Customs, Excise and Gold Tribunal - Tamil Nadu
Pck Buderus (India) Tool vs Commissioner Of Customs, Chennai on 28 September, 2001
Equivalent citations: 2002(149)ELT94(TRI-CHENNAI)
JUDGMENT
S.L. Peeran
1. This appeal arises from Order-in-original No. 51/96 dated 11.7.96 by which the Commissioner of Customs, Chennai by his order dated 11.7.96 has held that in the operative portion as follows:
i) The benefit of Advance Licence/DEEC Scheme available only for 4% of FOB value of the export product and the remaining goods be assessed at the appropriate rate of duty.
ii) I order the confiscation goods valued Rs. 8,58,782/- covered under the Bill of Entry No. 9212/22.02.96 under Section 111(d) and (m) of the Custom Act, 1962 readwith Section 33 of the Foreign Trade (Development Regulation) Act, 1992. However, I give an option to redeem the goods on payment of fine of Rs. 85,000/- (Eighty Five Thousand only) under Section 125 of the Customs Act, 1962.
iii) I impose a penalty of Rs. 10,000/- (Rs. Ten Thousands only) of M/s. PCK Buderus (India) Tool Steel Company, Madras-17 under Section 112(a) of the Customs Act, 1962.
2. The allegation against the appellant is brought out in paras-1 to 10 and the reply filed by the appellant is in para-20 of the impugned order which is extracted below:-
M/s. Alis Enterprises, the Custom House Agent (hereinafter called CHA) have filed the Bill of Entry No. 9212 dated 22.02.1996 on behalf of the importers M/s. PCK Buderus (India) Tool Steel Co., 13 South West Boag Road, Madras 600 017 (hereinafter called the importers). The goods covered under Bill of Entry were declared as "Alloy Steel Bars." The following documents have been filed alongwith the Bill of Entry.
a. Two invoices bearing No. 41568 and 41569 both dated 12.01.96 raised by M/s. Edelstahlwereke Buderus AG in favour of M/s. PCK Buderus (India) Tool Steel Co. Madras for a total consideration of DM 45050.90 (CIF). The description of the goods is Alloy Steel Bars i grade 1.2714:1.2738 ISO-BM, 1.2311 ISL-BM. The country of origin is Federal Republic of Germany.
b. 6 numbers of specific test reports covering the goods under both the invoices issued by Edelstahlwerke Buderus AG in favour of the importer showing percentage of chemical composition and result of the hardness test etc. c. Bill of lading bearing No. HJSCBREE 12889505 raised by Hanjin Shipping Co. Ltd.
d. Certificate of origin issued by Europeon Community invoice wise.
2. The Bill of entry was admitted in assessing Group-7 (DEEC Group) of Custom House. The Importers indicated Advance Licence No. P/L/0544650/dated 24.02.95 in the licence column of Bill of entry. The assessment was claimed under DEEC (Duty Exemption Entitlement Scheme) Scheme readwith C.N. 203/92 under 7228.60 of Customs Tariff Act.
3. Both the importers and CHA subscribed to a declaration as to the truth of the contents in the Bill of Entry as provided under Section 46(4) of Customs Act, 1962. The importers have further subscribed that they have not received any other documents or information showing different price, value, quantity or description of the goods and that if any time they receive any documents showing a different state of facts, they would immediately make the same known to the Commissioner of Customs.
4. The case was taken up for detailed investigation by Special Intelligence and Investigation Branch (SIIB) to verify the eligibility of item under the produced Advance Licence/DEEC Scheme.
5. The importers also produced Chartered Engineer Certificates issued by Shri K. Sethupathy, M.E. and a Certificate issued by shri N. Krishnaraj consultant Metallurgist stating that the goods under import are Alloy Steel of forging quality.
6. The importer vide letter dated 12.03.1996 requested permission to clear the consignment on payment of duty. Vide letter dated 19.03.1966 submitted two documents from the supplier certifying that the goods under import are Alloy Steel Bars as the length of each piece is more than 500 mm and are forged alloy steel bars and the classification is under 7226 40 10. The importers also referred to the ALC Circular 8/94 dated 27.04.1994, issued by the Directorate General of Foreign Trade.
7. Scrutiny of documents filed with the Bill of Entry reveal that the consignment was shipped from port of Hamburg, Germany and Country of origin declared as Germany. In the declaration form to be given as per Rule 10 of Customs Valuations Rules 1988 and signed by the importer at Sl. No. 17 no relationship with the buyer was declared. In the Bill of Entry importers claimed clearance of goods against an Advance licence No.: P/L/0544650/C/XX/37/D/95 dated 24.02.1995. In the invoice filed with the Bill of Entry it is declared as per P.O. No. PCK/BVI/TSO-4/94, Alloy Steel Bars in grade 1.2311 TSL-BM and 1.2738 ISO-BM in sizes as mentioned therein. Importers also produced Test reports from the supplier giving the composition for all grades and sizes for the steel under import.
8. The above referred value based Advance Licence submitted for clearance has been issued to M/s. TOP Forty suspension and made transferable as per para 127(i) of Hand Book of procedures to Export Import Policy 1992-97, for Alloy Steel Bars/rods/Bittets/Blooms/Ingots subject to the condition that quality and Technical Characteristics of Import items should match with the resultant product for a value of US$ 76125. As per a copy of shipping bill 410835 dated 30.1.95 produced by the importer M/s. TOP forty suspension exported alloy steel forging machined upto 10 KGPC wt as stipulated in the advance licence and hence the quality and Technical characteristics of items under import should match the export i.e. only forging quality ally steel bars/rods/Billets Blooms/Ingots are allowed to be imported.
9. As per input - output norms at Sl. No. 229 under heading Ferrous Manufactures as published in Volume II of Hand Book of Procedures to Export Import Policy (Corrected upto 31.03.94 i.e. norms applicable on the date of licence issued) against an Export of 50317 Pcs. Alloy Steel forgings machined (incl. stainless steel) upto 10 kg. PC WT, alloy steel bars/rods/Billets/Blooms/ingots are allowed at the rate of 1.7 Kg per 1 Kg. of Export, product. Die Steel/Die block are also allowed at the rate of 4% of FOB value and accordingly upto USD 6700 (i.e. 4% of US$ 1,67,500) only can be imported against the Advance licence filed with the Bill of Entry. In this case importers file the above referred Bill of Entry for a CIF value of DM45050.90.
