Custom, Excise & Service Tax Tribunal
) M/S.Ansun Systems Consulting (P) Ltd vs Commissioner Of Customs(Port), ... on 7 January, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Sl. No.1-3) Appeal Nos.Cus.Ap. 76483, 76484, 76478/14
(Arising out of Order-in-Original No.KOL/CUS/PORT/60/Gr.IV/2014 dated 31.10.2014 passed by Commissioner of Customs(Port), Kolkata.)
Both passed by Commissioner of Customs(Port), Kolkata.)
FOR APPROVAL AND SIGNATURE
HONBLE DR. D.M. MISRA, MEMBER(JUDICIAL)
HONBLE DR. I.P. LAL, MEMBER(TECHNICAL)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
1) M/s.Ansun Systems Consulting (P) Ltd.
2) Shri Shyamal Dasgupta
3) M/s.J.C. Bose & Sons
Applicant (s)/Appellant (s)
Vs.
Commissioner of Customs(Port), Kolkata
Respondent (s)
Appearance:
Dr.Samir Chakraborty, Advocate for Appellant No.1 & 3 and Shri K.K.Sanyal for Applicant No.2 Shri S.Chakraborty, D.C.(A.R.) for the Revenue CORAM:
Honble Dr. D.M. Misra, Member(Judicial) Honble Dr. I.P. Lal, Member(Technical) Date of Hearing :- 07.01.2014 Date of Pronouncement :-
ORDER NO.FO/A/75723-75725/2014 Per Dr.I.P.Lal.
1. These Appeals are filed against the order dated 31.10.2014 passed by the Commissioner of Customs(Port), Customs House, Kolkata.
2. Briefly stated the facts of the case are that M/s.Ansun Systems Consulting Pvt.Ltd. had filed self-assessed Bills of Entry namely 6092361 dated 14.07.2014, 6294232 dated 31.07.2014, 6483071 dated 19.08.2014, 6553150 dated 26.08.2014 and 6590902 dated 29.08.2014 declaring the imported goods in the first three Bills of Entry as , Silicon Electrical Steel Strips/Scrap originated from old and used, dismantled, transformer and remaining Bills of Entry as Silicon Electrical Steel Strips/Scrap originated from dismantled transformer. The classification of the goods were sought under Tariff Item 72044900 of the first schedule of the Customs Tariff Act, 1975 @ Basic Customs Duty 5% + Additional Customs Duty 12% + Education Cess 2% + Higher Education Cess 1% + Special Additional Duty 4% ad velorem. The assessable value declared for the impugned five consignments as Rs.,1,09,75,017/-. The goods were taken up for examination on the first check basis and on examination of the goods, the Dock Officers reported that on visual examination it is difficult to say whether the goods have been originated from old and used dismantled transformers or not, but goods appeared to be scrap. It appeared that the goods did not conform to the definition of scrap as per section notes 8(a) of the Section 15 of Customs Tariff Act, 1975 read with explanatory notes of harmonized commodity description and coding system (HSN) and therefore the said goods are not in the nature of scraps but old and used Silicon Electrical Steel Strips and therefore their import is not permitted under para 2.17 of the Foreign Trade (2009-2014) Policy and CBEC instruction dated 9.7.2014 read with Steel and Steel Products Quality Control Order, 2012 and 2014. The Board had clarified that import of second/defective/old and used CRGO sheets, strips and coil in any shape and size is not permitted in view of the Steel and Steel Products Quality Control Order, 2012 read with general note 2A of I.T.C. (H.S.), 2012, schedule 1 of the Foreign Trade Policy and the explanatory notes. Accordingly, a show cause notice dated 22.10.2014 was issued proposing confiscation of the goods and imposition of penalty on the importer, the Chartered Engineer and the CHA namely M/s.J.C.Bose & Sons, who have associated themselves towards clearance of the goods which they know are liable for confiscation. Being aggrieved by the said show cause notice, the Appellant