Customs, Excise and Gold Tribunal - Delhi
Vazir Polymers Ltd. vs Commissioner Of C. Ex. on 26 September, 2005
JUDGMENT
R.K. Abichandani, J. (President)
1. This group of appeals has been heard together since common points are involved and they are filed by the same appellants. In all these matters, the controversy centres around the liability of the appellants in respect of the imports of the material made as "plastic waste and scrap", which according to the Revenue did not fall under that category. The appellants have challenged the imposition of duty, redemption fine and penalty in these appeals.
Appeals No. C/415 and 416/01:
2. In Appeals No. C/415 and C/416/01, show cause notice was issued under Section 124 of the Customs Act, 1962 to the appellants alleging that the importer had mis-declared the cargo for which Bill of Entry No. 375, dated 15-6-1999 was filed. The cargo was declared as plastic scrap (polyethylene) under sub-heading 3915.90, whereas the useable and non-useable rolls found during the examination should have been shown separately under Heading 3921. It was also alleged that the value declared for assessment could not be taken as the transaction value. The value of seized useable/serviceable rolls was to be worked out by taking platt's price of LDPE (raw material) plus manufacturing cost of rolls, etc., or their value, i.e. cost of raw material and manufacturing cost and profit whichever was deemed fit by the adjudicating authority. It was also alleged that the importer was not entitled to claim the benefit of Notification No. 133/94, dated 22-6-1994 as the goods were found mis-declared and the importer was not granted the necessary licence for the import of these goods and that they were not as per the conditions imposed by the Development Commissioner in the Letter of Approval and as per guidelines contained in Circular dated 14-5-1997. It was also alleged that the Directors were liable to penal action as they did not fulfil the conditions of the Letter of Approval issued by the Development Commissioner, KFTZ, Gandhidham. The appellants were called upon to show cause why the quantity of useable rolls of 25272 Kgs., and 37908 Kgs. of scrap compressed in bales which was found concealing the mis-declared goods which was more than 3" x 3" in size, should not be confiscated under Section 111(d) and Section 111(m) of the said Act. They were also called upon to show cause why the classification of the goods for useable rolls should not be revised from sub-heading 3915.90 to sub-heading 3921.90 and why the value thereof should not be enhanced as stated in the notice. As the goods were found to be mis-declared and not in conformity with the conditions, they were called upon to show cause why duty should not be levied at the enhanced value along with interest and why penalty should not be imposed as indicated in the show cause notice.
2.1 It was alleged in the notice that intelligence was gathered by the Customs House that Units at KFTZ were importing prime plastic material in the guise of plastic waste and scrap. Transhipment Permit (TP) filed by the importer was, therefore, taken up for investigation and when the containers were opened for examination, it was, prima facie, noticed that the goods inside did not appear to be plastic scrap and waste as declared by the importer. Therefore, a detailed examination of all the goods was required for ascertaining the correct description. The importer produced the request letter dated 15-6-1999 for 100% examination at their factory premises by removing the containers from the port area to their factory premises.
2.2 The total assessable value was shown in the Bill of Entry as Rs. 5,63,400/- and duty exemption was claimed under Notification 133/94, dated 22-6-1994. The containers shown to contain plastic scrap in TP, Bill of Entry and invoice were examined at the importers industrial unit in the presence of two independent panchas and the goods were found in two categories i.e. (i) rolls serviceable and useable (ii) bales containing loose and compressed plastic scrap which were non-serviceable and non-useable. The approximate value of useable rolls was shown as Rs. 10,10,880/- while that of plastic scrap in bales containing compressed plastic scrap as Rs. 6,82,344/-.
2.3 The importer was importing plastic waste and scrap for recycling purposes. As per the prescribed guidelines contained in Public Notice 392(PN)/92-97, dated 1-1-1997, plastic waste and scrap was required to be imported as specified therein. The guidelines were incorporated in the Circular No. 1797-98, dated 14-5-1997 and all the approved units recycling plastic waste and scrap were directed to comply with that. The importer had been permitted to import plastic scrap/waste under permission dated 31-12-1996 issued by the Development Commissioner, KFTZ, Gandhidham, and such imports were to be done strictly in accordance with the EXIM Policy and Procedure thereof as applicable at the time of import.
2.4 It was stated in the show cause notice that the test reports of the Customs House laboratory showed that the imported goods cannot be considered as plastic waste/scrap as they were useable rolls of plastics in the guise of plastic waste and scrap. The useable rolls could be used for the purpose for which such type of goods were meant, while scrap compressed in bales can be used only for recycling purpose for which these goods were imported by the importer. Statement of Himanshu R. Rawal, authorised person of the importer was recorded on 24-9-1999 in which it was, inter alia, stated that they imported plastic film rolls in running length and in serviceable condition. He also admitted that no certificate from the factory in which plastic scrap/waste was generated was produced by them as required by the Public Notice dated 1-1-1997. He admitted that they had not fulfilled the condition of Public Notice dated 1-1-97 and the goods imported by them were not correctly classified by them.
