2015 (2) TMI 299 - AT - Customs

Misdeclaration of goods - Confiscation of goods - Imposition of redemption but on condition that before clearance, assessee mutilate the goods at their cost, so as to convert it into scrap. - Whether the imported goods are in the nature of scraps and freely importable or should be treated as old and used CRGO Strips whose import is restricted under the provisions of FTP, 2009-2014 read with Steel and Steel Products Quality Control Orders and the impugned Board s Circular - Held that - heading excludes articles which, with or without repair or renovation, can be re-used for their former purposes or can be adapted for other uses; it also excludes articles which can be refashioned into other goods without first being recovered as metal. Thus, it excludes, for example, structural steelwork usable after renewal of worn-out parts; worn railway lines which are usable as pitprops or may be converted into other articles by re-rolling; steel files capable of re-use after cleaning and sharpening. - Thus it appears that the Heading 72.04 excludes articles which can be reused for their former purposes or can be adopted for other uses with or without repair or renovation. It is also evident that usability as such/after processing is an important criterion to arrive at the conclusion whether the goods are scrap. Issue requires fresh adjudication by the Ld.Commissioner and before adjudication representative sample of the imported goods should be re-examined in presence of the importer s representative and the experts dealing in the relevant field to ascertain whether the items were usable as such or after their processing to arrive at the conclusion that the imported items are scrap or otherwise. - hence the examination of applicability of the judgements cited by both sides to the facts in our opinion, at this stage would be pre-mature. Accordingly, the order of the Ld.Commissioner is set aside with the direction to pass a fresh order after hearing all the parties. - Matter remanded back - Decided in favour of assessee.

Issues Involved:
1. Classification of imported goods as "scrap" or "old and used silicon electrical steel strips."
2. Legality of the import under the Foreign Trade Policy and Steel Control Orders.
3. Validity of the penalties imposed on the importer, the customs house agent (CHA), and the chartered engineer.
4. Adequacy of the examination and certification process for the imported goods.

Detailed Analysis:

1. Classification of Imported Goods:
The primary issue is whether the imported goods qualify as "scrap" or "old and used silicon electrical steel strips." The appellant argued that the goods are scrap, not usable in their current form, and thus should be freely importable under the Foreign Trade Policy (FTP). They cited several tribunal judgments supporting their claim that similar goods have been classified as scrap in the past. The respondent, however, contended that the goods do not meet the definition of scrap under Section 8(a) of Section XV of the Customs Tariff Act, 1975, as they are old and used silicon steel strips, whose import is restricted.

2. Legality of the Import:
The legality of the import was challenged based on the Steel and Steel Products Quality Control Orders, 2012 and 2014, and the CBEC instruction dated 9.7.2014, which restrict the import of second/defective/old and used CRGO sheets, strips, and coils. The Commissioner had confiscated the goods, allowing redemption upon payment of a fine and subject to mutilation to convert them into scrap. The appellant contested this, arguing that the goods were indeed scrap and the restrictions did not apply.

3. Validity of Penalties:
Penalties were imposed on the importer (Rs. 5.00 Lakhs), the CHA (Rs. 5.00 Lakhs), and the chartered engineer (Rs. 50,000). The appellant argued that there was no misdeclaration or contravention of the provisions of the Customs Act or the Customs Tariff Act. The CHA and the chartered engineer also contended that there was no evidence of their involvement in any wrongdoing or bias in the certification process.

4. Adequacy of Examination and Certification:
The examination and certification process was scrutinized, with the appellant arguing that the dock officers' and chartered engineer's reports confirmed the goods as scrap. The respondent, however, pointed out that these reports did not adequately detail the physical condition of the goods, such as length, width, and usability, which are crucial for determining whether the goods are scrap.

Judgment Summary:
The tribunal found that the examination reports were inconclusive and did not provide sufficient details to determine the nature of the goods. It noted that the classification of products under the Harmonized System of Commodity Description and Coding should be based on legal texts, section notes, and chapter notes. The tribunal directed a fresh adjudication by the Commissioner, emphasizing the need for a detailed re-examination of representative samples of the imported goods in the presence of the importer's representative and experts. The previous order was set aside, and the case was remanded for a fresh decision within a specified timeframe to address the urgency and ongoing demurrage costs.

Conclusion:
The appeals were allowed by way of remand, with instructions for a thorough re-examination and a fresh order based on the findings. The tribunal underscored the importance of a detailed and accurate assessment to determine the correct classification and legality of the imported goods.

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