M/s.Ansun Systems Consulting (P) Ltd. filed a Writ Petition before the Calcutta High Court, being W.P.No.962 of 2014. In the meantime they also filed reply to the show cause notice which was adjudicated by the Ld.Commissioner confiscating the impugned goods with an option to M/s.Ansun Systems Consulting Pvt.Ltd. to redeem the goods on payment of redemption fine of Rs.20.00 Lakhs only, in lieu of the confiscation, provided that before clearance, they mutilate the goods at their cost, so as to convert it into scrap. Ld.Commissioner imposed penalty of Rs.5.00 Lakhs on the said importer, penalty of Rs.5.00 Lakhs on M/s.J.C. Bose & Sons, CHA and penalty of Rs.50,000/- on Shri Shyamal Dasgupta, Chartered Engineer. The aforesaid Writ Petition came up for hearing before the Calcutta High Court when the same was disposed of by an order dated November 10, 2014 recording that the Writ Petition becomes infructuous. The Honble Court directed that Appeal be filed by 25th of November, 2014 by the Appellant, the said Appeal is to be disposed of within two months from the date of filing. In pursuance to the said direction, the present Appeals are taken up for disposal.
3.1 The Ld.Sr.Advocate Dr.Samir Chakraborty on behalf of the Appellant namely M/s.Ansun Systems Consulting (P) Ltd. submitted that the imported items are in the nature of scrap as they are not usable as such for any purpose including for use in transformers. He submits that such goods are treated as a scrap and are dealt with as such in trade and commercial parlance. Such scraps are allowed to be freely importable under the FTP. In support, he placed reliance on this Tribunals judgement (i) M/s.Ansun System Consulting (P) Ltd. vs. Commissioner of Customs(Port), Kolkata - 2005 (179) ELT 511 (Tri.-Del.), (ii) Kishore Kr.Agarwal vs. CC(Port) 2010 (255) ELT 138(Tri.Kol.) and (iii) SPS Metal Cast & Oils Ltd. vs. CC(Port), Kol 2004 (163) ELT 265(Tri.-Kol). It is submitted that in all these cases similar contention regarding classification of the goods originated from dismantled, old and used transformer as raised and it was held that Silicon Electrical Steel Strips/Scraps are scraps permissible for import without any license and declaration, as such does not amount to mis-declaration either in their description or value under the Customs Tariff Act and/or the Act.
3.2 He submitted that in following decisions, it has been held that if the goods are serviceable but cannot be used as such then it is to be treated as scrap.
(i) Patiala Castings (P) Ltd. vs. UOI 2003(156)ELT 458(P & H)(para 21 to 2)
(ii) CC vs. Bobsons Corpn. 2014(301)ELT 423(T).
3.3 It is the submission that imported goods being old, used and rusty which have several number of holes because of nuts and bolts used as such having traces of oils on the surface of the goods are not usable, but imported only for melting. He submits that onus of establishing that the goods are not classifiable as scrap, but as used and old Silicon Electrical Strips falling under sub-heading 7226 1100 has not been discharged by the Department, so the classification claimed is to be allowed. He relies on following judgements :-
(i) Hindusthan Ferodo Ltd. v. CCE 1997(89)ELT 16(SC)(Para 3)
(ii) CCE v. Vicco Laboratories 2005(179)ELT 17(SC)(Para 7)
(iii)Atlantic Spinning Mills & Weaving Mills Ltd.v.CCE & C, 2002(145)ELT 324(Para 10), affirmed by Supreme Court.
(iv)CC, Calcutta v. Hindalco Indus. 2007(201)ELT 343(Cal.)(Para 9 & 10) 3.4 Under the circumstances confiscation of the said goods, imposing further conditions for release of the said goods and imposition of penalty are untenable and unreasonable.