2.5 It was further stated in the show cause notice that the value of the useable rolls should be platt's price of LDPE (raw material) plus manufacturing cost of rolls or the value, i.e. the cost of raw material plus manufacturing cost and profit whichever deemed fit by the adjudicating authority. The other goods i.e. non-useable rolls and scrap compressed in bales/cartons which could be used only for recycling purposes were to be assessed at Rs. 8.83 per Kg. which was the value declared for assessment in the Bill of Entry.
2.6 The Commissioner of Customs, Kandla by order dated 20-4-2001, on the basis of the material on record, came to a finding that the goods were mis-declared and imported in contravention of the permission granted by the Development Commissioner, with an intent to claim the benefit of the Notification 133/94-Cus., dated 22-6-1994 and to avoid payment of duty. The goods were, therefore, liable to be confiscated for violation of Section 111(d) and 111(m) of the said Act. It was held that the film rolls of plastics were imported in the guise of waste and scrap of plastic and the invoice value thereof did not represent the correct transaction value. It was held that the imported goods could not be considered as waste as they were useable plastics. The useable rolls of plastic and plastic scrap of the total quantity of 63.180 MTs the declared value of which Rs. 5,63,400/- were accordingly confiscated. However, since the goods were provisionally released and not available for confiscation, a fine of Rs. 4,50,000/- was imposed in lieu of confiscation. The useable film rolls of plastics were classified under Customs Heading 3921.90 instead of 3915.90 as was done under the Bill of Entry No. 375, dated 15-6-1999 and the value of confiscated plastic useable film rolls was enhanced to Rs. 13,17,303/-. The benefit of the exemption notification dated 22-6-1994 was denied and a penalty of Rs. one lac was imposed on the importer and of Rs. 50,000/- on the Director. It was also ordered that interest as payable under the said Act was recoverable from the notice.
Appeal No. C/129/02
3. The appellants have challenged the order dated 24-12-2001 made by the Commissioner of Customs, Kandla, confiscating the goods weighing 67.944 MT of the enhanced value of Rs. 11,43,250/- imported vide Bill of Entry No. 791, dated 13-8-1999 giving an option to the importer to redeem the goods on payment of fine of Rs. two lacs, classifying the goods under Customs Tariff Heading 39.21, valuing the goods under detention at Rs. 11,43,250/-, denying the benefit of notification dated 22-6-1994, and imposing penalty of Rs. 50,000/- on the appellant.
3.1 The importer in the present case had filed Bill of Entry No. 791, dated 13-8-1999 declaring the goods as plastic scrap and sought assessment under Customs Tariff Heading 3915.90 claiming duty exemption under notification 133/94-Cus., dated 22-6-1994. The value was declared at US $ 13741.67 CIF (US $ 202.25 MT) for the total declared quantity of 67.944 MTs and the total assessable value was declared as Rs. 6,12,136/- and CIF value as Rs. 5,97,076/- in the Bill of Entry. The containers 'were examined in the presence of two independent panchas and the goods were found as 41.694 MTs of plastic films in rolls concealed in 26.250 MTs of plastic scrap in compressed bales having size more than 3" x 3". According to the Revenue, since the goods imported were plastic films in rolls concealed in plastic scrap, the rolls were classifiable under Chapter Heading 3921.00 in terms of Chapter Note 10 of Chapter 39 as such, and could not be considered as waste/scrap falling under Chapter Heading 3915. The unit was given permission by the Development Commissioner for import only of plastic scrap/waste whereas the goods on examination were found to be plastic films in rolls which were articles ready for use. As per the show cause notice, therefore, the importer was not entitled to the benefit of the said notification dated 22-6-1994.
3.2 The learned Commissioner of Customs by order dated 24-12-2001, on the basis of the material on record, passed the impugned order confiscating the goods under Sections 111(d) and (m) of the said Act and giving option to redeem the goods on payment of fine, classifying the goods under CTH 39.21 and with option to redeem the goods on payment of redemption fine of Rs. 9.80 lacs. The assessable value of the goods was enhanced to Rs. 9,73,759/-. The learned Additional Commissioner finding that the price of useable rolls would be much higher than the value of plastic scrap/waste, observed that the information regarding international price at which such or like goods are ordinarily sold or offered for sale can be ascertained only through internationally reputed financial journals like LME bulletin, Platt's Weekly report, etc., and be taken into consideration. The declared value was accordingly enhanced. The benefit of the notification dated 22-6-1994 was denied and the goods were classified under Heading 3915.90. A penalty of Rs. 10 lacs was also imposed under Section 112 read with Section 114(A) of the said Act on the importer and its Director.
