Customs, Excise and Gold Tribunal - Calcutta
Amar Roller Flour Mills vs Collector Of Customs on 4 May, 1989
Equivalent citations: 1991ECR784(TRI.KOLKATA), 1991(51)ELT613(TRI-KOLKATA)
ORDER T.P. Nambiar, Member (J)
1. These are two appeals filed by the appellants - one against the order of the Ld. Collector (Appeals) dated 19-12-1984 and another against the order of the Ld. Collector of Customs, Calcutta dated...1984.
2. The brief facts of the cases are as follows :
In appeal No. 312/85, the appellants imported 6 cases of Chilled Cast Iron Rolls valued at Rs. 62,270.27 (CIF) as spares for machinery installed in their flour mills and sought clearance of...as per SI. No. 4 of Appx. 4 of AM Policy, 1983-84. The appellants contended that the import was covered by OGL.
In Appeal No. CD(CAL)-183/84, the appellants imported 20 Chilled Cast Iron Rolls valued at Rs. 2,24,864.96(CIF) from Poland as spares for the Flour Mill machinery.
Both the cases were adjudicated and it was held by the Ld. Adjudicating Authority that Chilled Cast Iron Rolls appeared under SI. No. 446 and Appx. 3 of AM, 1983-84 Policy and since SI. No. 4 of Appx. 10 permitted import under OGL of spares other than those included in, inter alia, appx. 3, the import of the subject goods under OGL was not permissible and hence unauthorised and in contravention of the ITC Regulations. Accordingly, the said goods were ordered to be confiscated under Section lll(d) of the Customs Act, 1962 but allowed to be redeemed on payment of a sum of Rs. 20,000.00 in the case of C-312/85 and Rs. 1,00,000.00 in the case of CD(CAL)-183/84.
3. In the Grounds of Appeal it was mentioned that the impugned orders are against the facts and law and the orders have been passed without granting fair or reasonable opportunity of personal hearing. It is also stated that the authorities below have not made any finding that the subjected goods are mentioned against SI. No. 446 of Appx. 3 and therefore, outside the purview of SI. No. 4 of Appx. 10 of Import Policy, 1983-84. It was also contended in the appeal grounds that the Ld. Collector failed to properly appreciate the grounds urged in the Grounds of Appeal and passed the impugned order on erroneous grounds and therefore, the appellants prayed that the appeal may be allowed.
4. We have heard the learned representative and the learned S.D.R. at length. The Ld. Consultant for the appellants Shri P.N. Gupta stated that the appellants, had imported Chilled Cast Iron Rolls Spares for their flour mills machinery and claimed clearance under OGL (Appx. 10 of 1983-84 Policy). But the Customs considered it as hit by appendix 3, SI. No. 446 of the 1983-84 Policy and held that they could not be allowed under Appx. 10, SI. No. 446 of 1983-84 Policy and therefore, could not be allowed under Appx. 10 SI. No. 4. It was his contention that the Ld. Adjudicating Officer as well as the Appellate Authority erred in holding so. Appx. 3, according to him, covers raw-materials, components, consumables, tools and spares (other than iron & steel and ferro alloys) and the word 'spares' has to be understood in terms of the definition thereof, at page 2. That means, a part of some assembly or substitution that is ready to replace or ready for fitment. It was his contention that the items imported were declared as spare-parts in the Bill of Entry which was accepted by the Customs and they were classified accordingly. Spare-parts mean parts of definite shape and size and ready for fitment as held in Tribunal's order reported in 1989 (39) ELT 664 to 666 - Collector v. Heavy Engg. Corporation Ltd. It was also his contention that Entry No. 446 referred to by the department is in respect of Cast Iron/Cast Steel Rolls (finished upto 230 Tons for industrial use). Therefore, it was contended that with reference to the language and reference to weight, it shows that this Entry is not intended to cover spare parts i.e. parts ready for fitment. In this connection, he would also like to draw attention to Chapter 22 clarifications, given in paragraph 239, sub-para 5 which shows that Appx. 3 and 5 do not refer to spares anywhere. It was, therefore, his contention that some entries therein relate to components, sub-assemblies, consumables or modules, whereas the item does not appear individually elsewhere in these appendices i.e. in its own name, it could be imported as a spare under Chapter 9 by the eligible actual user. It was contended that Entry No. 446 could not be said to cover spare parts as the items imported by them are admittedly spare parts. The Ld. S. D.R. on the contrary contended that policy in respect of the items in question is very clear and the item imported is Chilled Cast Iron Rolls which have been declared as spare-parts for flour mill machinery. It was his contention that Appx. 3 also covers spares as would be evident from the caption of Appx. 3 and the item was, therefore, squarely hit by Entry No. 446 which covers all types of Cast Iron Rolls. It was his contention that since all types of Cast Iron Rolls are covered by Entry No. 446 of Appx. 3 they can be excluded from the purview of Entry No. 4 of Appx. 10. It was his contention that Entry No. 2 was not relevant at all inasmuch as it has to be read in the context of the Appx. mentioned therein. It was also contended that this entry presumably refers to Iron & Steel item other than finished parts which are either components or spares for which separate entries have not been provided. It was also his contention that Chapter 22, sub-para 5 of para 239 does not help the appellants, inasmuch as this paragraph has to be read in the context of the fact that these appendices have entries regarding components and therefore, if a part is specifically imported its importation would be permissible as spares provided it does not bar as such elsewhere in any appendix.
