Customs, Excise and Gold Tribunal - Delhi
Oswal Woollen Mills Ltd. vs Collector Of Customs on 15 November, 1989
Equivalent citations: 1990(25)ECC192, 1990ECR110(TRI.-DELHI), 1990(46)ELT495(TRI-DEL)
ORDER S.L. Peeran, Member (J)
1. In this appeal, the appellants have challenged the correctness of the order passed by the Collector of Customs (A) Madras in order dated 25-9-1987. The impugned order has been passed after considering the matter de novo in pursuance to CEGAT'S Order No. 397/85-D, dated 13-11-1985.
2. The facts of the case are that the appellants imported the impugned goods and declared them in the Bill of entry as 'wool waste'. The goods were assessed on the basis of the said declaration under Heading No. 53.01/05-CTA read with CN. No. 155/79 (Nil basic duty + 5% Auxiliary duty + Nil C.V. duty) after the appellants executed a test bond. Test of sample drawn from the consignment, according to the Department, revealed percentage of wool as 35.02%, the remainder being synthetic fibre. Hence the Department issued a demand notice for Rs. 9,88,869.30 P. reclassifying the goods under Heading 56.01/04-CTA. The Assistant Collector confirmed the demand for Rs. 8,70,103.17 P. In the impugned order, the Collector of Customs(A) has given his finding as imported goods being not wool waste on the basis of the test results of the imported goods in which wool content was found to be less than 20%. He has held that there is no evidence on record to show that the goods were wool waste and has also held that the appellants did not adduce evidence that the goods were wool waste. The Collector of Customs(A) has held that on test, the imported goods were found to be composed of wool fibres and synthetic fibres (both of cellulosic and non-cellulosic origin) and the percentage of wool being less than 50% and in the light of the provisions of Section Note 2.A of Section IX, the goods were classified under Heading No. 51.01/04-CTA. He has further held that the goods were a mixture of wool fibres and synthetic fibres, from the nature of the goods, the mixture cannot be homogeneous. The Collector has held that this is the reason for the differences in the percentages of the constituent materials in the test reports. He has held that a particular sample on a particular test report cannot be held as correct one. He has rejected the appellants claim that the report of the Chief Chemist in respect of a particular sample showing percentage of 60.2% or 51.8% should be accepted. He has held that a particular report cannot be held as authentic while the other reports are held as unreliable. He has held that all reports are equally authentic, reasons for differences in the reports could be attributed to the heterogeneous nature of the mixture and not to the standard or quality of the different tests. He has upheld the lower authorities reasoning of taking average of test reports which had worked out to 48.08% (i.e. less than 50%) of wool. The Collector has further observed that several equally authentic test reports showed deviations from one another regarding percentages or different constituent materials of the mixture, the only reasonable and justifiable course was to take the average for purposes of determining the correct classification. The Collector rejected the appellants contention regarding the rates of duty and working not given in the demand notice or in the order of the lower authorities.
3. The appellants in this appeal have challenged these findings and have made out a ground that the results of the test done by the Chief Chemist should be accepted in which he had held that the essential character of the goods was "wool waste". The contention of the appellants is that waste consisted of heterogeneous material and therefore, trial of full representative sample would not only be difficult but impossible. Their main ground is that in the circumstances of doubt, the determination of correct classification of goods should be resolved in favour of the appellants. They have challenged the finding of the Collector (A) that the goods were "mixture of wool fibres and synthetic fibres" as per results contained in test report dated 28-9-1979. The goods were found to be "heterogeneous material and yarn of colours and is an entangled mass". The sample was allegedly found to be composed of 27.7% wool, 50.0% acrylic, 14.6% Polyester, 2.9% nylon and 4.80% viscose. It was also stated in the test report that the goods were wool material. The goods were thus mixed waste of fibres and yarn in entangled mass. The appellants have challenged this portion of the findings. The appellants have also challenged the question of classification of wools and also assessing the additional duty of customs at the rate other than that applicable under CET Item 68 at the relevant time. Their case is that the goods being mixture of fibres and yarn in entangled mass, could not attract additional duty of customs equavalent to that applicable to CET Item 18-A, 18-B, 18-C and 18-E and hence sought for classification of the goods under CET Item 68. Hence they have sought for setting aside the impugned order and have sought for accepting the test results of the Chief Chemist and ignore the test results which were conducted at the earlier stage.
