Customs, Excise and Gold Tribunal - Tamil Nadu
Bansal Industries vs Commissioner Of Customs on 18 June, 2002
Equivalent citations: 2002(83)ECC544, 2002(147)ELT967(TRI-CHENNAI)
ORDER Jeet Ram Kait, Member (T)
1. This appeal is against Order-in-Original No. 222/2001-CAU dated 28.12.2001 (issued from File No. S8/Misc./183/2001 Gr.7A) passed by the Commissioner of Customs (Seaport), Chennai in de novo proceedings arising out of this Hon'ble Tribunal's Final Order No. 1721/2001 dated 3.10.2001 in Appeal No. C/Appl/342/2001 in the matter of M/s. Bansal Industries, New Delhi.
2. This is the second round of litigation. In the first round the Commissioner of Customs (Seaport) had passed Order-in-Original No, 142/2001-CAU dated 29.8.2001 and ordered enhancement of value on Tin Free Sheets (TFS) to US $ 442/MT and Tin Plates (TP) at US $ 550/MT in terms of Rule 6 of the Customs Valuation Rules, 1988 and demanded duty short levy of Rs. 7,50,223 under Section 28 of the Customs Act. The adjudicating authority also ordered confiscation of the goods and offered its redemption on payment of fine of Rs. 10 lakhs under Section 125 of the Customs Act. He further imposed a penalty of Rs. 2.50 lakhs under Section 112(a) of the Customs Act.
3. Aggrieved by this order passed by the Commissioner of Customs, the appellant herein filed an appeal (C/Appl/343/01) alongwith an application for waiver of pre-deposit and stay of the recovery of the amount and also prayed for out of turn hearing in the facts and circumstances of the case. This Bench of the Tribunal vide Final Order No. 1721/2001 dated 3.10.2001 set aside the adjudication order passed bytheLd. Commissioner with the direction that the case should be readjudicated in the light of the observations made by this Hon'ble Tribunal and it was specifically observed that the Ld. Commissioner ought to have given reasons why such experts opinions was not acceptable to him. It was however open to the Commissioner to have called the experts for cross-examination or to elicit further details from them. It was also open to the Commissioner to have called upon these experts to examine the consignment and also take samples for tests so that if there was any doubt lingering in the mind of the Commissioner or the NML scientists, the same could have been sorted out. The Hon'ble Tribunal had further observed that it is for the Commissioner to have got it clarified from either side to arrive at the correct conclusion as to what the goods are. It was specifically observed by the Tribunal that it was not open to the Commissioner to come to his own conclusion on the product. The Tribunal had also directed that the 3rd party opinion should be obtained to set the controversy at rest. It was also observed by the Tribunal that such a course would have been a correct course of action as there would have been transparency in the proceedings and there would not have been charge of violation of principles of natural justice. The Tribunal thus concluded with the direction that the Ld. Commissioner should call upon the importer's experts to examine the goods and test the same and obtain their fresh opinion so that the opinion given by the importer's experts becomes conclusive in nature and the doubts raised by the Commissioner that the consignment has not been examined visually would be cleared. In the facts and circumstances of this case the Tribunal had directed that the de novo proceedings should be concluded within two months from the date of receipt of this order.
4. The impugned order passed by the Ld. Commissioner of Customs (Seaport) in pursuance of Hon'ble CEGAT Chennai Bench's Final Order No. 1721/2001 dated 3.10.2001 in which he has ordered the following:
(a) I order enhancement of unit price of TSF to US $ 442/MT and tin plates to US $ 550/MT in terms of Rule 8 of the Customs Valuation Rules, 1988 and duty shall be charged accordingly.
(b) I demand short levied duty of Rs. 7,50,223 under the provisions of Section 28 of the Customs Act, 1962.
(c) I confiscate 72,635 MTs and 152,239 MTs valued at Rs. 53,20,111 under Section 111(m) of the Customs Act, 1962. However, I allow them to be redeemed on payment of redemption fine of Rs. 10 lakhs under Section 125 of the Customs Act, 1962.
(d) I impose a penalty of Rs. 2.50 lakhs on M/s. Bansal Industries, New Delhi under Section 112(a) of the Customs Act, 1962.
5. The brief facts of the case are narrated in paras 2 to 6 which are extracted herein below:
2. M/s. Bansal Industries, No. 10, Anand Parbat, New Delhi-5, filed a Bill of Entry No. 017169 dt. 21.5.2001 for clearance of goods declared as 72.635 MTs of TFS w/w Defective Sheets 0.33 mm and lighter temper and 152.239 MTs tin plate w/w defective sheets. The goods were imported from M/s. Fer Export s.a. vide invoice Nos. 0103/31 and 0103/31 (Supplementary invoice) dated 14.5.2001. The total value of the goods was declared as US $ 86,770.84 Bill of Entry was assessed by adopting the value of US $ 220 for tin free defective sheets and US $ 465/MT for tin plates defective under DEPB Scheme. Importers produced DEPB licence No.410015218 dt. 13.6.2001 for a value of Rs. 2,68,767 equivalent to basic customs duty on 72.635 MTs of TFS defective sheets. An amount of Rs. 23,04,423 was paid towards additional duty on TFS defective sheets and total customs and additional duty on 152.239 MTs tin plates defective sheets.
3. When the goods were examined on 4.7.2001 there arouse a doubt whether the item can be considered as waste/defective as declared by the importer. The matter was referred to National Metallurgical Laboratory (NML), Chennai, for their expert opinion. The NML vide their letter No. NM/MC/04/031/2001-02 dated 16.7.2001 stated that the entire consignment covered under Bill of entry No. 017169 in 9 containers at SICAL CFS (MAC) was inspected by them on 5.7.2001, 7.7.2001 and 11.7.2001. They reported that the consignment consisted of packages of TFS Sheets free from any significant visual defects and within each package the sheets were of uniform size and finish. However, the entire consignment consists of packages, which were of different dimensions and finish. Based on the visual observation of the TFS consignment, they confirmed that it cannot be considered as waste and they were confirmed to be TFS by Chemical Analysis of the sheets drawn from these packages. As regards tin plated sheets they reported that the consignment consisted of a few packages of sheets with defects like pin holes, abrasive roll marks, scrolled and rusted parts. However, many of the packages were free from any significant visual defects. Based on the visual examination, they opined that about 30% of the tin plated sheets can be considered as waste and the remaining cannot be considered as waste.
