2024 (2) TMI 206 - AT - Customs

Confiscation of imported goods - non-foundry scrap - demand of Custom Duty, interest, imposition of penalty - appellant has utilized raw material in excess of that prescribed in the input/ out put norms - to be classified under heading No. 7404 0022 of Custom Tariff Act 1975 or not - time limitation - HELD THAT - It is seen that the Additional Commissioner in the order-In-original has given the benefit of actual amount recovered on account of segregation. The calculation in the appeal is made by adoption of a fix ratio 1.5 which is not ratio of prescribed in DGFT letter. It cannot be accepted as the real ratio verified by the authorities is less than 1.5 and as per DGFT letter the ratio is a map of 1.5 but limited to the actual verified by Central Excise. The second point raised by the appellant in their calculation relates to the loss on account of slag - HELD THAT - From the letter DGFT dated 04.05.2011, it is apparent that the wastage norm for the stage of manufacturing brass items from segregated process mix brass scraped is 1.26 and is obviously inclusive of all kind of losses including slag. Thus, the calculation given by the appellant in their appeal cannot be adopted for the purpose of calculating unexplained consumption of scrap. Time Limitation - HELD THAT - It is seen that the demand has been raised not only invoking provisions of Section 28 but also Section 72 of the Customs Act. In terms B17 bond executed by the in terms of Notification 52/2003-Customs dated 31.03.2003. Therefore, since the demand has been raised invoking the condition of the bond the period of limitation would not be applicable to the instant case. There are no merit in appeals filed by the appellant the same are dismissed.

Summary

Issues Involved:
1. Classification of Non-Foundry Scrap.
2. Determination of Permissible Input-Output Ratio.
3. Calculation of Excess Consumption.
4. Period of Limitation.

Summary:

1. Classification of Non-Foundry Scrap:
The Commissioner (Appeal) held that non-foundry scrap is not classifiable under Custom Tariff header 7404 0022. Consequently, the demand of duty and order of confiscation of non-foundry scrap cannot be upheld. However, the Commissioner (Appeal) also stated that the quantity of non-foundry scrap must be generated as per Notification No. 52/2003-Custom read with the final norms fixed by the norms committee. If the appellants fail to prove compliance, the duty implication stands upheld. The Tribunal found that the Adjudicating Authority confirmed the classification under heading No. 7404 0022, which contradicts the Commissioner (Appeal)'s order. The Tribunal, referencing CBIC Circular No. 1029/17/2016, clarified that segregated foreign materials cannot be treated as clearance of "inputs as such." Therefore, the appeals E/11294-11295/2014-DB were allowed.

2. Determination of Permissible Input-Output Ratio:
The benefit of Notification 52/2003-Custom is subject to conditions including authorization by the Development Commissioner, manufacturing in Customs bond, and maintaining proper accounts. The appellant must prove that goods used in production are in accordance with the SION for export. The norms committee fixed wastage norms for segregation and manufacturing processes. The Additional Commissioner provided calculations for ascertaining the quantity required for manufacturing goods, revising the demand from Rs. 43,69,813/- to Rs. 19,76,115/- based on these norms.

3. Calculation of Excess Consumption:
The appellant argued for a fixed ratio of 1.5 for segregation, but the DGFT letter specifies "as per the actual verified by the Central Excise Officer subject to a maximum of 1.5 MT." The Tribunal found that the actual verified ratio was less than 1.5 and therefore, the appellant's calculation using a fixed ratio was not acceptable. The appellant's argument regarding slag loss was also dismissed as the wastage norm of 1.26 includes all kinds of losses.

4. Period of Limitation:
The demand was raised under clause-3 of Notification 52/2003-CUS, requiring the appellant to execute a bond to explain actual consumption of raw materials. The demand was raised invoking provisions of Section 28 and Section 72 of the Customs Act. Since the demand was based on the bond conditions, the period of limitation does not apply.

Conclusion:
All customs appeals were dismissed, except for appeals E/11294-11295/2014-DB, which were allowed. The Tribunal upheld the revised demand and dismissed the appellant's arguments regarding excess consumption and period of limitation. The judgment was pronounced in the open court on 30.01.2024.