2015 (11) TMI 1330 - AT - Customs

SEZ Unit - DTA Clearances - the allegation is that said materials were plastic waste and scrap classifiable under Heading (CTH) No. 39151909 of the Customs Tariff Act, and restricted items in the policy - Undervaluation of goods - Confiscation of goods - Imposition of redemption fine - Held that - In the Test Report, CIPET observed that the sample is cut pieces of clear film with Paper Stickers. The Adjudicating Authority proceeded on the basis Report of the Customs Laboratory. We find that the Hon ble Gujarat High Court in the case of Oswal Agricomm Pvt. Ltd. (2010 (7) TMI 712 - GUJARAT HIGH COURT ) on the identical situation observed that Report of CIPET, Ahmedabad cannot be ignored. In that case, the issue before the Hon ble High Court is whether test report submitted by the Customs House Laboratory, Kandla has any overriding effect on the Reports submitted by the CIPET, Ahmedabad and Chennai - High Court had given a clear direction to consider the Report of the CIPET. In the present case, the Adjudicating Authority had not given any finding on the Report of CIPET. In our considered view, the CIPET Report is required to be considered, before going to the Customs House Laboratory Report. Hence, the impugned order cannot be sustained on this ground alone. - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Classification of goods sold by SEZ units.
2. Allegations of misdeclaration and undervaluation.
3. Consideration of CIPET Report vs. Customs Laboratory Report.
4. Compliance with guidelines for testing of imported plastic waste/scrap.
5. Validity of impugned order and imposition of penalties.

Classification of goods sold by SEZ units:
The case involved M/s Lucky International, M/s Anshita Exports, and M/s Plasto Processors, SEZ units granted Letter of Permission for manufacturing plastic granules/flakes. The SEZ units sold plastic stickers to DTA units, which were classified as plastic waste and scrap by Customs Officers. A Show Cause Notice was issued alleging misdeclaration and undervaluation, leading to duty demand, penalties, confiscation, and redemption fine. The main contention was that goods matched CIPET's report, but Customs Laboratory changed the classification.

Misdeclaration and undervaluation allegations:
Customs Officers found misdeclaration and undervaluation by the appellants, supported by the Customs Laboratory report. The Revenue's Authorized Representative reiterated the Adjudicating Authority's findings, emphasizing the misdeclaration and undervaluation during the investigation. The Customs Laboratory report was deemed applicable in the case.

Consideration of CIPET Report vs. Customs Laboratory Report:
The CIPET report, forwarded by the Development Commissioner and Customs KASEZ, described the samples differently from the Customs Laboratory report. Referring to a Gujarat High Court case, it was highlighted that the CIPET report should not be ignored, and Customs should consider it before the Customs Laboratory report. The High Court's direction to consider the CIPET report was emphasized, indicating a flaw in the Adjudicating Authority's decision for not addressing the CIPET report.

Compliance with guidelines for testing of imported plastic waste/scrap:
The case highlighted the importance of following guidelines for testing imported plastic waste/scrap, as specified in Public Notice No. 392(PN)/92-97. The High Court's ruling emphasized sending samples to the nearest CIPET laboratory for analysis, underscoring the significance of adhering to prescribed procedures for testing and verification.

Validity of impugned order and imposition of penalties:
Upon reviewing the arguments and evidence, the Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for a fresh decision. The Tribunal found the impugned order unsustainable due to the failure to consider the CIPET report before the Customs Laboratory report. Consequently, all appeals by the appellants were allowed for remand, emphasizing the need for a lawful decision based on proper consideration of submissions.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT AHMEDABAD covers the issues of classification of goods, allegations of misdeclaration and undervaluation, consideration of testing reports, compliance with guidelines, and the validity of the impugned order and penalties.