Customs, Excise and Gold Tribunal - Tamil Nadu
Sri Renga Steel Corporation vs Commissioner Of Central Excise And ... on 11 August, 2006
Equivalent citations: 2006(113)ECC398, 2006ECR398(TRI.-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. This appeal of the assessee is directed against the order passed by the Commissioner of Customs pursuant to the Tribunal's remand order viz. Final Order No. 213/2005 dated 25.1.2005 in appeal No. C/296/2002. The party had imported what was declared as "G.I and M.S wire scrap, in three containers and filed two Bills of Entry dated 20.2.2001 for clearing the goods. They classified the goods under Heading 7204.49 of the First Schedule to the Customs Tariff Act and claimed the benefit of concessional rate of duty under Customs Notification No. 16/2000 dated 1.3.2000. The CIF value declared for the goods in the Bills of Entry was US$ 7848.75, for a declared total quantity of 68.25 MTs. The goods in the three containers were examined by the departmental officers and this yielded the following results:
S. No. Nature and ascertained description Weights (MTs)
of goods
1. G.I. wire rolls/bundles 53.150
2. Iron wire rope in coils (with rust 12.650
formation on the surface)
3. Aluminium sheet rolls 01.950
4. Misprint sheets 01.200
5. Bearings, Rubber hand gloves and 00.050
Rubber 'V'-Belts
Total 69.000
From the above, it appeared to the department that serviceable goods viz. G.I. wire rolls/bundles and Iron wire rope in coils had been imported by the appellants by misdeclaring the same as 'scrap'. It was also found that the non-ferrous materials, such as Aluminium sheet rolls, had not been declared in the Bills of Entry. The goods were, therefore, seized under Section 110 of the Customs Act. Samples of the above goods were drawn for chemical test for the purpose of correct classification. The Chemical Examiner, however, could not answer the query as to whether the wire samples were G.I and M.S. wire scrap, which, it was suggested, might be ascertained by physical examination of the entire consignment. However, it appeared to the department from the test report that the imported goods were usable as G.I. wire, Iron wire rope, Metallic sheet etc. and that none of the items was scrap. The department also suspected misdeclaration of the value of the goods by the importer and took the stand that the value was liable to be determined under Rule 8 of the Customs Valuation Rules, 1988. On the basis of the investigative findings, a show-cause notice was issued to the appellants, which proposed : (a) to reject the declared value and fix the assessable value at Rs. 12,78,055/- under Rule 8 ibid (b) to classify the goods viz. G.I. wire, Iron wire rope, Misprint sheet, Aluminium sheet, Bearings, Rubber hand gloves and "V"-Belts under Customs Tariff entries 7217.90, 73.12, 7210.11, 7606.11, 8482.10, 4015.19 and 4010.21 respectively and deny the benefit of Customs Notification No. 16/2000 dated 1.3.2000 (c) to demand Customs duty of Rs. 8,45,877/- on the goods (d) to confiscate the goods under Section 111(f), (l) and (m) of the Customs Act and (e) to impose penalty on the importer under Section 112(a) of the Act. These proposals were contested by the party.
2. Before proceeding to adjudicate the disputes, the Commissioner personally inspected the goods at ICD, Madurai in the presence of the appellants and found that bulk of the consignment was found to be G.I. wire in rolls/coils in running length. He directed the Superintendent of Customs, ICD to segregate the goods and weigh them separately and, accordingly, the Superintendent submitted the following report to the Commissioner:
S. No. Description of the goods Weight (in Kgs.)
1. G.I. wire in rolls 45,830
2. G.I. wire in bundles 6,370
3. G.I. wire with rust formation 968
After considering this report and other evidences gathered by the department, learned Commissioner upheld the proposals contained in the SCN. Apart from demanding differential duty of Rs. 8,45,877/- from the appellants, ld.Commissioner imposed a penalty of Rs. 10 lakhs on them under Section 112(a) ibid, besides imposing a redemption fine of Rs. 10 lakhs under Section 125 of the Act in lieu of confiscation of the goods. It was against this decision of the Commissioner that the party filed appeal No. C/296/2002, wherein this Tribunal found that the party was not permitted to offer their views on the Superintendent's report and that there was substantial difference in weight of the rusted items shown by the said report and the mahazar drawn earlier by the investigators. The Tribunal set aside the Commissioner's order and directed him to pass a fresh order after giving the party a reasonable opportunity of being heard on all the issues including the question whether, in the facts of the case, mutilation of serviceable goods should be allowed in terms of the relevant instructions of the Board and in view of the P&H High Court's judgment in Patiala Castings Pvt. Ltd. v. UOI .
