Custom, Excise & Service Tax Tribunal
Sabari Exim (P) Ltd vs Commissioner Of Customs (Imports) on 18 February, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
CHENNAI
Appeal No.C/61/2006
[Arising out of Order-in-Original No. 4575/2005 dt. 30.12.2005 passed by the Commissioner of Customs (Imports) Chennai]
For approval and signature :
Honble Shri P.K. Das, Judicial Member
Honble Shri Mathew John, Technical Member
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 authoritative report or not ?
3. Whether the Members wish to see the fair copy of the order ?
4. Whether Order is to be circulated to the Departmental authorities ?
Sabari Exim (P) Ltd. Appellant
Versus
Commissioner of Customs (Imports)
Chennai Respondent
Appearance:
Shri R. Raghavan, Advocate For the Appellant
Shri M. Rammohan Rao, DC (AR) For the Respondent
CORAM :
Honble Shri P.K. Das, Judicial Member
Honble Shri Mathew John, Technical Member
Date of Hearing : 17.1.2013
Date of Pronouncement : 18.2.2013
FINAL ORDER No.
Per Mathew John
1. Appellant imported goods described by them as Non-alloy steel bars/rounds/flats/squares and filed two Bills of Entries No. 834941 and 834942 dated 07-07-2005 at Customs House, Chennai.
2. They classified the goods under Customs Tariff Item (CTI) 7215 9090 and claimed exemption under Notification 21/2002-Cus at S.No. 190B. This exemption was available to All goods other than seconds and defectives falling under Customs Tariff Headings 72.03 to 72.17. On examination of the goods, the customs officers felt that the goods were secondary or defective because they were in bundle form in different shapes and sizes without usual packing as in the case of prime goods normally imported. A scientist from National Mineral Laboratory was called to inspect the lot and also to test representative sample and give his view. The NML vide their Report No.NML/MC/04/MI/52/05-06 dated 16.8.05 for B/E No.834941 and Report No.NML/MC/04/MI/47/05-06 dated 16.8.05 for B/E No.834942 has opined that, Bars with different length were found in same bundles; Bars are with moderate surface defects; and also bars were found with defects like broken ends, bends, and surfaces with lap joints; the materials can be considered as non alloy steel bars rounds / fats/ squares seconds.
3. Based on their own inspection and the report of the scientist from NML, the department took a view that the appellant had imported Non-alloy Steel bars-seconds in the guise of non-alloy steel bars prime and claimed duty exemption as applicable to prime goods only. A Show Cause Notice proposing confiscation of the goods on account of mis-declaration of description and also for demanding differential duty by denying the exemption notification was issued and adjudicated resulting in denial of the exemption in Notification 21/2002-Cus (S. No. 190B) dated 01-03-2012, confiscation of the goods under section 111 (m) of the Customs Act, 1962 with option to redeem the goods on payment of fine of Rs. 10,00,000/- and imposition of penalty of Rs. 1,00,000/- on the importer. Aggrieved by the order of the Commissioner, appellants have filed this appeal before the Tribunal.
4. The Counsel for appellant submits that the words seconds and defectives used in the notification is not defined in the Customs Tariff or the Notification or any known trade standards. NML and Revenue have adopted its own criteria for understanding the expression and came to a conclusion that the goods were seconds or defectives. The standards adopted by NML for deciding the goods to be seconds were not disclosed to the appellants. It is their contention that mild rust formation noticed on a few pieces cannot be a reason to conclude that the goods were seconds because due to storage and exposure to atmosphere steel goods are bound to get rusted. Similarly the bars being of different lengths also cannot be a sufficient reason to consider the goods to be seconds. The NML report has held that the consignment consists of some rods, bars, which have broken ends, lap joints etc but the laboratory has failed to quantify such items in the total consignment. The counsel also points out that their request for getting the opinion of any other renowned agency like IIT, Madras was denied and thus the proceeding was not a fair proceeding.
5. The Counsel further points out that the adjudicating authority has held that the goods were not in international standard packing without specifying what such standard was.
He also points out that the Commissioner relied upon the fact the appellant did not produce Mill Test Certificate from the manufacturer of the goods. He argues that no such issue was raised in the Show Cause Notice. Further this certificate mainly shows the composition of the material and composition of the material imported is known from the test report of NML.
6. The Counsel also relies on the decision of the Tribunal in their own case on identical issue in their own case, namely, Sabari Exim Ltd Vs CC-2005 (180) ELT 386 (Tri-Chennai) wherein the Tribunal did not accept the report of NML in the case of similar goods and extended the exemption. So he argues that in the present case also, the confiscation and penalty should be set aside and exemption extended.
