2014 (5) TMI 789 - AT - Customs

Mis declaration of goods - classification of the API 5L PSL2x70 and x80 grades - Stainless Steel - Alloy steel - Non alloy steel - production of Advance Authorizations - power of DGFT and its subordinate officers under the Foreign Trade Policy to amend/modify the Advance Authorizations retrospectively - Held that - if any one of the elements specified in Chapter Note 1(f) to Chapter 72 in a steel, imported by importer appellants, is within the specified limit mentioned therein then that steel will be considered as Other alloy steel . When the grades imported by the importer appellants had Niobium (Nb) and Molybdenum (Mo) elements as per the limits specified in Chapter Note 1(f), theoretically those grades were required to be classified under Customs Tariff Head 7225, as even opined by importer appellants when these facts were confronted to them by the investigating agency. Production of advanced authorization - Held that - From the above facts available on records technically the Advance Authorizations produced before the Customs assessing officers were not valid for the import of Other alloy steel at the time of importation but looking to the provisions of Foreign Trade Policy and the subsequent acts of the offices of DGFT, necessary curative action was taken in favour of some of the importer appellants by the appropriate authorities in the interest of exports and export obligations with respect to certain Advance Authorizations have been accepted. However, the matter has not reached finality till date in view of the conflicting views expressed by the authorities under DGFT & due to the fact that the matter is subjudice before the Mumbai High Court but the defects in Advance Authorisations seem rectifiable. Preliminary objection taken by the appellants that provisions of sub-Section (ii) of Section 28 of the Customs Act, 1962 are not applicable to the show cause notices issued before 16.09.2011, is not acceptable as the amendment carried out under the Customs (Amendment and Validation) Act, 2011 uses the word Section which has to mean the entire Section 28 of the Customs Act, 1962, because amendment carried out inserted a sub-Section (ii) to the main Section and not a Section. Therefore, the argument taken on jurisdiction by the appellants is rejected. Willful mis-declaration on the Bills of Entry - Held that - in the present imports made by the importer appellants a declaration given with respect to classification of steel as CTH 7208 in the Bills of Entry, cannot be considered as wilfull mis-declarations with intention to evade customs duty, in the absence of any other corroborative evidence - revenue is unable to bring on record that MTCs were manipulated by M/s PSL Ltd. or its employees. Further admission of non-alloy nature of imported steel grades by the appellants will not help the Revenue s case because at the time of placing orders the exact percentages of various alloying elements are not known which can be seen only at the time of actual import of steel grades as per the MTCs - no malafide can be attributed on the part of the appellants and it cannot be held that imported goods were liable to confiscation or the importer appellants and other appellants were liable to penal action under the Customs Act 1962. Extended period of limitation - Held that - All the appellant importers have been importing these grades of HR Coils from 2000 onwards under CTH 7208 as per SION Code C-593. On this ground also it cannot be said that these importers had any malafide intention to deliberately declare a wrong classification in the Bills of Entry to get undue financial advantage when such a classification practice was in vogue before the period of demand in the present proceedings. Accordingly extended period of five years available under Section 28 of the Customs Act, 1962 cannot be invoked. Powers of DGFT and its subordinate offices to amend the Advance Authorizations issued when the export obligations with respect to majority of them have already been fulfilled - Held that - if any doubt or question arises in respect of interpretation of Foreign Trade Policy or in the matter of classification of any item of the ITC (HS) or in the Handbook, the said question or doubt shall be referred to DGFT, whose decision thereon shall be final and binding - The Customs authorities cannot deny the benefit of Customs duty exemption under the notifications governing the advance licensing scheme. If at all they felt that the appellant had violated any of the terms and conditions of the licences, they should have referred the matter to the licensing authority for appropriate action rather than taking action suo motu. Practice of Customs clearance of the same grades of steel under similar Advance Authorizations right from 2000 onwards, clearly convey that classification of impugned grades was not considered important by the Assessing Officers in view of the export incentive schemes under Foreign Trade Policies read with Customs exemption notifications availed by the importer appellants. The most important aspect of the export incentive schemes under Advance Authorizations is that the same grade of steel (whether non-alloy or alloy steel) when exported in the exported goods the same grade of steel was eligible for import by the importer appellants. These appeals filed by the appellants cannot be decided against them on the basis of few admission statements of the individuals who were not involved in the practice of Customs clearances and were also not the metallurgical experts. The assessments made by the Assessing Officers on the Bills of Entry have not been challenged by the Revenue and the assessments already made cannot be opened only on the basis of a change in the mind of an authority based on a different interpretation when all the material facts were also within the knowledge of the Assessing Officers. - Decided in favor of assessee and against the revenue.

