the imported goods belonged had also not been identified . In support of his contention he placed reliance on the following case law:
Swan Mills Limited and Anr. v. H.R. Amarnani and Ors. -1982 (10) E.L.T. 445;
Akbar Badruddin Jiwani v. Collector of Customs -1990 (47) E.L.T. 161;
4. On behalf of the Revenue, Shri K.K. Jha, Learned SDR submitted that the representative samples from the consignment in question were tested by the Chemical Examiner in Kandla Customs House. According to the test report the goods consisted of greyish and yellowish grey small irregular metallic pieces some having pointed edges and composed of an alloy of Copper and Zinc (Brass) with Copper content over 67%. He contended that even though the report of the Chief Chemist was not based on actual test of the samples drawn from the consignment in question the opinion given by him on the basis of the similar goods imported under other consignments only confirmed the finding given by the Chemical Examiner, Kandla Custom House after testing the samples drawn that the goods in question had high copper content and were in the form of greyish and yellowish gray small irregular metallic pieces having pointed edges. He contended that in view of high copper and overall metallic content of the goods which were in the form of greyish and yellowish gray small irregular metallic pieces with pointed edges the presence of scum oxide was immaterial and in accordance with the decision in the case of Premier Brass & Metal Works Pvt. Ltd. v. Collector of Customs reported in 1990 (48) E.L.T. 98 and P.S. Metal Corporation, Bombay v. Collector of Customs, Bombay reported in 1987 (28) E.L.T. 172 the goods had to be deemed as Brass Waste/Scrap falling under Heading 74.01/02 of the Customs Tariff Act, 1975 and not as Dross/Ash under Heading 26.02/04. He stated that in the case of Collector of Customs v. Shankar Metal Trading Co. reported in 1992 (60) E.L.T. 154 the question before the Tribunal was whether Brown Coloured powdery material containing brass powder, metallic compound (mainly zinc) and silicious matter was classifiable as brass ash under sub-heading 2620.90 of the Customs Tariff Act, 1975. He contended that in view of the mis-declaration of the nature and description of the goods and the goods being actually brass scrap and not brass dross ash as declared by the assessee the value on the basis of unit price of US $ 25 PMT was correctly rejected by the Collector. He argued that under these circumstances the determination of the value of the imported goods on the basis of the price of contemporaneous imports of brass scrap was sustainable in terms of the provisions of Section 14 of the Customs Tariff Act. In support of his contention he also placed reliance on the Tribunal's decision in the case of Pradeep Kedia v. Collector of Customs reported in 1993 (67) E.L.T. 519 and Deepak Electronics v. Collector of Customs, Bombay reported in 1994 (73) E.L.T. 817.
5. We have examined the records of the case and considered the submissions made on behalf of both sides. It is seen that the main question that arises for consideration in this case is whether the imported goods were brass ash/dross falling under Heading 26.02/04 of the Customs Tariff Act, 1975 as claimed by the importers or they were brass waste/scrap falling under Heading 74.01/02 of the Customs Tariff Act, 1975 as claimed by the Revenue. On behalf of the importers it has been contended by the Learned Consultant that the Department's finding that the goods were brass waste/scrap was mainly based on the opinion given by the Chief Chemist which could not be relied upon since it was not given after testing the samples from the consignments imported by the assessees. He stated that Shri R.S. Venkataraman who had retired as Deputy Chief Chemist was cross-examined during the proceedings before the Collector and he had confirmed that he had not tested the goods imported against Bills of Entry Nos. 5770, dated 26-12-1988 and 5748, dated 26-12-1988 which were shown to him and he had confirmed that the letter dated 21-12-1987 from the office of the Chief Chemist was sent in reply to the letter from the Assistant Director, DRI Jamnagar and the samples had been tested originally at Kandla Custom House Laboratory. He filed a copy of the record of cross-examination of Shri R.S. Venataraman, retired Deputy Chief Chemist and Shri U.S. Gaud, A.O. Kandla Custom House. We find from the order passed by the Collector on 10-4-1992 in respect of six consignments that the goods were tested in the Custom House Laboratory at Kandla. It is seen that the copies of these similarly worded test reports in respect of the goods imported against Bill of Entry listed in the impugned order dated 10-4-1992 are available in the case records at pages 66 to 76. Since the findings of the Chemical Examiner Kandla Custom House in these reports would be relevant for deciding the classification of the disputed goods, we consider it desirable to refer to these reports. One such report relating to the goods imported against Bill of Entry No. F. 1127/7-3-88 is reproduced below :
Report "Simple as received consists mainly of grey coloured slightly moistened metallic pieces of irregular shapes and sizes (some having pointed edges) with very little amount of greyish powdery material adhered to them. It is mainly composed of alloy of copper and zinc (brass).