10. Comparison of chemical composition with the specification given for each grade i.e. 1.2714 (56 Ni Cr. MOV), 1.2311 (40 Cr.Mn.MO), 1.2738 ISO-BM (40CR Mn Ni Mo 8.6.4), it appears the goods under import are only die steel/plastic mould steel. It is also mentioned that the plastic mould steel 2738-ISO-BM was developed to supplement conventional mould steels in order to eliminate the well known short comings over 400 mm DIN standard 17350 (1980) Tool Steels also lists 56 Ni Cr.Mn V grade steel with material No. 1.2714, with chemical composition considers as hot working steel. The chemical composition for goods under import in 1.2714 compared with the composition for DIN 17350 tool steels.
11. Based on the details declared in the invoice M/s. Steel Authority of India Ltd (SAIL) was approached for technical opinion/clarification and have stated that the steels under import in grades 1.2714, 1.2738 ISO-BM 1.237 ISL-BM are not of forging quality steel but tool steel as defined under DIN 17350 (1980) and the sizes mentioned are not bars but blocks.
12. In the light of the above, summons was issued to M/s. PCK Buderus (India) Tool Steel Co. and Shri P.L. Krishnan, Partner in his voluntary statement deposed on 22.03.1996 under Section 108 of Customs Act, 1962 stated that there is no agreement between us; that they import only from M/s. Edelstahlwarke Buderus Ag, that many people import from Buderus and they do not get any commission for such sales; that for this import the supplier offered 150 days credit; that the list of items required are sent to Germany and orders are placed on M/s. Edelstahlwarke Buderus AG, that they receive order confirmation from them confirming order acceptance; that M/s. P.C. Krishnan Iyer & Co. are the agents of M/s. Edelstahlwarke Buderus AG and he is also a partner of the said company. In case of third party imports like BHEL, TVS-SUZUKI, IFB etc where they need a local representation, M/s. P.C. Krishnan Iyer & Co. receives 2% agency commission in Indian rupees; that the steel items imported by them can also be imported by third parties in India and earlier M/s. Godrej has imported the same. The alloy steel bars imported under Bill of Entry No. 9212 dated 22.02.96 are basically for stocking in India and to be delivered against orders.
13. In continuation of his earlier statement he stated on 26.03.96, that opinion was given without visual inspection of cargo and requested for visual inspection in their presence on showing the opinion obtained from M/s. Steel Authority of India Ltd by the department that he will submit from the supplier complete production procedure adopted to manufacture the pieces supplied and confirming that all steel bars supplied are forged. The representative of M/s. SAIL has certified the grade of the steel only based on the test certificates produced by the importer.
14. In their letter dated 28.03.96, after showing the Technical opinion obtained by the department from M/s. SAIL, the importer submitted a copy of Tariff advice No. 47/76 which states blocks of steel answering a description of bars/rods of customs tariff shall be considered as bars and any material of cubical dimension shall only be classified as blocks. It appears the clarification has been issued with reference to the Customs Tariff which was in vogue till February 1986 which was based on Customs Co-operative Council Nomenclature system whereas the existing Tariff is based on Harmonised System of Nomenclature and Tariff Headings 7306/07, 73.10, 73.15 refer to articles of Iron and Steel.
15. The forging quality steel is defined with reference to IS specification 1875 Class IV; DIN 17200 Material No.: 1.0402. From the statement given by the importer and documents produced it appears the steel imported is only forged steel and is not forging quality. The goods under import though conform to Alloy Steel, basically they are only tool steel.
16. Steel obtained fro various processes are divided according to their content as alloy steel (stainless or other). They are further divided in accordance with their special properties into high speed steel, tool steel etc. The steel items under import are not working steels as per the grade declared in the invoice, relevant literature and are used to make hot working tools such as forging dies or extrusion dies. Hence it appears the steel items had been in correctly described as forging quality alloy steel.
17. The importers have produced an Advance Licence No. 0544650 dated 24.02.95 under which the goods are claimed clearance, stated description of goods as alloy steel Bars/Rods/Billets/Blooms/Ingots subject to the condition that quality and technical characteristics of Import item should match with the resultant product. Clause 1 of the General Note for "Engineering Products" to Handbook to Procedure, Vol. II issued under Export-Import Policy 1992-97 states that "wherever import of steel is allowed, the thickness and specification etc. of steel imported and that is used in export product should conform. It shows that the benefit of DEEC exemption to an article being usable is not available. The above mentioned provision suggests that there should be a nexus in the imports and exports and the intention is to prevent the mis-use of the DEEC Scheme. There is no provision to exclude the trader, who is importing under transferable advance licence. The burden of proving the nexus is on the person who is claiming the benefit. The importers have not proved the nexus in this case.
18. From the totality of facts, circumstances and investigation carried out, the following facts appear to emerge:
(i) Importers have imported tool steel in guise of forging quality Alloy Steel Bars and sought clearance under an Advance Licence issued for export of forging quality Alloy steel. Scrutiny of technical specification for grades under import, market enquiries and opinion from Steel Authority of India reveal that the steel under import is only tool steel which can be permitted as consumable upto 4% of Export Value of licence as a consumable. Hence the goods are not eligible for clearance, under the above referred advance licence/DEEC. Therefore for mis-declaration of material particulars and manipulation of documents contrary to declaration made under Section 46(4) of the Customs Act, 1962 the importers rendered the goods liable for confiscation under Section 3(3) of the Foreign Trade (Development and Regulation Act, 1962 readwith Section 111(d) and (m) of the Customs Act, 1962.
(ii) By in correctly describing the goods under import, importer have attempted to evade Customs duty of Rs. 6,73,080/- at the rate of 40% + 15% under heading of Customs Tariff Act 7228.00.
(iii) In view of the detailed act viz incorrect description of goods in the import documents filed with the Bill of Entry, importers rendered the goods liable for confiscation and thereby importers are liable for penalty under Section 112(a) of the Customs Act, 1962.
