1988 (3) TMI 235 - AT - Customs

Issues Involved:
1. Liability of copper scrap to countervailing duty (C.V. Duty) under Tariff Item 26A CET prior to 1-3-1981.
2. Classification of imported copper scrap under Tariff Item 68 CET for levy of additional duty.
3. Applicability of the Supreme Court judgment in Khandelwal Metal Works v. Union of India to the present case.
4. Argument of the respondents regarding the nature of copper scrap and its classification.
5. The validity of the revenue raising the issue of classification under Tariff Item 68 CET for the first time during the proceedings.
6. Certainty in taxation and the ability of the department to shift its stand.

Detailed Analysis:

1. Liability of copper scrap to countervailing duty (C.V. Duty) under Tariff Item 26A CET prior to 1-3-1981:
The appellants argued that the copper scrap imported from Dubai on 22-3-1979 was not liable to countervailing duty under Tariff Item 26A CET as it stood before the amendment on 1-3-1981. The Assistant Collector rejected this claim, but the Appellate Collector allowed the appeal. The government issued show cause notices under Section 131(3) of the Customs Act, questioning why C.V. Duty should not be demanded under Tariff Item 26A CET and why the Appellate Collector's order should not be annulled or modified.

2. Classification of imported copper scrap under Tariff Item 68 CET for levy of additional duty:
The revenue argued that the imported copper scrap should be classified under Tariff Item 68 CET for the levy of additional duty. The learned SDR cited judgments from the Madras and Kerala High Courts, which held that the goods imported before 1-3-1981 should not be classified under Tariff Item 26A CET but under Tariff Item 68 CET. The SDR also cited the Supreme Court judgment in Khandelwal Metal Works v. Union of India, which upheld the leviability of countervailing duty on scrap, although the import in that case was made after 1-3-1981.

3. Applicability of the Supreme Court judgment in Khandelwal Metal Works v. Union of India to the present case:
The respondents argued that the Khandelwal case was not applicable to the present case as it dealt with the period after 1-3-1981 when Tariff Item 26A(1b) explicitly covered waste and scrap. The Supreme Court did not consider the applicability of Tariff Item 68 to scrap in that case. The Tribunal agreed with the respondents, stating that the judgment in Khandelwal related to a period after the amendment and could not be applied to the present case.

4. Argument of the respondents regarding the nature of copper scrap and its classification:
The respondents argued that the scrap imported was not identifiable goods and had no specific description. They cited various judgments to support their claim that waste and rejects cannot be termed as finished excisable products. The Tribunal dismissed these arguments, stating that the chargeable event under the Customs Act is importation, and the imported scrap is liable to duty irrespective of the criteria applicable to goods manufactured in India. The Tribunal held that the imported scrap is goods and is liable to Customs duty, including additional duty of Customs (C.V. Duty).

5. The validity of the revenue raising the issue of classification under Tariff Item 68 CET for the first time during the proceedings:
The respondents argued that the department was not competent to raise the issue of classification under Tariff Item 68 CET at this stage. The Tribunal noted that the duty liability under Tariff Item 68 is less than under Tariff Item 26A and that the show cause notice left scope for alternative arguments. The respondents had ample opportunity to counter the arguments regarding the classification of the goods under Tariff Item 68 CET.

6. Certainty in taxation and the ability of the department to shift its stand:
The respondents argued that there should be certainty in taxation and that the department should not be allowed to shift its stand arbitrarily. The Tribunal acknowledged the importance of certainty in taxation but noted that the Excise and Customs Tariffs must change from time to time based on economic and financial requirements. The Tribunal held that the imported goods are liable to duty under Tariff Item 68 CET and that the Supreme Court judgment in Khandelwal overrides other orders on the subject.

Conclusion:
The Tribunal held that the imported copper scrap is liable to additional duty of Customs under Tariff Item 68 CET. The impugned order of the Appellate Collector was modified to this extent, and the appeal was allowed in these terms.

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