Custom, Excise & Service Tax Tribunal
) Indo Deutsche Trade Links vs Commissioner Of Customs (Imports) on 11 February, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH
CHENNAI
Appeal Nos. C/218 to 225/2010 & C/231/2010
[Arising out of Order-in-Original No.10191/2009 dt.13.11.2009, OIO No.10617/2010 dt. 21.12.2009, OIO No.10618/2010 dt. 1.12.09, OIO No.10620/2010 dt. 21.12.09, OIO No.10826/2010 dt. 7.1.2010, OIO No.10828/2010 dt. 1.12.2009, OIO No.10829/2010 dt. 1.12.2009, OIO No.10830/2010 dt. 7.1.2010, OIO No.10831/2010 dt. 7.1.2010 passed by the Commissioner of Customs (Seaport-Import), 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 ? :
1) Indo Deutsche Trade Links Appellant
2) Uni Interlinks
Versus
Commissioner of Customs (Imports)
Chennai Respondent
Appearance:
Shri P. Saravanan, 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 : 06-11-2013 Date of Pronouncement :11-02-2014 FINAL ORDER No.40093-40101/2014 Per Mathew John
1. Nine appeals are being considered in this proceeding. Out of these, 8 appeals are filed by one appellant and another appeal by another appellant. All the appeals involve the same issue and hence are being considered in the same proceeding. These appeals involve imports made under 10 Bills of Entries out of which two were filed in June 09 and 8 Bills of Entries were filed in Oct 2009.
2. The appellants had imported nine consignments of goods declared as Heavy Melting Scrap and claimed classification of the goods under heading 7204 of Customs Tariff. Goods falling under this heading could be imported free of any licensing restriction. Further the appellants claimed exemption from basic customs duty under Notification 21/2002-Cus (S. No. 200) for Melting Scrap of Iron and Steel falling under heading 7204 of the Customs Tariff. On examination the goods were found to be used rails of assorted sizes (The sizes are not recorded in the impugned orders). Revenue was of the view that such goods were classifiable under heading 73021090 with the consequences that a license would be required for import of such used goods and the concessional rate for basic customs duty under Notf 21/2002-Cus (S. No. 200) would not be available to the appellants. Further the Revenue made out a case that the description of the goods were mis-declared and hence value declared on the Bills of Entry could not be accepted. So value was enhanced on the basis of value of similar goods imported around the time of import of the disputed goods. The goods were confiscated under sections 111 (d) and 111 (m) of the Customs Act, 1962 read with section 3 (3) of the Foreign Trade (Development and Regulation Act, 1992. and allowed to be redeemed on payment of varying fines, under section 125 of the Customs Act, for each consignment. Further penalties for varying amounts for each consignment were imposed under section 112 (a) of the Customs Act, 1944. Aggrieved by the orders of the adjudicating authority the appellants have filed these appeals. The appellants are contesting all the three issues, namely, that the goods were not restricted for imports, that goods were eligible for exemption under notification 21/2002-Cus (S. No. 200) and that the transaction value should be accepted without any loading.
3. The Counsel for appellants submit that the dispute regarding classification involved in this case has been decided by the Tribunal in favor of the appellant in the case of Hinduja Foundries Ltd reported at 2013 (288) E.L.T. 571 (Tri. Chennai) and pleaded that the appeals may be allowed following the said decision. He basically relied on the arguments recorded by Tribunal in favour of the importer in that case.
4. Since the matter appeared to be covered by the decision of the Tribunal in the case of Hinduja Foundries both sides were heard briefly and were asked to give written submissions. Both sides have given written submissions and the appeals are being decided on the basis of submissions during hearing and also in written submissions apart from the case records.
5. In the matter of valuation the Ld. Advocate for appellants submits that the transaction value was rejected for the ground that the description of goods was mis-declared. Once it is accepted that these goods are Melting Scrap of Steel there is no mis-declaration involved and hence the ground for rejection of transaction value becomes unsustainable. He also submits that Revenue has not produced any proof of additional remittance of any consideration. He also argues that scrap of metal imported in different consignments, that too at different points of time, cannot be compared.
6. Opposing the prayer of the appellants the Ld. A. R. for Revenue pleads that the following facts may be taken note of:-
(i) Importers in these appeals are traders
(ii) Importers admitted the mis-declaration of the goods. i.e. Used Rails were imported in the guise of Heavy Melting Scrap, which was found on examination of the goods to be Used Rails of assorted sizes. Thus there was an attempt to wrongly avail the benefit of Notifn.21/2002-Cus (Sl.No.200) by above said mis-declaration.