4. Shri Harbans Singh, learned Advocate appearing for the appellants strongly argued the case on behalf of the appellants and submitted that the entire procedure followed by the lower authorities in taking the average of the test result is not a correct procedure and the burden of proof of the material being not wool waste, lies on the Department, which did not discharge and favourable test results cannot be ignored, but the benefit should go to the appellants. He has submitted that test result is not comprehensive proof and the burden still lies on the Revenue which they have not discharged. He has also relied upon the ruling as laid down in the case of Madhu Wool Spinning Mills v. Union of India & Others [1983 (14) E.L.T. 2200] wherein the Bombay High Court has held that previous test results cannot be ignored and the results which suits the Revenue cannot be taken. He also relied upon Notification No. 172/72, dated 18-7-1977 for claiming exemption of additional countervailing duty on the imported goods.
5. Shri L.C. Chakraborti, learned Departmental Representative appearing for the Revenue stoutly defended the orders passed by the lower authorities. He placed before the Bench a chart of the test results and pointed out that the test results conducted at Madras and Delhi at various times at the request of the parties, showed an average of 7.82%. He has pointed out four methods of calculating averages of the five test results and has shown in the calculation that except third method of calculation, which showed 53.40% average which did not include the result of the fifth test of original sample, the average test result by three modes of calculation would be below 48.07%. By all the other three methods of calculation it will be below 48.07%. He submitted that in this case the synthetic waste is predominent and hence the classification and assessment made by the lower authorities is correct one. He submitted that the Chief Chemist was in favour of the assessee while all were against the assessee. He further pointed out that the assessee had not shown any lacunae in the test result neither had the assessee shown as to why all other test results were rejected and test results showed the wool content to be less than 58.07% and in the test, the result was as low as 23.4%, 27.7%, 35.2%, 40.80%, 41.9%. There was no reason to reject the findings of the lower authorities.
6. The question that arises for consideration in this appeal is whether the test results which are in favour of the assessee as per the Chief Chemist's report should be accepted or majority of the test results obtained in the first instance and that of the second instance which are less than 50% of wool waste should be taken for denial of the benefit to the assessee.
7. The second question is with regard to levy of C.V. duty. As can be seen from the facts of the case and from the orders passed the appellants had imported consignment consisting of wool waste weighing 36,255.5 kg with Invoice No. 754, dated 26th May, 1977. The documents were filed for clearance on 11-9-1979. The samples had been drawn and on the basis of the test report, the Assistant Collector of Customs, Madras issued a Notice under Section 28(1) of the Act calling upon them to explain as to why the amount of Rs. 9,88,869.39 P. be not demanded from them as the test report revealed that the percentage of wool content in the consignment was found to be 35.2% and therefore, it was to be considered as synethic waste instead of wool waste. The appellants were not satisfied with the results of the said test hence, they sought for retest of the remnant samples to be done by the Chief Chemist. The Chief Chemist by his report reported the results of original and counter sample. The original sample had five parts and the result of wool content of each part was 40.84%, 41.70%, 49%, 43.28% and 53.4% respectively, average being 45.60%. The results of four parts of counter samples were furnished which were 41.19%, 48.97%, 60.02%, 51.8%, the average of these four parts worked out to be 50.55%. As in comparing to these results with the original results, there was a variation but however, the Chief Chemist's report indicating part 5 of the original sample showed 53.4% and part 3 and 4 of counter sample showed 60.2% and 51.8%. The appellants are solely relying upon the result of percentage of wool which is indicated in part 5 of original sample and part 3 and 4 of counter sample as in the Chief Chemist report.
8. Shri L.C. Chakraborti for the Department, strongly contended that if the averages of the test results taken in the first instance and the second instance through the Chief Chemist is compared, as given by him in the chart by which he has shown four methods of calculation, the average would still be less than 50% and as such, he had submitted that the assessee would not be entitled to the benefit of the notification which laid down the criteria of satisfying 50% of wool waste for grant of exemption.
9. The appellants have not challenged the varacity of the test results obtained on first occasion nor that of the results of the Chief Chemist for setting aside the entire test results. They have not confronted their own test results either. But only point made out by them was that the fifth part of the original sample and part 3 and part 4 of the counter sample results in the Chief Chemist report was in their favour and as such, that benefit should be given to them. Their case is that the Department has not proved the content being less than 50%. One thing remains certain in this matter which is that in the original test results, the wool content had been only 35.2% and the majority of the test results of the Chief Chemist also showed less than 50%. The documents accompanying the consignment only reveals the gross weight, Tare weight, net weight in the respective bills but none of the documents has disclosed the percentage of wool waste. Hence we have to be content with the results of the test conducted in the first instance and that conducted by Chief Chemist.
