Customs, Excise and Gold Tribunal - Tamil Nadu
Sujana Steels Ltd. vs Commissioner Of C. Ex. on 29 June, 1999
Equivalent citations: 2000ECR776(TRI.-CHENNAI), 2000(115)ELT539(TRI-CHENNAI)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from the Order-in-Appeal No. 3/97, dated 24-1-1997 passed by the Commissioner of Central Excise (Appeals), Hyderabad holding that the goods described in the invoice and the Bill of Lading (BL) as MS scrap, the goods actually imported were found to be used pipes of varying lengths and therefore, he has held that they have to be assessed as they are presented for examination and not based on the description contained in the invoice and the Bill of Lading. This finding given is also not disputed by the appellants that the goods imported are used and rusted pipes. The appellants contended that it is melting scrap to be used in their electric arc furnace. Waste and scrap according to Note 6 of Section XV of the Customs Tariff Act means "metal waste and scrap from the manufacture or mechanical working of metals and metal goods definitely not useable as such because of breakage, cutting or ware or other reasons." He has noted that the goods did not satisfy definition of waste and scrap referred to above and therefore, their claim for classification under Heading 7204.29 which relates to waste and scrap of alloy steel other than of stainless steel read with relevant concessional notifications is not sustainable. He therefore, held that the goods falling under 7204 should satisfy the definition of waste and scrap as per Note 6 of Section XV. He has noted that Heading 73.04 relates to tubes, pipes and hallow profiles, seamless, of iron under the residuary category. He also did not find the need to refer the case to chemical examination or for expert opinion to find out whether they are pipes or scrap. He has noted that in International language they may be treated as scrap, as far as the Indian trade conditions are concerned, they may be treated as used pipes and tubes of circular cross section. He has noted that whether the price declared corresponds to the value of scrap in international market is not verifiable at this end, therefore, the adjudicating authority has not disputed value declared. He has also noted that as per 29 of the EXIM Policy 1992-97 referred to by the adjudicating authority, all second hand goods need to be imported in accordance with the public notice or a licence issued under the said policy. Since the goods were imported without the authority of any public notice or import licence and since the goods described in the bill of entry varied from the description of the goods actually found, he did not find any infirmity in the order of confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962. Therefore, he imposed penalty. He also upheld the finding of the adjudicating authority but since the goods are found to be in the midst of waste and scrap, they cannot be considered for segregation and mutilation. He also distinguished the large number of citations on the point that the goods may be released after mutilation and treating the item as scrap. The citations were in respect of other items on which similar view had been expressed by customs authorities.
2. We have heard Shri S.S. Radhakrishnan, learned Counsel for the appellants and Shri S. Sankaravadivelu, learned DR for the Revenue.
3. The learned Counsel submits that it is an undisputed fact that the items imported were discarded pipes and are not usable at all as they are rusted due to breakage, cutting or ware or other reasons and they are required to be classified only as scrap. He further submitted that even in terms of Note 6 of Section XV of the Customs Tariff the items satisfy the definition of waste as defined thereunder. He contended that the definition of waste and scrap clearly laid down that metal waste and scrap arising from mechanical working on metals and they should be definitely be not usable as such because of breakage or cutting or ware or other reasons and he submits that the item has lost its utility as pipe due to long usage and having been sold as scrap and therefore, it is definitely not usable as such because of breakage, cutting up, ware or other reasons. He further pointed out that the procedure adopted by the authorities to classify on the visual examination as pipes is not definitely reasonable and not as understood in the international trade. He pointed out that it does not satisfy note 6 of Section XV of the Customs