Customs, Excise and Gold Tribunal - Tamil Nadu
Ars Metals (P) Ltd. vs Cce on 20 April, 2004
Equivalent citations: 2004(170)ELT227(TRI-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. M/s. A.R.S. Metals (P) Ltd. (Appellants in Appeal No. C/2556/94) had filed Bill of Entry No.5281 dated 15.2.93 through their CHA, M/s. Saravana Shipping Services (P) Ltd. for clearance of 211 MTs of what was declared as "Bushling Steel scrap" (BS scrap, for short) imported from Singapore. The goods were cleared at Customs on payment of duties of customs at rates applicable to sub-heading 7204.49 of the Customs Tariff. The goods were cleared in 10 containers. Four of these containers were received in the appellants' factory and destuffed some time before 23.2.93. Officers of Central Excise, who visited the factory on 23.2.93 and noticed that only 4 containers had been received there, were told by Sri Puneet Bhatia (Director of the appellant-company and appellant in Appeal No.C/2557/94) that 6 more containers were yet to be received. On 23.2.93 itself, the officers seized certain documents from the premises. Subsequently, the six containers were received in the factory and were unloaded in the presence of Central Excise officers and representatives of the company, namely, Puneet Bhatia (Director) and Rajesh Kumar Jha (Supervisor). All the imported/destuffed goods (from all the 10 containers) were segregated into BS scrap and other goods viz. tin-coated discs, tin-coated sheets, zinc-coated sheets, zinc-coated coils and uncoated coils and were separately weighed. This was done in Mahazar proceedings dt 5.3.93 of Central Excise officers, witnessed by Sh. Puneet Bhatia and independent witnesses. The "other goods" weighed 55.315 MTs, leaving the weight of BS scrap to be estimated as the difference, 211-55.315=155.685 Mts. It was believed by the officers that the tin/zinc-coated materials and the uncoated coils were not scrap out serviceable goods and the same had been imported by the appellants by misdeclaring the goods as scrap with intent to evade payment of customs duty applicable to serviceable goods. Accordingly, the entire materials were seized under the Mahazar. Statements of Sri Puneet Bhatia were recorded from time to time. He consistently stated that the seized materials, whether uncoated or coated with zinc/tin, were only rusted, dented steel scrap meant for only melting in furnace for the manufacture of MS ingots. A statement of one Shri K. Ganesan, Accountant in the appellant-company, was also recorded, wherein he stated that the company had not imported zinc-coated or tin-coated sheets or coils or uncoated coils along with BS scrap prior to 23.2.93. Statements of certain other persons were also recorded by the investigating officers. Subsequently, as per order of the Collector of Central Excise dated 3.5.93 as modified by judgment dated 15.7.93 of the Madras High Court, the BS scrap weighing 155.685 MTs was provisionally released to the appellants on 6.8.93 against a bond for Rs. 7,43,000/- and a bank guarantee for Rs. 1,85,745/-.
2. From the results of investigations, it appeared to the department that the appellants had misdeclared the goods in their Bill of Entry and had smuggled the tin/zinc-coated materials and the uncoated coils, totally weighing 55.315 MTs, by concealing the goods with BS scrap. It, further, appeared to the department that the appellants had done so with intent to evade payment of customs duty at the higher rate applicable to such goods as against the low rate of duty for steel scrap. The department, accordingly, held that "other goods" to be liable to confiscation under Section 111 of the Customs Act. the BS scrap was also held to be liable to confiscation under Section 119 of the Act as it was allegedly used for concealing the "other goods". Further, appellants were held to be liable for penalty under Section 112 of the Act. Accordingly, show-cause notice dt. 25.8.93 was issued under Section 124 of the Act for confiscating the seized goods and imposing penalty on the company and its Director (Sri Puneet Bhatia), apart from recovering differential duty of Rs. 9,76,622/- on the imported goods. The demand of duty and other proposals in the show-cause notice were contested. In adjudication of the dispute, the Collector passed an order, the operative part whereof reads as under:
"I confiscate the seized Tin coated discs/sheets, zinc coated sheets/coils, un-coated coils, etc. totally weighing 55.315 MTs valued at Rs. 7,62,551/- under Section 111 (d), (f) (I) & (m) of the Customs Act, 1962 and allow M/s. A.R.S. Metals (P) Ltd. to redeem the same on payment of redemption fine of Rs. 1,00,000/- (Rupees One lakh only) within a period of 3 months from the date of receipt of this order.
I also confirm Rs. 9,76,622/-, being the differential duty from M/s. A.R.S. Metals (P) Ltd towards 55.315 MTs of zinc/tin coated sheets/coils and uncoated coils under Section 28 of the Customs Act, 1962.
I also confiscate 155.685 MTs of Bushling scrap imported under Bill of Entry No. 5281 dtd. 15.2.93 (HC 0203924 dt. 20.02.93) under Section 119 of the Customs Act, 1962. However, I allow the same (detained and provisionally released under bank grantee) to be redeemed on a fine of Rs. 40,000/- (Rupees Forty thousand only) within a period of 3 months from the date of receipt of this order.
