2011 (3) TMI 832 - Commissioner - Customs

Classification - penalty - goods under import were declared as non-alloy steel Slabs secondary/defective - Adjudicating Authority rejected the transaction value imported goods were held to be secondary/defective alloy and non alloy Steel Plates as against declared description of non-alloy Steel Slabs secondary/defective - Held that - The allegation that the impugned goods imported are Plates , instead of Slabs as declared, has not been proved conclusively so as to warrant confiscation of the goods on the ground of misdeclaration of description of the goods. The order of confiscation of the impugned goods on this ground is therefore set aside. 489.67 MT of the imported goods is held to be alloy steel, instead of non alloy steel as declared, on the basis of the chemical analysis test report of National Metallurgical Laboratory, Chennai, and therefore they are technically liable for confiscation for misdeclaration of description of the goods under Section 111(m) of the Customs Act, 1962. However, since 75% goods were released on PD bond, and only 25% i.e. 122.42 MT of alloy steel are available for confiscation, the said 122.42 MT of alloy steel is confiscated under Section 111(m) of the Customs Act, 1962 with the option to redeem the same on payment of a fine of Rs. 20 Lakhs (Rupees Twenty Lakhs only).

Issues Involved:
1. Classification of imported goods as "Steel Slabs" or "Steel Plates."
2. Misdeclaration of goods and consequent valuation.
3. Licensing provisions for import.
4. Confiscation of goods and imposition of redemption fine and penalty.
5. Determination of transaction value and differential duty.
6. Classification of goods as "alloy" or "non-alloy" steel.

Detailed Analysis:

1. Classification of Imported Goods as "Steel Slabs" or "Steel Plates":
The primary issue was whether the imported goods declared as "Non-Alloy Steel Slabs" were actually "Steel Plates." The Department relied on visual examination and test reports, while the Appellants cited explanatory notes to Heading 7208, technical literature, and case laws. According to HSN explanatory notes, sheets and plates have strict tolerances and are cross-rolled, whereas slabs are roughly rolled and have round edges. The examination report and test results indicated the goods were secondary/defective steel plates, not slabs. However, the Appellants provided technical literature showing slabs could be as thin as 30 mm, challenging the Department's classification.

2. Misdeclaration of Goods and Consequent Valuation:
The Department alleged misdeclaration of the goods, impacting their valuation. The Adjudicating Authority rejected the transaction value based on the misdeclaration and reassessed the value using the LME Bulletin price of prime steel plates, granting a 25% discount for secondary/defective goods. The Appellants argued that transaction value should not be rejected without valid reasons and cited case laws supporting higher discounts for defective goods. The judgment noted that transaction value cannot be rejected without convincing reasons and that LME prices for prime materials should not be used for defective goods.

3. Licensing Provisions for Import:
The Show Cause Notice alleged violation of licensing provisions, claiming the goods required a valid import license. However, the Adjudicating Authority held that the restriction was applicable only to hot rolled coils and that the imported goods, whether alloy/non-alloy steel sheets/plates, were freely importable without a license.

4. Confiscation of Goods and Imposition of Redemption Fine and Penalty:
The Adjudicating Authority confiscated the goods for misdeclaration, imposing a redemption fine of Rs. 2 crores and a penalty of Rs. 15 lakhs. The Appellants contended that the classification of slabs should include thinner slabs and that the percentage calculation of slabs in the consignment was arbitrary. The judgment found the evidence for misdeclaration unconvincing and reduced the redemption fine and penalty, considering the mitigating factors such as demurrage charges and the absence of significant profit from the import.

5. Determination of Transaction Value and Differential Duty:
The Adjudicating Authority's rejection of the transaction value and reassessment at Euro 423.75 PMT C&F was contested. The judgment emphasized that transaction value should be accepted unless there are valid reasons for rejection. It was noted that the LME Bulletin price for prime materials should be discounted by at least 50% for defective goods. The declared transaction value was found to be correct, and the differential duty demand of Rs. 22,52,521/- was set aside.

6. Classification of Goods as "Alloy" or "Non-Alloy" Steel:
The chemical analysis test report indicated part of the consignment was alloy steel. The Adjudicating Authority extrapolated this to the entire consignment, leading to allegations of misdeclaration. The judgment held that 489.67 MT of the goods were alloy steel, technically liable for confiscation. However, since 75% of the goods were released on PD bond, only 122.42 MT of alloy steel were available for confiscation, with a reduced fine of Rs. 20 lakhs and a penalty of Rs. 5 lakhs.

Conclusion:
The judgment modified the Order-in-Original, setting aside the confiscation of goods on the ground of misdeclaration of description, accepting the transaction value, and reducing the redemption fine and penalty. The appeal was disposed of accordingly.

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