Appeals No. 108 to 116/024.5 In Appeals No. C/108 to 116/02 which arise from a common order made by the Commissioner (Appeals) from which Appeal Nos. C/106-107/02 also arise, the facts are almost similar and need not be reproduced. We have been taken through the record of all these matters by the learned Counsel while making common submissions in respect of all the appeals. We may indicate that the goods which are the subject matter of Appeal Nos. C/108-109/02 were Mc Donald's ICE bag 11 x 22 with twist, total weight 490 Kgs. (98 x 5), Calmar PO 20" x 14" total weight 360 Kgs. (60 x 6 kg.) and without marking 612 Kgs. (102 x 6 Kg.). All these according to the Revenue were useable plastic bags. Appeals Nos. C/110-111/02 4.6 The goods in respect of which Appeal Nos. C/110-111/02 arise, were useable rolls (9170 Kgs.) and lumps (18680 Kgs.) which were more than 3" x 3". The assessable value of useable rolls was Rs. 3,66,800/- and of lumps Rs. 3,73,600/-. Appeals Nos. C/112-113/02 4.7 The goods to which Appeal Nos. C/112-113/02 relate, were plastic lumps more than the size of 3" x 3".
Appeals No. C/114-115/02 4.8 The goods of Appeal Nos. 114-115/02 were plastic powder, lumps of more than 3" x 3", plastic scrap in compressed form.
Appeals Nos. C/116-117/02 4.9 Goods of Appeal Nos. C/116-117/02 were plastic lumps of more than 3" x 3".
Appeals Nos. C/118-119/02 4.10 Goods of Appeal Nos. C/118-119/02 were plastic scrap in compressed form and lumps of more than 3" x 3".
5. It has been contended that in all these appeals, the appellants had satisfied the conditions of the Public Notice dated 1-1-1997 because the imports were made under the permission/licence which was obtained by the appellant and all the imports were of plastic scrap/waste. It was further argued that the Central Institute for Plastic Engineering and Technology (CIPET) had analyzed the consignment as per its report and the goods were shown as plastic scrap/waste. It was also indicated therein that the goods were plastic scrap/waste as per Public Notice dated 1-1-1997. It was then argued that the department could not have sent the samples to the Custom House Laboratory at Kandla, in view of Clause (vii) of the Public Notice dated 1-1-1997. He submitted imposing penalty as stated in the order. It was found that under the Public Notice dated 1-1-1997, only the type of plastic scrap/waste specified therein was to be considered as plastic scrap and waste, and the rolls of film which were concealed in plastic scrap could not be treated as plastic scrap and waste. It was held that deliberate and conscious mis-declaration was made by the noticee of the consignment as plastic scrap to avail of the benefit of the notification on the basis of the permit granted by the Development Commissioner for importing plastic scrap and waste. Appeals No. C/106 to 119/02
4. Appeals No. C/106 to 119 are directed against the common order of the Commissioner (Appeals), Ahmedabad by which the orders-in-original in all the matters were confirmed. The Commissioner (Appeals) made a common order because the common appeals were argued together before him. Even in all these matters, the facts are similar to the above matters, inasmuch as, according to the Revenue on opening the containers covered under the relevant Bill of Entry, it was noticed that the goods therein were not plastic scrap for which the appellants were having permission.
4.1 In the order-in-original from which Appeal Nos. 106-107/02 arise, the importer had filed Bill of Entry No. 120, dated 28-4-1999 in which the goods were described as plastic scrap (polyethylene), assessable value of which was declared as US $ 200 PMT C & F Kandla and the total assessable value was shown as Rs. 3,79,898/- and duty exemption claimed under the said notification dated 22-6-1994. When the containers were examined, in the presence of two independent panchas, the goods were found to be in three categories (i) rolls serviceable or useable (ii) bales and cartons containing loose and compressed plastic scrap which were not serviceable and non-useable. The approximate market value of the same was estimated by the independent panchas at Rs. 9,23,320/- for the useable rolls (23083 Kgs.), Rs. 46,170/- for non-serviceable damaged rolls (2565 Kgs.), and Rs. 3,11,688/- for bales and cartons containing compressed plastic scrap (17316 Kgs.) 4.2 Samples from the goods of Bill of Entry 120, dated 28-4-1999, were forwarded to the Chemical Examiner, Custom House, Kandla to ascertain the composition, nomenclature, nature, etc., and whether it was virgin plastic or waste or scrap. The test result dated 28-4-1999 showed that the sample was in the form of a cut piece of transparent plastic film. It was indicated that the entire consignment may be taken into consideration. The other sample was of irregular cut piece of colourless plastic film while the third sample was of cut piece of a transparent film. It was stated that whether this was scrap or not could be known from the nature of the whole consignment which may be taken into consideration.
4.3 The test report indicated that these samples may be considered to be made of virgin plastic. It was stated that sample No. 3 drawn from the plastic scrap compressed in bales and cartons was transparent film of more than 3" x3" in size.