(iii) Goods being classifiable under CTH 7302, the ITC restrictions on import of used items, not being Capital Goods, are applicable vide Para 2.17 of Foreign Trade Policy of the relevant period.
(iv) The value of goods was enhanced as per the value admitted @ US$ 418/MT CIF by the importer as against a declared value of US$ 350/MT(C&F) on the Bills of Entry.
(v) Accordingly, goods were reclassified under 73021090 and ordered for reassessment at the enhanced value of US$418/MT CIF; along with imposition of Redemption Fine and Penalty.
7. He points out that in the case Hinduja Foundries Ltd (Supra) to arrive at the decision to classify Used Rails under 7204 the Tribunal placed reliance on two factors, namely,-
(i) DGFTs decision to classify said goods under 7204; and
(ii) the importer in that case was an actual user who intended to melt the goods and was apparently not a re-roller.
8. He argued that in this case the importers are traders and hence the concession given to actual user cannot be extended to a trader. Secondly he produced copy of Notification No. 36 (RE-2012)/2009-14 dated 28-02-2013 issued by DGFT. Para 3 of the notification clarifies that the effect of the notification as under:
Used Rails, including cut rails of all lengths, will be classified under Chapter 73 of ITC (HS). Import of Used Rails is free subject to pre-inspection condition.
9. He argues that in view of the above new facts the decision in the case of Hinduja Foundries (Supra) should be reviewed for laying down the classification correctly, at least as applicable to this batch of appeals.
10. The Ld A. R. submitted his arguments both relying on,-
(i) the Section Notes, Chapter note and Interpretative Rules of the Customs Tariff; and
(ii) HSN Notes.
11. The first type of arguments are as under:-
As per Section Note 8 of Customs Tariff, Waste and Scrap has following meaning:-
(a) Metal Waste arising from the manufacture or mechanical working of metals and metal goods definitely not usable as such because of breakage cutting up, wear or other reasons.
12. According to Ld. A. R. the first category of inclusion refers to waste and scrap from the manufacturer or mechanical working of iron or steel (example crop and filings and turnings). The second category refers to Waste and Scrap arising from Articles of Iron or Steel. Such articles to be called waste and scrap, have to,-
(i) be definitely not usable because of reasons breakage, wear etc.
ii) be adapted for the use primarily of melting by undergoing processes mentioned therein.
(These are defective arguments because the words as such appearing in the note are omitted for building the argument. Further the note does not say that the waste and scrap has to undergo any specific process to make it suitable for melting. The fact that the goods had undergone the processes of wear and tear and cutting are ignored for raising this argument.) Arguments based on HSN Notes.
13. He relies on HSN Notes under heading 72.04 reading as under:
(A)?WASTE AND SCRAP The heading covers waste and scrap of iron or steel, as defined in Note 8(a) to Section XV. Such waste and scrap of iron or steel is of a miscellaneous nature and generally takes the form of:
(1)?Waste and scrap from the manufacture or mechanical working of iron or steel (e.g. crop ends, filings and turnings) (2)?Articles of iron or steel, definitively not usable as such because of breakage, cutting-up, wear or other reasons; iron or steel waste and scrap is usually prepared by means of the following processes, in order to adapt it to the dimensions and qualities required by the users :-
(a) Shearing or flame-cutting of heavy and long pieces
(b) compression into bales, particularly in the case of light scrap, using for example hydraulic press
(c) Fragmentation (shredding) of motor vehicle bodies and other light scrap, followed by separation (which may be magnetic) with a view to obtaining a high density product that is fairly clean
(d) Crushing and agglomeration into briquettes of iron and steel filing and turnings
(e) Breaking up of old iron articles.
Waste and scrap is generally used for the recovery of metal by remelting or for the manufacture of chemicals.
But the heading excludes articles which, with or without repair or renovation, can be re-used for their former purposes or can be adapted for other uses; it also excludes articles which can be refashioned into other goods without first being recovered as metal. Thus, it excludes, for example, structural steel work usable after renewal of worn-out parts, worn railway lines which are usable as pitorops or may be converted into other articles by re-rolling; steel files capable of re-use after cleaning and sharpening.
14. He relied on HSN Notes under heading 73.02 reading as under:
This heading covers iron or steel railway and tramway track construction material, whether of normal or narrow gauge.
(1) Rails for railways or tramways are hot-rolled products. The heading covers all lengths of such rails including bullhead rails, flange (or flat-bottomed) rails, grooved tram rails, slot rails for electric tramways and conductor-rails etc. This heading covers all rails of the type normally used for railway or tramway track irrespective of their intended use (overhead transporters, mobile cranes, etc.). It does not, however, cover rails not of the railway or tramway type (e.g. sliding door rails and lift rails).