4. Accordingly, M/s. Bansal Industries were given an opportunity to explain their case. On their request no formal show cause notice was issued. Shir A.S. Sundar Rajan and Smt. Shakthi Thyagesh, Advocates, appeared for personal hearing on 1.8.2001. They produced expert opinions from Department of Metallurgical Engineering IIT, Chennai, Dr. N. Krishnaraj, Consultant, Metallurgist Chennai and Dr. V. Mohan, Proprietor, M/s. V.M. Enterprises. These opinions of the importer's experts were forwarded to National Metallurgical Laboratory who confirmed their initial opinion that the entire quantity of tin free sheets was not waste and 30% of the Tin Plate sheets can be considered as waste and balance quantity was not waste. On the basis of these opinion the matter was adjudicated by the adjudicating authority vide under No. 142/2001-CAU dated 29.8.2001. M/s. Bansal Industries filed an appeal against the same. The Hon'ble CEGAT, Chennai, after considering the contention of the importers set aside the order and directed the Commissioner to readjudicate the matter. The Hon'ble CEGAT in its order stated that though the importer's experts have not seen the goods they have given reasons for their opinion whereas the National Metallurgical Laboratory scientists had not given any reasons for their opinion and if necessary the National Metallurgical Laboratory experts can be called for cross examination. The Hon'ble CEGAT further directed that the correct nature of the goods should be redetermined on the basis of the importer's expert opinion and National Metallurgical Laboratory report. On the basis of these directions the experts of the importers namely, Dr. K. Prasad Rao, Professor and Head of Department of Metallurgical Engineering, Dr. N. Krishna Raj, Consultant Metallurgist and Dr. V. Mohan, Proprietor of M/s. V.M. Enterprises were given an opportunity to examine the goods. National Metallurgical Laboratory was also requested to be present at the time of examination. The goods were examined by a team consisting of Dr. K. Prasad Rao, Dr. N. Krishna Raj and Dr. V. Mohan. No representative from National Metallurgical Laboratory as present. The team after examination of the goods gave a report with the following observation:
17 packages of tin plate sheets and 18 packages of tin free steel (TFS) Sheets were examined (35 out of 159 packages making up to more than 20% sampling as stipulated in ISO 1111-1: 1983. Section 9.1). The package Nos. and the quantity are mentioned in Annexure 1 The following observations are made with regard to Tin Plate sheets.
(a) The packages consist of assorted sizes and mixed sizes.
(b) Surface defects such as roll marks, pin holes, wrinkles and dents are noticed in a number of places.
(c) Lot is mixture of matte and bright finish sheets.
(d) Edge wrinkles and weld seams are present in few sheets.
The following observations are made with respect to Tin Free Steel Sheets.
(a) The lot consists of packages with different sizes.
(b) The lot consists of packages with different thicknesses.
(c) The lot consists of packages with different surface finishes.
(d) Samples were collected from four packages for temper verification (got them tested at ALPHA STANDARDS, Chennai). Actual temper value measured are enclosed in the Report given by them. The test confirms the lot consists of TFS sheets of mixed temper ranging from soft (HR 30T- 57) to extra hard (HR 30T-77).
1. Our current examination of th actal goods reconfirms our earlier opinion given based on observations made by NML vide report No. NML/NL/04/031/2001-02 dated 16th July, 2001.
2. The above observations confirm that the lot containing tin plates and TFS sheets can be considered as assorted and unassorted waste-waste as per Clause 2.5.6 of IS 10340-1982 (Glossary of terms for cold reduced Tin Plate and cold reduced black plate), because the lot consists of:
(a) mixed sizes,
(b) mixed tempers,
(c) mixed thicknesses,
(d) mixture of bright, matte finishes,
3. In coming to the above conclusions, the committee made extensive references to the various clauses given in the ISI Standards 10340-1982 ISO 1111-1: 1983 and IS 1993-1993. In the opinion of the committee, why NML could not come to the same conclusion, is perhaps their not checking the temper of the sheets as required by the relevant standards.
They also collected samples and got them tested for temper by a company called ALPHA STANDRDS and the test also confirmed that lot consists of TFS sheets of mixed temper ranging from soft to extra hard.