Copper 66.3% Zinc 27.5% Rest being oxygen, chloride, moisture, tin and iron etc. Note Sheet attached to KCH/Imp/2547/10-3-1988 CTM No. 287/10-3-88.
As the physical appearance and composition of the sample under reference is somewhat similar to the samples tested under Lab. No. (1) Kch/Imp/1159-1160, dated 9-7-1987 (2) Kch/Imp/1107/1-7-1987 (T.M. Nos. 877 & 878, dated T.M.No 838 dated 1-7-1987 respectively forwarded to Chief Chemist by DRI for test. Hence administrative decision may be taken regarding the same under reference for considering it as "dross" or "Waste/scrap" in the manner taken for above referred samples."
It is seen that the assessee's contention that in arriving at his finding that the imported goods were brass waste/scrap the Collector had relied on the report of the Deputy Chief Chemist which was not given after testing of the sample drawn from the imported consignments is not based on fact. A perusal of the record of cross-examination of R.S. Vankataraman, Retired Deputy Chief Chemist follows that the opinion given in the letter C. No. 33/Cus. 87, dated 21-12-1987 from the office of the Chief Chemist was issued in reply to letter dated 6-7-1987 from the Assistant Director, DRI, Jamnagar and the goods covered by the consignments which were the subject matter of the proceedings before the Collector were not actually tested by the Control Laboratory at Delhi. The Deputy Chief Chemist had confirmed that the samples from the consignments which were the subject matter of the proceedings before the Collector could not have been tested by the Control Laboratory at Delhi. However, as observed by us the reports given by the Chemical Examiner, Kandla Custom House in respect of the goods imported in the consignment which were the subject matter of the proceedings before the Collector are available in the case records. On perusal of these similarly worded reports, it is evident that these were given by the Chemical Examiner after testing the goods in the Custom House Laboratory at Kandla. From these reports it is seen that the copper content of the goods varied between 65.8% to 68.3% and the overall metallic content (copper plus zinc) was between 93.8% to 96.4%. Thus apart from the very high copper content, the overall metallic content of the goods was also found to be very high. As regards the physical appearance of the goods the reports of the Chemical Examiner indicated that the goods were mainly in the form of grey coloured slightly moistened metallic pieces of irregular shapes and sizes with few big pieces (some having pointed edges) with very little amount of greyish powdery material adhered to them. According to these reports the goods comprised mainly of such irregular pieces with metallic content of over 90% and the residuary content, which evidently was insignificant, comprised of oxygen, chloride, iron etc. Since the goods in question had high metallic content consisting mainly of copper and zinc in the form of irregular pieces with pointed edges and their oxygen content was insignificant, we find that the importers' contention that the goods were "Brass Ash/Dross", as declared by them, does not have any force. "Dross" according to Concise Chemical and Technical Dictionary by H. Bennett is "Metal oxides in molten metal resulting from oxidation, material usually of oxide nature rising to the surface of impure molten metal." Metallurgical Dictionary by Handerson describes "Dross" as "Similar to slag consisting of metallic oxides that rise to the surface in metallurgical oxidation process." Text book of Metallurgy by Bailey, on which the importers have also relied describes "Dross" as "The oxide and other insolubles separating from a molten metal ore sometimes referred to as Dross. The residue of dross separated in liquation type processes are treated to recover their constituents or utilized in some other way". As observed by us, according to the chemical reports furnished by the Chemical Examiner in Kandla Custom House after testing the sample, the goods in question consisted mainly of brass and zinc and the oxygen content in the goods was insignificant. For these reasons the goods could by no stretch of imagination be deemed as consisting mainly of metallic oxides of the type which rise to the surface of the molten metal during metallurgical processes.