3.5 He submitted that Ld.Commissioner has erred in distinguishing the aforesaid Tribunals judgements by holding that prohibition/restriction imposed by the Control Order, which was amended by Steel and Steel Quality Control Order, 2012 which came into effect after passing of the said decisions of the Tribunal and CBEC instruction. Contention is that the said CBEC instruction [Para 2(i)] it would be seen that the same relates import of sub-standard CRGO Steel sheets and strips whereas from the aforesaid decisions of the Tribunal it would be seen that goods cannot be classified as defective CRGO steel sheets/goods and can only be treated as scrap within the meaning of note 8A of section 15 of the Customs Tariff Act, 1975. Neither the said control order nor the CBEC instruction restrict importation of such scrap. He submits that in fact from para 3(2) of the control order it would be seen that in terms thereof sub-standard or defective steels and steel products which do not conform to the specified standards of India Stndard IS:3024, have to be disposed of as scrap.
3.6 He submits that on examination, the dock officers in presence of Assistant Commissioner recorded the findings on the Bills of Entry that goods appear to be scrap. The Chartered Engineer report also confirmed the said report. Re-verification was done by a team of officers led by Deputy Commissioner of Customs on October 24, 2014 wherein the findings of the Chartered Engineer was endorsed. It is the submission that even the load port examination result contained in the pre-shipment certificate also duly certified that the said goods were scrap. The Ld.Sr.Advocate submitted that as per report of the Chartered Engineer the goods were found to be old, used and rusty most of which have several number of holes because of nut and bolts used and that traces of oil were found on the surfaces of the goods, which are from old and used dismantled transformer. On the basis of the said findings on examination, the Chartered Engineer thereafter certifies as under : (i) the goods to be originated form old, used and dismantled transformer, (ii) the goods are in the nature of scrap, (iii) the goods cannot be re-used as such in its present condition without any further processing, (iv) the goods in its present condition confirm to description of scrap, (v) ISRI Code of the goods not found.
It is the contention that on the basis of these evidences on record the said goods are scrap classifiable under CTH 7204.4900 and there is no contrary evidence enclosed in either the show cause notice or in the impugned order.
3.7 It is submitted that no cogent reasons are given either in the show cause notice or the impugned order for rejecting the said certificate which are in favour of the Applicant.
3.8 The Ld.Sr.Advocate on behalf of CHA submitted that since there is no mis-declaration or contravention of the provisions of act or the Customs Tariff Act or of CBEC instruction, penalty is not imposable. It is the contention that there is no evidence to indicate that the said CHA has associated in clearance of the goods which are liable for confiscation and that he played an active and vital role in managing Chartered Engineers Certificate which has been held to be false in the impugned order and therefore no penalty is imposable.
3.9 Ministry of Steel in its Circular bearing No.1(8) 2012-TW dated 20.02.2014 has requested the Board to look into the tenability of clearing of Silicon Electrical Steel Scrap originated from old and used transformer under CTH 72261100. It is thus evident that the Ministry of Steel is of the opinion that such strips are not classifiable as scrap.
3.10 Shri K.K.Sanyal, the Ld.Consultant for Shyamal Dasgupta submitted that the Appellant is a qualified Chartered Engineer, listed in the panel of Chartered Engineer, as appointed by Customs House in its approved list No.1/2014 dated 30.01.2014, having long experience in examination of the consignments of raw materials. No evidence is produced by the department that his report was a biased one or influenced by any extraneous material and therefore no penalty is imposable on him.