4.4 The Additional Commissioner on a detailed examination of the material on record found that the goods were mis-declared both in terms of their value as well as the description and were imported in contravention of the provisions of the letter of permission granted by the Development Commissioner and with an intent to claim the benefit of the notification dated 22-6-1994 in order to avoid payment of duty. The goods were, therefore, ordered to be confiscated that the report of Custom House Laboratory was inconclusive as it required the whole consignment to be checked in order to decide whether it was plastic scrap or not. He submitted that the said report did not show that the consignment was not scrap. He also argued that the restriction on size of scrap of 3" x 3" was not applicable to films and that the rolls and tapes were not of less than 3" x 3". It was contended that in any event, the rolls and tapes should be mutilated to make them scrap/waste.
5.1 The learned Counsel placed reliance on the following decisions in support of his contention:
(a) The decision of this Tribunal in Sushil Halwai v. Commissioner of Customs (Port) Calcutta reported in 2001 (135) E.L.T. 1032 (Tri.-Kolkata) to point out that it was held in paragraph 4 of the judgment that looking to the fact that whenever there was a dispute about mutilation of the goods normally the importer is permitted to get the goods mutilated before clearance. It was observed in that case the correct procedure would have been to get the goods mutilated before clearance and, therefore, there was no violation of Import Policy if the goods were mutilated before clearance. The Tribunal directed the authorities to get the goods fully mutilated and see that the converted goods were exported.
(b) The Tribunal's order in Appeal Nos. C/182 & 183/04-Mum. (M/s. Vazir Polymers and Mr. Amit D. Jain rendered on 30-11-2004 was cited to point out that it was held in paragraph 2.2 of the judgment that since the goods in powder form and powder waste was permitted to be imported by the assessee situated in Export Processing Zone (EPZ), duty free, there could, therefore, be no reason to mis-declare the goods.
(c) The decision of this Tribunal in M/s. Shiv Cables and Wire Industries (India) v. Commissioner of Customs, Faridabad reported in 2004 (178) E.L.T. 762 (Tri. - Del.) : 2004-TIOL-920-CESTAT-DEL. was cited for the proposition holding that the Revenue to take the price of the virgin plastic and then allow the deductions in respect of recycled/reprocessed LDPE imported by the importer. It was noticed that the Tribunal held in Deeja Plastics case that platt's price report was not based on transaction value but it was merely a compilation of price ranges of various plastic material and those prices were region-wise and not country-wise and as such they did not represent the alternate transaction value. It was held that the transaction value was to be accepted as the assessable value.
(d) The decision of this Tribunal in Vijay Inder Plastics v. Commissioner of Customs, New Delhi reported in 2005 (68) RLT 261 (CESTAT-Del) was also cited for the proposition that platt's price cannot be made the basis for enhancement of the value of imported goods. The Tribunal relied upon its earlier decision in Adani Exports Ltd. v. CCE which was confirmed by the Supreme Court in Commissioner v. Adani Exports Ltd. reported in 2002 (146) E.L.T. A213.
(e) The decision of the Tribunal in Specific Ventil Fabrik v. Collector of Customs, Bombay reported in 1992 (40) ECR 338 (Tribunal) was cited to point out from Paragraph 5, that it was observed that the adjudicating authority had allowed clearance of the subject goods under the advance licence after ordering mutilation. The Tribunal observed that in Section 24 of the said Act, when such a mutilation has been done, then the import has to be taken as not in contravention so as to attract the provisions of Section 111. It was held that mutilation having already taken place, order of confiscation was not sustainable.
(f) The decision of the Tribunal in Promising Estate & Traders Pvt. Ltd. v. Commissioner of Customs, Calcutta was cited to point out that while setting aside the confiscation and enhancement of value, ordered that the goods shall be fully mutilated and on conversion shall be exported. The Tribunal followed its earlier decision in Sushil Halwai v. CC, (Port), Calcutta (supra).
(g) The decision of the Supreme Court in Damodar J. Malpani v. Collector of Central Excise was cited to point out that the Supreme Court had disapproved the distinction being made in similar case, in a case relating to classification of tobacco. The appellant's product was chewing tobacco which was not necessarily manufactured tobacco or classifiable under Tariff Heading 24.04 and the classification of chewing tobacco as unmanufactured or manufactured tobacco would ultimately depend on the process adopted for and composition of chewing tobacco. The appellant had relied upon the instance of a particular manufacturer of chewing tobacco, whose product was classified under unmanufactured tobacco falling under Tariff Heading 24.01. According to the appellants, similar treatment should have been given to its product. It is in this background that the Supreme Court held that it was difficult to understand the reasoning of the Tribunal and that it was competent for the Central Excise officers to examine each and every case and come to a decision. The Supreme Court observed that even till the date of hearing before it, no explanation was forthcoming by the Revenue authorities as to why different stand was being taken.
(h) The decision of the Calcutta High Court in Lakhotia Udyog v. Union of India was cited to point out from paragraph 15 of the judgment that it was held that if the goods (buttons/snap fastners) were mutilated what would be released to the petitioners would, therefore, be only scrap. It was held that by directing duty to be charged on the basis that the goods had been imported in the mutilated form, Section 24 of the Act created a fiction as if the goods had been imported in the mutilated form and that this appeared to be an equitable and rational approach.