5. The Ld. Consultant for the appellants further contended that the importation was hit by Appx. 3. On the contrary it was covered by OGL inasmuch as in Appx. 10 there are two entries -
Entry No. 2: Iron & Steel Items: Other than those included in the Appendices 4, 6, 7 and 8;
Entry No. 4: Permissible spares (i.e. items other than those included in Appendices 3, 4, 15 and 30);
It was, therefore, their main contention that the importation was covered by Appex. 10(4). Their alternative prayer was that it must be deemed to be covered by Entry No. 2. It was also his contention that the imported items are not excluded by other Appendices 3, 4, 15 or 30 mentioned in Entry No. 4 or by Appendices 4, 6,7 or 8 mentioned in Entry No. 2.
6. It was his alternative contention that technically and technologically there is a distinction between Cast Iron and Chilled Cast Iron. In this connection, he would like to file a photocopy of reproduction of their technical book called "Metals Handbook, Ninth Edition, Volume I, published by American Society for Metals Park, OHIO 44073." It was contended that there are four types of cast irons which are white iron, gray iron, ductile iron and malleable iron. Besides, these four types, there are other specific forms of cast iron and chilled iron is white iron that has been produced by cooling very rapidly. It was stated therein that chilled iron castings are produced by casting the molten metal against a metal or graphite chill and this term chilled iron - is used to distinguish it from iron that is white throughout. It was therefore, his contention that chilled cast iron is a specific form by itself and is distinguished in commercial parlance as also technically from white iron and other types, of cast irons. In this connection, he would like to emphasise the word - individually - used in sub-para 5 of paragraph 239(1) of Chapter 22 and not in para 57(1) of Chapter 9. But the Ld. S.D.R. contended that even chilled Cast Iron is a type of cast iron and the only difference is with respect to some process in cooling. Therefore, it cannot be contended that the chilled cast iron does not come within the purview of cast iron.
7. In view of the several contentions which have been raised by the above arguments, the points to be determined by us in these two cases are as follows :-
(i) Whether chilled cast iron is different from cast iron and other iron?
(ii) Whether the chilled cast iron rolls which are imported by the appellants are covered in appx. 3, SI. No. 2 as iron and steel item?
(iii) Whether they are covered by appx. 10(4) and alternatively by Entry No. 2 of Appx. 10?
(iv) Whether the redemption fine of Rs. 20,000.00 imposed on the appellants is necessary in the circumstances of these cases?
8. As per the first point is concerned, the Ld. Representative relied on the American Publication on Metals Hand Book, Ninth Edition, Vol. 1, Properties and Selection : Irons and Steels, wherein it is observed as follows :
"The term "Cast Iron", like the term "steel", identifies a large family of ferrous alloys. Cast irons primarily are alloys of iron that contain more than 2% carbon and from 1 to 3% silicon. Wide variations in properties can be achieved by varying the balance between carbon and silicon, by alloying with various metal-, lie or nonmetallic elements, and by varying melting, casting and heat treating practices."
"Cast irons, as the name implies, are intended to be cast to shape rather than formed in the solid state. Cast irons have low melting...form undesirable surface films when poured, and undergo slight to moderate shrinkage during solidification and cooling. However, cast irons have relatively low impact resistance and ductility, which may limit their use."