Tariff as has been held by the Commissioner (Appeals). He pointed out that it has been imported for melting. He further pointed out that the authorities have also not raised the valuation and accepted the value of scrap. He referred to the Bill of Lading which describes the item as MS scrap including description in the invoice. He pointed out that the department has not produced any evidence to show that the items are fresh pipes and they can be used as such for the purpose of classification under Chapter Heading 7304.90 which relates to tubes, pipes and hallow profiles, seamless (other than cast iron or stainless steel). He pointed out that the department has not discharged their burden on classification. He pointed out to the judgment of the Bombay High Court in the case of Karendra Kumar & Co. v. SD Shahapurkar as reported in 1989 (42) E.L.T. 381 and that of Taiwan Bros (P) Ltd. v. C.C. as reported in 1992 (59) E.L.T. 323 wherein identification of the goods by visual examination has not been accepted by the Bombay High Court/Tribunal. He relied upon the judgment rendered in the case of Indian Cables Co. Ltd. v. C.C.E. as reported in 1994 (74) E.L.T. 22 (S.C.) wherein the Apex Court laid down the law pertaining to classification of goods inasmuch as that the goods are required to be classified in terms of the common parlance and the words used with reference to a particular trade or business are to be construed in that trade parlance. It was held that the Revenue should produce material evidence either oral or documentary to enter appropriate finding with regard to the aspect of classification. It was contended that the burden to show that certain goods fell under certain specific tariff item for the purpose of taxation lies with the Revenue. In this regard the appellants relied upon the following case laws :
(a) Union of India v. Garware Nylons reported in 1996 (87) E.L.T. 12 (S.C.), para 15.
(b) Hindustan Ferado Ltd. v. C.C.E,. Bombay reported in 1997 (89) E.L.T. 16 (S.C.) para 3.
(c) Santosh Gupta v. U.O.I. reported in 1990 (48) E.L.T. 210 (Bombay).
It was also contended that there was no misdeclaration on account of the Revenue having accepted the goods itself as old and used ones and hence the question of misdeclaration does not arise. In this regard, the ratios of the following judgments were cited:
(a) JK Industries Ltd. v. C.C., New Delhi reported in 1996 (88) E.L.T. 41 (T) para 5.
(b) Hindustan Lever Ltd. v. C.C., Bombay reported in 1996 (83) E.L.T. 520 (T).
The appellants have also claimed a direction to the Customs authorities to grant them a detention certificate for waiving the demurrage charges. In this regard they relied upon the judgment in the case of C.L. Jain Woollen Mills v. U.O.I. reported in 1995 (79) E.L.T. 197 (Del), and that of the High Court of Calcutta in the case of Donald & Mercarthy v. U.O.I, reported in 1997 (89) E.L.T. 53 (Cal).
4. Shri Sankaravadivelu, learned DR for the Revenue defended the impugned order on the basis of the finding given by the Collector (Appeals). The DR contended that the goods have been described as MS scrap while on examination they were found to be not so as they were in the nature of used rusted pipes and therefore, they are required to be classified as such and not as waste and scrap as it does not satisfy the definition of waste and scrap in terms of note 6 of Chapter XV of the Customs Tariff Act. The DR also justified re-classification and also for ordering confiscation and imposition of penalty contending that the judgments cited are distinguishable.
5. On consideration of the submissions made we notice that there is admission by the Revenue, on the following points :
(a) that the items imported are used and rusted pipes;
(b) Appellants imported the goods for melting purpose in their factory in the induction furnace in terms of the concessional rate of duty under Notification 36/96, dated 23-7-1996 (Item Sl.116) which carries import basic duty of 5%, additional duty CVD of 5%, and special duty of 2% ad valorem.
(c) that these are old and used pipes.
(d) That in international language they are to be treated as scrap. However, as far as Indian trade conditions are concerned, they will be treated as used pipes and tubes of circular cross section.
(e) The Collector (Appeals) has accepted the price of the goods to the value of scrap in international market as can be seen from para 7 of his order.
The above are in terms of the order passed by the Collector (Appeals) in paras 4 to 7 of his order.
