2002 (11) TMI 704 - AT - Customs

Export rejects - Dutiability - Interpretation of taxing statute - Export-Oriented Unit - Penalty

Summary

Issues Involved:
1. Classification of Sodium Azide as export waste or export rejects.
2. Compliance of Sodium Azide with stringent conditions for use in Inflatable Restraint Systems.
3. Examination of mala fide intentions and role of exonerated officer N.A. Reddy.
4. Wilful suppression of facts with intent to evade duty.
5. Marketability of the goods and Chemical Examiner's report.
6. Correctness of the assessable value for duty demand.

Issue-wise Detailed Analysis:

1. Classification of Sodium Azide:
The tribunal examined whether the Sodium Azide manufactured during trial runs should be treated as export waste or export rejects. It was concluded that the Sodium Azide, although not meeting export specifications, was not waste but export rejects. The guidelines for export rejects, as per the Ministry of Commerce and relevant circulars, were considered. The tribunal noted that the Commissioner had concluded the Sodium Azide was export rejects but failed to apply the guidelines correctly.

2. Compliance with Stringent Conditions:
The tribunal noted that the Sodium Azide produced did not meet the specifications required for use in Inflatable Restraint Systems (Air bags). The material was contaminated and contained unreacted raw materials. The Commissioner accepted that the material did not meet export specifications but concluded it was suitable for domestic use, thus falling under Chapter Heading 2850.

3. Examination of Mala Fide Intentions and Role of N.A. Reddy:
The tribunal considered whether there was any mala fide intention on the part of the directors and officers of the appellant company. It was noted that N.A. Reddy, who was responsible for Customs and Central Excise functions, had been exonerated. The tribunal found that the Commissioner did not adequately examine the role of N.A. Reddy in light of the appellants' plea that he was responsible for compliance with laws and regulations.

4. Wilful Suppression of Facts:
The tribunal examined whether there was wilful suppression of facts with an intent to evade duty. The Commissioner had relied on statements and documents indicating that the goods were removed without payment of duty and without proper accountal. However, the tribunal found that the appellants' belief that the goods were not liable for duty was not adequately considered.

5. Marketability of the Goods:
The tribunal found that the marketability of the Sodium Azide was established by the fact that it was sold to Raghu Chemicals and further sold to actual users. The Commissioner had concluded that the Sodium Azide was marketable and classified it under Chapter Heading 2850. However, the tribunal noted that the Commissioner did not obtain a Chemical Examiner's report as directed by the Hon'ble Tribunal.

6. Correctness of Assessable Value:
The tribunal examined the assessable value adopted for demanding duty. It was noted that the Commissioner had valued the goods based on the transaction value of Rs. 200/- per kg. However, the tribunal found that the duty demand should consider the selling price as cum-duty price, and an abatement should be given for the duty to arrive at the correct assessable value.

Conclusion:
The tribunal set aside the Commissioner's order, finding that the Sodium Azide should be classified as export rejects and not waste. It was concluded that no duty was payable as the goods were not part of the DTA quota and were exempt under Notification No. 125/84-C.E. The penalties imposed under various sections of the Central Excise Rules and the Customs Act were also set aside. The appeals were allowed, and the order was annulled.