19. M/s PCK Buderus (India) Tool Steel Co, 13, South West Boag Road, Madras 600 017, were called upon to show cause to the Commissioner of Customs-II, Custom House, Rajaji Salai, Madras-1 within 10 days from the date of receipt of the notice as to why:-
a) the benefit of Advance Licence/DEEC Scheme should not be denied as goods are not alloy steel bars of forging quality and the goods should not be confiscated under Section 3(3) of Foreign Trade (Development & Regulation) Act, 1992 readwith Section 111(d) and (m) of the Customs Act, 1962;
b) duty of Rs. 6,73,080/- should not be charged under heading of Customs Tariff Act 7228 at the rate of 40% + 15% and
c) penalty should not be levied on M/s PCK Buderus (India) Tool Steel Co., Madras-17 under Section 112(a) of the Customs Act, 1962 for having rendered the goods liable for confiscation.
20. M/s. PCK Buderus (India) Tool Steel Co. vide reply dated 25.4.96 has stated as follows:
"1.0) in the show cause notice it has been very well admitted that the material imported is alloy steel bars. This description of goods is in conformance with supplier's invoice, analysis certificate etc. Consequently there is no dispute on the description of goods.
1.1) the document B/L, invoice, Test Certificate have been perused by Assessing Officer and no query on any ambiguity relating to the description of goods was raised by AO (Gr 7) 1.2) The material was inspected by SIIB and no contradicting remarks to the description was recorded in the show cause notice.
1.3) Based on these points there was no contravention of Section 46(4) of Customs Act by way of any misdeclaration.
1.4) Accordingly the show cause notice on misdiclaration does not survive.
2.0) The show cause notice repeatedly points out that the material is not forging quality.
2.1) It was stated in para 8 that the licence permitted only import of alloy steel forging quality due to specific endorsement on the licence to the effect that "Tech characteristics of items under import should match with export product."
2.2) the item of import namely alloy steel bars satisfy the chemical composition criteria laid down in chapter 72 of customs tariff and consequently fulfill the technical characteristic condition in the sense that export product were only alloy steel forging under broad heading. On this count the specific condition of meeting technical characteristics condition as demanded by the licence is completed met.
2.3) Due to the repeated mention of the term FORGING QUALITY, the issue is well settled restricting the scope of examination of material to forging quality. This term forging quality means that the material shall possess forging characteristics or forging properties after deriving the meaning of quality. While examining the material from this definition the material is accepted in the show cause notice under para No. 15 that the importer material is forged steel bar. Once the material is supplied in the forged condition, it clearly shows that it is capable of getting forged and automatically it is a forging quality only. On the extension of meaning, it is clear that the material possess forging characteristics or property for further application. The show cause notice has not added nor mentioned any limitation for the material imported to undergo forging operation.
2.4) Under para No. 16 show cause notice admits the fact that the material is usable for forging dies.
2.5) In respect of the material capability for forging operation we are submitting a certificate from a practising metallurgical consultant with rich credentials. The certificate is clearly pointing out that the material is useable for forging automobile components.
2.6) Opinion of SAIL as stated in para No. 11 is not well found that on the point that complete specification sheet was not provided to them nor an examination of the material by sail was arranged.
There was only a casual reference to SAIL for a market opinion and their opinion obtained in this way cannot be taken for acceptance for the high quality product imported by us.
In this context, we had requested you to forward our letter dated 15.4.96 to SAIL for a re-examination after studying the catalogues of the product imported. Eventhough the issue is a live B/E we are yet to hear from you regarding the forwarding of the letter.
2.7) In case the issue of show cause notice will rest on SAIL's opinion already recorded in the notice we reserve the right to cross examine SAIL exerts on this point.
2.8) In para No. 16 details of classification of steel was described, it states very clearly the classification of steel based on composition/physical properties. While doing so, the show cause notice failed to note one major point that the present issue is with reference to the material capability for a particular method of line of manufacture that is forging. So incorrect description of goods on this count does not sustained.
2.9) We also enclose a declaration of the supplier before German Chamber of Commerce certifying that the items supplied by them correspond to HSN No. 72284010 which covers bars of alloy steel not other than forged. Supplier's declaration clearly eliminated the other classifications under HSN 7228 which included Die and Tool steel. This itself is a testimony from a Foreign Chamber of Commerce that the material does not belong to Tool or Die steel category instead belong to forging category.
2.10) Din 17200 as mentioned in the para 15 only to cover forging quality is not correct. The title of DIN 17200 is in fact "Quenched and Tempered steels" and not forging quality steels. This standard covers wide range of steels based on chemical and physical/characteristics. Hence it is not acceptable that DIN 17200 covers forging quality steels. Moreover this is a standard classifying steels on characteristics and not manufacturing methods.
2.11) To further prove our stand, we wish to bring to your notice that in DIN 17200 and DIN 17350 there are grades listed with similar composition.
Hence you cannot conclude that DIN 17200 covers exclusively Forging quality material.
2.12) Based on these submission we wish to reiterate that the materials are only forging quality and show cause notice fails to prove categorically the other way.
3.1) Show cause notice repeatedly mentions that the conditions of licence relating to technical characteristics is not fulfilled.
3.2) The above condition on the technical characteristic originate from para 378 of EXIM Policy VOLUME III which is as per the following extract:
Quote whenever import of steel is allowed the specification of steel imported and that used in the export product should confirm.
However in respect of the export of steel products (whether finished or semi finished) in primary, flat, rolled, drawn forged case form the criteria of confirmity shall only be by way of chemical composition unless otherwise specified.
Unquote The imported material fully satisfied the chemical composition criteria as mentioned above and as such the term technical characteristic is met without any ambiguity, 3.3) While considering an examination as stated above, ALC circular No. 8/94 dated 27.4.94 also merits significant attention.
The second para of circular clearly permits the duty free of the steel among the same group provided there is no change in the duty structure.
In this case there is uniform duty for all categories of aloy steel bars and this provision of promise by the Commerce Ministry adequately protects the imports.
In conclusion, they submit that Material imported is only alloy steel bars leaving no case of misdeclaration under Section 46(4) Imported material is a forging quality for availing benefits of advance licence submitted.
Import policy provisions adequately justify the claim for duty exemption."