4. As per contra, it is the contention of the Ld.A.R. for the Revenue that the impugned goods are old and used Steel Strips and not in the nature of scrap as per definition of scraps under section 8(a) of section XV of the Customs Tariff Act read with explanatory notes as per HSN;. being used and old silicon steel strips their import is not authorized under the Steel Control Order, 2012, read with para 2.17 of the Exim Policy and the Boards Circular dated 09.07.2004. It is submitted that the Chartered Engineer while certifying the impugned import goods to be scrap did not record any observation/opinion regarding length, width, dimension etc. of the representative sample and its usability as defined in the section Note 8(a) of Section XV read with explanatory notes contained in HSN and thus it does not describe correctly the nature of imported goods. He submits that none of the report/certificate is categorical and therefore cannot be relied upon. He further submits that in case of Ansun Systems Consulting Pvt.Ltd. and Kishore Kumar Agarwal (supra),. the Tribunal has not discussed regarding the goods that are usable/re-usable in nature and therefore the facts of the present case are distinguishable. It is submitted that the Tribunal in these cases passed the order prior to steel orders came into force and consequent circular issued by the Board.
5. Heard both the sides. We find that the issue involved in the present case is whether the imported goods are in the nature of scraps and freely importable or should be treated as old and used CRGO Strips whose import is restricted under the provisions of FTP, 2009-2014 read with Steel and Steel Products Quality Control Orders (supra) and the impugned Boards Circular.
6. We notice that while passing the order, the Ld.Commissioner has stated that in view of reported misuse of substandard Strips(old and used) being sold to some local transformer manufacturers, for use in manufacture of substandard transformers and sold to electric supply company, Ministry of Steel has intimated the department of Revenue, Ministry of Finance that the Quality Control Orders (supra) has been enforced on all the grades of CRGO Steel sheets and strips excluding the domain refined goods (of prime quality). Accordingly, Board issued instructions vide Circular dated 09.07.2014 clarifying that import of second/defective/old and used cargo sheets, strips and coil in any shape and size is not permitted. Since in this case the goods were declared by the importer as old and used Silicon Electrical Steel Strips/Scrap, their import was not authorized. While considering the impugned goods not as a scrap he observed that (i) the Dock Officers Report that from visual examination, it is difficult to say whether the goods have been originated from old and used dismantled transformer or not, but goods appear to be scrap which is not definitive. (ii) Chartered Engineers Certificate stating the whole of the consignment as a scrap is not correct inasmuch as importer himself declared the goods as Silicon Electrical Steel Strips, Scrap. Further it does not give the reasons i.e. length and width of the strips and health which may determine their usability. (iii) He observed that the importer in para 23 of their reply before him have stated that the goods are in the form of strips which originated from old and used transformer. The said importer had also not claimed the benefit available to melting scrap under Exemption Notification No.12/2012-CUS dated 17.3.2012. In view of above he held that the impugned consignments to be usable and as they were used and old Silicon Electrical Steel Strips, their import was not authorized in view of the para 2.17 of the Exim Policy read with the Steel Control Orders stated (supra) and the Boards Circular cited (supra).
7. We find that both sides in support of their claim have relied upon section note 8 (a) to section 15 of the Customs Tariff Act, which reads as under:-
metal waste and scrap from the manufacture or mechanical workings of metal, and metal goods definitely not usable as such because of breakage, cutting up, wear or other reasons. It is the contention of the Ld.Commissioner that as the impugned consignments have not arisen from the manufacture or mechanical working of metals and no evidence is produced to the effect that they are meant for re-melting purposes only, the said consignments cannot be treated as scrap.
8. We find that in the matter of classification of products under Harmonized System of Commodity Description and Coding is done on the basis of legal text, section notes and chapter notes. As per H.S.N. Notes Waste and Scrap means :-
8.- In this Section, the following expressions have the meaning hereby assigned to them:
(a) Waste and scrap Metal waste and scrap from the manufacture or mechanical working of metals and metal goods definitely not usable as such because of breakage, cutting-up, wear or other reasons.
(b) Powders Products of which 90% or more by weight passes through a sieve having a mesh aperture of 1 mm.