15. It is argued that as per HSN Notes for 7204, waste and scrap classified thereunder is of miscellaneous nature. Hence used rails of assorted sizes cannot fall under this heading.
(This again is not a correct argument. The note implies that different types of waste fall under the heading. This note does not imply that every consignment of waste should have miscellaneous items in it).
16. Further to the submissions on HSN 7204, it is submitted that HSN 7302 specifically covers goods described as Rails and the heading covers all lengths of such rails, accordingly, goods in question are classifiable under 7302 in terms of The General Rules for the Interpretation of Import Tariff.
17. He argues that two categories of goods are excluded from heading HSN 7204 viz.,
(i) Articles which can be reused without repair/renovation for former or can be adapted for other purposes. Articles, being not yet adapted for the said purpose, are covered under the exclusion. Had they undergone the process of adaptation, merit classification under 7204.
(ii) the purpose stands for use as waste & scrap for melting. Used Rail cannot be used for melting without breaking the same, per se it is not in the nature of waste & scrap under 7204 as it is not yet to adapted to the purpose of use as waste & scrap for melting.
(iii) Articles which can be refashioned into other goods without first being recovered as metal also excluded from 7204. Examples provided for such refashioning include worn railway lines that can be used in re-rolling.
18. According to the Ld. A. R. If the first category of exclusion refers to old articles not in the nature of being amenable to refashioning/rerolling and also not adapted to the purpose of use as waste & scrap for melting, the second category essentially refers to articles in the nature of re-rollable scrap, which is also separated from the purpose of use as waste & scrap for melting for the reason that the same is not adapted to the said purpose. In second category of cases, Re-fashioning or re-rolling is possible without first being recovered as metal.
19. He also relies on the decision of Honble Supreme Court in the case of Commissioner of Central Excise Vs. Bhushan Steels and Strips Ltd. [2010 (257)ELT 5 (SC)]. Relevant findings are reproduced below.
12.?The Tribunal neither accepted the contention of the counsel for the assessee to place the items in question under Heading 72.04 as waste and scrap nor did it accept the contention raised by the Revenue that the disputed items were liable to fall under Headings 72.08, 72.09 and 72.11. Following the judgment of this Court in L.M.L. Ltd. v. CCE the Tribunal held that in view of the definition of waste and scrap given in Chapter 72 of the Tariff Act, the items in dispute would not fall under Heading 72.04 as the same are usable as such; that if iron and steel items were fit for any purpose other than recovery of metal or for use in the manufacture of chemicals, they could not be termed to be waste and scrap; that only the metals or metal goods definitely not usable as such, could fall under heading waste and scrap under Heading 72.04. It was further held that though offcuts which are usable would be liable for payment of duty but the same would be under Heading 72.16, as had been held in L.M.L. Ltd. case (72.16 is equivalent to 72.10 L.M.L. Ltd. case) and not under Headings 72.08, 72.09 and 72.11, as had been contended by the Revenue. The assessee has accepted the findings recorded by the Tribunal and has not come up in appeal. 15.?We agree with the view taken by the Tribunal. HSN Explanatory Notes in Chapter 72 provide that waste and scrap is generally used for the recovery of metal by re-melting or for the manufacture of chemicals. It further provides that Heading 72.04 excludes articles which, with or without repair or renovation, can be reused for their former purposes or can be adapted for other uses; it also excludes articles which can be refashioned into other goods without first being recovered as metal.
16.?It is apparent from the reading of HSN Explanatory Notes that if the goods can be reused without first being melted, are excluded from the purview of Heading 72.04. Accordingly, in the given facts of that case, Hon Court went on to hold that They would also not fall under Tariff Entries 72.08, 72.09 and 72.11 as the offcuts are of different shapes and sizes and would not fall under these tariff items. Thus, the Tribunal has, and in our view, rightly held that the side slittings, end cuttings and others will be classifiable under Heading 72.16 of the Schedule to the Tariff Act being offcuts of different shapes and sizes.
20. It is argued that classification of goods in question cannot be with reference to the way it is old or used. They have to be classified as per their description i.e. Rails since Additional Notes to the General Explanatory Notes to Import Tariff mandates that heading, subheading and tariff item mean description of goods. It means an article, as long it is described by its generic name, say, RAILS having not undergone the adaptation by said processes, would not be classified as Waste and Scrap of 7204.
