Custom, Excise & Service Tax Tribunal
Shyam Ferro Alloys Ltd vs Commissioner Of Customs (Port), ... on 12 August, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No.C/75215/2016
(Arising out of Order-in-Original No.KOL/CUS/Commissioner/Port/01/2016 dated 15/02/2016 passed by the Commissioner of Customs (Port), Kolkata)
FOR APPROVAL AND SIGNATURE
Honble Shri H.K.Thakur, Member (Technical)
Honble Shri P.K.Choudhary, Member (Judicial)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
Shyam Ferro Alloys Ltd.
Applicant (s)/Appellant (s)
Vs.
Commissioner of Customs (Port), Kolkata
Respondent (s)
Appearance:
Sri S.K.Meheta, Advocate for the Appellant (s) Sri K.C.Jena, ADC(AR) for the Respondent (s) CORAM:
Honble Shri H.K.Thakur, Member (Technical) Honble Shri P.K.Choudhary, Member (Judicial) Date of Hearing:-12.08.2016 Date of Pronouncement :-31.08.2016 ORDER NO.FO/A/75972/2016 Per Shri H.K.Thakur
1. This appeal has been filed by the appellant with respect to Order-in-Original No.KOL/CUS/Commissioner/Port/01/2016 dated 15/02/2016 passed by the Commissioner of Customs (Port), Customs House, Strand Road, Kolkata-01, as Adjudicating Authority. Under this OIO dated 15.02.2016 Adjudicating Authority has held Broken Copper Cathode as Waste and Scrap of CTH 74040019 for which pre-shipment inspection certificate is required and accordingly confiscated imported goods under Section 111(d) & (m) of the Customs Act, 1962 and also imposed penalty upon the appellant under Section 112 (a) (i) of the Customs Act, 1962.
2. Shri S.K.Mehta (Advocate) appearing on behalf of the appellant argued that appellant is an actual user and has imported broken copper cathodes as refined copper for use in the manufacture of stainless steel and ferro-alloys. It is the case of the appellant that purity of broken copper cathodes imported is 99.60% and the value is also commensurating to the prime material as per London Metal Exchange (LME) and not as waste and scrap. Learned Advocate made the bench go through the invoice of the imported goods and assay certificate from the supplier where the percentage purity is 99.6% and other elements also satisfy the criteria laid down in Chapter Note (a) of Chapter 74 of the Customs Tariff Act. Learned Advocate strongly argued that the goods imported is a category of Refined Copper classifiable under CTH 74.03 and cannot be classified as waste and scrap of CTH 74040019 decided by the Adjudicating Authority.
2.1. That even if the imported goods are treated to be waste and scrap then also pre-shipment inspection certificate is not required. Learned Advocate made the bench go through para-2.32 and 2.54 of Chapter 2 of Foreign Trade Plicy (FTP) to argue that only scrap of paragraph 2.54(a) of the FTP needs pre-shipment inspection certificate. That the goods imported by the appellant is not unshredded, compressed and loose form but is prime and is properly packed into 48 bags as prime goods which were contracted as copper cathodes of high purity and not as Waste & Scrap.
2.2. That in view of the following case laws either no pre-shipment inspection certificate is required or redemption fine/penalty should be minimal :-
(i) Electrosteel Castings Ltd. vs.- Commr. Of Cus.(Port), Kolkata[2009(239) E.L.T. 258 (Tri.-Kolkata)].
(ii) NGA Steels Pvt. Ltd.-vs.- Commr. Of Customs, Chennai [2010(262) E.L.T. 578(Tri.-Chennai)].
(iii) Anugraha Valva Castings Ltd.-vs.-Commr. Of Cus.(Seaport), Chennai[2013(292) E.L.T.86(Tri.-Chennai)].
(iv) Commr. Of Customs, Chennai-vs.-Pushpit Steels (P) Ltd.[2015(329)E.L.T. 833 (Tri.-Chennai)].