3. However, the Ld. Commissioner did not agree with their submissions and therefore has confirmed the order by recording in paras-36 to 54 as follows:-
36. I have carefully gone through the facts of the case and the submissions both written and oral made by the importers.
37. M/s. PCK Buderus (India) Tool Steel Co. Madras-17 had filed a Bill of Entry No. 912 dt. 22.2.96 through M/s. Alis Enterprises, CHA for the clearance of goods declared as Alloy Steel bars and sought clearance under duty free clearance in terms of advance licence No. P/L/0544650 dated 24.2.95 in terms of CN 203/92. The goods were supplied by M/s. Edelstahlwerke Buderus AG vide invoice No. 41568 and 41569 both dated 12.1.96. The description of the goods was Alloy Steel bars in grades 1.2714, 1.2738 ISO-BM and 1.2311 ISL-BM. The country of origin was Germany.
38. The value based advance licence cited supra was issued to M/s. TOP Forty suspension and made transferable in terms of para 127(i) of Hand Book of procedures to Export Import Policy 1992-97 for Alloy steel Bars/rods/Billets/Blooms/ingots subject to the condition that quality and Technical Characteristics of Import items should match with the resultant product for a value of US $ 76125. M/s. TOP Forty suspension vide shipping bill 410835 dated 30.01.95 exported the resultant products namely alloy steel forgings machined upto 10 KGPC wt. as stipulated in the advance licence. Thus, the quality and technical characteristics of items under import should match the export i.e. only forging quality alloy steel bars/rods/Billets/Blooms/Ingots are allowed to be imported.
39. Further in terms of input output norms at serial No. 229 under heading Ferrous Manufactures as published in Volume II of the Hand Book of Procedures to Export Import Policy (Corrected upto 31.03.94 i.e. norms applicable on the date of licence issued) against an Export of 50317 Pcs. Alloy steel forgings machined (incl. stainless steel) upto 10 Kg. PC WT, alloy steel bars/rods/Billets/Blooms/ingots are allowed at the rate of 1.7 Kg per 1 Kg. of Export, product. Die Steel/Die block are also allowed at the rate of 4% of FOB value and are also allowed at the rate of 4% of FOB value and accordingly upto USD 6700 (i.e. 4% of US$ 1,67,500) only can be imported against the Advance licence filed with the Bill of Entry. In this case importers filed the above referred Bill of Entry for a CIF value of DM 45050.90.
40. The technical details of the goods under import for different grades shows as follows
1. 2714 56 NiCrMov 7 Type of steel Nickel-Chromium-molybdenum-based hot working steel Characteristics This hot working steel is a classic die steel. High compression strength, good toughness properties, better retentivity of hardness resistance to heal cracking and thermal shocks, with very good through-hardening properties and low hardening distortion.
Applications Standard steel for annealed or heat-treated dies in large numbers, irrespective of die size and shape of impression; stems up to medium specific pressures; orifice rings dies backers; tool holders; bolsters, backings; mandrel holders; hot shear blades.
2. 2311 40 CrMnMo 7 Type of steel Chromium-molybdenum-alloyed hot working steel Characteristics Medium-alloy hot working steel with high retention of hardness an absolute resistance to softening of heating, no hardness distortion and particularly low hardening temperatures.
Applications For intermediate liners and container shells for extruder containers; pressure pads and bolsters; die frames and die carriages which are exposed to moderate thermal stresses.
3. 2738 ISO-BM 40 CrMnNiMC 8.6.4 The new plastic mould steel for large-dimensioned moulds i.e. dimensions 400 mm hardening cross-section.
The material concept The new plastic mould steel 2738 ISO-BM was developed to supplement conventional mould steels in order to eliminate the well-known shortcomings enumerated with dimensions over 400 mm such as decline in strength towards the ingot centre problems with processing and inadequate graining capacity.
41. Comparison of chemical composition with the specification given for each grade i.e. 1.2714 (56 Ni Cr. MOV) 1.2311 (40 Cr.Mn.Mo) 1.2738 ISO-BM (40 Cr Mn Ni Mo 8.6.4), the goods under import are only die steel/plastic mould steel. It is also mentioned that the plastic mould steel 27.8-ISO-BM was developed to supplement conventional mould steels in order to eliminate the well known short comings over 400 mm.
DIN standard 17350 (1890) Tool Steels also lists 56 Ni Cr. Mn. V grade steel with material No. 1.2714.
42. M/s. Steel Authority of India Ltd (SAIL) have stated that the steels under import in grades 1.2714 1.2738 ISO-BM 1.237 ISL-BM are not of forging quality steel but tool steel as defined under DIN 17350 (1980) and the sizes mentioned are not bars but blocks.
43. M/s. PCK Buderus (India) Tool Steel Co. are related with M/s. P.C. Krishnan Iyer and Company. M/s. P.C. Krishnan Iyer and Co. are the agents of M/s. Edelstahlwarke Buerus AG and receives 2% agency commission in Indian rupees.
44. The forging quality steel is defined with reference to IS specification 1875 Class IV DIN 17200 Material No. 1.0402. From the documents shows that the imported steel is only forged steel and is not having any further forging quality. The goods under import are tool steels, die and plastic mould steels.
45. The importers have produced an Advance Licence No. 0544650 dated 24.02.95 under which the goods claimed clearance, states description of goods as alloy steel Bars/Rods/Billets/Blooms/Ingots subject to the condition that quality and technical characteristics of Import item should match with the resultant product. Clause 1 of the General Note for "Engineering Products" to Handbook to Procedure, Vol. II issued under Export-Import Policy 1992-97 states that "wherever import of steel is allowed the thickness and specification etc. of steel imported and that is used in Export Product should conform." The above mentioned provision suggests that there should be a nexus in the imported goods and exported goods. There is no provision to exclude the trader, who is importing under transferable advance licence. The burden of proving the nexus is on the person who is claiming the benefit.
46. The importer submitted that the material imported was only Alloy Steel Bars leaving no goods of misdeclaration under Section 46(4);
that the benefit of Advance Licence/DEEC Scheme should not be denied as goods are not alloy steel bars of forging quality and the goods should not be confiscated under Section 3(3) of Foreign Trade (Development & Regulation) Act 1962 readwith Section 111(d) and (m) of the Customs Act, 1962;
that the duty of Rs. 6,73,080/- should not be charged under heading of customs Tariff Act 7228 at the rate of 40% + 15%;
that the penalty should not be levied on M/s. PCK Buderus (India) Tool Steel Co. Madras-17 under Section 112(a) of the Customs Act 1962 for having rendered the goods liable for confiscation.