9. In that book, it was stated that there are four basic types of cast iron which are white iron, gray iron, ductile iron and malleable iron. It is also stated that the chilled iron is white iron which is produced by cooling very rapidly through the solidification temperature range. He may reproduce some of the important observations made in the above book. They are as follows:
"(a) The four basic types of cast iron are white iron, gray iron, ductile iron and malleable iron."
"(b) Besides the four basic types, there are other specific forms of cast iron to which special names have been applied. Chilled iron is white iron that has been produced by cooling very rapidly through the solidification temperature range. An area of the casting that solidifies at a rate intermediate between those of chilled iron and gray iron, and which exhibits micro-structural and fracture-surface features of both types, is known as mottled iron. Compacted graphite cast iron (also known as vermicular iron) has a structure intermediate between those of gray iron and ductile iron; compacted graphite cast iron is described more completely in a subsequent section of this article."
"(c) White Cast Irons, so named because of their characteristically white fracture surfaces, do not have any graphite in their microstructures. Instead, the carbon is present in the form of carbides, chiefly of the types Fe3C and Cr7C3. Often, complex carbides such as (Fe, Cr)3C and (Cr, Fe)7C3, or those containing other carbide-forming elements, are present also.
White cast irons usually are very hard, which is the single property most responsible for their excellent resistance to abrasive wear. White iron can be produced either throughout the section, (chiefly by adjusting the composition) or only partly inward from the surface (chiefly by casting against a chill). The latter iron is sometimes referred to as chilled iron to distinguish it from iron that is white throughout. Chilled iron castings are produced by casting the molten metal against a metal or graphite chill, resulting in a surface virtually free from graphite carbon. In the production of chilled iron, the composition is selected so that only the surfaces cast against the chill will be free from graphite carbon. The more slowly cooled portions of the casting will be gray or mottled iron. The depth and hardness of the chilled portion can be controlled by adjusting the composition of the metal."
"(d) The main difference in microstructure between chilled iron and white iron is that chilled iron is fine grained and exhibits directionality perpendicular to the chilled face, whereas white iron ordinarily is coarse grained, randomly oriented and white throughout, even in relatively heavy sections. (Fine grained white iron can be produced by casting a white iron composition against a chill). This difference reflects the effect of composition difference between the two types of abrasion-resistant iron. Chilled iron is directional only because the casting, made of a composition that ordinarily is gray, has been cooled through the eutectic temperature so rapidly at one or more faces that the iron solidified white, growing inward from the chilled face. White iron, on the other hand, has a composition so low in carbon equivalent or so rich in alloy content that gray iron cannot be produced even at the relatively low rates of cooling that exist in the center of the heaviest section of the casting."
10. It is, thus, seen that chilled iron is also a type of white iron and the main difference between the chilled iron and white iron is that chilled iron is fine grained and exhibits directionality perpendicular to the chilled face, whereas white iron ordinarily is coarse grained. Again in the same book, it is further observed as follows :
"Molybdenum in chilled and white iron compositions is distributed between the eutectic carbides and the matrix. In graphite irons, its main functions are to promote deep hardening and to improve corrosion resistance and high-temperature strength.
In chilled iron compositions, molybdenum additions mildly increase depth of chill (they are about one-third as effective as chromium). The primary purpose of small additions (0.25 to 0.75%) of molybdenum to chilled iron is to improve the resistance of the chilled face to spalling, pitting, chipping and heat checking. Molybdenum hardens and toughens the pearlitic matrix."
11. It is, thus, seen that chilled iron is another form and it cannot be said that the chilled cast iron is completely different from that of cast iron. Hence the arguments of the Ld. Representative that chilled cast iron is different from that of cast iron cannot be accepted. The term - Cast Iron - like the term - steel - identifies a large family of ferrous alloys. But in the production of different types of ferrous alloys, different processes are followed and even amongst cast iron, different types of irons like white, gray, ductile and malleable irons are produced; so also chilled iron is also produced. It only goes to show that chilled iron is also one of forms of Cast Irons and the argument that it is completely different cannot be accepted.
12. As far as the second and third points are concerned we will deal with the same together. Under Chapter 9, para 58, actual users, both industrial and non-industrial - will be permitted to import under open general licence; permissible spares which are required by them for operation and maintenance of capital goods including accessories, ancillary equipment, control and laboratory equipment and safety appliances. But under Chapter 9, para 57(1), spares have been divided into the following two categories :
(i) Permissible spares i.e. items other than those appearing individually in appendices 3, 4, 15 and 30 and (ii) Non-permissible items individually appearing in appendices 3, 4, 30.