(i) The decision of this Tribunal in Commissioner of Customs, Bombay v. Pudumjee Agro Industries Ltd. was cited to point out that the Tribunal did not find any infirmity in the order of the Commissioner (Appeals) holding that the goods in question which were roll waste (paper) were sold by the exporter and that they were never intended to be sold as paper. The Commissioner (Appeals) had observed that the Customs House was at liberty to further mutilate the goods. It was also observed that one course could be to drill the rolls at three/four places. Such a course of action was approved by the importer.
(j) The decision of this Tribunal in Adani Exports Ltd. v. Commissioner of Customs, Visakhapatnam was cited to point out from Paragraph 11 of the judgment that it was held that platt's price reported was not based on transactions but it was merely a price compilation of price ranges of various plastic materials and these were region-wise and not country-wise and, therefore, they did not represent alternate transaction values. The appeal against this decision was dismissed by the Supreme Court in Civil Appeal No. 2279/00 on 15-3-2001 on the ground that they did not find merit in the appeal [as reported in 2002 (146) E.L.T. A213].
6. The learned Authorised Representative for the Department took us through the relevant provisions incorporated in the Public Notice, the contents of permit granted to the appellants, and other relevant record of the case in all these appeals. He submitted that in view of the conditions of the Public Notice dated 1-1-1997, goods could not be mutilated. The rolls, and tapes of larger size of 3" x 3" were declared as plastic scrap. The rolls, and lumps were concealed in plastic scrap. He also submitted that the price of the rolls, and lumps had been enhanced especially in view of the statements made by the witnesses working for the appellant. He also submitted that platt's price was taken only for the purpose of ascertaining the price of raw material in which necessary additions were made in the cost incorporated in making of the useable rolls. The learned Authorised Representative for the Department supported the reasoning and adopted by the authorities below in their decisions. He submitted that there was no request for mutilation made till now and, therefore, there was no scope for directing the goods to be mutilated into plastic scrap.
6.1 The learned Authorised Representative for the Department relied upon the following decisions in support of his contention:
(a) The decision of the Supreme Court in Garg Woollen Mills (P) Ltd. v. Additional Collector of Customs, New Delhi was cited to point out in paragraph 6 of the judgment, the Supreme Court had rejected the submission that instead of the goods being directed to be confiscated, the offer made by the appellants that the imported goods may be further mutilated by the authorities. It was held by the Supreme Court that "the question as to whether the offer for further mutilation of the goods could have been accepted would arise, only in a case where the import was found to be bonafide and the matter only related to the extent of mutilation of the goods which had been imported". It was held that the appellants could not claim the benefit of the offer to have the goods to be further mutilated to avoid confiscation since in that case it was found that there was a fraud in the entire process of import.
(b) The decision of the Supreme Court in Collector of Customs, Bombay v. Hardik Industrial Corporation was cited to point out that it was held in paragraph, the point of time at which the respondent made the offer of mutilation was relevant. If at the very outset, the respondent had asked for mutilation of the goods, that might have been a different matter. The Collector's order suggested that it did not. It sought to clear the goods. It was only upon the examination of the seventh container that it was noticed that a part of what it contained was serviceable material. If that be so, the respondent's offer of mutilation was made only after the offence had been discovered.
(c) The decision of the Supreme Court in Union of India v. Madanlal Steel Industries Ltd. reported in 2001 (132) E.L.T. 526 (S.C.) was cited to point out that the Supreme Court observed that it saw little justification for the High Court to have granted any relief to the respondent in the manner it did by releasing the stainless steel sheets after mutilation.
7. The appellant was importing plastic scrap/waste under a permission granted under the EXIM Policy to EOU/EPZ. Such permission was to be construed as a licence, for all purposes. Copy of the permission issued by the Development Commissioner in favour of the appellant on 27/31-12-1996 is on record. The permission was granted in respect of the items mentioned therein for import of plastic granules/shreddings/grinding/pieces, etc. from waste/scrap/discarded/obsolete plastic items on the conditions which, inter alia, included condition No. 4 that reads as under:
Import of plastic scrap/waste shall be strictly in accordance with the Export and Import Policy and Procedure thereof, as applicable at the time of import of such items The letter of permission was valid for one year from the date of its commercial production and it was stipulated in Clause (v) that if the appellants failed to comply with the conditions, the permission was liable to be revoked/rejected.
8. Though at one stage, we ourselves wanted to examine whether there was any scope for considering the matter in the context of the provisions of Section 120(2) of the Act, which lays down that where smuggled goods were mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole goods shall be liable to confiscation, it became clear, during the course of the arguments that such separation was permissible only where the owner of such goods proves that he has no knowledge or reason to believe that they included any smuggled goods, in which event only such part of the goods the value of which was equated to the value of the smuggled goods were liable to confiscation. The learned Counsel had initially stated that he was not raising this contention, but subsequently relied upon the said provision.
