2023 (8) TMI 268 - AT - Customs

Import and use of brass scrap correctly or not - Compliance with the N/N. 52/2003-Cus, read with the provisions of import-export and the SION Norms or not - clarification by the Circular 1029/17/2016-CX dated 10 May, 2016 - HELD THAT - As can be seen from the order of Commissioner (Appeals), he has in principle allowed the benefit on all the issues however remanded the matter for verification of the fact, if the brass scrap imported by the appellants was in the nature of brass scrap containing impurities like iron, steel, rubber, plastic, etc., or not. He is of the opinion that benefit of segregation can be allowed only if the imported scrap contained impurities like iron, rubber, plastic, steel etc. Prima facie from the clarification dated 10.05.2016 reproduced above, it is seen that even the revenue is of the belief that honey grade scrap also contains iron, steel ,etc., as impurities. It is seen that this circular dated 10.05.2016 was not produced before the original or first appellate authority and consequently there is no examination of this circular. It is seen that the circular has been issued after the date of passing of the impugned order. The original Adjudicating Authority will examine the applicability of this circular dated 10.05.2016, and any other circular issued on the subject to the remand directions given in the impugned order and decide the issue a fresh - while doing so it shall be free to decide the nature of product imported by documentary evidence or otherwise on the basis of materials already on record - impugned order modified.

Summary

Issues Involved:
1. Compliance with Input-Output Ratio Norms
2. Classification of Brass Scrap
3. Manufacturing Activity and Segregation
4. Duty on Excess Slag and Imposition of Interest and Penalty

Summary:

1. Compliance with Input-Output Ratio Norms:
The primary issue was whether the appellants followed the input-output ratio as per the statutorily prescribed norms of wastage under Notification No. 52/2003-Cus. The appellants argued that the wastage norms fixed by the Norms Committee were adhered to, and thus, no customs duty should be charged for wastage beyond 2%. The Tribunal noted that the Norms Committee had fixed wastage norms in two stages: segregation and manufacturing. The Tribunal remanded the matter for verification of whether the imported brass scrap contained impurities as specified by the Norms Committee.

2. Classification of Brass Scrap:
The second issue was whether the clearance of brass scrap under a different Customs Tariff Heading (CTH) than the one used for import was proper. The Tribunal held that the classification adopted by the appellant at the time of clearance was appropriate, provided they could prove that the imported brass scrap matched the description given by the Norms Committee. If the appellants fail to prove this, the customs duty and other penalties confirmed by the lower adjudicating authority would stand.

3. Manufacturing Activity and Segregation:
The third issue was whether the segregation of scrap amounted to a manufacturing activity. The Tribunal found that although segregation was not defined as "manufacture" under the Foreign Trade Policy, it was an essential activity towards manufacturing goods for export. The Norms Committee had allowed the segregation process, and thus, the appellant's activities were deemed permissible. However, the benefit of this finding hinged on the verification of the nature of the imported brass scrap.

4. Duty on Excess Slag and Imposition of Interest and Penalty:
The fourth issue was whether the duty on slag generated in excess of 2% of the input quantity should be recovered, along with the imposition of interest and penalties. The Tribunal found that the excess quantitative consumption norms were based on clearance rather than generation during manufacturing. Therefore, the demand for duty and order of confiscation on the excess quantity was not sustainable, subject to verification by the jurisdictional Central Excise authorities.

Conclusion:
The Tribunal, in principle, granted relief on all issues but remanded the matter for verification of the nature of the imported brass scrap. The original adjudicating authority was directed to examine the applicability of Circular 1029/17/2016-CX dated 10 May 2016 and any other relevant circulars to the remand directions. The Tribunal emphasized that the benefit of the Norms Committee's wastage norms would only apply if the appellants could prove that the imported brass scrap contained the specified impurities.