13. The Ld. Consultant stated that the chilled cast iron is covered under Appx. 10 which mentions the item allowed to be imported under OGL. In Appx. 10(2), it has been mentioned the iron and steel items other than those included in the Appendices 4, 6, 7 and 8 and in Appx. 10(4), it is mentioned permissible spares i.e. items other than those included in Appendices 3, 4, 15 and 30). It was, therefore, his contention that these cases will fall under Appendix 10(4) or alternatively under Appx. 10(2). Appx. 10(4) mentions permissible spares other than those included in Appendices 3, 4, 15 and 30. The case of the Department is that Chilled Cast Iron is covered by Appx. 3, SI. No. 446. In this regard, the caption to Appx. 3 is relevant and reads as follows :
"Raw materials, components, consumables, tools and spares (other than iron and steel and ferro-alloys)".
14. On a perusal of SI. No. 446 of Appx. 3 it is mentioned "cast iron and cast steel rolls (finished weight per roll upto 30 tonnes), for industrial use." Therefore, obviously the items under SI. No. 446, do not mention about any spares. Even if the caption to Appx. 3 is taken into consideration, spares other than iron and steel and ferro-alloys alone are listed in Appx. 3. Therefore, SI. No. 446 obviously does not refer to any spares of ferro alloys. The appellants have made a declaration that these are the , spares used for the flour mill machinery. The Department also had accepted the imported goods as spares which are chilled cast iron used in the flour mills. The records produced by the appellants in this case also speak the same. It is also not disputed by the Department that these are not spares. The Bill of Entry of the appellants' company is produced in the records by the appellants and this also describes the spare parts as follows :
"Spare-parts chilled cast iron rolls type".
15. Therefore, the appellants imported the articles in question as spare-parts under the Bill of Entry and they declared so before the Customs Authorities and sought for clearance. In Chapter 22, para 239(1) it is stated that a part could be component, spare or any accessory depending upon the nature of its use and requirements. In Chapter 22, it is stated that Appendices 3, 15 - do not refer to spares anywhere, but some entries therein related to components, consumables, sub-assemblies, modules. It was also mentioned there that where an item does not appear individually (elsewhere) individual appendices i.e. in its old name, it could be imported-as spares under Chapter 9 by the eligible users. Therefore, if the caption of Appx. 3 is read along with SI. No. 446, it becomes clear that SI. No. 446 does not refer to Chilled Cast Iron Rolls used as spares. Under Chapter 6, para 24(4) import of spares other than those included in Appendices 3, 4, 15 and 30 will be allowed under OGL by actual users subject to actual user condition. Under Chapter 2(11), spare is defined as part or sub-assembly or assembly for substitution i.e. ready to replace identical similar part or sub-assembly or assembly when it becomes faulty or worn out, and includes accessory (or attachment) in the same regard. Under Chapter 9, para 58, actual users, both industrial and non-industrial, will be permitted to import under OGL permissible spares which are required by them for operation and maintenance of capital goods including accessories, ancillary equipment, control and laboratory equipment and safety appliances. It is, thus, seen that Chilled Cast Iron Roll is covered under SI. No. 4 of Appx. 10 and is not hit by SI. No. 446 of Appx. 3. We are, therefore, of the considered view that spare parts which are chilled cast iron roll imported by the appellants comes within the purview of Appx. 10(4) and it is not included either in Appendices 4, 6, 7 and 8 or Appendices 3, 4, 15 and 30. Therefore, the importation was not hit by Appx. 3, SI. No. 446, as contended by the Department. In such circumstances, we are of the considered opinion that the order of the Collector upholding the order of the Ld. Deputy Collector of the Customs passed on 30-7-1984 by upholding that the goods under clearance which is chilled cast iron roll appeared in Appx. 3, SI. No. 446 and that the same did not fall within the purview of SI. No. 4 of Appx. 10, is not correct and accordingly, the same is set aside and the appeals are accepted. In view of this finding on point Nos. 2 and 3, point No. 4 does not survive and the appeals are accordingly accepted. It is hereby ordered that the spares in question be returned to the appellants.