9. There is no dispute about the fact that the appellant was required to abide by the conditions incorporated in the Public Notice 392(PN)/92-97, dated 1-1-1997 which regulated import of all types of plastic waste/scrap (except PET bottle waste/scrap). It was mentioned in the Public Notice that the applicant who wishes to submit application to the Directorate General of Foreign Trade for grant of licence for import of plastic waste/scrap was required to strictly comply with the guidelines/conditions stated in the Public Notice. As per the Public Notice, import of plastic waste/scrap was permitted only against a licence. It is significant to note that the expression plastic waste/scrap was specifically defined in the said Public Notice in the context of import of plastic waste/scrap. The said "description/definition" for the purpose of the said Public Notice reads as under:
Plastic scrap/waste constitute those fractions of plastics generated by various plastic processing operations or those fractions generated in the production process of plastics in a plant, which have not been put to any use whatsoever and as such can be termed as virgin or new material which can be recycled into viable commercial products using standard plastic processing techniques but without involving any process of cleaning whereby effluents are generated", (emphasis added).
It will thus be seen that the expression "plastic waste/scrap" has to be read in the context of this definition and there is no scope of resorting to any dictionary meanings of those words. The definition clearly contemplates only fractions' of plastic generated in plastic processing or in the production process and there is no scope for including any useable articles in that definition which are not fractions of plastics.
9.1 Condition No. (ii) of the Public Notice dated 1-1-1997 is also important for our purpose and, therefore, reproduced herein below:
Such virgin/new plastic scrap/waste shall be permitted to import in the following forms i.e. compressed, films in cut condition, cut tape soft waste, flakes powders, pieces of irregular shape (not exceeding the size of 3" x 3")"
(emphasis added).
It will be noticed from this condition that the import is permitted only against a licence for "plastic scrap/waste" as defined in the condition No. (i) of the Public Notice, and only in the forms indicated in condition No. (ii). The expression compressed films in cut condition and cut tape clearly rules out consideration of any rolls of films or tape as plastic scrap/waste permitted for import. In other words, this condition clearly shows that no rolls of films of plastic scrap/waste which are not in cut condition could have been described as plastic waste/scrap by the appellant in the Bill of Entry. Large quantity of such rolls of films and tapes were found concealed in the containers and this coupled with the false declaration that they were plastic waste/scrap was clearly indicative of the deliberate effort of the appellant to evade the customs duty that was otherwise payable on the consignments which were not plastic scrap/waste as defined in the Public Notice dated 1-1-1997 and the import of which was not permitted under that Heading in view of condition No. (ii) of that Notice.
10. Under condition No. (vi) each consignment of plastic scrap/wastes imported against an import licence was required to be accompanied with a certificate from the factory in which it was generated to the effect that it conforms to the description/definition given in sub-paragraph (i) of the Public Notice. The importer was also required to furnish a declaration certifying that the plastic scrap/waste imported and for which clearance was being sought should strictly conform to the description/definition as given in sub-paragraphs (i) and (ii) of the Public Notice. Admittedly, no certificate from the factory in which the so called plastic scrap/waste was generated, was produced by the appellant. The certificate on which reliance was placed was issued by the supplier which is not contemplated in the said Notice and no credence can be given to it when the specific requirement is for producing the certificate from the factory in which the waste/scrap was generated. It was also stipulated in the Public Notice that while the importers of plastic waste/scrap by 100% EOUs and units in EPZ shall continue to be governed by the provisions of Para 19 of the EXIM Policy, the parameters for import of plastic waste/scrap as specified in the Public Notice shall be kept in view by the Board, while approving the units under the scheme. The facts which have been established on the record shall clearly reveal the requirement of the Public Notice dated 1-1-1997 were not satisfied and the import was in clear breach of the guidelines and conditions contained therein. The confiscation of the goods was, therefore, fully justified.
10.1 The contention that the samples of the goods could not have been sent for testing to the Kandla Customs Laboratory, and that no reliance could have been placed on the report of that Laboratory and further that the report of Central Institute of Plastic Engineering and Technology (CIPET) which was in favour of the appellant, was conclusive since the goods were described as plastic scrap/waste was based on sub-para (vii) of the Public Notice dated 1-1-1997 which is reproduced below:
(vii) Before the clearance of the plastic waste/scrap, all imported consignments of such plastic scrap/waste shall be subjected to scrutiny and testing of samples.
Customs authorities shall for this purpose draw a sample and send the same to the nearest laboratory/Office of the Central Institute of Plastic Engineering and Technology (CIPET) with a view to having the same analyzed and verified that such imported consignments are in conformity with the description/definition as given in sub-paragraph (i) and (ii) above.