10. The average of original 5 parts as shown in the test result of the Chief Chemist, New Delhi is 45.6%. There is no result of the fifth part in the counter sample and as such, the counter sample result was given as 50.55%. If the fifth part result was also added, there could have been a possibility of the result being either more than 50% or less than 50% confirming to the original sample and also to the first test report. The test report of the Chief Chemist clearly indicated that the majority of the parts revealed less than 50%. Only 3 parts out of 9 parts from both original and counter samples went in favour of the appellants. The appellants have not challenged the sampling method and have not sought for setting aside on that ground. We do not know from which consignment the favourable results have been obtained to give benefit to appellants. Since six parts from the Chief Chemist report of original and counter sample, has gone against the appellants and the original test result also has gone against the appellants, the entire test results cannot be set aside. The inference of the lower authorities that the reason for differences in the reports can be attributed to the heterogeneous nature of the mixture, cannot be overlooked. The Collector(A) in his findings has observed that when several equally authentic reports showed deviation from one another regarding percentages of different constituent materials of the mixture, the only reasonable and justifiable course to opt for was to take the average for purposes of determining the correct classification of the goods.
11. In this part of the findings, there appears to be an error as pointed out by the learned Counsel for the appellants. Having found the consignment to be of heterogeneous nature, it follows that in all these consignments from which the samples were drawn, have shown results over 50%, then that part of the sample representing the lot should go in favour of the appellants. From the report of the Chief Chemist, part 5 of the remnant original sample shows 53% of wool content. The consignment representing part 5 should get exemption so also the consignments representing part 3 and part 4 of remnant of counter sample which has shown the result of 60.20% and 51.80% respectively should go in favour of the appellants. The Department shall give relief in respect of the consignments from which the remnant sample drawn have shown results more than 50% as per the report of the Chief Chemist. The appellants shall pay the duty in respect of all those consignments from which the sample is drawn and testing have shown results less than 50%. While recovering duty from those consignments, the Department shall given the details of duty charged as sought for by the appellants in this appeal.
The appeal is partly allowed.
12. [Order per : S.K. Bhatnagar, Member (T)]. - With due respect to the Learned Member (Judicial), our views orders are as follows :-
The appellants have imported the consignment of the goods in question under bill of entry No. GN 548/79. The goods were declared as wool wastes and classified and assessed under 53.01/05-CTA pending test results.
13. On receipt of the test report the Deptt. observed that the goods could not be considered as wool wastes in view of the low percentage wool and issued the impugned demand. The appellants requested for re-test and a second re-test which was done by the Chief Chemist.
14. The Asstt. Collector found that on the basis of tests, the goods were correctly assessable as synthetic waste and do not merit assessment as wool waste and confirmed the demand.
15. Learned Collector (Appeals) observed inter alia that keeping in view Note 2(a) of Section II of the CTA, the goods were classifiable under Heading 56.01/04-CTA.
16. Learned Collector (Appeals) also mentioned that levy of additional duty was not disputed at the initial stage and could not be raised at this stage in an attempt to enlarge the scope of appeal.
17. We observe that the basic issue in the instant case is the correct classification for the purpose of customs duty and additional duty.
18. In this connection, it is required to be decided whether the consignment was that of wool wastes as declared. We observe in this connection that the samples were tested 3 times. This shows by itself that the appellants had not found the results of the first two tests satisfactory and had contested the same and the Deptt. allowed their request for the test two (three) times. In the circumstances, both the sides were bound by the result of the test by the Chief Chemist.
19. It is interesting to note in this connection that both the sides are interpreting the same test results (of Chief Chemist's test) and considering it...of their restrictive stand.
20. It is seen from the records that undisputedly the sample was in the form of heterogenous mixture of fibres and yarns and pieces. The whole question, actually, boils down to determining as to what these results implies.
21. In this connection, it is observed that undisputedly, the material was in the form of a heterogenous mixture of fibres and yarns in the nature of a waste material. In the circumstances, it is not surprising if the samples or parts of samples show varying percentage of various materials.
22. Further more, since the samples were drawn according to prevalent practice and procedure and the number of samples drawn or the method of drawing samples was not disputed during the original proceedings, therefore, the only course left open was to find out what the majority of the parts, tested disclosed. From the copy of the Chief Chemist's test report produced before us, it is seen that Part I, Part II, Part III and Part IV of the original sample and Part I and Part II of the counter sample show that the percentage of wool was less than 50%. In other words, in 6 out of 9 parts tested the woollen content was less than 50%. The same result is obtained if all the 9 parts are taken together and an average is worked out. In the circumstances, we are not convinced by the Learned Counsel's argument that the percentage of wool was more than 50% and the material be treated as wool waste.
23. Since the majority of the parts tested show the content as less than 50% and the average of all the parts of (sample and counter sample taken together) also comes to less than 50%, therefore, we are inclined to accept the DR's plea.
24. In the above circumstances, we are not inclined to interfere with the orders of the lower authorities.
The appeal is accordingly rejected.