2024 (11) TMI 20 - AT - Customs

Scrap imported - Eligibility for the concessional rate of duty under Customs Notification No. 12/2012-Cus. dated 17.03.2012 vide Sl.No. 330 - Appellants purchased 251.300 MTs of re-rollable scrap each on high sea sales basis - Assessee classifying the imported materials under the CTH 7214 1090 as re-rollable scrap but the Department treated it as Defectives and Seconds and denied notification benefit - HELD THAT - Seconds and defective steel products can be of products of non-standard dimensions or downgraded products. Downgraded products mean that the steel products suffering from surface defects and internal faults. If the imported cargo is meant for sale as defective or second goods, then only the benefit of Notification No. 12/2012-Cus. dated 17.03.2012 can be denied to the Appellants. Neither there is an allegation nor any finding that the importer-Appellants are disposing these cargo as such. Taking into consideration of all the facts obtaining in all these appeals and Examination Reports as the Appellants being the manufacturers who regularly import scrap both for melting and re-rolling, we are of the view that the imported cargo cannot be treated as seconds and defectives and so are eligible for the benefit of concessional rate of duty in terms of Notification No. 12/2012-Cus. dated 17.03.2012 at Sl.No. 330.

Summary

Issues Involved:

1. Eligibility for concessional rate of duty under Customs Notification No. 12/2012-Cus. dated 17.03.2012.
2. Classification of imported goods as 'seconds and defectives' versus 're-rollable scrap.'
3. Alleged violation of principles of natural justice by the Department.
4. Justification for denying the benefit of the notification.

Detailed Analysis:

1. Eligibility for Concessional Rate of Duty:

The core issue in these appeals was whether the imported cargo qualified for the concessional rate of duty under Customs Notification No. 12/2012-Cus. dated 17.03.2012. The appellants, M/s. DSRM Steels Pvt. Ltd. and M/s. Amman Steel Corporation, imported re-rollable scrap and sought the benefit of a reduced duty rate. However, the Department denied this benefit, classifying the goods as 'seconds and defectives,' which are excluded from the concessional rate under Sl.No. 330 of the notification.

2. Classification of Imported Goods:

The appellants contended that the imported goods were re-rollable scrap, not 'seconds and defectives.' They argued that 'seconds and defectives' arise during manufacturing and do not meet standards, whereas scrap is waste from dismantling machinery. The examination reports confirmed that the cargo was in the form of scrap, specifically rusted iron rods, which could not be re-rolled without melting. The Tribunal found that the imported goods were indeed scrap, not defectives or seconds, as they were not meant for sale without processing.

3. Alleged Violation of Principles of Natural Justice:

The appellants argued that the Department did not provide notice or reasons for denying the notification's benefits, violating natural justice principles. The Tribunal noted that the appellants paid the assessed duty under protest due to incurring ground rent charges, and the Department failed to vacate the protests or provide adequate notice.

4. Justification for Denying the Benefit of the Notification:

The Tribunal examined whether the goods could be classified as 'seconds and defectives,' which would justify denying the notification's benefit. The Tribunal considered guidelines from the Ministry of Steel regarding non-prime steel products and found no evidence that the imported goods were being sold as defectives or seconds. The Tribunal cited the case of Lucky Steel Industries, which highlighted that goods used as scrap for re-rolling should not be classified as second or defective solely based on their chemical composition.

Conclusion:

The Tribunal concluded that the imported cargo was re-rollable scrap, not 'seconds and defectives,' and thus eligible for the concessional duty rate under Notification No. 12/2012-Cus. The impugned Orders-in-Appeal were set aside, and the appeals were allowed with consequential relief as per law. The decision emphasized the importance of correctly classifying goods and adhering to principles of natural justice in customs assessments.