The importers further argued that dies for forging can still be manufactured by hot forging methods.
47. The case Law relied by the importers reported in 1996(81) ELT 628 (Tribunal) deals with the classification of Railway Track material namely elastic rail clips are classifiable under item 26 AA(ia/25(8) of the erstwhile Central Excise Tariff and not under item 68 as an article of iron and steel. The present case involves the determination of nexus between the imported and exported goods.
48. The other Case Law reported in 1992(58) ELT 248 (Tribunal) in the case of Overseas Cycle Company versus Collector of Customs relates to the MS defective cold roled steel sheets for manufacture of cycle parts and export under DEEC are allowed eventhough the licence shows mild steel cold roled sheets. In this case there is a restriction of 4% of tool steel/die steel in terms of input output norms. There is no such restriction in the cited Honourable case. Therefore, the cited case is different and distinguishable to this case.
49. It is also observed from the catalogue sheets produced by the importers that the applications of the different grade under import shows that they are not useful for making alloy steel forgings machined, whereas they are useful in making dies, tool components etc. Therefore the goods under reference, cannot be used for the production of the resultant product viz: Alloy steel forgings machined upto 10 kg pc weight. The possible items that can be manufactured from the impugned goods are totally different from the resultant products. Thus, there is no nexus exists between the imported goods and the exported goods.
50. The importers reliance on Commerce Ministry's letter No. 8/94 also do not throw much weight in this case since the advance licence allows only alloy steel bars/rods/Billets/Blooms/Ingots subject to the condition that quality and technical characteristics of import item should match with the resultant product. The resultant products are alloy steel forging machined upto 10 Kg per piece wt. The import items are tool steel, die steel and plastic mould steel. In terms of input output norms tool die steel/die block are allowed at the rate of 4% of FOB value of export items only. Accordingly, the consumable value works out to US $ 6,700 i.e. 4% US$ 1,67,500 and this much value of goods only allowed in this licence. In terms of specific condition in the licence and the input output norms specification, the ALC Circular 8/94 cannot be applied in this case.
51. Further, I find that the importers have imported tool steel, die steel and plastic mould steel which cannot be used for the manufacture of the resultant product, namely, alloy steel forging machined since the goods under reference have already been reached the stage of forged quality. The benefit of Duty Exemption restricted to 4% of the FOB value of export and the remaining has to be assessed on merits. The importer's contemplation that they have not mis-declared the goods and they have correctly declared as alloy steel bars under the import items. This explanation cannot be accepted in view of the fact that the importers had mae an attempt to clear the restricted consumable under the guise of alloy steel bars.
52. The importers have imported tool/die steel and plastic mould steel in the guise of forging quality alloy steel bars and sought clearance under the cited advance licence issued for export of forging quality alloy steel. It could be seen from the technical specification of the goods under reference revealed that the goods under import are forged tool steel, die steel and plastic mould steel from which forging quality alloy steel items cannot be made.
53. Thus, the importers have declared the goods in such a way to avail the duty free assessment and attempted to evade duty to the tune of Rs. 5,23,857/- and contravened the provisions of Section 3(3) of the Foreign Trade (Development Regulation) Act 1962 readwith Section 111(m) and 111(d) of the Customs Act, 1962. By the above said acts of commissions and omissions the importers are liable to penalty under Section 112(a) of the Customs Act, 1962.
54. Having regard to the facts and circumstances of the case and the demurrages incurred by the importer, I pass the following order:
4. Arguing for the appellant, Ld. Counsel submitted that the order is violative of principles of natural justice in as much as that they produced the expert evidence in the form of opinion given by Shri N. Krishnaraj, Consultant Metallurgist, Research Scholar, IIT, Madras of 25 years experience who on examination of the imported of goods had opined in his certificate which is annexed with this order.
5. The opinion of Chartered Engineer which is at page 34 of the paper book is also relied by the appellant. The same is reproduced herein below:-
CHARTERED ENGINEER CERTIFICATE This is to certify that I have thoroughly gone through the catalogues of grade 2714/2311/2738 enclosed.
All the three above STEEL grades are conforming to Alloy Steel as per notes of chapter 72 of customs tariff.
All the above three categories of steel are only of "Forging Quality" as evidenced by the term "Hot Working Steel" characteristics in the catalogue and also in particular the suitability of composition of Carbon, Nickel, Silicon and Chromium. These categories of steel are suitable to manufacture Forged Engineering Components.
I have also gone through the wording subject to the condition that quality and Technical Characteristics of Import items should match with the Resultant products in the Licence No. 544650/24.2.95 and also in DEEC Books No. 152197 stating technical characteristics as "Alloy Steel" and quality as "Forging".
In respect of this note, I certify that items Import clearly match the items of Export as the items of Import are Alloy Steel and of Forging quality suitable to manufacture Forged Alloy steel components.
6. The supplier M/s. Buderus had given them a certificate which is at page 35 of the paper book which is also extracted herein below:-
BUDERUS EDELSTAHL TO WHOMSOEVER IT MAY CONCERN This is to certify that the Carge despatched by us against invoice No. 41568 dated 12.02.1996 and 41569 dated 12.01.1996 and shipped with steamer Hanjin Hamburg under B/L. No. HJSCBREE 1288905 are "FORGED ALLOY STEEL BARS"
The classification of this cargo is under Tariff No. 72284010.
Sd/- for EDELSTAHLWERKE BUDERUS AG. Wetzlar i.V. i.A.