5. A personal hearing was granted to importer's advocate who also wanted to cross-examine the scientists of National Metallurgical Laboratory. Accordingly, Shri A.S. Sundar Rajan, Advocate, cross-examind Dr. S. Srikanth, Scientist-incharge of National Metallurgical Laboratory on 22.11.2001. He also give two written submissions dated 26.11.2001 and 28.11.2001. In the written submission dated 26.11.2001 he objected to the fact that National Metallurgical Laboratory scientist was absent on the day when other experts examined the goods. In his written submission on 28.11.2001 he pointed out that the latest report of the team consisting of Dr. K. Prasad Rao and others indicated that the goods were not prime and they were only assorted and unassorted waste-waste as per Clause 2.5.6 of IS 10340-1982. Further regarding the cross examination of Dr. S. Srikanth of National Metallurgical Laboratory he submitted that it was clear that Dr. Srikanth had not examined the goods personally nor tested any of the parameters required to come to the conclusion that the goods were prime. The National Metallurgical Laboratory did not refer to any of the BIS specifications or any other international specifications and the report of National Metallurgical Laboratory did not contain any reference to visual or any other examination with reference to these standards. Further, he submitted that to a specific question from the adjudicating authority as to what exactly the goods were, Dr. S. Srikanth said that these goods were Standard Grade Electrolytic Tin Plate and first grade Tin Free Steels. The advocate submitted that the standard grade is the third grade after prime and second grade. Since Dr. Srikanth has not examined the goods personally but got them examined by other scientists his evidence should be taken as hearsay evidence. He only certified the findings of other scientists and he has not actually ascertained the temper, finish, size and weight of the goods and has only copied the data from the packing specifications. Though Dr. Srikanth has claimed that he has tested the goods as per IS specifications, the advocate contended that he has not done any physical examination or conducted any chemical tests. Further, the advocate submitted that the contention of Dr. Srikanth that IS specification, 10340-1982 was not relevant specification, was not correct. He produced a certificate from the Bureau of Indian Standards stating that IS 10340-1982 is a Glossary of terms which was issued in 1982 and reaffirmed in 1998. There has been no subsequent revision of the said Glossary of Terms. According to the advocate that this clearly showed the ignorance of Dr. Srikanth and, therefore, his opinion should be discarded. Further, as per para 3.4 of IS 1993-1993 (ISO 1111-1:1983) wherein a consignment is defined as a "quantity of tin plate or black plate of the same dimension and quantity made available for dispatch at the same time". The advocate submitted that the practice of the department has been to assess goods covered by one bill of lading as one consignment irrespective of the number of packages containing different dimensions of the product. The advocate submitted that Dr. Srikanth in his report dt. 14.8.2001 has stated that the container must be divided into as many consignments as there were packages of different sizes, dimensions of sheets. At the same time in his report dt. 15.7.2001 he has referred to the entire consignment packed in nine containers. Thus, it appeared that he was not clear about the exact meaning of 'a consignment'. The advocate submitted that waste-waste normally consists of goods of different dimensions, different thickness, of different finish. The tin plate waste/waste was canalised item in the earlier import policies. Even in the latest import Policy under Notification No. 31 (RE-99)/1997-2002 dt. 1.11.99 it was appearing as one of the items where floor prices have been fixed. The advocate also submitted that the contemporaneous imports vide Bills of Entry Nos. 328677 dt. 4.6.2001 and 334551 dt. 3.7.2001 have been relied on for fixing the price of goods at a price of US $ 442 and US $ 550 PMT. He pointed out that this pertained to import of Tin Plate prime quality of a single dimension whereas the subject goods were of different dimensions, thickness, finish as is evident from the packing specifications. Therefore, by no stretch of imagination the present import can be compared with the above-mentioned bills of entry. Therefore, there was no justification in enhancing the value beyond US $ 465 PMT for Tin Plate waste-waste which was the floor price fixed by the Government of India. Further he submitted that no two consignments of waste-waste can be compared.
6. Shri A.S. Sundar Rajan and Smt Shakthi Thyagesh, Advocates, again appeared for a final personal hearing on 4.12.2001 and gave another written submission dt. 5.12.2001. They again submitted that Dr. Srikanth of National Metallurgical Laboratory was not qualified to give an expert opinion of the goods under dispute.
6. The Hon'ble Commissioner gave his findings which are recorded from paras 7 to 18 and the same are extracted herein below:
7. I have gone through records of the case carefully. As is evident from the above, a number of reports from NML are availablefor my guidance. On the other hand, the group of experts from the importers' side have given their opinion by their letter dated 1st August, 2001, 20th August, 2001 and 5th November, 2001.
8. The NML by their first report dated 16th July, 2001 indicated that tin-free sheets examined by them were free from any visual defects and, therefore, they cannot be considered as waste. The NML also confirmed that after chemical analysis, these sheets were confirmed to be tin-free sheets. As regards tin-plated sheets they found a few packages with pin-holes, abrasive roll marks, scrolled and rusted spots. The package numbers were indicated in the Table 2 of the Annexure to the letter. However, they stated that many of the packages were free from any visual defects. Therefore, they came to the conclusion that 30% of the tin-plated sheets can be considered as waste and the rest are not waste.
9. The importers produced a report from Dr. K. Prasad Rao vide his letter dated 1st August, 2001. After examining the NML reports, Dr. Prasad Rao stated that the standard grade tinplate permits lacquering and printing over the entire surface while second grade may have imperfections and, therefore, did not guarantee suitability for lacquering and printing over the entire surface. He also stated that as per the IS specification, first grade (Prime) should have no visual defects in the normal condition of storage and use and should be suitable for lacquering and printing over the whole surface of the sheets. Because NML found that some of the sheets were not free from defects, he opined that tin-plated sheets cannot be treated as prime material. Dr. Prasad Rao again stated that in respect of tin-free sheets and tin-plated sheets the NML report indicated in Table 1 & 2, it was apparent that none of the bundles were defect-free. Therefore, he came to the conclusion that the entire goods were waste-waste and cannot be considered as prime material. So Dr. Prasad Rao described the NML findings as inconsistent and contended that the goods were other than prime material. This was concurred by other 2 experts Shri R.N. Krishna Raj and Dr. V. Mohan.
10. This report was examined by the Scientist at NML who explained that when they stated that tin-free sheets did not have visual surface defects, they meant that they were suitable for lacquering and printing. They confirmed that on opening 13 packages of tin-free sheets, they could not find any surface defect and, therefore, based on mere scratches or wrinkles on afew sheets, the entire material cannot be declared as seconds. They stated the definition of the prime grade tin-free steel in IS 12591-1988 was that at the time of dispatch, it was free from defects readily visible to the unaided eye. Mere presence of a few minor handling marks in a large consignment caused during the transit and handling, which can be easily removed did not affect the suitability for lacquering and printing over the entire surface on the sheets and cannot render the goods as a lower grade. When they mentioned 'no visual defects', they implied only insignificant defects were present which would not affect the suitability of goods to lacquering and printing. As regards tin-plates, the NML stated that one 'consignment' should be a quantity of tin-plate of the same dimension and quality made available for dispatch at the same time. In other words, in a large consignment there may be material of varying sizes and properties and qualities. In a large consignment cleared under one bill of entry, there could be varying sizes due to such differences in individual packages. The entire goods cannot be treated as assorted waste-waste. The NML stated that as per IS specification, one consignment is one homogeneous lot. According to them since the present 229.4 MTs comprise of tin-plate and tin-free steels cannot be considered as one consignment as it comprised of various dimensions and quality but in each package, the sheets were of uniform size and quality. According to them, the entire quantity of tin-free sheets can be classified into 18 homogeneous lots, Therefore, the entire tin-free steel which did not have any visual defects cannot be considered as waste-waste despite the differences in the dimensions and quality in different packages. As regards tin-plates, the material can be classified into consignments of uniform size, quality and finish. All packages contain sheets of uniform dimensions, quality and finish. However, in the case of tin plates, minor surface defects were observed in some of the sheets in selected packages and hence 30% of the tin plates were classified as waste-waste. Merely because different packages have different dimensions and quality the goods will not qualify to be considered as waste-waste.