The words "to the nearest laboratory/Office of the CIPET" clearly gave option to the Customs authorities to send the samples either to a nearest laboratory or to the Office of CIPET. It cannot, therefore, be said that the goods could not have been sent to the Kandla Custom House laboratory. The report of the Kandla Laboratory that the whole consignment was required to be verified for deciding whether it was plastic waste/scrap was justified because only a sample of cut piece of film was forwarded and sitting in the laboratory, the analyzer could not have known about the useable rolls which were found in the containers along with other plastic scrap material. Merely because CIPET report states that the sample which was sent to them was "plastic waste/scrap", that did not absolve the appellant in respect of the liability for the imported useable rolls of film/tapes and pieces of lumps of plastic and larger size than the permissible size of 3" x 3" found in the container. When specific scrap/waste as defined was required to be only fractions of plastic, rolls of tapes/films were obviously excluded from the expression plastic scrap/waste. Therefore, even if the size of 3" x 3" described in sub-paragraph (ii) was in respect of pieces of irregular shape and did not apply to films and tapes, there was no warrant for including rolls of films and tapes in the category of plastic waste/scrap as defined in sub-paragraphs (i) and (ii) of the said Public Notice.
11. The contention that even if rolls of plastic films/tape and lumps larger than 3" x 3" were not considered as plastic waste/scrap, this Tribunal may direct them to be mutilated, thereby converting them into plastic scrap/waste for the purpose of releasing them duty free to the appellants in all these appeals. It is submitted that such a course had been adopted in many cases and, therefore, there should not be any distinction made against the appellants. This submission is wholly misconceived, because it is clearly established from the record that there has been mis-declaration of the goods and during the proceedings and up-till now no such request for mutilation was ever made. It is only when the authorities detected the attempted evasion of duty and the decisions have gone against the appellants that, now, such a submission is being put forth. There is no statutory provision requiring such illegal imports to be legalized nor such a submission can be countenanced. The Supreme Court has in terms held that no such offer of mutilation could be accepted when it is made to avoid confiscation, where the import was not bona fide. The question as to whether the offer for further mutilation could be accepted, can arise only in a case where the import was found to be bona fide Garg Woollen Mills (supra) and Madanlal Steel Industries (supra) 11.1 Even in the past if, in some cases, depending on the facts, mutilation was allowed, that would not obviously be a binding precedent for claiming mutilation in cases where there has been flagrant violation of the statutory provisions.
11.2 The scheme of mutilation is reflected in the provisions of Section 24 of the said Act which reads as under:
Section 24: Power to make rules for denaturing or mutilation of goods: The Central Government may make rules for permitting at the request of the owner the denaturing or mutilation of imported goods which are ordinarily used for more than one purpose so as to render them unfit for one or more of such purposes and where any goods are so denatured or mutilated they shall be chargeable to duty at such rate as would be applicable if the goods had been imported in the denatured or mutilated form (emphasis added) Admittedly, there are no rules made by the Central Government for mutilation of imported goods which are ordinarily used for more than one purpose so as to render them unfit for one or more such purposes. Therefore, the appellants cannot claim that the goods should be mutilated and then be chargeable to duty applicable to the goods imported in the mutilated form. In absence of any statutory rules, there is no warrant directing mutilation of the goods. Moreover, mutilation was never asked for and, as held above, the imports were clearly not bona fide because they were made by a false declaration that the goods were "plastic waste/scrap" contrary to the definitions of that expression given in sub-paragraphs (i) and (ii) of Public Notice dated 1-1-1997. Any attempt to describe the rolls of films /tapes useable and larger lumps of plastic waste/scrap on the basis of dictionary meanings of those expressions would be misleading and impermissible in view of the clear definition of "plastic waste/scrap" adopted in the Public Notice dated 1-1-1997 for the purpose of imports of plastic waste/scrap. We, therefore, do not see any justification for directing mutilation of the said goods. Any such course will, in our view, perpretrate illegality and encourage attempts to evasion of duty by the importers taking a chance and smuggling the goods on which duty is payable by resorting to false declarations and concealing them in the goods which are exempt from duty.
12. That takes us to the valuation aspect. It does appears that in Adani Exports, the Tribunal took the view, as reflected in Paragraph 11 of the order, that platt's price report not being based on transaction, but being only compilation of price ranges, did not represent alternate transaction value. In the present case, however, we may refer to the statement of Mr. Himanshu R. Rawal, who was the authorised person of the appellant company, which has a direct bearing on the question of valuation. In his statement dated 17-5-1999 recorded under Section 108 of the said Act, after stating that only virgin plastic lumps of the size not exceeding 3" x 3" were permitted to be imported under the Public Notice dated 1-1-1997 and that the plastic lumps under the panchnama were not as per the said Public Notice and were more than 3" x 3", and also that they had not received any certificate issued by the factory in which the imported goods were generated and no such certificate was produced by them to the Customs for any of the imported goods, he has stated on the question of valuation:
On being asked, I have to state that the value declared for plastic waste and scrap under TP Nos. 252/26-4-99 and 2971, dated 10-5-99 and B/E Nos.