7. He contends that department had sent the goods to Steel Authority of India and one Shri Dev Dhar, Asst. General Manager had given the report against the expert opinion. Therefore, appellants had requested the department that SAIL Asst. General manager to be called for cross examination but the said person was never produced. Instead, another person in his place was called and offered for cross examination. This itself is violative of principles of natural justice. He relies on the Bill of Entry which clearly indicates the test results and he submits that all the details and the technical literature of the items produced have not been gone into and verified to come to the conclusion that the item imported was in terms of licence and for the purpose of final product. He filed written submissions which are extracted below:-
1. The appellants were holding value based "Advanced Licence", which was made transferable as per para 127 (1) of Hand Book, 1992-97, which was originally issued M/s. Top Forty Suspension, from whom the license was transferred to the appellant. As per the license, the licensee, in this case the appellant, is entitled to import alloy steels bars, rods, billets, blooms, ingots. While importing under bill of entry No. 9212 dated 22.09.1996 after fully describing the property as per the invoices the appellant claimed exemption on the ground that the imported goods represented "Alloy Steel Bars". However the appellant were not allowed to clear the goods and the respondent issued show cause notice dated 10.04.1996 on the ground that
a) the imported goods were not of forging quality and liable to be confiscated
b) a duty of Rs. 6,73,080/- was imposable and
c) penalty was also imposable for rendering the goods liable for confiscation.
2. It is submitted that the petitioner imported only Alloy Steel Bars which are of forgeable quality. In support of their claim, they obtained expert opinions from two well qualified experts namely Mr. N. Krishna Raj, Consultant Metallurgist, Research Scholar, IIT, Madras 600 036 (at page 18 of the typed set of papers) and from Mr. K. Seethapathy chartered engineer (at page 34 of the typed set of papers). On the other hand the respondent relied on the purported expert opinion given by Mr. Dev Dhar, Asst., General Manager, Steel Authority of India Ltd., Chennai 600 024 (at page 21 of the typed set of papers). The qualification and credentials of Mr. Dev Dhar to render the technical opinion is totally absent. He does not belong even to the research and development wing. Being the Asst. General Manager belongs to the Administrative Cadre. Further while the expert opinions given by the appellants were well reasoned the opinion of Mr. Dev Dhar is cryptic and unreasoned. Therefore in the reply to the notice itself the appellants objected against the relying on the opinion of Mr. Dev Dhar and also sought for his cross examination. (Pages 31 and 32 Para 2.6 and 2.7 of the typed set of papers). To this reply, in the order the respondent had merely stated that Mr. Dev Dhar had expressed his inability and deputed Shri Manivasagam Additional Chief (Marketing) for this purpose. Since cross examination could be conducted only with the person giving the opinion the said Mr. Manivasagam's appearance was not considered. (page 52 para 35) However Mr. Dev Dhar's opinion was relied on even in the findings. (page 56 para 42).
3. It is submitted that the question whether the imported alloy steel bars were of forgeable quality being technical the respondent should have based his judgment on the expert opinions available when the appellant furnished to well reasoned opinions as against an opinion by a person without any apparent credentials and without reasons the respondent ought to have found that the Alloy Steel Bars were of forgeable quality. Further in the absence of the opportunity to cross examine the opinion of Dev Dhar should not have entered into consideration.
4. In this regard there are atleast two decisions of the Tribunal. In Nitco Marble and Granite Pvt. Ltd., v. Collector of Customs, (1999) (112) E.L.T. 193 (Tribunal) was held that the Commissioner cannot ignore substantial material available when the importer had given enough experts opinion. Further in Sewa Polymers v. C.C.E. 2000 (118) E.L.T. 621 (Tribunal) it was held that in matters of classification on the basis of parameters of chemistry in interpretation of those parameters the opinion of experts will prevail over a impression of a lay person and it would be patently wrong if such expert opinion was not relied on. It was also held that the assessees would be entitled to seek clarification as to in what manner the samples were examined and what methodology was adopted to arrive at the conclusion.
5. In the present case also the commissioner erred in relying on the opinion of Mr. Dev Dhar and ignoring the opinions given by the appellant. Further he also erred in entering into a judgment on a technical matter as he does at para 49 of the order (page 58 of the typed set of papers).
6. It is also submitted that all the opinions were given on the basis of the catalogues and the chemical compositions as per test reports only. There is no indication any where in the record to show that even the surveyor had taken samples of the imported goods for making the endorsement behind the bill of entry. In fact the endorsement of the survey is only to the effect that documentary proof has to be demanded from the importer. Further the appellant themselves have properly replied that the material is of forged quality (para 2.3) of the reply of page 31 of typed set. In para 2.6 it has specifically pointed out that complete specification was not provided to SAIL nor an examination of material by SAIL was arranged. Apart from that in fact the appellant had requested the commissioner to send the material for test as the bill of entry was a live bill of entry which letter is available in the records of the commissioner. Therefore in the absence of any specific laboratory tests on behalf of the department the expert opinions furnished by the importer on the basis of test reports ought to have been accepted by the commissioner. It is also submitted that only when the show cause notice is issued to the importer there is no contemplation of imposition of liability on the appellant. Till then whatever endorsement is made on the bill of entry or any other opinion need not make the appellant or the importer challenge such decisions and views. Only when the process crystallises into a show cause notice the interest of the importer would be affected. When the respondent relies on any market enquiries such enquiries ought to have been furnished to the appellant and the appellant ought to have been given the opportunity to cross examine. The respondent being a quasi judicial authority ought not to have scrutinized technical specification on his own without the aid of expert opinion.
7. In any event the respondent ought not to have imposed penalty because the case is not one of misdeclaration or wrongful claim of exemption. The bill of entry the chemical composition as per invoice has been reproduced. It has been described as Alloy Steel bars and the appellant had claimed exemption. In such an event the claim of exemption was only the belief of the appellant and it would not amount to misdeclaration. In this regard the appellant will rely on the decision of the Supreme Court in Northern Plastic Ltd. v. Collector of Customs and Central Excise, (1998) 6 SCC 44.
8. It is respectfully submitted that the authorities in Vulcan Engineers Ltd., v. Collector of Customs (1992) (62) E.L.T. 636 (Tribunal) and Zenith Tin Works Ltd., v. C.C.E. 1995 (75) E.L.T. 865 (tribunal) may not directly apply to the presen case as the show cause notice does not proceed on the basis that the end product did not correspond with the imported raw materials. On the other hand clause (A) in para 18 only says that "Goods are not Alloy Steel (SIC) of forging quality" (at page 27 of the typed set of papers). Any finding in the order beyond the scope of the show cause notice would be illegal nad violative of principles of natural justice.