3. In the present appeal, the Commissioner's order in the remanded proceedings is challenged mainly on the ground that the Commissioner, not being an expert, is not competent to certify the goods to be 'scrap' on the basis of his own visual examination and that there is no evidence of misdeclaration of the goods or its value by the appellants. It is also contended that, in the facts and circumstances of the case, mutilation of the goods ought to have been allowed so that they could be used for the intended purpose. At the time of personal hearing, ld.counsel for the appellants submitted that the relevant invoices issued by the foreign supplier had described the goods as "light melting scrap". It was described likewise in the HIGH SEAS SALES AGREEMENT dated 18.1.2001, whereunder it was sold to M/s. Aruna Machine Tools Import & Export, Madurai. The High Seas buyers, in their statement, had stated that the goods was intended to be melted in their furnace. This statement was never retracted, nor was it controverted by the department. In the circumstances, according to ld.counsel, it was not correct to hold that the appellants had misdeclared the serviceable goods as scrap. In any case, according to counsel, mutilation of the goods could have been allowed so that the goods could have been cleared on payment of duty at the rate applicable to scrap. Ld.SDR opposed this plea by submitting that the appellants had not requested for mutilation of the goods at the time of filing the Bills of Entry and that their subsequent plea for mutilation would go to suggest that they had wilfully misdeclared the serviceable goods as scrap. In any case, SDR submitted, mutilation of misdeclared goods was not to be allowed. In this connection, reliance was placed on UOI v. Madanlal Steel Industries Ltd. 2001 (132) ELT 526 (SC), wherein the apex court did not approve the permission granted by High Court for mutilation of certain goods imported by the respondents, after noting that the goods had been misdeclared.
4. We have carefully considered the submissions. Ld.counsel has submitted that the appellants are willing to clear the goods on payment of duty as applicable to scrap if permitted to mutilate the goods. He has also contended that, as there was no misdeclaration of the goods by the party, the Commissioner's order confiscating the goods and imposing penalty on the party cannot be sustained. In the case of mMadanlal Steel Industries (supra), it was held by the Hon'ble Supreme Court that mutilation of goods misdeclared by the importer was not to be permitted under Section 24 of the Customs Act. In the instant case, therefore, the primary question is whether the appellants can be held to have misdeclared the goods. If it is held that they misdeclared the goods, they cannot be permitted to mutilate them. In one of the invoices issued by the supplier, the goods was described as "M.S. & G.I. WIRE SCRAP", while the other invoice described the goods as "G.I. & M.S. WIRE SCRAP". Both the Bills of Entry declared the goods as "G.I. & M.S. WIRE SCRAP". The goods were, admittedly, covered under a HIGH SEAS SALES AGREEMENT, which described the goods as "LMS-LIGHT MELTING SCRAP". M/s. Aruna Machine Tolls Import and Export, Madurai, the High Seas buyers, in their statement, confirmed that the goods were purchased for melting purpose. This statement was never retracted. It was not contradicted by the department either. On these facts, in our view, it must be held that the appellants correctly declared the goods as "scrap". Ld.Commissioner found misdeclaration of the goods by the party on the basis of what had been observed by his predecessor-in-office who conducted physical examination of the consignments as also on the basis of the importer's statement dated 2.3.2001. It is true that the importers had stated that the goods imported by them were usable/serviceable materials and that the Commissioner had, in the course of the first round of adjudication of the case, found, on physical examination, that the goods were usable/serviceable and hence not scrap. Obviously, the adjudicating authority did not want to record a finding of misdeclaration by the importer only on the basis of their statement. Otherwise, the authority would not have sent samples of the goods for chemical examination and inspected the goods himself. Ld.Commissioner chose to take the importer's statement as a corroborative evidence only. The main peace of evidence, found by the Commissioner in support of his finding of misdeclaration, is the physical examination report of his predecessor-in-office. But, in our view, this physical examination report would not necessarily call for a finding that the entire consignment contained usable/serviceable materials only. The physical examination done by the Commissioner, not being an expert competent to certify the goods to be usable/serviceable, cannot claim unquestionable authenticity. In the circumstances, on the question whether the imported goods were useable/serviceable, we have to give the benefit of doubt to the importer. As the Commissioner himself chose not to take the importer's statement as conclusive evidence of misdeclaration of the goods, we would not be justified in taking a different view inasmuch as it has never been the department's proposal to confiscate the goods solely on the basis of importer's statement. At this juncture, one has got to fall back on other evidentiary materials on record. We have already observed that the appellants correctly declared the goods in the Bill of Entry on the basis of the supplier's invoices and the terms and conditions of the HIGH SEAS SALES AGREEMENT. Hence the finding of misdeclaration recorded in the impugned order cannot be sustained.
5. Merely because the importer, at a subsequent stage, requested for permission to mutilate the goods, it need not necessarily be held that they are conceding misdeclaration of the goods as 'scrap'. The plea for mutilation can as well be discerned as a gesture to reassure the department that the goods would only be used for melting purpose. The appellants can be seen as acting without intent to evade Customs duty. The ruling handed down by the apex court in the case of Madanlal Steel Industries (supra) is against mutilation of misdeclared goods. Now that we have found no misdeclaration by the importer, the plea made by the appellants for permission to mutilate the goods cannot be defeated on the strength of the said ruling, particularly when the Revenue has not cited any judicial authority in support of their case that any mutilation of goods, not claimed at the time of importation, cannot be allowed at a later stage.
6. For the reasons noted above, we are of the view that the appellants should be allowed to clear the goods in mutilated condition, on payment of duty as applicable to scrap. The goods were confiscated under Section 111 of the Customs Act on the ground of misdeclaration and the penalty was imposed on the importer under Section 112 of the Act on the ground that the importer, by misdeclaring the goods, rendered the goods liable to confiscation under Section 111. Now that we have found no misdeclaration of the goods by the importer, there is no reason for confiscation of the goods or for penalty on the importer.
7. In the result, we set aside the impugned order to the extent of setting aside confiscation (with redemption fine) and penalty and permitting the appellants to clear the goods in mutilated condition, on payment of duty as applicable to scrap.
(Operative part of the order was pronounced in open court on 11.8.06)