120/28-4-99 and 177/12-5-99. But on examination the goods found (i) plastic film serviceable and useable rolls (ii) non-serviceable damaged plastic film rolls (iii) plastic cut films (scrap), compressed packed in bales and cartons (iv) lumps of plastic. The value estimated by the panchas in panchnama dated 6-5-99 and 12-5-99 for the serviceable plastic film rolls Rs. 40/-for non-serviceable damaged plastic film rolls and cut films in bales/cartons Rs. 18/- and for the lumps of plastic Rs. 20/- is correct and it is reasonable market value on retail basis. I admit that the goods that is plastic waste/scrap imported by M/s. Vazir Polymers Ltd., KFTZ, Gandhidham is not fulfilled the conditions laid down under the Public Notice No. 392 (PN)/92-97, dated 1-1-1997 and the goods imported by us is not correctly classified under the Customs Tariff Act 1975.
12. We may also note that in the statement of Rajesh Gowri Shankar Khatod, who was responsible to deal in the matters relating to customs/bank, etc., and day-to-day factory work i.e. including manufacturing and administrative work, has stated in his statement dated 14-5-1999, in answer to the question whether rolls and lumps imported by the appellant company under the Bills of Entry dated 28-4-1999 and 12-5-1999 were fulfilling the condition No. (ii) of the Public Notice dated 1-1-1997, that, the rolls and lumps were not fulfilling the condition No. (ii) of the Public Notice.
13. It is clear to us from the record that the rolls of films/tapes, and lumps of larger size which could not have been imported as plastic scrap/waste were concealed with plastic scrap/waste. The appellant had every reason to believe that the goods in question which could not have been imported as plastic waste/scrap were smuggled goods. The word "smuggling" as defined under Section 2(39) of the said Act, in relation to any goods means "any act or omission which renders such goods liable to confiscation under Section 111 or Section 113 of the said Act". Under Section 111(d), any goods which are imported or attempted to be imported contrary to any prohibition imposed by or under this Act or any other law for the time being in force, are liable to confiscation. Under Section 111(m), any goods which do not correspond in respect of value or in any other particular with the entry made under this Act in respect thereof, are also liable to confiscation. Therefore, the plastic material which did not fall within the definition of expression of plastic waste/scrap as defined in the Public Notice dated 1-1-1997 which alone could have been imported as per the Public Notice, were smuggled goods. The appellant had every reason to believe that rolls of films/tapes contained in the said consignment were imported under a false declaration. Furthermore, the goods were mixed with other goods, viz., lumps were mixed with powder and the rolls were concealed in plastic scrap/waste. Therefore, even if there was genuine plastic scrap, since it was used for concealing the smuggled goods such plastic waste/scrap was also liable to confiscation in view of Section 119 of the said Act. Therefore, there is absolutely no scope for resorting to Section 120(2) of the said Act in respect of the confiscated goods.
14. Since platt's price is not favoured for adopting as the basis for working out the correct assessable value and the transaction value of the goods declared on the basis that they are plastic waste/scrap, cannot be accepted because in fact they were not such plastic waste/scrap, being unserviceable rolls of films, and larger lumps, and there was no reliable documentary evidence available for determining the assessable value under Rules 5, 6, 7 or 7A, it has to be determined under Rule 8A of the Customs Valuation Rules, 1988 using reasonable means consistent with the principles and general indicated in the provisions of the said rules, on the basis of the data available. It appears from the record that at the time of seizure/detention, panchnamas were drawn in which the approximate value of the goods was recorded. Accordingly, the value of the serviceable plastic film rolls was adopted at Rs. 40/- per Kg., non-serviceable plastic film rolls and cut films in bales/cartons at Rs. 18/- per Kg. and lumps of plastics at Rs. 20/- per Kg. This was accepted as reasonable market value of such goods as confirmed by panch witnesses and also by Himanshu R. Rawal, authorised person of the appellant company as noted herein above. This can, therefore, be a reasonable market value which can be taken into consideration for arriving at the assessable value in the absence of any other material before us. We, therefore, arrive at the assessable value following the principles of Rule 7(1) of the said rules by deducting 10% from the market price for arriving at the wholesale-cum-duty price and after deducting 35% of customs duty from it. The assessable value is arrived at as under:
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Goods Market Value Assessable value
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Serviceable plastic rolls Rs. 40/- per Kg. Rs. 26.66/- per Kg. Non-serviceable Plastic Rs. 18/- per Kg. Rs. 12/- per Kg. rolls and cut films Plastic lumps of Larger size Rs. 20/-per Kg. Rs. 13.33/- per Kg.
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15. For the reasons given hereinabove, we concur with the authorities below, and subject to modification on the valuation aspect, as indicated herein above, on the basis of which, the authorities will recalculate the amounts payable by way of duty by the appellant in all these appeals, we dismiss all these appeals.
(Dictated in open Court on 26-9-2005)