(Here we note that this is a defective argument because the Additional Notes reads as under:-
heading, in respect of goods, means a description in the list of tariff provisions accompanied by a four digit number and includes all sub-headings of the tariff items , the first four digit of which correspond to that number The note implies that heading numbers specified in the tariff and descriptions in the tariff have to be read together. The note also implies that that a heading includes sub-headings under it.)
21. Further, the Ld A. R argues that classification cannot be based on intended use goods was confirmed in the case of Sarvalakshmi Paper & Board 2000 (126) ELT 935 (Tri.). In the subject case, goods imported were used Rails, its intended use has no significance for classification.
22. As regards value, the value of goods was enhanced as per the value admitted by the importer / Appellant @ US $ 418/MT CIF as against a declared value of US$ 350/MT C&F.
23. Further to above submissions, the findings in O-in-O on confiscation of goods under Sec 111 (d) and (m) of Customs Act, 1962 and subsequent order for redemption fine and penalty were reiterated.
24. We have considered submissions on both sides. The disputes in this appeals are on the following issues,-
(i) Whether the goods were restricted for import under the import policy;
(ii) Whether the goods were eligible for exemption under notification 21/2002-Cus (S. No. 200) exempting Melting Scrap of Iron and Steel falling under chapter 72;
(iii) Whether there was under valuation of goods.
Restriction on import of goods
25. The classification of products commonly known as re-rollable and industrial scrap which can be used for purposes other than melting has been under dispute between trade and CBEC since 1983 as recorded in para 16 of the order in the case of Hinduja Foundries (Supra). During the period of import under these appeals, if the goods were classifiable under heading 72.04 the goods were freely importable. If the goods were classifiable under 73.02 the goods were restricted for import. It is to be noted that this restriction comes on account of the fact that the goods were old and used and the general rule for allowing import was that any goods, other than capital goods, which were old and used were restricted for import. For scrap which is in the nature of raw material relaxation from import was given but such policy was incorporated in chapter 72 and not in chapter 73. It is a not a case where there was a policy backed by statute to restrict import of re-rollable scrap as against policy backed by statute for allowing free import of melting scrap. While deciding the case of Hinduja Foundries Ltd (Supra) in para 12 of the order notes that in the meeting of EXIM facilitation Committee held on 16-02-2012 by the DGFT it was clarified that such goods are freely importable because they are classifiable under heading 72.04. Now the Ld A. R. for Revenue has produced Notification No. 36 (RE-2012)/2009-2014 dated 28-02-2013 permitting import of used rails including cut rails of all lengths, under ITC (HS) Code 7302 is free subject to certain condition regarding radiation levels of the goods. This implies that DGFT has changed its stance on classification of goods but not on the fact that the policy was to allow its import without license. In matters relating to import policy the clarification issued by DGFT should prevail. So we do not find any reason to hold that these goods were restricted for import during the relevant time, especially because during the relevant time DGFT was of the view that the goods were classifiable under heading 72.04 and allowed to be freely imported.
Dispute Regarding Rate of duty applicable
26. Issue of classification cannot be proved by admission. If it is decided that these goods cannot be considered to eligible for exemption then only the charge of mis-declaration gets support.
27. For this issue the situation is that if the goods were considered to be Melting Scrap of Iron and Steel falling under chapter 72 basic customs duty was exempted under notification 21/2002-Cus (S. No. 200). Revenue submitted two arguments. First argument was that the goods were suitable for re-rolling and hence it could not be considered as Melting Scrap. Second argument is that HSN notes under heading 72.04 exclude worn railway lines which are usable as pitorops or may be converted into other article by re-rolling. So if HSN notes are taken into account the goods imported could not be classified under heading 72.04.
28. We have considered all the arguments given by the Ld. A. R. against classification under heading 72.04. We do not find anything in the arguments based on Section Notes, Chapter notes and descriptions of heading in the Traiff which is against the decision in Hinduja Foundries. The reasons are already recorded in the appropriate paragraphs above. Submission of the Ld. A. R. that HSN notes under heading 72.04 excludes worn railway lines which are usable as pitorops or may be converted into other articles by re-rolling is the only argument of merit.
