2007 (8) TMI 164 - AT - Customs

Steel skull scrap - Manufacturing of Iron and Steel Revenue intended to classify that scrap under Heading 26.19 not under 72.04 On basis of composition metallic part was found to contain 94% iron and slag part was found to contain 43.34% iron Held that there is no mis-classification by assessee

Summary

Issues Involved:
1. Classification of imported 'steel skull scrap'
2. Alleged misdeclaration of goods
3. Applicability of specific import licence
4. Liability for confiscation and penalty

Issue-wise Detailed Analysis:

1. Classification of Imported 'Steel Skull Scrap':
The primary issue revolves around the classification of the imported goods, described as 'MS skull scrap' in the Bill of Entry. The importer classified the goods under Heading 72.04 of the Customs Tariff Act, which covers "Ferrous waste and scrap; remelting scrap ingots of iron or steel." However, the Customs authorities argued that the goods should be classified under Heading 26.19, which pertains to "slag, dross (other than granulated slag), scalings and other waste from the manufacture of iron or steel." The Customs authorities based their classification on the presence of slag in the material, as reported by the National Metallurgical Laboratory (NML). The Tribunal, after considering the NML report and the HSN Explanatory Notes, found that the goods were more appropriately classifiable under Heading 72.04, as the material was considered suitable for melting and contained a significant amount of recoverable iron.

2. Alleged Misdeclaration of Goods:
The Customs authorities accused the importer of misdeclaring the goods by classifying them under Heading 72.04 instead of 26.19. The Tribunal, however, found that the importer had correctly classified the goods as 'steel skull scrap' under Heading 72.04. The Tribunal referenced a similar case involving M/s. Ponneri Steel Industries, where the goods were also classified under Heading 72.04 despite containing some slag. The Tribunal held that the presence of slag did not alter the classification of the goods as 'steel skull scrap.'

3. Applicability of Specific Import Licence:
According to the Customs authorities, goods falling under Heading 26.19 required a specific import licence, which the importer did not possess. This led to the conclusion that the import was in violation of the Foreign Trade Policy. However, since the Tribunal determined that the goods were correctly classified under Heading 72.04, which does not require a specific import licence, this issue became moot.

4. Liability for Confiscation and Penalty:
The Joint Commissioner of Customs had ordered the confiscation of the goods under Section 111(d) & (m) of the Customs Act and imposed penalties under Section 112(a) of the Act. The Tribunal, referencing its decision in the case of M/s. Ponneri Steel Industries, found that there was no misdeclaration or misclassification by the importer. Consequently, the Tribunal set aside the confiscation order and the penalties imposed on the importer and the high seas seller.

Conclusion:
The Tribunal concluded that the imported 'steel skull scrap' was correctly classified under Heading 72.04 of the Customs Tariff Act. The presence of slag did not warrant reclassification under Heading 26.19. As a result, the allegations of misdeclaration and the requirement for a specific import licence were dismissed. The orders of confiscation and penalties were set aside, and the appeals were allowed.