5. The definition of waste and scrap in terms of Note 6 of Chapter XV of the Customs Tariff Act is as follows :
"metal waste and scrap from the manufacture or mechanical working of metals and metal goods definitely not usable as such because of breakage, cutting or ware or other reasons"
The Collector (Appeals) has held that it does not satisfy the above definition. He has not elaborated not as to how it does not satisfy the definition except to say in one sentence that it does not satisfy the definition of waste and scrap. Probably the Collector (Appeals) after quoting the above definition has not applied his mind and to understand the connotation of those words. The terms "Metal goods not definitely not usable as such because of breakage, cutting or ware or other reasons" is required to be understood by us in the context of the understanding of the materials imported by the appellants. For the purpose of classifying the same the Revenue has not brought on record the understanding of Indian Trade parlance. For the purpose of understanding of the goods as scrap, the Collector (Appeals) noted in para 7 of his order that:
"Although in international language they may be treated as scrap, as far as the Indian trade conditions are concerned, they will be treated as used pipes and tubes of circular cross section. Whether the price declared corresponds to the value of scrap in international market, is not verifiable at this end. The adjudicating authority has also not disputed the value declared"
6. The above paragraph clearly indicates that the Revenue has not proved the understanding in the Indian trade of the goods viz. pipes and tubes of circular cross section. Having accepted the international market to the value of the scrap, the question of it being considered as 'pipes and tubes of circular cross section' does not arise. All the documents show in the declaration as 'MS scrap'. The contention of the importers that it is to melt the goods in the induction furnace has not been disputed by the Revenue. The definition of waste and scrap as can be seen from note 6 of Chapter XV of the Customs Tariff clearly recognises metal goods definitely not usable as such because of breakage, cutting or ware or other reasons, are required to be treated as metal scrap. The present goods admittedly are used and rusted pipes and it is not usable as "tubes, pipes and hallow profiles, seamless, of iron (other than cast iron) or steel" as described under Chapter 7304.90. This heading as described in this heading has to be understood as those which are used "as such', to mean those which are in the condition as understood in the market for sale on the basis of its manufactured price. Further it seems that the goods are not usable as new ones. The goods which have exhausted its use and have rusted and are not usable as new ones cannot be equated. The Revenue having accepted the price as that of scrap cannot for the purpose of classification consider the same to be new ones. Therefore, there is inherent contradiction in the finding itself clearly demonstrating non-application of mind and such findings have to be considered as perverse and not acceptable in the eye of law. The reasons further being is that the onus of classification is on the Revenue. The same has not been discharged to show that the goods are fresh and new material to be used as pipes. The same having been accepted as scrap for international purposes cannot in the absence of evidence of Indian trade parlance and understanding be called as 'pipes or tubes' for classification under Heading 7304. The appellants being the importers, have usage of the items in the induction furnace, are required to be considered as the one of the users having Indian trade understanding. The appellants' trade understanding has to be considered as that of Indian trade market and the appellants have declared as such and produced evidence. Such evidence cannot be rejected as not sufficient unless the Revenue counters it with other trade understanding of other users, which should be contradictory to the appellants' understanding. Such exercise not having been done by the Revenue, therefore, the appellants' understanding as that of trade understanding of the Indian traders cannot be rejected, The understanding of the revenue officials cannot be accepted as understanding of the Indian Trade and therefore in terms of the ratio of the judgments of the Hon'ble Supreme Court in the case of Indian Cable Co. Ltd. v. C.C.E., Calcutta (supra) and Union of India v. Garwase Nylons (supra), the burden of proof has not been discharged by the Revenue and hence the declaration given by the appellants and the report of physical examination showing the goods to be rusted and used pipes are to be treated as having satisfied the definition of waste and scrap under Note 6 of Chapter XV of Customs Tariff Act, and they are not new and fresh goods in terms of the value also. Therefore, the appellants have proved their case and their declaration ought to have been accepted. For such import of goods as waste and scrap, licence is not required and hence the goods are not confiscable.
7. The appellants are also entitled for a certificate for clearance of the goods without demurrage in terms of the ratio of the judgment cited by the Counsel for the appellants as detention of their goods is not based on any evidence and it was due to total non-application of mind and therefore the Customs authorities are bound to issue the certificate for non-imposition of demurrage in the matter. In this view of the matter, the appellants succeed and we allow the appeal with consequential relief.