8. He relies on the following judgement in NITCO MARBLE AND GRANITE PVT. LTD v CC Nhavasheva reported in 1999 (112) ELT 193 wherein the Tribunal held in paras 5 & 6 as follows:-
5.The more important question relates to the nexus between the goods. The duty-free import entitlement has been earlier allowed and goods imported or sought to be imported. The entitlement is, in some cases, in respect of relevant raw marble slabs", and in other cases in respect of "raw marble slabs". The stand taken by the Commissioner was that the goods imported are to raw marble slabs but processed marble slabs. The customs authorities have taken the samples form various containers of imported marble slabs. These samples were got examined by Professor S.D.Shah of Department of Earth Sciences, IIT Bombay. Professor Shah submitted a preliminary report and promised to submit a final report but did not actually submit a final report. The samples were cut to specific dimensions. The edges of the samples, all of white colour with one side rough or non-glazed and the other side smooth and non-glazed. He reported that the goods were ready to use depending on their end-use. All the polished glazed slabs/tiles can be used readily for facing stone, while the polished unglazed slabs/tiles can be used as kitchen platforms, sinks in both bathrooms and toilets.
The appellants got the samples examined by Mr. Hafeez, Contractor, an (SIC) of Bombay who opined that none of the samples is in finished condition and (SIC) processes have to be followed to make them ready to be used and the samples were absolutely rough samples. The Commissioner did not apply his (SIC) to this report since the report of Professor S.D. Shah was several reports of other experts also secured by the customs department. By the report dated 19-5-(SIC). Professor Sanjay V.walavalkar of Sir J.J.College of Architecture, Bombay opened to the effect that he inspected the marble slabs belonging to one of the two parties in the presence of the customs shed appraiser and that the marble was completely in a rough/raw and unpolished condition and needed further processing before use. There are similar reports in regard to the consignments in two other appeals, in this respect. At the instance of the customs department, the Principal of Sardar Patel College of Engineering, Bombay inspected the samples. He opined that the samples have to undergo about 8 to 10 processes for them to be used in civil engineering construction. The final product would give a polished mirror form and the marble has to be classified as rough or raw marble in civil engineering/architectural parlance. At the instance of the department, Shri I.M.Kadri, Architect of Bombay inspected the samples and opined that the marble slabs would require further cutting, processing and polishing before they can be used in a building project.
6. The main governance of the appellant is that though the opinion of Shri Hafeez Contractor, an architect of Bombay was available, the Commissioner chose to consider only the report nad opinion of Professor S.D. Shah of IIT, Bombay and disregarded the opinion given by Shri Hafeez, Contractor and ignored the reports of other experts which were also secured by the department itself. The department having consulted a number of experts, the Commissioner relies only on the report of Professor Shah, though according to the appellant, various reports contained data and were favourable to them. It would have been open to the Commissioner on proper consideration of the available material to arrive at a reasonable conclusion; the conclusion arrived at by ignoring substantial material available cannot be regarded as reasonable or (SIC). On this ground alone, the impugned orders deserve to be set aside and are hereby set aside. The three cases will be considered afresh by the Commissioner. It is for the Commissioner to consider whether in the circumstances my of the experts should be called for examination. It is also open to the appellants to suggest to the Commissioner that one or more experts should be examined by the Commissioner."
9. He further relies on the judgment of the Mumbai Bench rendered in SEWA POLYMERS v. CC Mumbai-II reported in 2000 (118) ELT 621 (T) wherein the Bench held in paras-6 to 11 as follows:-
6. We have heard Shri S.P.Sheth Advocate for the appellants and Shri K.L.Ramteke for the Revenue.
7.We note that Professor Dr. Pandya was present before both the lower authorities during the proceedings. The orders of both the authorities noted his presence and his opinion also. The Assistant Commissioner made light of his chemical opinion in holding that an independent person's opinion was not binding on him. We observe that where the tariff seeks to classify a product on parameters of Chemistry, in the interpretation of those parameters, the opinion of an expert would prevail over the impression of a lay person. We find that the Assistant Commissioner was patently wrong in not placing reliance on the expert opinion. During the hearing before us, Shri K.L.Ramteke referred to the Supreme Court Judgment in the case of Reliance Cellulose Products Ltd. v. Collector of Central Excise [1997 (93) E.L.T. 646 (S.C.). We have seen this judgment in which the Supreme Court had observed that the Assistant Collector could rely upon the reports given by the Chemical Examiner and Chief Chemist unless it was shown that the authorities were palpably wrong. The Supreme Court observed that where such was the situation, the court was entitled to re-direct securing of correct opinion. We find that these observation would apply squarely to the case before us. Firstly there is no opinion on record of the Dy.Chief Chemist. What is on record is a single line extract of his opinion given by way of a paragraph in the show cause notice. The assesses were entitled to seek clarification from the Dy. Chief Chemist as to in what manner he had examined the samples and what was the methodology in arriving at his conclusion. The request for examination of the departmental Chemical authority was not even referred to in the orders let alone being considered. The opinion of Professor Pandya would demonstrate that the Dy. Chief Chemist's opinion was palpably wrong". In that case we would be justified in directing re-examination of the entire issue.
8. It is not that Professor Pandya is an employee of the assessee or that he is a interested person. Therefore the prohibition stipulated by the Supreme Court in their Judgment in the case of (SIC) India.Ltd. v. Collector of Central Excise and Customs, Hyderabad [1994 (73) E.L.T.769 (S.C.)] would also not apply.
9. Both the Assistant Commissioner and the Commissioner exclusively relies upon test report (infact an extract of the report) to the entire exclusion of an opinion given by an independent expert after visiting the assessees factory and after studying the raw materials, the process involved and the chemistry relating to such process.
10. The coverage of Chapter 40 is governed by the stipulations made in the notes thereto. The phrase "rubber" covers synthetic rubber. Synthetic rubber has been defined in Note 4 to Chapter 40. Synthetic rubber is a term applicable to natural rubber which is modified by grafting or mixing with plastics, depolymerised natural rubber, mixtures of unsaturated synthetic substances with saturated synthetic high polymers provided that all the above mentioned products comply with the requirements concerning vulcanisation, elongation and recovery as given in part (a) of the said note. The parameters briefly are elongation and residual length after being returned to the position of non-extension. This note has been referred to by Professor Pandya in confirming that the product passes this test. Professor Pandya enthusiastically refers to the process adopted as a revolutionary process.