11. On the basis of these opinions, the matter was adjudicated. The Hon'ble Tribunal however set aside the order and in the light of the order of the Tribunal, the experts nominated by the importers examined the goods and submitted a report by their letter dated 5th Nov. 2001 which stated that in the tin-plate sheets, there were roll marks, pin-holes, wrinkles and dents. As regards tin-free steel, they stated that they were different sizes, different thickness and different surface finishes and different temper. Because of this, they confirmed their original opinion that the goods cannot be treated as prime. Subsequently, the advocate gave a detailed written submission and also cross-examined the NML Scientist. The NML Scientist also examined the final report of the group led by Dr. Prasad Rao and gave his opinion during the cross-examination. It may be specifically mentioned that during the examination of the cargo by the group led by Dr. Prasad Rao, the NML Scientists were not present. Later, when it was offered to the importers that a common examination could be organized, the advocate of the importers did not agree and, therefore, no combined cross-examination was conducted.
12. I find that the Hon'ble Tribunal has stated that in view of the lack of meeting point among the experts, it may be worthwhile to get the matter referred to a third party. However, it was felt that bringing a third expert into the matter will not resolve the problem because any opinion expressed by a third expert would also be contested by one of the present experts, i.e., NML or by Dr. Prasad Rao. I have also examined in detail the contentions of the advocate on behalf of the importers submitted by his letter dated 28.11.2001. The advocate has chosen to attack the qualification of Dr. S. Srikanth, the NML Scientist and the method adopted by him instead of trying to meet the conclusions given by Dr. Srikanth. The advocate has made much of the fact that Dr. Srikanth has not personally examined the goods although during cross-examination, Dr. Srikanth made it clear that a group of Scientists nominated by him examined the goods and the conclusions were forwarded under the name of NML. Therefore, I do not find any infirmity in the procedure adopted by Dr. Srikanth nor am I agreeing with the contention of the advocate that Dr. Srikanth lacks qualification for expressing his opinion on the present subject. The advocate further stated that NML has not relied on the standards specified by the Bureau of Indian Standards to arrive at the conclusion. Although in the first report dated 16th July 2001, the NML has not mentioned anything about the standards against which they have examined the goods, in their further communication dated 14th August, 2001, I find they have stated that they were guided by IS 12591-1988, IS 1993-1993, ISO 1111-1-1983 and IS 10340-1982. Therefore, the absence of reference to standards mentioned by the Advocate is incorrect.
The Second point made by the advocate is Dr. Srikanth of NML has gone by the bureaucratic methods of obtaining the inspection done by the subordinates. As already mentioned, the Advocate should have concentrated on the merits of the report rather than on procedure adopted. The advocate has not questioned the competence of the group of scientists who examined the goods and, in any case, merely because if was a collective, decision of a group of scientists, the conclusion cannot be dismissed as hearsay evidence. The advocate has also further alleged that the report of the NML is a clerical report, etc. which do not merit detailed examination. What is relevant is to examine whether the NML explained the reasons for their conclusion. I find that the advocate has not been able to bring in any technical data to controvert the conclusions of NML. The advocate has laid considerable emphasis on the term "free from any significant visual defect" which according to him is ambiguous. Further, he has stated that the entire consignment should be considered as one lot as against the suggestion made by the NML. The advocate has also reiterated 'Waste Waste' is goods of different dimensions, thickness and finish and he has further harped on the fact that the goods are of different sizes, different thickness, finish and temper and they should be considered as Waste Waste.
13. I find that the submissions of the advocate are merely echoing the final report submitted by the experts nominated by him. Their final opinion has already been reproduced as above. They have after examination of the goods came to the conclusion that the goods, both tinplate and tin free steel are waste-waste because the tin plate has roll marks, pin holes, wrinkles, etc. and tin free sheets are of different sizes, finish, etc. Because of the varying sizes, tempers, finish, they came to the conclusion that these are Waste-Waste. However I find though they have stated that the tin plates are of assorted sizes they have not indicated the exact number of packages which were examined by them. The annexure 1 of their final report dated 5th Nov. 2001 appears to be only about handling marks which were observed by NML Scientists also during their initial inspection but the NML were clearly of the opinion that these marks did not render them of lower grade. In fact the Bureau of Indian Standards specification also clearly mentions that handling marks caused during transit cannot render the goods as lower grade goods. Dr. Prasad Rao is not very clear whether the roll marks and dents noticed by him were due to handling of the goods. Similarly, hedging could not also have been due to handling. It is further observed that the different types of finishes in the tin sheets and they were of assorted sizes but then the NML has clearly stated although these are assorted and varying sizes, each package is of a homogenous goods. In other words, each package consisted of goods of same size and same finish. It is a different matter that different packages are of different sizes. When each package is of uniform size it would be unscientific to treat the entire consignment as non-standard grade. Similarly in the case of tin free steel the observation of Dr. Prasad Rao are that they are of different sizes, thickness and finish and of different temper. They have not mentioned any surface defects. In the tin free sheets though they have tested the temper it has to be noted that temper was in any case mentioned in the packing list itself. What is relevant is that though the packages were of different sizes, thickness and tempers, within each package the sheets were of uniform sizes and temper.
