Assistant Commr. of Cus., Ludhiana vs Aman Alloys Ltd.

Ashutosh Mohunta, J.—This judgment shall dispose of Custom Appeal Nos. 29 and 36 of 2008 as common question of law and fact arise in both the cases and the same were disposed of by orders dated 6-2-2008 [2008 (225) E.L.T. 555 (Tri.-Del.)] passed by Customs, Excise and Service Tax Appellate Tribunal, New Delhi (hereinafter called as ''CESTAT'') vide which the appeals filed by the assessees were allowed and it was directed that the offending goods may be released to the assessees after effective mutilation under the customs supervision thereby rendering the goods as scrap. The Tribunal further directed that the scrap so generated after mutilation be cleared on payment of appropriate custom duty on the loaded value of US $ 105 per metric tone by classifying it under Tariff Heading 7204.49 of the Customs Tariff Act.

For the sake of convenience, facts have been extracted from CUSAP No. 29 of 2008.

The Revenue has raised following Questions of Law :

(a) Whether the action of the Respondent warrants for the confiscation and imposition of penalty and redemption fine?

(b) Whether the Ld. Tribunal is justified in allowing the appeal without discussing the issue and merits of the case altogether?

(c) Whether the Order of the Ld. Tribunal is per se, illegal and the findings recorded therein are perverse and unsustainable in the eyes of law?

Facts from Customs Appeal No. 29/2008 are considered. The Respondent/Assessee imported material vide bill of entry No. 699 dated 26-4-2000 consisting of two containers. In the bill of entry description was declared as HMS classifiable under Chapter Heading 7204.49 of First Schedule to the Customs Tariff Act, 1975.

The Respondent/Assessee claimed concessional rate of duty @ 5% in terms of Notification No. 16 of 2000-Cus., dated 1-3-2000. The goods were invoiced at USD 100 PMT by foreign supplier and the Assessing Officer loaded the value and assessed at USD 105 PMT. On examination, the Customs Authority found that material consisting of TOR/Ribbed Steel Bars whereas HMS normally contains Girders, Channels, Pipes, Saria etc.

The Assessee vide its letter dated 26-5-2000 requested the Appellant/Revenue that if the department is of opinion that the material is serviceable, the mutilation u/s 24 of the Customs Act may be allowed.

On 20-6-2000 a Panchnama was prepared and goods were seized. The seizure was effected alleging that consignment did not appear to be HMS but contains IMS Rounds of different dimensions/diameter/length and these are fresh and unusable material. The Revenue after completing investigation, issued a Show Cause Notice dated 12-12-2000 to show cause to the Additional Commissioner of Customs as to why the goods should not be classified as MS Rounds falling under Chapter Heading 72.14 attracting duty @ 35%, value should not be assessed @ Rs. 8.82 per Kg., goods should not confiscated and penalty should not be imposed u/s 112 of the Customs Act.

The Respondent filed Civil Writ Petition No. 9089 of 2000 before this Court praying release of the goods. This Court while disposing of the Writ Petition vide Order dated 3-5-2000 directed the Petitioner that Petitioner may file reply to the Show Cause Notice and this shall be disposed of by passing Speaking Order within three months from the date of receipt of reply.

The Adjudicating Authority vide Order dated 19-9-2002 ordered the goods to be classified as MS Rounds valued at Rs. 7.76 per Kg. The Adjudicating Authority further ordered confiscation of the goods but allowed redemption on payment of fine of Rs. 50,000/- and penalty of Rs. 25,000/-.

The Respondent filed Appeal before the Commissioner (Appeals) and Commissioner (Appeals) vide Order dated 30-11-2004 rejected Appeal of the Respondent. The Respondent further filed Appeal before the Tribunal assailing the Order passed by lower authorities. The Tribunal vide its Order dated 6-2-2008 allowed Appeal of the Respondent. The Tribunal directed that pending goods may be released to the Respondent after affecting mutilation under Customs supervision thereby rendering them as scrap. The scrap so generated after mutilation would be cleared on payment of appropriate customs duty on the loaded value of USD 105 PMT by classifying it under Chapter Heading 7204.49. The Tribunal further set aside imposition of penalty and redemption fine.

The Revenue has filed this Appeal against the Final Order passed by the Tribunal. The Id. Counsel for the Appellant contended that the Tribunal has wrongly held that facts in the case of Collector of Customs, Bombay v. Hardik Industrial Corporation, 1998 (97) E.L.T. 25 (S.C.) are distinguishable. The Respondent in the present case has also declared description of the goods as scrap whereas on examination material has been found as fresh material. By filing Application for mutilation, the Respondent cannot avoid his liability of enhance duty, fine and penalty. The Counsel further contended that the Tribunal has wrongly relied upon the statement of the Respondent that authorities in the case of identical placed importers have allowed mutilation. There is no evidence of permission for mutilation in the case of other importers. Counsel also contended that the decision of this Court in the case of M/s. Dutt Multi Metals Limited deals with interim arrangement for release of goods and does not wipe out liability of the Importer.

Per Contra, Counsel for the Respondent heavily relied upon judgment of this Court in the case of Patiala Castings Private Limited Vs. Union of India (UOI), . Ld. Counsel contended that they have timely filed mutilation Application so Commissioner has wrongly rejected their Application.

After hearing arguments of the Counsel of both the parties and perusal of record, we are of the considered opinion that Appeal of the Revenue must be allowed. The reliance placed by the Respondent on the judgment of this Court In the case of M/s. Patiala Castings Private Limited (supra) is misplaced. This Court in various paras has found that goods Imported by the said Petitioner were metallic scrap and not serviceable pipes. It had been found that the goods were rusted, pitted and perforated and had been even repaired whereas it is not case of the Respondent. The Respondent had also filed Writ Petition No. 9089 of 2000 but this Court did not allow mutilation of the goods and directed that the Respondent Assessee may file reply to Show Cause Notice. Therefore, the facts of the present case are totally different.

Present case is squarely covered by the judgment of Hon''ble Supreme Court in the case of Collector of Customs, Bombay v. Hardik Industrial Corporation (supra). The Tribunal has not found that goods were waste or scrap. The Tribunal has allowed Appeal of the Respondent only on the ground that the Respondent-Assessee had no means to know in advance as to what is contained in the container. There is nothing on record to show that the Respondent-Assessee was unaware of the actual description of the goods. It cannot be assumed that the assessee had been unaware of the description, as he himself had applied for first check. In the present case, duty was assessed on 26-4-2000 and thereafter during the course of examination, the goods were found to be TOR/Ribbed Steel Bars and the Respondent applied for mutilation on 26-5-2000 much after the detection of the offence. In these circumstances, it cannot be held that the Respondent acted in a bona fide manner and he is not liable to fine and penalty.

Apart from the above, a perusal of the case file shows that only those goods which are not usable because of breakage, cutting up wear etc. can be considered as waste and scrap. However, in the present case, the Chartered Engineer Shri Shori in his opinion has clearly opined that the goods are usable as such. It is clear that the usability and not the length is the criterion for deciding whether the goods are scrap or not. The goods reported in the present case were complete and contained MS rounds instead of HMS and could not be said to be waste material and, therefore, the Commissioner has rightly held that the invoice price for HMS is liable to be rejected as the importer has mis-declared the description as well as the value of goods with an intent to evade customs duty.

Resultantly, the order passed by the Tribunal is set aside, appeal filed by the Revenue is allowed and the orders passed by the Adjudicating Authority and the Commissioner are upheld. The questions of law are answered against the Assessee and in favour of the Revenue.