3. Shri K.C.Jena, ADC(AR) appearing on behalf of the Revenue argued that imported goods are not useable at all as copper cathodes as per Chartered Engineers opinion obtained and has to be considered as waste and scrap of CTH 7404 by virtue of section note-8 of Section XV of Customs Tariff Act and chapter note given under Headings 7204, as made applicable by HSN notes under chapter heading 7404. That all categories of waste and scrap need pre-shipment inspection certificate under FTP and adjudication correctly ordered confiscation and redemption along with imposition of penalty. Learned AR defended the order passed by the Adjudicating Authority and also relied upon the following case laws in support of his argument;
(i) Adhunik Corporation Ltd.-vs.-Commr. Of Customs(Port), Kolkata[2008(225)E.L.T.524 (Tri.-Kolkata)].
(ii) Adhunik Corporation Ltd. vs.-Union of India[2009(246) E.L.T. 97(Cal.)].
4. Heard both sides and perused the case records. The issue involved in the present proceedings is whether the goods imported by the appellant under Bill of Entry No.9171068 dt. 08.05.2015 should be classified under Customs Tariff Heading (CTH) 74031100 claimed by the appellant or CTH 74040019 decided by the Adjudicating Authority. The goods were described by the appellant as Copper Cathodes based on the contract entered with the foreign supplier and related invoice etc. Department was not clear about the nature of the goods, therefore 100% exemption of the consignment was done and the goods were found to be packed in 48 jumbo bags and consisting of broken parts of copper cathodes. Opinion of Govt. approved Chartered Engineer was also obtained who vide a letter dated 21.05.2015 gave the following opinion:
1) Whether the goods are prime or old & used:
The goods/materials are not old & used these are found broken Copper Cathode parts.
2) Whether in the present form they can be treated as Copper Cathodes or as waste/scrap; In the present form the goods/materials can be treated as broken parts of Copper Cathodes because during examination the goods/materials were found in the form of broken Copper cathodes strips of various shapes/sizes. The goods/materials are not waste/scrap, these are broken parts of Copper Cathodes. The condition of the goods/materials were such that they have lost their mechanical strength.
3) If waste/scrap, what is the ISRI Code: The goods/materials are not waste/scrap these are broken parts of copper cathodes and these are not covered strictly in the ISRI Code.
4) Whether the goods/materials can be used as such: The goods/materials cannot be re-used because the goods/materials have lost their desirable properties and they have no re-useable value and can only be used for melting purpose.
5) Whether the value is adequate: The value declared found adequate. 4.1. Adjudicating Authority has relied upon the provisions contained in Section Note-8 of Section XV of the Customs Tariff Act, 1975 to hold that imported goods are classifiable as waste and scrap under CTH 74040019 because broken copper cathodes are not useable as such. It is observed from the case records that percentage purity of copper in the goods imported by the appellant is 99.60%. As per Chapter Note (a) of Chapter-74 of the Customs Tariff Act 1975 refined copper means;
(a) Refined copper Metal containing at least 99.85 per cent. by weight of copper; or Metal containing at least 97.5 per cent. by weight of copper, provided that the content by weight of any other element does not exceed the limit specified in the following Table:
TABLE-OTHER ELEMENTS Element Limiting content % by weight Ag As Cd Cr Mg Pb S Sn Te Zn Zr Other elements *, each Silver Arsenic Cadmium Chromium Magnesium Lead Sulphur Tin Tellurium Zinc Zirconium 0.25 0.5 1.3 1.4 0.8 1.5 0.7 0.8 0.8 1.0 0.3 0.3 4.2. The percentage purity of the copper in the imported goods is more than 97.5% and there is no contrary evidence that other elements in the imported goods exceed 2.5%. Accordingly, the imported goods satisfy the definition of Refined Copper as defined in the Customs Tariff. 4.3. Refined Copper is classifiable under CTH 74031100 to CTH 74031900 as follows:
- Refined Copper 7403 11 00 - Cathodes and sections of cathodes 7403 12 00 - Wire-bars 7403 13 00 - Billets 7403 19 00 - Other 4.4. It is observed from the above tariff description that not only copper cathodes but Sections of Cathodes are also covered under 7403 11 00 as a category of Refined Copper. Further CTH 7403 19 00 also gives scope for other categories of copper which could be Refined Copper. As per Rule-1 of the General Rules of Interpretation to the first schedule to the Customs Tariff Act, 1975 classification of imported goods shall be determined according to the terms of the headings and any relevant section or chapter notes. Under the section and chapter notes there is a definition of Refined Copper and a definition for Waste & Scrap. Nowhere in the Customs Tariff or HSN explanatory notes it is specified that notes for waste and scrap will get precedence over chapter note on Refined Copper. It is not refuted by the department that broken copper cathodes are not a category of refined copper. Even if imported goods are not considered as Sections of Cathodes then also the imported goods could be classified as --Other under CTH 7403 19 00 so long as the imported goods satisfy the criteria of Refined Copper.