14. In respect to the tin plated sheets, NML in their first report pointed out that there were some defective sheets and, therefore, they considered about 30% can be considered as Waste. The present report of Dr. Prasad Rao does mention about wrinkles, etc. without mentioning the exact package numbers. Assuming that such defects are noticed in a few packages the finding of the NML that roughly 30% of the consignment can be considered as waste should take care of these defects in the tin sheets. Therefore, I find that there is considerable common ground between the finding of Dr. Prasad Rao during his inspection and the findings of NML in their initial inspection as far as tin sheets are concerned. Treating 30% as defective would take care of the pin holes, wrinkles, etc. noticed by Dr. Prasad Rao.
15. In regard to tin free sheets, Dr. Prasad did not notice any surface defects. Secondly he has not contested the findings of NML that each package is a homogenous lot. He has also made no observation of the NML finding that the entire TFS can be grouped into 18 homogenous lots. He has come to the conclusion merely because of varying sizes, dimensions, thickness, and finish ignoring the fact that within each package, the sheets are of uniform sizes and thickness and finish having no surface defects except perhaps some handling marks. Therefore, clearly the conclusions of Dr. Prasad Rao are not based on detailed facts given by the NML. Secondly it would set a wrong precedent if one large consignment as in the present case is treated as of lower grade merely because there are differences in sizes and finish in the packages. The grade of the goods, as rightly pointed out by the NML, should be based on the actual condition of each sheet and whether the sheet can be used for the purpose of which it is meant. From this angle, I am in agreement with the conclusions of the NML. Therefore, I hold that the entire consignment of tin free sheets and 70% of the tin sheets have to be considered as prime grade and 30% of the tin sheets have to be considered as waste-waste.
16. The next question is regarding the fixation of the value for assessment. In view of the fact that the valuation of the importer was incorrect and the goods found to be other than what was declared, the declared value cannot be treated as the correct transaction value for the purpose of assessment. Therefore the value has to be determined by means of any of the Rules from Rules 5 to 8 of the Customs Valuation Rules. I find there were no imports of identical or similar goods for the purpose of comparing the present imports. Similarly no data is available to arrive at the value under Rule 7 or/and 7A (Deduction Value and Computed Value method). Underthe circumstances only method to determine the value appears to be the method under Rule 8 which permits determination of the value taking into consideration the principles of all the other Valuation Rules as well as the provisions of Sec. 14 of the Customs Act, 1962. This rule also permits the application of the valuation principles with flexibility.
17. I find that there were some imports of tin free sheets and tin plates at prices of USD 442 per MT, USD 550 per MT under Bills of entry Nos. 328677 dated 4.6.01 and 334351 dated 3.7.01 respectively. The Advocate has pointed out that these prices were of goods of uniform sizes and grades. Even assuming he is correct, it has to be kept in mind that within the present consignment, each package is of uniform size and grade. In the absence of contemporaneous import price of each size and grade and in view of the flexibility allowed by Rule 8, the Department would be fully justified in adopting these prices under Rule 8 to determine the assessable value of the goods. Accordingly I order the Tin free sheets shall be assessed at USD 442 per MT and 70% of the Tin sheets at 550 USD per MT and the remaining 30% of tin sheets at USD 465 per MT. On this basis the total value of the goods comes to Rs. 53,20,111 and the differential duty works out to Rs. 7,50,223.
18. In view of the misdeclaration of the description and value, the goods are liable for confiscation under Section 111(m) of the Customs Act, 1962 and the importers are liable for penalty under Section 112(a) of the Customs Act, 1962. Accordingly, I pass the following order:
7. Aggrieved by this order the appellants have come in appeal on the grounds that the order is not legal and proper. The Commissioner failed to appreciate that he continued to violate the principles of natural justice and failed to resort to transparency in the proceedings which is evident from the fact that he has been carrying on correspondence and discussion with NML behind the back of the appellant and did not furnish the details of these discussions and advice received from NML. On this ground along the order is liable to be quashed. The Commissioner failed to read and understand the order of this Hon'ble Tribunal wherein specific direction had been given and also it has been recorded that the order was passed after hearing both sides, whereas the Commissioner erroneously concluded that the order was passed after hearing the appellant alone. The Commissioner failed to appreciate and consider the fact that earlier his only objection was that the Experts produced by the importer has not seen the goods which deficiency was cured by the subsequent visual examination and their report confirming that their earlier conclusions are correct. The Commissioner failed to appreciate and consider the fact that in these proceedings the competency, expertise and unimpeachable integrity of the experts produced by the appellants have not been questioned. The Commissioner failed to appreciate and consider the fact that the cross-examination of the signatory to the report of NML had failed to establish his knowledge, academic or professional, and also the fact that he did not physically inspect the goods. The Commissioner failed to appreciate and consider the fact that the NML was confronted with a leading answer to the question posed to them and, therefore, the NML was bound to give an opinion as desired by them. On this ground alone the option of the NML are vitiated.
The Commissioner failed to appreciate and consider the fact that the NML did not conduct inspection or examination of the goods as per the Bureau of Indian Standards Specification, whereas the experts of the appellant herein had conducted detailed examination as per the procedure laid down in the Bureau of Indian Standards Specification. Herein lies the superiority of the opinion of the experts. The Commissioner failed to appreciate and consider the fact that it was too late in the day to challenge the merits of the opinion given by the experts of the appellant herein, more particularly considering the fact that neither the deponent for the NML nor the Commissioner had the required expertise in this regard. The Commissioner failed to appreciate that if he had entertained any doubt regarding the opinion of experts he ought to have called the experts and clarified the doubts as observed by the Hon'ble Tribunal. He, however, failed to do so and picked holes in the report without any basis. The Commissioner failed to read and give effect to the observations and findings of this Hon'ble Tribunal. The Commissioner failed to appreciate and comply with the directions of this Hon'ble Tribunal that he should not come to his own conclusion involving such a technical subject. The Commissioner failed to take into consideration the binding directions of this Hon'ble Tribunal that he should take third party opinion to set the controversy at rest. However, without discussion on the subject he unilaterally turned down the plea for reference to a third party. The Commissioner failed to appreciate and take into consideration the observations of this Hon'ble Tribunal that the fresh opinion of the experts after visual examination of the goods should become conclusive. The Commissioner failed to appreciate and consider the fact that the team of officers who visually examined the goods consisted not only of Dr. Prasad Rao but also two other experts viz. Dr. Krishnaraj and Dr. V. Mohan, Metallurgists in their own rights, but the Commissioner failed to deal with the same.