29. The Tribunal in the case of Hinduja Foundries (Supra) took note of the fact of exclusion of used rails from 72.04 as per HSN notes but still decided that the classification should be under 72.04 for the following main reasons :-
(i) The Tribunal in various decisions involving import of re-rollable scrap has upheld classification under 72.04 as may be seen in the following decisions:-
(a) Sujana Steels and Pipes Ltd Vs. CCE-2000 (115) ELt 539 (Tri)
(b) CCE Vs. Rimjhim Isapat Ltd -2005 (183) ELT 283)
(c) Shiva Ispat Udyog Vs. CC 2010 (254) ELt 297 (Tri-Kol)
(ii) There is no change in Tariff descriptions or description in notification which would warrant a change in practice
(iii) There had been frequent change of opinion among the authorities and the authorities about classification of the goods whether under 72.04 or 73.02
(iv) Between the two different competing headings 72.04 and 73.02 , 72.04 is more appropriate because the goods are more in the nature of scrap and not in the nature of rails
30. The position is that the goods were cut used rails as per the submission of the appellants as seen recorded in the impugned orders. As per examination report the goods were used rails of assorted sizes. From this it is evident that the goods were not suitable for use as rails. Revenue also has not produced any evidence that these goods were capable of use as rails. The dispute is whether the goods could be given exemption meant for Melting Scrap. After considering the various arguments and precedent decisions dealt with elaborately in the decision of Hinduja Foundries, Tribunal came to the conclusion that the goods were more in the nature of scrap and not in the nature of rails.
31. We do not see any reason to change our view. This decision is not in conflict with any Section Note or Chapter Note or Interpretative Rules for Tariff. In the decision of Hiduja Foundries Ltd also the Tribunal had noted that the decision is not entirely in conformity with HSN notes under Heading 72.04. But Tribunal adopted the heading 72.04 for the reason that when a choice is between 73.02 for Rails and 72.04 for Scrap the more appropriate heading is 72.04. Here the Interpretative Rules for the Tariff are in favour of classification under 72.04 and not under 73.02 because the nature of goods is that of scrap and not of rails. The decision of the Hon Apex Court in the case of TISCO Vs CCE 1995 (75) ELT 3 (SC) is also to the effect that defective rails cannot be considered as rails though this decision is with reference to the old Central Excise Tariff. Though this decision was in the context of old Central Excise Tariff the Tribunal had taken note of this decision while arriving at the decision in Hiduja Foundries. The decision of the Apex Court in the case Bhusan Steel and Strips decided classification of the particular type of waste involved in that case, between different heading in chapter 72 and it is not a decision to choose between a heading under headings in chapter 72 and chapter 73. Here it is to be noted Chapter 72 of the Customs Tariff only have headings for waste and scrap and not chapter 73 which covers various articles of iron and steel. The Tribunal had also noted that the Finance Ministry was originally classifying re-rollable scrap under 72.04 as is evident from S. No. 201 of Notification 21/2002-Cus as was issued originally. Originally there was condition for monitoring end use of the goods against both S. No. 200 of the notification to ensure that the goods were actually melted. The end use conditions got omitted later. This change indicates a policy change from strict monitoring of the actual use of imported scrap of iron and steel scrap. Entry 201 which specifically covered cut and used rails also got omitted .
32. Further in view of competing arguments and in a matter were the CBEC and DGFT has been changing its stand the Tribunal adopted for maintaining consistency with past decisions.
33. The classification of the goods cannot be decided with reference to the type of importer though rate of duty can be with reference to end-use if suitable condition is prescribed. Since end-use conditions are not prescribed we do not see any reason to take any different decision for the present importers who are traders as against Hinduja Foundries Ltd who was an actual user for melting of the goods.
34. So we consider it proper not to deviate from the earlier decisions of the Tribunal in the matter. So the issue of rate of duty for levying basic customs duty is also answered in favour of the appellants.
35. Now there is a question to be decided whether the value loaded for assessment is sustainable because duty other than basic customs duty was payable even when exemption under notification 21/-2002-Cus (S. No. 200) is extended. The only reason for increase in value made is mis-declaration in description of goods. No evidence of additional remittance of money is brought out. Also there is an issue scrap is not a type of goods which can be easily compared. The appellants have also taken objection that the time of import of the comparable goods taken was also different and hence the value adopted for assessment has no legal basis. Revenue argues that the appellants accepted the increased value before clearance and hence they cannot challenge it now. No record showing acceptance of increase in value is brought on record. So we do see merit in the arguments of the appellants and this issue is also decided in favor of the appellants. In this matter we take into account the fact that there is no adequate material to reject the transaction value and follow the decision of the Tribunal in CC Vs. D. M. International -2009 (237) ELT 306 (Tri-Del). So duty other than basic will be payable on value as rightly declared by the importer.
36. Therefore, we set aside the impugned orders and allow the appeals in the above terms.
(Pronounced in open court on 11-02-2014)
(MATHEW JOHN) (P.K.DAS)
TECHNICAL MEMBER JUDICIAL MEMBER
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