Summary

Issues Involved:
1. Correct classification of API 5L PSL2x70 and x80 grades.
2. Coverage of imported grades under Advance Authorizations.
3. Willful mis-declaration and time-barred nature of demands.
4. Powers of DGFT and its subordinate offices to amend Advance Authorizations retrospectively.
5. Imposability of penalties under the Customs Act, 1962.

Detailed Analysis:

1. Correct Classification of API 5L PSL2x70 and x80 Grades:
The Revenue argued that the imported grades were "Other alloy steels" falling under CTH 7225 as per Chapter Note 1(f) to Chapter 72 of the Customs Tariff Act, 1985. The appellants contended that these grades were previously classified under CTH 7208 without objection from the Revenue. The Tribunal held that if any one of the elements specified in Chapter Note 1(f) is within the specified limit, the steel will be considered as "Other alloy steel." Thus, the grades imported by the appellants with Niobium (Nb) and Molybdenum (Mo) elements within the specified limits were theoretically required to be classified under CTH 7225.

2. Coverage of Imported Grades under Advance Authorizations:
The Tribunal examined whether the Advance Authorizations covered the imported grades. The description of the export item under SION C-593 did not specify "Other alloy steel" or "Non-alloy steel," whereas the import item did. Given the practice and international understanding, the Tribunal noted that both non-alloy steel and other alloy steel could exist within the API PSL2 x70 & x80 grades. The Tribunal observed that the amendment to SION C-593 effective from 02.06.2011 was clarificatory and could be considered retrospective. The Joint DGFT Ahmedabad had amended the Advance Authorizations retrospectively, while the Additional DGFT Mumbai had not, leading to conflicting views.

3. Willful Mis-Declaration and Time-Barred Nature of Demands:
The Tribunal found no evidence of willful mis-declaration by the appellants. The classification under CTH 7208 was a longstanding practice, and the appellants had provided all necessary documents, including Mill Test Certificates, during assessments. The Tribunal referred to the Customs Appraising Manual and the Supreme Court's judgment in Northern Plastic Ltd. to support that a classification claim by the importer cannot be deemed willful mis-declaration. The Tribunal concluded that the extended period under Section 28 of the Customs Act, 1962, could not be invoked, and the demands were time-barred.

4. Powers of DGFT and Its Subordinate Offices to Amend Advance Authorizations Retrospectively:
The Tribunal noted that the Norms Committee under the DGFT is the apex authority for issuing and amending Advance Authorizations. The Tribunal referred to various provisions of the Foreign Trade Policy and Handbook of Procedures, which allow for the modification and ratification of Advance Authorizations. The Tribunal observed that the matter of retrospective amendment of Advance Authorizations was sub-judice and required a uniform view from the appropriate authorities under the Foreign Trade Policy.

5. Imposability of Penalties under the Customs Act, 1962:
The Tribunal held that there was no intention to evade duty by the appellants as the imported materials were used in the manufacture of export products, fulfilling the export obligations. The Tribunal found no basis for imposing penalties under the Customs Act, 1962, as there was no willful mis-declaration or suppression of facts. The Tribunal referred to the Supreme Court's judgment in Northern Plastic Ltd. and other case laws to support its decision.

Conclusion:
The Tribunal allowed the appeals filed by the appellants, setting aside the Orders-in-Original passed by the Adjudicating authority. The Tribunal concluded that the imported grades were correctly classified under CTH 7208, the Advance Authorizations covered the imported grades, there was no willful mis-declaration, the demands were time-barred, and no penalties were imposable.