The Commissioner inspite of the observations of this Hon'ble Tribunal accepted the report of the NMLas Gospel Truth. The Commissioner misdirected himself in dealing with the NML's report rather than the joint report of the experts produced by the appellant herein. In other words, he violated the remand order of this Hon'ble Tribunal. The Commissioner failed to appreciate and give proper weightage to the unbiased, independent and authoritative opinion of the Indian Institute of Technology which was decisive of the disputed questions. The Commissioner failed to appreciate and deal with the affidavit filed by Dr. Krishnaraj, whose report he chose to ignore. The Commissioner failed to appreciate and consider the report of Dr. V. Mohan, an ex-employee of NML, whose report was not faulted by the NML The Commissioner failed to appreciate and consider the fact that Dr. Srikanth on his own volition, chose to appear for cross-examination knowing very well that his contribution to the report was NIL. Therefore, the errors of omission or commission committed by him during cross-examination are his own. In other words, he could have chosen to field any one of his subordinates who could have probably answered many of the questions with facts and figures. The Commissioner failed to appreciate and consider the plea of the appellant herein that the second report of the NML was an after thought to justify their errors of omission and commission pointed out by the appellant hereinbefore the adjudicating authority. The Commissioner failed to appreciate that it is settled law that in a case where conflicting options were available the benefit of doubt ought to go to the assessee. The Commissioner failed to deal with the relied upon judgments. The Commissioner failed to appreciate and consider the alternative claim of the appellant herein that the question involved is the classification and valuation of the goods simplicitor on which there appeared to be difference of opinion between the department and the appellant and, therefore, the question of invoking the penal provisions of the Customs Act would not arise for consideration. The Commissioner miserably failed to look into the records and has failed to comply with the principles of natural justice at every stage.
The Commissioner was vague in his opening remarks wherein he has stated that he had a number of reports from NML without specifying the details of the same though he was very specific with the reports produced by the appellant herein. The Commissioner failed to appreciate that there was contradiction in the observations of the Commissioner, wherein he has observed that the NML scientist also examined in final report of the group led by Dr. Prasad Rao and gave his opinion during his cross-examination, which was contrary to the record as per the minutes of the cross-examination itself. The Commissioner failed to appreciate that the appellant herein vide letter dated 26.11.2001 had specifically brought to the attention of the Commissioner that the matter could be referred to a third party as observed by the Hon'ble Tribunal. However, he chose to ignore the same and unilaterally came to a conclusion that it was not necessary to do so. In other words, transparency was lacing in this regard. The Commissioner failed to appreciate that there was no transparency in regard to the communication between the NML and the Customs. Whereas during cross-examination the scientist in charge of NML stated that the official copy of the report has not been furnished to him, the Commissioner proceeded to deal with the same as if the NML has furnished their comments. Here again there was no transparency and there was denial of principles of natural justice. This also demonstrates the bias with which the customs dealt with the case. The Commissioner even failed to read the report of the NML, which specifically stated that homogeneous lot of 20,000 sheets have to be segregated according to the quality and dimensions which was not done in this case. The Commissioner failed to appreciate that instead of dealing with the issues on merits the Commissioner chose to direct his attack on the advocates and recorded that the advocate was merely echoing the final report of the expert. The Commissioner failed to appreciate that the advocate was representing the appellant and the views of the experts and, therefore, he was duty bound to do what he was alleged to have done. The Commissioner failed to appreciate and give any rationale grounds for the appellant to accept and pay for a consignment as prime when the same consisted of mixed lot of goods. The Commissioner failed to appreciate and consider the fact that his observations on the valuation have already been faulted by this Hon'ble Tribunal and he reiterated the same without any basis.
Further in the earlier proceedings the Commissioner invoked Rule 6 whereas in the present proceedings on the same findings he has invoked Rule 8 without giving any explanation as to the need for a change. The Commissioner failed to consider the other aspects of the case which did not justify confiscation of the goods or imposition of fine or penalty. The Commissioner failed to take into consideration the heavy demurrage and financial loss to the appellant herein in the long detention of the goods and the damage caused to the same due to exposure to the vageries of the weather. The Commissioner failed to appreciate and consider the fact that the opinion of the NML that the consignment should be divided into 18 homogeneous lots was without any basis and in any case they were not competent to make any such suggestion which was contrary to the BIS specifications, wherein it has been specifically stated that a lot must consist of 20,000 sheets. Even assuming that each sheet, weighs 1 kg, the whole lot would weigh 20 tons, equivalent to one container. In any case the Commissioner was not to accept the statement of NML as Gospel Truth particularly when it has been established in cross-examination that they lacked expertise in the field. The Commissioner failed to appreciate and consider the fact that the geometrical dimensions of the sheet alone could not be the criteria inasmuch as the temper of various sheets differed and they cannot be said to be homogeneous. The Commissioner failed to appreciate that the suggestions of the NML to segregate the goods imported into 18 lots was contrary not only to BIS specifications but was also contrary to the NML's own report dated 14.8.2001. The Commissioner failed to appreciate and consider the fact that NML has nowhere (suggested) that each packed was of homogeneous lot. On the other hand it has only suggested that the goods should be divided into 20,000 sheets of uniform dimensions. The Commissioner failed to appreciate in respect of many of the packages the dimensions were not furnished in the packing specification and the NML also failed to note the dimensions which were relevant consideration.
