2017 (6) TMI 215 - AT - Customs

Benefit of exemption under Sl. No. 125 of N/N. 20/1999-Cus - denial on the sole ground that the imported scrap is used in the basic oxygen furnace and not in the electric arc furnace - Held that - Sl. No. 125 of N/N. 20/1999-Cus., dated 28.02.1999 grants exemption to melting scrap of Iron or Steel for use in electric arc furnace, induction furnace or for melting in hot blast cupola or for supply to a unit for use in electric arc furnace, induction furnace or for melting in hot blast cupola. The imported melting scrap has either been used directly in the electric arc furnace or has been used in such furnace indirectly after passing through the processing in the basic oxygen furnace - the portion of the scrap initially charged in the basic oxygen furnace will also be eligible for import at concessional rate of duty inasmuch as it has indirectly found its way into electric arc furnace. The appellant will be eligible for the concessional rate of duty under Customs N/N. 20/99 dated 28.2.99 - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Denial of exemption under Sl. No. 125 of Notification No. 20/1999-Cus. dated 28.02.1999 for imported Shredded Steel Scrap due to failure to furnish an end-use certificate.
2. Rejection of the application for the end-use certificate.

Issue-wise Detailed Analysis:

1. Denial of Exemption Under Notification No. 20/1999-Cus:

The Appellant, an integrated steel plant, imported Shredded Steel Scrap and claimed exemption under Sl. No. 125 of Notification No. 20/1999-Cus. The exemption was claimed for use in electric arc furnaces, induction furnaces, or hot blast cupolas. The Appellant filed the necessary bond/undertaking for the use of the imported scrap in the electric arc furnace, and the Bills of Entry were provisionally assessed, extending the benefit of a concessional rate of duty.

The Assistant Commissioner of Central Excise rejected the application for an end-use certificate on the grounds that the scrap was used as a coolant in the basic oxygen furnace, not in the electric arc furnace. The Commissioner (Appeals) upheld this decision, leading to demand notices for customs duty due to the failure to produce the end-use certificate.

2. Rejection of Application for End Use Certificate:

The Appellant argued that the term "for use" in the notification includes both direct and indirect use. They contended that the scrap used in the basic oxygen furnace (as a coolant) was eventually used in the electric arc furnace for further refinement, thus qualifying for the exemption. They presented a flow chart demonstrating that a significant portion of the scrap was directly added to the electric arc furnace, and the liquid steel from the basic oxygen furnace was further processed in the electric arc furnace.

The authorities below focused solely on the scrap used in the basic oxygen furnace and denied the benefit of the notification, ignoring the technical write-up and flow chart provided by the Appellant. The authorities did not consider that the scrap indirectly found its way into the electric arc furnace.

Judgment:

The Tribunal found that the imported melting scrap was either directly used in the electric arc furnace or indirectly after processing in the basic oxygen furnace. The Tribunal concluded that the portion of the scrap initially charged in the basic oxygen furnace is eligible for the concessional rate of duty as it ultimately found its way into the electric arc furnace. Consequently, the Tribunal set aside the impugned orders and allowed all three appeals in favor of the Appellant, granting the exemption under Notification No. 20/1999-Cus.

Conclusion:

The judgment emphasized that the term "for use" in the notification includes both direct and indirect use. The Tribunal recognized the continuous process of steel manufacturing and the eventual use of the imported scrap in the electric arc furnace, thereby granting the exemption and setting aside the previous orders.