The Bank guarantee furnished by M/s. A.R.S. Metals (P) Ltd., for Rs. 1,85,745/- may be adjusted for the redemption fine.
I also impose a penalty of Rs. 1,00,000/- (Rupees One lakh only) on M/s. A.R.S. Metals (P) Ltd., and Rs. 25,000/- (Rupees Twenty five thousand only) Shri Puneet Bhatia under Section 112 (a) of the Customs Act, 1962."
Appeal No. C/2557/94 of Sri Puneet Bhatia is against the penalty imposed on him as per the last paragraph of the above order. Appeal No. C/2556/94 of the company is directed against the rest of the order.
3. The adjudicating authority did not accept the contention of the importer that the seized goods were only steel scrap. In this connection, the Collector relied on the definition of "scrap" under the HSN notes to Chapter 72 and also on his own visual observation of the goods, which were inspected by him at the request of the importer in the factory on 2.12.93. The learned Collector also relied on a test report of the Chemical Examiner. The contention of the appellants to the effect that the goods were segregated only under the instructions of departmental officers and, till then, they were not aware of the presence of tin/zinc-coated materials and uncoated coils in the consignment and, in the circumstances, they could not be held to have any malafide intention of smuggling such goods was also not acceptable to the learned Collector, who, in this connection, relied on the Mahazar dated 5.3.93 which, stated that, before the arrival of the officers in the factory on 23.2.93, the goods had already been destuffed from containers and kept 'separately' in the factory premises. It also appears from the impugned order that the request of the appellants for mutilation of the seized 55.315 MTs of materials under Section 24 of the Customs Act was turned down on the ground that the said materials viz. tin/zinc-coated and uncoated materials were usable as such. Ld. Collector was not agreeable for mutilation of the materials on the further ground that the goods had been imported by misdeclaration. He held that, once the goods were treated as contraband, the question of mutilation would not arise.
4. Heard both sides. Ld. Counsel for the appellants submitted that the imported goods had been entirely shown in all shipping documents as scrap only and that there was no documentary evidence of misdeclaration of any part of the consignment. The appellants had ordered for purchase of scrap only and declared the goods as scrap in the Bill of Entry on the basis of the shipping documents. All the goods were, indeed, scrap only. Without prejudice to this claim, counsel submitted that the decision of the adjudicating authority not to allow mutilation of the seized goods was not in accordance with the law laid down by the Hon'ble Supreme Court and the Hon'ble Calcutta High Court. In this connection, Counsel relied on the following decision :-
1) Union of India Vs Shine Woollen Mills (P) Ltd., 1999 (111) ELT 321 (SC)
2) Lakhotia Udyog Vs Union of India, 1992 (58) ELT 385 (Cal.)
3) G.H. Shaikh Vs CC, Pune, 2003 (151) ELT 190 (Tri-Mumbai) Referring to the chemical test report, the learned Counsel submitted that the said report provided no basis for the Collector's finding that the goods in question were serviceable. According to learned Counsel, the report of the Chemical Examiner was not reliable inasmuch as his laboratory was not equipped to determine whether the samples were of Iron/Steel. Counsel also faulted the Mahazar proceedings of 5.3.93. Further, he cited instances of the Departmental authorities having allowed mutilation of imported goods in similar circumstances.
5. Ld. DR relied on the Mahazar dated 5.3.93 in support of the department's case that, by the time the officers of the department visited the factory, the appellants had already destuffed the imported goods from the four containers and segregated them into scrap and non-scrap materials, which, according to DR, clearly brought out the malafide intention of the party to evade payment of duty by importing serviceable goods in the guise of scrap. Ld DR also submitted that the decisions cited by the counsel on the mutilation issue were not applicable to the facts of this case inasmuch as the appellants had applied for mutilation of goods only after their offence of misdeclaration was detected by the department and, in this connection, relied on the Supreme Court's decision in CC Bombay Vs. Hardik Industrial Corporation, 1998 (97) ELT 25 (SC).