8. During the course of personal hearing Ld. Consultant Shri K.L Rekhi alongwith Shri A.S. Sundararajan submitted that this order has arisen as a result of the remand order passed by this Hon'ble Tribunal vide Final Order No. 1721/2001 dated 3.10.2001. He further submitted that they had imported 72.635 MTs of Tin Free Sheets W/W defective sheets 0.33 mm and lighter Temper and Tin Plate WW defective sheets and 152.239 MT of Tin Plate WW defective sheets. He further submitted that the supplier by mistake had loaded tin plate waste alongwith tin free sheet waste. Therefore, they prayed for permission to file the Bill of Entry on the basis of the revised invoice indicating the correct entry. The Commissioner referred the matter to the National Metallurgical Laboratory (NML), a Govt. Organisation for opinion on the goods. The goods were inspected and based on the inspection report the scientist incharge issued a report. The appellant's were aggrieved with this report. Therefore, they sought opinion from 3 of the experts of NT, Chennai namely Dr. N. Krishnaraj, Consultant, Metallurgist, Dr. V. Mohan, Proprietor of M/s. V.M. Enterprises and Dr. Prasad Rao, Head of the Department of Metallurgy, NT, Chennai. All the three experts had given detailed report and have commented extensively in the light of the technical literature and ISI specifications and have opined that even in terms of the report of the NML, the item is assorted waste/waste.
Shri K.L. Rekhi, Ld. Consultant took us to page 49 of the paper book which is a letter from FER EXPORT s.a. dated 15.11.2000 in which the supplier has offered M/s. Bansal Industries, New Delhi that they can offer stock lot material rejected by MILL and the rejected material as TFS rejected/defective/W/W sheets having thickness 0.30mm and lighter and temper of T1-T5/DRB, total quantity about 800 MT at price of US $ 240/MT C&F Chennai or Mumbai Port. The condition of this offer is that they make payment by 100% irrevocable and confirmed letter of credit. By the above correspondence, the Ld. Consultant submits that the imported goods were stock lot material which were rejected by MIL and they were imported against 100% irrevocable and confirmed letter of credit. Accordingly bill of entry bearing No. 017169 was filed on 21.5.2001. The goods were imported from M/s. Fer Export s.a. invoice Nos. 103/31 and 103/31 (supplementary invoice) dated 14.5.2001 the total value of the goods was declared as US $ 86,770.84 and bill of entry was assessed by adopting the value of US $ 220 for free defective sheets and US $ 465/MT for tin plates defective under DEPB scheme. The importers produced DEPB licence No. 410015218 dated 13.6.2001 for a value of Rs. 2,68,767 equivalent to basic customs duty on 72.635 MTs of TFS defective sheets. They had paid an amount of Rs. 23,04,423 towards additional duty on TFS defective sheets and total customs and additional duty on 152.239 MTs on tin plates defective sheets. Ld. Consultant also invited our attention to page 61 to 64 of the paper book in which opinion has been given by the scientist from NML. They also submitted that the goods were under OGL on whatever category and no classification dispute was also involved as the goods were same. On a question whether the goods are waste/waste, he invited our attention to page 173 and submitted that the answer were given as per the clarification sought from them. He also invited out attention to page 174 to the question posed by their adjudicating authority and the answer given by Dr. S. Srikanth of NML. The adjudicating authority has asked that in his report dated 16.7.2001 he only said that the goods are not waste-waste and then what exactly the goods are? He answered that the goods can be classified as standard grade electrolytic tinplate and first grade tin free sheets respectively. This opinion was applicable to 70% of TP and 100% of the TFS.
9. On a question asked from the advocate, Dr. Srikanth Scientist of the NML had stated that the basis for the above answer is subscribed in IS 12591-1988 and IS 1993-1993 for verification of grades. Ld. Consultant Shri K.L. Rekhi took us to page 73 & 74 of the paper book and specifically to para 2.5.1, 2.5.2 and 2.5.3. and pointed out the various explanation given in the Indian Standard Glossary of Terms for Cold Reduced Tin Plate and Cold Reduced Black Plate and that the expert opinion given by Dr. Srikanth is not matching to the Indian Standard as deposed by him during the cross-examination. Ld. Consultant also took us to para 2.5.3.1, 2.5.3.2, 2.5.3.3 about 3rd grade opinion of the description mentioned in the Indian Standard are matching to the goods to the period given by them. Therefore, the opinion given by the scientist of the NML cannot be relied upon. He also invited our attention to page 42 of the Order-in-Original in which it has been made clear that they have imported unasorted size and none of their product are of uniform lot. He therefore invited our attention to para 4 of the order in which they have produced expert opinions from Department of Metallurgical Engineering, NT, Chennai and Dr. N. Krishnaraj, Consultant, Metallurgist, Chennai and Dr. V. Mohan, Proprietor, M/s. V.M. Enterprises.
These opinions obtained by the importers were forwarded to National Metallurgical Laboratory who confirmed their initial opinion that the entire quantity of Tin Free Sheets was not waste and 39% of the Tin Plate Sheets can be considered as waste and balance quantity was not waste. This opinion was given by the Scientist of the NML without any basis and without any authoritative book. Ld. Consultant invited our attention to page 63 & 64 of the report of the scientist and submitted that the dimensions in mm of each package is different from the other package and, therefore, there is no doubt that their stock lots are having defects and even some of them are having rusted spots and are not prime quality product since the stock lot value is declared by them and have to be accepted. He also submitted that out of 11 packages 7 packages were found with defective goods and 4 packages found with defects but not of much significance. He also invited our attention to Page 43 and the finding of the examination of the goods done by the team of experts and the report indicates that TFS consisted of assorted sizes and mixed sizes. There were surface defects such as roll marks, pin holes, wrinkles and dents are noticed in a number of places. They also pointed out and invited our attention to the defects and observation made by the scientist with regard to TFS which consists of packages with different sizes, different thickness and with different surface finishes. The TFS were found to be of mixed sizes, mixed tempers, mixed thickness and mixture of bright, matte finishing. Ld. Consultant also invited our attention to the finding given by the experts Dr. K. Prasad Rao, Department of Metallurgical Engineering, NT, Madras, Chennai vide his report dated 1.8.2001 and the affidavit dated 1.8.2001 from Dr. N. Krishnaraj and Dr. V. Mohan dated 4.8.2001. All these reports are favourable to the assessee. Even the report from the scientists of NML which is at page 63 & 64 of the paper book are also favourable to them. He also invited our attention to the defects of waste-waste in para 2.5.6 at page 74. He therefore argued that there need not be significant defect in the material once their defect is categorised as waste as per the Indian Standard and they had to be categorised was waste-waste. Even NML has certified them to be of 3r grade quality.