4.5. Further it is observed that Adjudicating Authority has only confined himself to section note-8 of Section XV of the Central Excise Tariff which uses the word metal goods definitely not usable as such. Learned AR has relied upon HSN explanatory note for heading 72.04 under (A) waste and scrap to argue that imported goods are Waste & Scrap but has failed to bring to the notice of the bench that explanation given at the end of this chapter note of HSN also convey that waste and scrap of this heading is generally used for the recovery of metal by remelting or for the manufacture of the chemicals.
4.5.1. From the above HSN explanatory notes it is abundantly clear that Waste & Scrap of Section XV of Central Excise Tariff 1975 has to be considered as only those materials which are used for recovery of metal by remelting or for the manufacture of chemicals. Appellant argued this point before the Adjudicating Authority but the same was brushed aside by the Adjudicating Authority in para 15 of the OIO dt. 15.02.2016, as not relevant. Department cannot rely upon one portion of a chapter note of HSN explanatory notes on the one hand and ignore the other part of the same chapter note on the other hand. Secondly, HSN explanatory notes have to be relied upon in interpretation of Customs Tariff as the former is the mother of the latter where chapters of Customs Tariff & HSN have been harmonized. Appellant herein is neither a trader nor the manufacturer of copper ingots etc. but is an actual user for the manufacture of copper alloy and stainless steel where refined copper is used as such for adjusting the % of the copper in the final steel/alloy products. It has not been challenged by the department that value of the imported goods is at par with the value of Waste & Scrap prevailing in the international market. On the contrary appellant has argued that the imported goods have been purchased at international prices commensurate with the prices of prime copper material as per LME prices. Accordingly Chartered Engineer in his opinion dt. 21.05.2015 is right in saying that imported goods do not belong to Waste & Scrap but are usable for melting at the same time because imported goods used in melting and making alloy metals cannot be considered as copper waste and scrap so long as they are classifiable as Refined Copper under CTH 7403. This view is further fortified by the HSN explanatory notes given under Heading 74.03 as follows:
This heading covers unwrought refined copper and copper alloys as defined in Chapter Notes 1(a) and 1(b) respectively.
Refined copper containing at least 99.85% by weight of copper is obtained by electrolytic refining, electrolytic extraction, chemical refining or fire refining. Other refined copper (containing at least 97.5% by weight of copper) is normally produced by alloying the above-mentioned refined copper with one or more other elements up to the maximum content limits as shown in the table in Chapter Note 1 (a). Refined copper is cast into ingots or ingot-bars for remelting (e.g. for alloying purposes) or into wire-bars, slabs for rolling, billets (including those of circular cross-section) and similar forms for rolling, extruding, drawing or forging into plates, sheets, strip, wire, tubes and other products. Electrolytically refined copper is sometimes presented in the form of cathodes consisting of plates or sheets with two loops attached by which the original starting sheets were suspended in the electrolytic refining tank, or with the loops cut off, or cut into sections. As per the above HSN explanatory notes even cathodes cut into sections are classifiable under 74.03 as refined copper. 4.6. In view of the above observations we are of the considered opinion that goods imported by the appellant will be classifiable, as a category of Refined Copper under CTH 7403 and not as Waste & Scrap of CTH 7404. We have not gone into the other aspect of requirement of pre-shipment inspection certificate as the impuned goods imported are not classifiable as Waste & Scrap. OIO dt.15.02.2016 passed by the Adjudicating Authority is accordingly set aside. Appeal filed by the appellant is allowed with consequential relief, if any.
( pronounced in the open court on 31.08.2016) S/d. S/d.
(P.K.Choudhary) (H.K.Thakur) MEMBER MEMBER (JUDICIAL) MEMBER(TECHNICAL) SS 1 Appeal No.C/75215/2016