11. Thus from the opinion of the expert it would appear that the claim as to the classification advance by the assessee was correct. On the other hand the Dy. Chief Chemist's opinion gives only the conclusion of the goods being made of plastic. Even in this opinion there is a lacuna, because in describing the results of samples of the sheets drawn from M/s. Shree Balaji Marketing (one of the buyers), the sample is described to be of cellular rubber. In this situation it has to be held that the authorities below erred in relying upon an incomplete and cryptic opinion of the department chemical experts in preference to an extensive report of an independent authority. This defect was amplified in the failure of the original as well as the appellate authorities to even discuss the relative opinions as also the blanket disregard of the request for cross-examination of the departmental chemical authority. We have reproduced the ld. Commissioner's order in its entirety above. He has reiterated what the Assistant Commissioner held in his order; and has completely ignored the opinion of Dr. Pandya. On the ground of lack of appreciation of mind alone, this appeal would succeed.
10. He also relies on the Apex Court judgment in the case of NORTHERN PLASTIC LTD., reported in (1998) 6 Supreme Court Cases 443 wherein the Apex Court in para-28 have held that when there are no grounds for misdeclaration nor there are grounds made out and allegation of unauthorised or illegal importation of goods, then the order of confiscation cannot be made and on that ground the Hon'ble Apex Court set aside the fine levied in the matter.
11. Ld.SDR on perusal of the entire order nad on specific query from the Bench as to whether there is any violation of principles of natural justice, conceded the points and submitted that he has no objection, if the matter is remanded for de novo consideration to reconsider all the pleas as stated in the written submissions and also the documents which are extracted.
12. On a careful consideration of the submissions made by both sides and on examination of documents, we notice that appellants had clearly described various chemical composition in the alloy steel bars, rods, billets etc., in terms of invoices indicated in the bill f entry. The said details have not been challenged by the revenue by sending samples for chemical test. On the other hand, the appellants have got this tested through their supplier and the details furnished by the supplier in the form of catalogue, literature and the materials. There is also reliance on the said certificate issued by the expert, Shri Krishana Raj, Metallurgical, Research Scholar, IIT Madras and the Chartered Engineer. In spite of these evidences produced by appellants, Revenue had merely referred the matter to SAIL. One Shri Dev Dhar, Asst. General Manager of SAIL had merely opined in his letter as below:-
"We thank you your telefax message dated 14/3/96 seeking certain clarification on the importance of Alloy Steel material. Wee wish to confirm that the sizes and grade indicated in your telefax message are-
(a) not of forging quality steel but tool steel as defined under DIN 17350 (1980) and
(b) sizes mentioned are not bars but blocks."
13. On the basis of abvoe reply, the Ld. Commissioner has concluded that there is violation of advance licence and the import policy and appellants had attempted to evade customs duty of Rs.6,73,080/-. We are of the considered opinion that the entire order of the Commissioner is violative of principles of natural justice. The reason being that the whole case is made out on the opinion of the Asst.General Manager of SAIL who has not been produced for cross examination at all. The reason for coming to such a conclusion by the Asst. Genl.Manager of SAIL has not been delineated. It is not known about his qualification or about his competence and as to whether he has tested the material. On the other hand, appellants have produced a strong and clinching evidence, which has not been put to test or challenged nad the said expert has not been called for cross examination. Noting the evidence produced by both sides and also considering the fact that the revenue's witness/expert has not been called for cross examination , we hold that on the grounds made out the order is violative of principles of natural justice and requires to be set aside.
14. Ld.SDR did not seriously contest for the matter to be remanded. Ld. Counsel prayed for remand of the matter so that they can establish that there is no violation of terms of the import policy and charges are not proved with regard to misdeclaration and attempt to evade duty. Thus, in view of our finding of fact that there is clear violation of principles of natural justice, the impugned order is set aside and matter remanded to the Commissioner for taking into consideration the entire evidence that was produced and submissions which had already been extracted in this order for the purpose of convenience for perusal of the Ld.Commissioner. The Ld. Commissioner shall grant an opportunity of hearing to cross examine the Asst.General Manager of SAIL. If the said Manager of SAIL does not appear for cross examination, he cannot be substituted by another officer on his behalf. The evidence of Asst.General Manager cannot be taken into consideration of he fails to appear for cross examination and when the same being not tested by cross examination. We make this point very clear only to avoid any violation of principles of natural justice in the second round of litigation. The impugned order is set aside and matter remanded for de novo consideration in the light of observations above. Appeal is allowed by way of remand.
(Pronounced in open court on 28.9.01) ANNEX-I N. Krishnaraj 889, Syndicate Bank Consultant Metallurgist Colony, Research Scholar, Annanager West Extn., IIT, Madras-36. Madras 600 101. March 10, 1996 CERTIFICATE
I am a post-graduate in Metallurgical Engineering from IIT, Madras and current pursing my Ph.D. with IIT, 'Heat Treatment of Steals'. My experience spans over 25 years, having worked in Lucas-Tvs and Wheels India. As Chief Metallurgist of Wheels India, I have been associated with selection and application of several goods of steel. With my rich credentials I am competent to issue this certificate.
I have been called upon to consent whether the steel grades 2714, 2311 and 2738 are I forging quality and whether the sizes of products in question can be classified as bars:-
Based on the technical specification details and also on the classifications listed in HSN classification, chapter 72, I can categorically certify the following:-
a) The steel grades can be forged into engineering components that can be put to clerated temperature use, such as, valves for automobile engines. The strength valves given in the product literature for various high temperatures adequately justify this application.
b) The product literature also state that these grades have equal strength at centre of the section, and also have good through hardening characteristics. These two attributes cannot be ensured from a primary product such as ingot or castinnous casting product. This excludes its classification under 72.24 and correspondently from para (ij) of chap. 72. Hence the product must have been forged. Also the cross-section being uniform throughout the length amply justifies its classification as 'bar' under JSM 72.28 and also para (m) of chapter 72.
In summary, the grades 2714, 2311 and 2738 are forging quality alloy steel bars.