7. Opposing the prayer, the Ld. Authorized Representative for Revenue submits that this is a case where odd sized products were bundled in adhoc manner and shipped. The goods were of German origin shipped from UAE by a supplier in UAE. He submits that prime quality bars and roads manufactured and sold by manufacturers are shipped in different type of packing and always contain material of same length in same bundle which is not the case here. Further, during the visual examination of the goods, it was seen that some of the items were rusted which shows that the goods were rusted and damaged. Therefore, the goods were actually rejects and wastes bundled together and shipped and the concession under Notification 21/2002-Cus (S. No. 190B.) cannot be extended in such cases. He emphasizes that the Commissioner has adopted the common parlance test for the expression seconds and defectives. He also contests that the opinion of the National Metallurgical Laboratory which is a government institution of experts in the field cannot be ignored without any reason to do so. He also submits that the appellants did not submit Mill Test Certificate as required under Public Notice No.29/2004 dt. 18.2.2004.
8. We have considered submissions on both sides. The issue before the Tribunal is to decide what is meant by the expression seconds and defectives without any authoritative definition for the same. Two paragraphs of the findings of the adjudicating authority which are considered most relevant are reproduced below:
12.9 In Common Trade Parlance the words seconds refer to a material which is not first quality. Any material which may be with defects ranging from minute to very major, the material may be considered as seconds / defectives / rejects. And also, it is a practice in the Trade that such material would be available at a considerably cheaper price. And also in such cases the buyer cannot have any claim over the goods, once the sale is over. It may also be seen that even India, when any seconds materials are sold, the goods will not be in proper / normal packing, the seller clearly stipulates that the buyer cannot have any claim over the goods once sale is made. And also, it is everybodys knowledge, that seconds do have defects which in many cases cannot be found out. Therefore, in Common Trade Parlance the seconds do not have proper packing / labeling. The buyer will not have any claim after purchase when any defects are found to be present in the consignments supplied. Further, in the international steel trade, the manufacturer furnishes a Mill Certificate for all prime materials. These mill certificates are issued for each bundle / coil / sheet with details such as Heat Number, Chemical Composition and the mechanical properties. This is an International Trade practice in the steel business.
13. Such being the case of Common Trade Parlance or Trade Practice, I find that the importers are only making a claim to consider the goods as prime material without submitting a mill certificate in which case, the entire exercise of referring the issue to NML would have been avoided. Further, I find that as a matter of Trade Practice, most of the importers in the case of import of prime material are submitting Mill Certificates, hence they are not facing problems on this account. Therefore, I am unable to accept the request made by the Ld. Advocate to consider the subject material as prime.
9. The documents submitted by the importer nowhere mentions that the goods are seconds or of defective quality. No such documents have been unearthed by department either. No case is made out that the prices declared were lower as compared to prices for goods other than defective and seconds. Since customs is most focused on Revenue on an item like this and no case of undervaluation is made out in spite of allegation that the goods are seconds it is reasonable to conclude that the prices declared corresponded to prices for prime quality of goods. No case is made out that if the goods were seconds or defective, it was prohibited for import. Once this factor is taken into account all what revenue is relying is the fact that some packages had goods which were not of same sizes and that the goods were not packed properly. NML has given a report based on the fact that rust was seen on some items and defects like broken ends, bends etc. were found. This results in a situation wherein NML lays down standards for deciding what is defective or seconds and deciding whether the goods are defective or seconds. In the absence of Notification empowering to NML to do both these aspects, this is not a desirable situation because a person importing goods should know what is the standard so that his business fortunes does not get decided arbitrarily after the event of import. This issue came up before Tribunal earlier also in the appellants own case wherein NML took a stand that the goods were seconds but the Tribunal took into account opinion of IIT and gave the benefit of doubt to the appellants. Thereafter also, there has been no change in the notification to clarify the position to the public at large.
10. Against such background, we give the benefit of doubt to the appellants and hold that the goods were not seconds or defective. Consequently, we allow the appeal by setting aside the impugned order and allowing the appellant to clear the goods by classifying the goods under CTI 7215 9090 and claiming exemption under Notification 21/2002-Cus at S. No. 190B.
11. Appeal is allowed in above terms.
(Pronounced in open court on 18.2.13)
(MATHEW JOHN) (P.K.DAS)
TECHNICAL MEMBER JUDICIAL MEMBER
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