72.04 Ferrous waste an scrap; remelting scrap ingots of iron or steel.
7204.10 - Waste and scrap of cast iron
- Waste and scrap of alloy steel:
7204.21 - Of stainless steel 7204.29 - Other 7204.30 - Waste and scrap of tinned iron or steel
- Other waste and scrap :
7204.41 - Turnings, shavings, chips, milling waste, sawdust, filings, Trimmings qand stampings, whether or not in bundles 7204.49 - Other 7204.50 - Remelting scrap ingots (A) WASTE AND SCRAP The heading covers waste and scrap or iron or steel, as defined in Note 8(a) to Section XV.
Such waste and scrap of iron or steel is of a miscellaneous nature and generally takes the form of:
(1) Waste and scrap from the manufacture or mechanical working of iron or steel (e.g., crop ends, filings and turnings).
(2) Articles of iron or steel, definitely not usable as such because of breakage, cutting-up, wear or other reasons; iron or steel waste and scrap is usually prepared by means of the following processes, in order to adapt it to the dimensions and qualities required by the users:
(a) Shearing of flame-cutting of heavy and long pieces.
(b) Compression into bales, particularly in the case of light scrap, using for example a hydraulic press.
(c) Fragmentation (shredding) of motor vehicle bodies and other light scrap, followed by separation (which may be magnetic) with a view to obtaining a high density product that is fairly clean.
(d) Crushing and agglomeration into briquettes of iron and steel and turnings.
(e) Breaking up of old iron articles.
Waste and scrap is generally used for the recovery of metal by remelting or for the manufacture of chemicals.
But the heading excludes articles which, with or without repair or renovation, can be re-used for their former purposes or can be adapted for other uses; it also excludes articles which can be refashioned into other goods without first being recovered as metal. Thus, it excludes, for example, structural steelwork usable after renewal of worn-out parts; worn railway lines which are usable as pitprops or may be converted into other articles by re-rolling; steel files capable of re-use after cleaning and sharpening.
Thus it appears that the Heading 72.04 excludes articles which can be reused for their former purposes or can be adopted for other uses with or without repair or renovation. It is also evident that usability as such/after processing is an important criterion to arrive at the conclusion whether the goods are scrap.
9. We however find that both examination report of the Dock Officers and the Chartered Engineers report neither has considered the above aspect nor disclose the details of the examination report in respect of the impugned goods mentioning length, width, physical conditions to determine the nature/condition of the goods, whether they are usable as such/after re-processing. We therefore are of the opinion that the examination reports are inconclusive and leads to nowhere. We also notice that while arriving at the conclusion that the impugned consignments are usable, the Ld.Commissioner has mainly relied upon the importers declaration but the same being disputed by them.
10. In view of the above observations we are of the opinion that the issue requires fresh adjudication by the Ld.Commissioner and before adjudication representative sample of the imported goods should be re-examined in presence of the importers representative and the experts dealing in the relevant field to ascertain whether the items were usable as such or after their processing to arrive at the conclusion that the imported items are scrap or otherwise. Since the facts of the present case are not clear in the light of above discussion, hence the examination of applicability of the judgements cited by both sides to the facts in our opinion, at this stage would be pre-mature. Accordingly, the order of the Ld.Commissioner is set aside with the direction to pass a fresh order after hearing all the parties and following the observations made above.
11. In the result the order of the Ld.Commissioner is set aside and Appeal of M/s.Ansun Systems Conosulting (P) Ltd. is allowed by way of remand. Consequently the Appeals filed by Shri Shyamal Dasgupta and M/s.J.C.Bose & Sons are also allowed by way of remand.
12. Since the issue is quite significant and considering the nature of urgency expressed by both sides and also demurrage is being incurred, therefore we direct that the goods should be re-examined after informing the Appellants within 15 days of receipt of this order, a copy thereof should be provided to all the parties and the Ld.Commissioner will dispose the case within one month from the date of examination. Appeals are disposed in above terms.
(Pronounced in the open court on .)
(D.M.MISRA) (I.P.LAL) MEMBER(JUDICIAL) MEMBER(TECHNICAL)
sm
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Appeal No. Cus.Ap. 76483, 76484, 76478/14