2016 (12) TMI 427 - AT - Customs

Confiscation of imported goods - import of Stainless steel melting scrap - mis-declaration of goods - whether the material imported by OIL is stainless steel melting scrap or a large part of it can be treated as serviceable material? - Held that - while the allegation is that the material imported by OIL is serviceable stainless steel sheets of which grade 301 and 304 the same have nowhere been treated as prime material. The material was found under the scrap as neatly strapped and palletised sheet.Scrap is not neatly strapped and palletised. Scrap is not of relatively uniform shape and size and with neatly trimmed edges. Thus the material recovered in palletised form with neatly machined edges can only be treated as SS sheets of prime/serviceable quality. The notice seeks to classify the material under heading 7208 while the impugned order classifies it under heading 7219/7220 depending on the width. The impugned order rejects the proposition to classify it under heading 7208. Thus it is clear that the allegation made in the notice has been dropped. It is not open to revenue to make an entirely different case. In the description of contemporaneous comparative imports also the product description is SS steel coils/ SS cold rolled steel/ SS hot rolled steel. No heading or classification has been mentioned in the said data. Presumably if the attempt was to classify the products under heading 7208 then contemporaneous data of the same heading i.e. 7208 would have been taken. If the product has been found to be classifiable under heading 7219/ 7220 the contemporaneous data of imports of heading 7208 cannot be used to redetermine the transaction value under Rule 4. The demand cannot be sustained. Since demand itself is not sustained on merit, the confiscation cannot be upheld. The appeal of OIL is allowed - decided against Revenue.

Summary

Issues Involved:
1. Confiscation of imports, revised assessable value, redemption fine, and penalty under Customs Act.
2. Allegation of misdeclaration of goods as scrap by the importer.
3. Challenge by revenue on demand confirmation under different sections of the Customs Act.
4. Dispute over classification and valuation of imported material.
5. Appeal by OIL against the order and the revenue's challenge.

Issue 1: Confiscation, Revised Value, Redemption Fine, and Penalty:
The appeal was filed against an order confiscating imports by OIL, with revised assessable value due to alleged misdeclaration. The goods were confiscated and offered for release on a redemption fine. A penalty was imposed under Section 112 of the Customs Act. Revenue challenged the confirmation of demand under Section 18 and sought penalty under Section 114A.

Issue 2: Alleged Misdeclaration of Goods:
OIL imported material declared as stainless steel melting scrap, but upon examination, it was found to contain serviceable stainless steel sheets concealed beneath scrap. The material's nature was disputed, with revenue alleging misdeclaration by the importer based on expert reports and contemporaneous imports data.

Issue 3: Challenge on Demand Confirmation:
Revenue contested the demand confirmation under Section 18 instead of Section 28, also challenging the non-imposition of penalty under Section 114A. The order was disputed for not confirming the demand under Section 28 and not imposing an equal penalty under Section 114A.

Issue 4: Classification and Valuation Dispute:
The dispute revolved around whether the imported material was scrap or serviceable sheets, affecting its classification and valuation. Arguments were made regarding the material's actual use, grade mix, and comparison with contemporaneous imports for valuation enhancement.

Issue 5: Appeal and Decision:
OIL argued that the material was scrap as per market understanding, used for melting, and challenged the classification and valuation methods used. The Tribunal analyzed expert reports, physical characteristics, and classification discrepancies to conclude that the material was serviceable sheets, not scrap. Consequently, the demand was not sustained, leading to the appeal's allowance and the revenue's appeal dismissal.

This detailed analysis of the legal judgment covers the issues involved comprehensively, addressing the confiscation, misdeclaration, demand confirmation, classification, and valuation disputes, leading to the final decision by the Tribunal.