6. The goods being mainly in the form of metallic pieces of irregular shape and having pointed edges, in our opinion they would qualify for classification as Brass Waste/Scrap even in terms of Note 6(a) to Section XV of the Customs Tariff Act according to which waste and scrap arise from the manufacture or mechanical working of metal. As observed by us earlier the imported goods on test by the Customs House Laboratory was found to be having metallic content ranging between 93.8% and 96.4% with very little presence of oxide. The classification of such goods was examined by the Tribunal in the case of Premier Brass & Metal Works Pvt. Ltd v. Collector of Customs reported in 1990 (48) E.L.T. 98, wherein it was held that goods having metal content of 91% to 97% with little presence of oxides and sulphide were classifiable as Brass Waste/Scrap under Heading 74.01/02 of CTA, 1975 and not as Dross/Ash under Heading 26.02/04 of CTA, 1975. Para 7 of the said order being relevant is reproduced below :
* * * * * * *
7. We find that in the case of P.S. Metal Corporation, Bombay v. Collector of Customs, Bombay (supra) the Tribunal had held that yellow brass metal with 69.4% copper content was classifiable as brass metal and not brass dross. In view of the above discussion and following the decision of the Tribunal quoted above, we hold that the imported goods having copper content ranging from 65.8% to 68.3% and having overall metallic content of copper and zinc between 93.8% and 96.4% with insignificant oxygen content and being in the form of small pieces of irregular shapes and sizes and having pointed edges were correctly classifiable under Heading 74.01/02 and not under Heading 26.02/04 as 'dross' as claimed by the importers. In our view, the Tribunal's decision in the case of Collector of Customs v. Shankar Metal Trading Co. reported in 1992 (60) E.L.T. 154 relied upon by the importers is not relevant since in that case the imported goods were brown coloured powdery material containing mainly brass powder, metallic compound mainly zinc and silicious matter.
8. In the case of African Trading Co. (P) Ltd. v. Collector of Customs reported in 1993 (64) E.L.T. 497, the Tribunal has held that the price of contemporary imports of similar goods being available the invoice price quoting lesser amount for the goods was not acceptable and the value of the goods would be enhanced on the basis of the price of contemporary imports of similar goods. Similarly in the case of Pradeep Kedia v. Collector of Customs reported in 1993 (67) E.L.T. 519 when the imported goods declared as low grade resistance wire were actually found to be quality resistance wire of a well-known Japanese brand, the Tribunal held that the invoice price could not be relied upon and the value determined by the Department on the basis of contempraneous invoices in respect of goods of the type actually imported was the correct value under Section 14(1) of the Customs Act, 1962. Since the goods have been held as Brass Waste/Scrap and not Brass Dross/Ash as declared in the suppliers' invoice and in the Bills of Entry filed by the importers, on the ratio of these decisions we hold that the value determined on the basis of the price of contemporaneous imports of similar goods represented their correct value in terms of Section 14(1) of the Customs Act, 1962.
9. In view of the finding that the imported goods were Brass Waste/Scrap classifiable under Heading 74.01/02 and not Brass Ash/Dross falling under Heading 26.02/04 as declared by the assessees, the charge of mis-declaration of the description and the value of the goods is sustainable.
10. In view of the foregoing, the appeal filed by the Revenue is allowed and the appeals filed by the importers are rejected.