He further submitted that there is no dispute on classification and dispute is limited to the value of the product and also the finding that the goods are of prime quality. Ld. Consultant submits that no authority has supported the view of the Department that they are prime quality product. He also invited our attention to para 12 of the Order-in-Original and informed us that the direction to the Commissioner in view of lack of the meeting point among the experts was to get it referred to the 3rd party. The Commissioner did not act on this direction of the Hon'ble Tribunal who felt that bringing a 3rd expert into the matter will not resolve the problem because any opinion expressed by a third expert would also be contested by one of the present experts that is NML or by Dr. Prasad Rao. He, therefore, submitted that the direction as contained by the Hon'ble Tribunal has not been followed by the Commissioner, by giving some justification. He also invited our attention to page 78 of the paper book and informed that it has been mentioned that they had imported one consignment and there was only one entry in the bill of entry in respect of the 159 packages. He also submitted that not even one package was valued with the dimension of the other package. He submitted that NML took up 11 packages and each package was having different dimensions as could be seen from the report given by them. He also invited our attention to para 5 of the Order-in-Original in which Ld. Commissioner has treated 159 consignment as of the same dimension which is factually incorrect. He further submitted that they were of different sizes within the packs and there were visible defects though not of much significance as held by NML. He also invited our attention to page 16 & 17 of the Order-in-Original and pointed out that the findings by the Ld. Commissioner are factually incorrect. Since the goods which have been compared, are not of the same size, they cannot be compared with the value of the non-comparable goods and the Commissioner cannot go to Rule 8 without exhausting Rule 4(1) and without bringing the transaction value within the mischief of Rule 4(2) of the Customs Valuation Rules and it is only when transaction value under Rule 4(1) cannot be accepted then only he has to go sequentially to Rules 5 to 8 of the Customs Valuation Rules.
The Commissioner has gone wrong in determining the value under Rule 8 of the Customs Valuation Rules. Ld. Commissioner in para 17 of his order had tried to compare with the price in respect of goods which were of uniform size and grades and since there was no contemporaneous import the transaction value cannot be discarded. He further submitted that since there is no suppression of the facts, the goods are also not liable for confiscation under Section 111 of the Customs Act and the importers are not liable to penalty under Section 112(a) of the Customs Act, 1962. Ld. Consultant relied on the judgment rendered by the Tribunal in the case of CC, Calcutta v. Bharat Teachest Industries 2000 (123) ELT 851(T) and the Apex Court judgment rendered in the case of Eicher Tractors Ltd. v. CC, Mumbai . He further submitted that under Sub-rule (1) of Rule 4, acceptance of transaction value is binding on the departmental authorities unless transaction value is hit by the mischief of Sub-rule (2) of Rule 4 of the Customs Valuation Rules. Ld. Consultant relied on the judgment rendered by the Apex Court in the case of HMM Ltd. v. CCE and since they did not have any mala fide in the importation of these goods, the transaction were transparent and no penalty can be imposed on them.
10. Ld. SDR Shri G.S. Menon reiterated the findings contained in the order passed by the Ld. Commissioner and submits that the goods are other than waste-waste. The opinion of Dr. Srikanth, Scientist of NML who constituted the penal and who is the senior-most scientist cannot be faulted with as the NML is an autonomous organisation and his report has to be accepted. He invited our attention to packing list at page 191 and para 9 of the order passed by the Ld. Commissioner. He further submitted that the floor price of 465 US $ MT is same for all the goods and they have already paid duty at the rate of 465 US $ MT.
11. We have considered the submissions made by both the sides and come to a conclusion that the Department has not chosen to refer the matter to the 3rd expert since there was difference of opinion between the scientists of NML and the experts of IIT, Madras who had given reports favourably to the assessee. We also find that the reports given by scientists of NML who have found various defects though not of much significance. Therefore, the goods cannot be said to be of prime quality and some of the goods were found to be of 3rd quality by the scientists of NML. We also observe that the lots were not of uniform size and dimensions and there are no contemporaneous imports and the Department has not categorically found that the transaction value was not acceptable under Rule 4(1) and they have not given any reasons. The revenue has also not found that the imported goods were covered under mischief of Rule 4(2) of the Customs Valuation Rules, 1988 and until goods are covered in the exception as contained in Rule 4(2) of the Customs Valuation Rules, the transaction value is binding under Rule 4(1) and cannot be discarded. We therefore, find force in the submission made by the Ld. Consultant Shri K.L Rekhi assisted by Shri A.S. Sundararajan. Their case is fully covered by the judgment rendered by the Tribunal in the case of CC, Calcutta v. Bharat Teachest Industries (supra) and the Apex Court judgment rendered in the case of Eicher Tractors (supra). Since there is no mis-declaration the goods are also not liable for confiscation under Section 111(m) of the Customs Act. We, therefore, set aside the redemption fine of Rs. 10 lakhs imposed under Section 125 of the Customs Act, 1962. Since there is no mis-declaration or suppression from the Department no penalty can also be imposed on them in view of the judgment rendered by the Apex Court in the case of HMM Ltd. (supra) under Section 112(a) of the Customs Act, 1962. We also set aside the order of enhancement of unit price of Tin Free Sheets and Tin Plates in terms of Rule 8 of the Customs Valuation Rules, 1988. In view of the above facts and circumstances, the order passed by the Ld. Commissioner is set aside with consequential relief, if any, as per law. Ordered accordingly.