2018 (9) TMI 768 - HC - Customs

Valuation - goods cleared on provisional assessment - Whether the Hon'ble Tribunal failed to appreciate that the second test report dated 29.08.2005 issued by the National Metallurgical Laboratory (NML) would be determinative of the issue particularly when the Commissioner of Customs chose to agree to the Appellant's request for re-test of the goods imported in one lot? - Whether the Tribunal had erred in upholding the imposition of penalty by holding that the appellant had misdeclared the description of the goods when the declaration was made as per the import documents issued by the supplier abroad? - Held that - Though the goods have been released, it is only a case of provisional release and the Department having accepted the request made by the appellant for a re-test and the test report on the second test having gone in favour of the assessee and the benefit having been extended to the remaining goods, in our considered view, the transaction cannot be split up into two, more so when there is no notice issued to the assessee as to from which containers the samples were drawn at the first instance. The onus is on the Department to prove that the goods, which are contained in the containers are all different category than what was drawn for the purposes of making test. If such is the allegation, then it would amount to a case of concealment or wilful mis-statement with an intention to smuggle the goods. In the absence of any such allegation, the benefit of the second test report ought to have been granted to the assessee in respect of the entire goods, which were imported vide two bills of entries. Appeal allowed - decided in favor of appellant/assessee and against the Revenue.

Summary

Issues:
1. Appeal against final order of Customs, Excise and Service Tax Appellate Tribunal.
2. Questions of law regarding test reports and misdeclaration of goods.

Analysis:
1. The appellant challenged the final order of the Customs, Excise and Service Tax Appellate Tribunal, raising substantial questions of law. The first issue revolved around the Tribunal's failure to consider the second test report issued by the National Metallurgical Laboratory (NML) as determinative, especially when the Commissioner of Customs agreed to a re-test. The second issue questioned the imposition of penalties based on alleged misdeclaration of goods, despite the declaration being in accordance with import documents from the supplier abroad.

2. The case involved the importation of goods declared as non-alloy heavy metal scraps. Initially, samples were tested, and it was concluded that the samples did not qualify as non-alloy steels. The appellant then requested a re-test, highlighting various justifications for the re-test, including the nature of the material, sourcing from Africa, and concerns regarding sampling methods. A second set of samples was tested, favoring the appellant, leading to the dispute over customs duty, confiscation, and penalties.

3. The High Court disagreed with the Tribunal's decision, emphasizing that the test reports were based on random samples drawn by the Department without specific notice to the importer. The Court noted that the goods were provisionally released, subject to final adjudication. It was highlighted that if samples certify as per the importer's declaration, the entire consignment is presumed to be of the same nature unless proven otherwise by the Department.

4. The Court found that the benefit of the second test report should apply to the entire imported goods covered by the bills of entries. Notably, subsequent tests on similar products confirmed the nature as non-alloy steels. The provisional release of goods further supported extending relief to the appellant. Consequently, the Court deemed the Commissioner of Customs' order and the Tribunal's confirmation as untenable, allowing the appeal, setting aside the impugned orders, and ruling in favor of the appellant on the substantial questions of law.