6. We have carefully examined the records and submissions. The adjudicating authority has relied on HSN notes and Chemical Examiner's report to hold that the tin/zinc-coated and uncoated materials weighing 55.315 MTs imported by the appellants were usable as such and were not scrap for melting. It's findings of misdeclaration is apparently based on the Mahazar dated 5.3.93 as well as the chemical. Test Report dated 18.8.93. We have seen two mahazars amongst the records, one dated 5.3.93 and the other dated 10.3.93, the latter pertaining to sampling of goods for chemical test. The Mahazar dated 5.3.93 needs to be examined in detail. It has two parts, the first part being a record of what the officers of Central Excise told the witnesses about certain past proceedings in relation to the imported goods and the second part being a record of current proceedings, i.e., proceedings of 5.3.93. As a mahazar is not a story-telling proceeding but a factual record of what happens in the presence of witnesses on the day on which it is drawn, we reject the first part as irrelevant and accept the second part as admissible evidence. It was the irelevant - part of the mahazan that the Collector relied on for recording the finding that the appellants had segregated the destuffed goods from four containers into BS scrap and other goods before the arrival of officers at the factory. Hence we reject this finding. There is no other mahazar or other documentary evidence, in this case, of departmental officers having noticed that BS scrap and other goods destuffed from four containers had been separately stored within the factory premises prior to 23.2.93, nor is there any documentary evidence of any Metallurgist of the department having identified the "other goods" as tin-coated discs, tin-coated sheets, zinc-coated sheets, zinc-coated coils and uncoated coils of non-alloy steel. Ld. Collector's finding to the contra cannot be sustained. Though destuffing of the four containers by the appellants in their factory prior to 23.2.93 is not in dispute, segregation of the goods prior to that date has not been admitted by them. The department has not proved it either. We, therefore, sustain the appellants' contention that they had not segregated the goods destuffed from the four containers, into BS scrap and other goods before the officers' first visit (on 23.2.93) to the factory. In so far as the remaining six containers are concerned, admittedly, both destuffing and segregation were done in the presence of officers of Central Excise. The mahazar dt. 5.3.93, to the extent held to be admissible evidence, is conclusive proof of such segregation of all the imported goods (from all 10 containers) into BS scrap and other goods. It also provides the separate weight (55.315 Mts.) of the "other goods" viz. tin/zinc-coated materials and uncoated coils. Thus it appears that it was only when the segregation of the goods was carried out in the presence of departmental officers that the appellants first came to know that the imported consignment contained materials other than the declared goods (BS scrap). The statements of Puneet Bhatia were consistently to this effect and the same have not been controverted. It is also the appellants' case that Sh. Puneet Bhatia had ordered for purchase of only scrap, from the foreign supplier, and that too orally. This plea has not been disproved by the Department. We, further, note that the shipping documents pertaining to the goods had described the goods as scrap only. For all these reasons, we are of the view that the Department have not been able to substantiate their allegation of misdeclaration against the appellants.
7. The impugned order has held that the materials weighing 55.315 Mts were usable as such and hence cannot be considered as scrap. This finding is based on three factors viz. (i) the chemical test report (ii) the Collector's own visual observation, and (iii) HSN notes to chapter 72. The test report reads as under:
"REPORT:
CX.205-Said to be Tin coated disc.
The sample is in the form of circular disc. It is composed of Iron/Steel coated with Tin on both sides. CX.206-Said to be Tin coated sheet.
The sample is in the form of a cut piece of a sheet. it is composed of Iron/Steel coated with Tin on one side. CX.207-208-Said to be Zinc coated sheet & Zinc coated coil. (In each case) The sample is in the form of a cut piece of a sheet. It is composed of Iron/Steel coated with zinc on both sides. CX.209- Said to be uncoated coil (Non-alloy-steel). The sample consists of a cut piece of a sheet and a fabricated piece both having rusted surfaces. It is composed of Iron/Steel. CX.210 - Said to be Bushling Steel scrap.
The sample is a cut piece containing designs/shapes probably obtained by cutting. It is composed of Iron/Steel. Please see note below:-
NOTE :-
This laboratory is not equipped to determine whether these are of Iron/Steel. sealed remnants returned herewith."
In our view, the reliability of the REPORT is undermined by the NOTE thereto as the laboratory was not equipped to de termine whether the samples were of iron or steel. Ld. Collector ought not to have relied on anything contained in the test report. It is also noteworthy that the Chemical Examiner was not called upon to determine whether the goods were usable as such. Ld. Collector himself inspected the goods in question and found them to be tin-coated discs etc. and to be different from the declared steel scrap. This finding will be rejected at once for obvious reasons. To state the obvious, we may pen down that it was not within the competence of the learned Collector to record such a finding of technical nature. Even an expert might not, without chemical test, identify the metal coated on the surface of another metal or alloy. Now that both the test report and the Collector's visual observation have proved futile in supporting the Department's case that the tin-coated discs etc. imported by the appellants were serviceable goods and not scrap, we do not find room for applying the definition of 'scrap' as per HSN notes to Chapter 72.
8. On the mutilation issue, both sides have argued at length. Ld. Counsel has contended that, under Section 24 of the Customs Act, it was permissible for the Commissioner to allow mutilation of the goods. He has heavily relied on Calcutta High Court's decision in Lakhotia Udyog Vs. Union of India (supra) and the apex Court's judgment in Shine Woollen Mills (supra) in this connection. Ld. DR has countered on the strength of the apex Court's judgment in Hardik Industrial Corporation (supra). But we need not examine these arguments as we have already found, on our own appreciation of evidence in this case, that the department's allegation that the tin/zinc-coated and uncoated materials weighing 55.315 MTs were not scrap as declared by the importer, is not sustainable. The question of mutilation would arise only when it is shown that the goods imported was not scrap.
9. Having found no misdeclaration of imported goods in this case, we hold that the goods are not liable to be confiscated under Section 111 of the Customs Act and, consequently, the appellants are not liable to be penalized under Section 112 of the Act. As the importers have paid duty on the goods at the appropriate rate applicable to steel scrap falling under sub-heading 7204.49 of the Customs Tariff, no further amount of duty is recoverable from them.
10. We set aside the impugned order and allow this appeal with consequential reliefs.