2013 (11) TMI 1398 - AT - Customs

Waiver of pre-deposit - Classification of goods - Commissioner has confirmed the demand for duty on the ground that the goods imported are Non Alloy Steel falling under Tariff Heading 72.25 by virtue of Chapter Note 1(f) of Chapter 72 of Customs Tariff - Issue of Advance License - Duty free import of Non-Alloy Steel - Held that - Any type of steel is an alloy and there is no definition of Non Alloy Steel in the Customs Tariff - The use of the word Other and the absence of definition of non alloy steel, at this stage, subject to detailed further hearing, prima facie indicates that Note 1(f) covers all forms of steel - when there are more than one elements to make it alloy steel but if all the elements are in different proportions, it would be non-alloy steel. If this interpretation is accepted than even as per MTC, the steel imported by the Applicants cannot fall under Note 1(f) - Prima facie it does appear that even if interpretation by both sides is considered, when two views are possible, on first principles, and without any reference to the case of Tata Motors, the one in favour of assessee must be preferred in matters of classification where as is the settled law, the burden to prove is on the Department. On limitation, it does appear that manufacturer s certificates were obtained instead of producing the MTCs for clearance. Even on the basis of the chemical composition in the MTC if the goods merit classification under heading 72.08, the non disclosure of MTCs would not amount to wilfull conduct or concealment on the part of the Applicant, particularly when description in the bill of entry is not disputed. Even the few Country of Origin Certificates with heading 72.25 did not raise any query or objection from the assessing officer since the goods were meant for manufacture of export goods - prima facie no illegal illegible benefit or gain to the Applicant, if all goods are exported and hence prima facie no case of intention to evade duty, given the absence of diversion or misutilisation is made out - since all duty free inputs as imported in this case are required for manufacture of goods for export and have infact as claimed and not disputed, actually so used, there is no question of passing of the incidence of duty - appellant has made out a prima facie case for waiver of pre-deposit of duty, interest thereof and penalty. Accordingly, the applications for waiver of pre-deposit of the amounts involved is allowed and recovery thereof until the final disposal of the appeal - Stay granted.

Summary

Issues Involved:
1. Classification of imported steel as "Non-Alloy Steel" or "Other Alloy Steel" under Tariff Heading 72.25.
2. Interpretation and application of Chapter Note 1(f) of Chapter 72 of Customs Tariff.
3. Eligibility for duty-free import under Advance Licences.
4. Allegation of misdeclaration and intention to evade duty.
5. Applicability of extended period of limitation for demand of duty.
6. Financial hardship and waiver of pre-deposit.

Issue-wise Detailed Analysis:

1. Classification of Imported Steel:
The primary issue revolves around the classification of the imported steel. The Commissioner of Customs classified the goods under Tariff Heading 72.25 as "Other Alloy Steel" based on Chapter Note 1(f). The appellant contended that the steel imported is non-alloy and the Commissioner misinterpreted Chapter Note 1(f). The appellant argued that the steel was used in the export product, fulfilling 100% export obligation, and hence should be considered non-alloy steel.

2. Interpretation and Application of Chapter Note 1(f):
The appellant's counsel argued that Chapter Note 1(f) should be read in conjunction with Notes 1(d) and 1(e), which define "Steel" and "Stainless Steel." According to the appellant, Note 1(f) uses the phrase "containing by weight one or more of the following elements in the proportion shown," which means that all elements must be present in the specified proportions for the steel to be classified as alloy steel. The appellant asserted that the imported steel did not meet this criterion and should be classified as non-alloy steel under heading 72.08.

3. Eligibility for Duty-Free Import under Advance Licences:
The appellant applied for advance licenses to import duty-free raw materials required for manufacturing export products. They argued that the objective of the advance licence scheme is to allow duty-free import of inputs physically incorporated in the export product. The appellant relied on various provisions of the Foreign Trade Policy (FTP) and Hand Book of Procedures (HBP) to support their eligibility for importing alloy steel under advance licences. They also pointed out that the customs duty on alloy and non-alloy steel was the same, except for a brief period, and that the imported steel was used for export production, fulfilling the export obligation.

4. Allegation of Misdeclaration and Intention to Evade Duty:
The respondent argued that the appellant knowingly imported alloy steel under the guise of non-alloy steel to avail duty-free benefits. The respondent cited statements from the appellant's senior officers admitting the mistake in applying for licenses for non-alloy steel. The appellant countered that there was no intention to evade duty, as the correct description of goods was declared in the bill of entry, and the imported steel was used for export production. They also argued that the classification dispute did not amount to misdeclaration.

5. Applicability of Extended Period of Limitation for Demand of Duty:
The respondent invoked the extended period of limitation under Section 28(1) of the Customs Act, alleging willful misstatement and suppression of facts by the appellant. The appellant contended that there was no willful conduct or concealment, as the description in the bill of entry was accurate, and the goods were used for export production. They argued that the non-disclosure of Mill Test Certificates (MTCs) did not constitute suppression, as the onus was on the customs officer to call for MTCs if there was doubt about the steel's quality.

6. Financial Hardship and Waiver of Pre-Deposit:
The appellant submitted that they were facing financial hardship, with a post-tax loss of about Rs. 88 crore, and any order of pre-deposit would cause undue hardship. The tribunal considered the financial statements and the deposit of Rs. 1.5 crore made during investigations. The tribunal also noted that the imported steel was used for export production, and there was no question of passing the incidence of duty.

Conclusion:
The tribunal concluded that the appellant made out a prima facie case for waiver of pre-deposit of duty, interest, and penalty. The tribunal allowed the waiver of pre-deposit and recovery thereof until the final disposal of the appeal. The tribunal also granted early hearing of the appeal, scheduled for 23rd September 2013.