2019 (12) TMI 1349 - AT - Customs

Classification of imported goods - heavy melting scrap HMS - to be classified as serviceable parts or not - eligibility for exemption under N/N. 21/02-Cus - Department opined that the impugned goods were secondary / defective / rejected stock comprising of stainless-steel U and C channels of grade 410 (magnetic) and HR coils / strips of grade 410 (magnetic) - HELD THAT - The adjudicating authority has not explained as to why various certificates submitted by the appellants were not accepted. It is not known as to why the department has not allowed the request for mutilation of the goods before clearance. Chartered Engineer s examination was also not ordered. This being the factual milieu, Department cannot reclassify the goods unilaterally on the basis of the examination report of officers alone. Technical opinion given by the pre-inspection certificate and by M/s. Alloys and Metal Test Services, cannot be disregarded. Also the fact that all the shipping documents describe the goods as steel melting scrap only cannot be denied. Under such circumstances, denying the classification and the benefit of exemption are not tenable. For the same reason, the department has not made its case for redetermination of the value of the impugned goods for the purpose of assessment. The declared classification and valuation cannot be rejected only on the basis of examination report of the officers, more so, when technical reports were not in favour of the view taken by the Revenue. Therefore, taking recourse to LME prices is also not acceptable. It is not the case of the department that to value over and above the price declared in the invoice was paid to the overseas supplier. It is also not the case of the department that the said scrap was not utilised as scrap. Therefore, Department has not given forth any evidence to support the allegation. Appeal allowed - decided in favor of appellant.

Summary

Issues: Classification of imported goods as scrap, eligibility for exemption under Notification No.21/02-Cus, valuation of imported goods, denial of exemption, reclassification of goods, technical reports, examination report, mutilation of goods, classification and valuation based on examination report, reliance on shipping documents, redetermination of value, LME prices, evidence supporting allegations.

Classification of Imported Goods as Scrap:
The appellants imported stainless steel melting scrap and claimed exemption under Notification No.21/02-Cus. The department objected, considering the goods as secondary/defective material. The appellants argued that the goods met the definition of scrap under Section Note 6(A) of Section XV and were correctly classifiable under Heading 72.04 of the Customs Tariff. They provided evidence, including certificates and test reports, supporting their claim. The tribunal noted that the department's reclassification based solely on examination reports was not justified. Technical opinions and shipping documents described the goods as scrap, supporting the appellants' classification.

Valuation of Imported Goods:
The appellants contended that the declared value was accurate, without any extra payment to the supplier. They argued against invoking Rule 10 of the Customs Valuation Rules, citing the transaction value accepted under Section 14(1) of the Customs Act. The tribunal agreed, emphasizing that no evidence supported a higher valuation or misdeclaration. The department failed to provide evidence contradicting the declared value or proving misdeclaration, leading to the rejection of the redetermination of value.

Denial of Exemption and Reclassification of Goods:
The department denied the exemption and reclassified the goods based on examination reports, disregarding technical opinions and certificates submitted by the appellants. The tribunal found the department's actions unjustified, as the examination report alone was insufficient to reclassify the goods. The failure to consider technical reports and the request for mutilation before clearance rendered the department's decision untenable. The tribunal emphasized that the department lacked evidence to support its allegations, leading to the appeal's allowance and rejection of the impugned order.

Reliance on Technical Reports and Shipping Documents:
The tribunal highlighted the importance of technical reports and shipping documents, which described the goods as steel melting scrap. The department's unilateral reclassification without considering these documents and technical opinions was deemed legally unsound. The tribunal emphasized that the department's failure to provide evidence supporting its allegations led to the appeal's success and the rejection of the department's order.

Operative Portion of the Order:
The tribunal allowed the appeal, providing consequential relief as per law. The decision was pronounced in open court on 09/12/2019, emphasizing the appellants' success in challenging the department's reclassification and denial of exemption based on insufficient evidence and lack of legal basis.

This detailed analysis of the judgment comprehensively covers the issues involved, the arguments presented by both parties, and the tribunal's reasoning leading to the decision in favor of the appellants.