9911796707
TMI Blog1998 (9) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... lared value of Rs. 1,000/- per metric ton CIF is to be rejected as true transaction value. He has held that for determination of customs duty the value will be taken as Rs. 3155/- per metric ton CIF in terms of Rule 6 of Valuation (Determination of Price of Imported Goods) Rules, 1988 read with Section 14 of Customs Act, 1962. He has also held that the tyres of a kind usable for saloon cars are correctly classified under Heading 4011.40 of Central Excise Tariff and others under Heading 4011.50 of Central Excise Tariff and the additional duty had been correctly assessed under these headings read with Notification No. 21/95-C.E., dated 16-3-1995. He has imposed a penalty of Rs. 8,00,000/- under Section 112(a) of the Customs Act, 1962. 2. The facts of the case are that the appellants imported the goods described in the Bill of Entry No. 26, dated 18-3-1995 as `used rubber tyres for retreading (Scrap)'. The show cause notice dated 14-12-1995 was issued alleging that during March, 1995, "used rubber tyres of foreign origin" were not cut, and were imported at Mundra Port in Kutch, Gujarat by the appellants. They had sought clearance without a licence. It was stated that as per clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the market at around Rs. 30/- a piece which is very low compared to the prevailing market price varying between Rs. 130/- to Rs. 600/- per piece, for different sizes of tyres. It was stated that the declared price do not appear to be acceptable as value payable within the scope and meaning of the Section 14 of the Customs Act, 1962 and as such is liable to be discarded in reference to Rule 4 of the Valuation (Determination of Price of Imported Goods) Rules, 1988. It is stated that accordingly the value is to be ascertained from the view point of assessment for duties. As there does not exist invoices of a third party to give prices of identical or similar goods imported during the same period and already accepted earlier by the Customs, therefore, the value cannot be determined in terms of Rule 5 or Rule 6 of the said Valuation Rules. Under the circumstances, the value is to be ascertained in terms of Valuation Rule No. 7 by the deductive method with the help of market inquiry. 5. It is stated that in the course of market inquiry, three persons were contacted having good and fair knowledge in the business of used tyres and they were shown the goods, which have been imported. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat they had declared the CET as 4011.99 which is a residual sub-heading under the main CET Heading 40.11, there is no separate scope for any used/scrap tyres and therefore, the used/scrap tyres of each type shall fall under its respective sub-heading. It is therefore, alleged that the used LTV and HTV tyres are to be assessed under CETH 4011.40 and 4011.50 respectively as against the Heading 4011.99 claimed by the importer. Further, it was stated that the concessional benefit of Notification No. 21/95-C.E., dated 16-3-1995 can be extended. It is stated that the sizes of the tyres are not covered under the Notification No. 21/95-C.E. Accordingly the Additional duties of Customs should be leviable at specific rates per piece depending on the size of the tyres imported because neither the said heading nor the said notification distinguishes between used and new tyres. 10. It was alleged that the importers had misdeclared the CET heading to avail a lower duty i.e., at 35% as against the above stated specific rates and thus, having committed contravention of Section 111(m) of the Customs Act, 1962. After noting certain facts, it was concluded that the importer had imported the go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serviceable as `tyre' and as such is different insofar as its use is concerned. It states the term `manufacture' as given in the policy is inclusive one as is clear from the expression "and shall include .....". They stated that it covers even processes like segregation and polishing. They stated that an inclusive definition is used in interpretative clauses to enlarge the meaning of the words in the statute. Where the word `include' is used in an interpretation clause, it must be construed as comprehending not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. Therefore, they stated that the imported consignment is not unauthorised and does not require any licence. They stated that the restrictions of para 29 is thus not applicable to actual user. Further they stated that it is a raw material for use and cannot be called `second-hand goods'. This would be clear from the fact that Customs authorities all over the country are allowing import of waste and scrap of all materials without a licence even though such waste and scrap may be second-hand. They quoted the example of waste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the goods imported by them. Therefore, they did not misdeclare the price of the said goods. They objected to the department resorting to Rule 7. The appellants also stated that no penalty can be imposed as there was no deliberate act leading to guilty for imposition of penalty and they relied on number of citations. 15. The matter was initially adjudicated by the Commissioner, Customs (Preventive), Gujarat, who ordered for confiscation of goods under Sections 111(d) and 111(m) of the Customs Act, 1962. However, he granted redemption on payment of fine of Rs. 8,00,000/-. He valued the goods at Rs. 3,155/- per metric ton CIF under Section 11 of the Customs Act, 1962 read with Rule 6 of Valuation (Determination of Price of Imported Goods) Rules, 1988. He directed the tyres of the kind usable for saloon cars to be classified under Heading 4011.40 and others under 4011.50 of Central Excise Tariff. He directed the Additional duty of Customs to be charged on these sub-headings read with Notification No. 21/95-C.E., dated 16-3-1995. He also imposed a penalty of Rs. 8,00,000/-. 16. The appellants are aggrieved with this order and hence they appealed before the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there is also an order of confiscation under Section 111(d) and (m) of the Act, which required re-examination. Therefore, on this ground, directed the case to be decided de novo. The Commissioner re-adjudicated the matter and passed the impugned order. The Commissioner has recorded the details of the case including submissions made by the party in reply to the show cause notice as well as before him including the observations of the CEGAT. He has noted that the department could not give any concrete ground in respect of valuation at the initial stage of the issuance of show cause notice and had gone by some market enquiry made for the market value of the tyres. He has observed that he does not find it quite reliable and scientific, hence he has held that he will not proceed with the findings of market enquiry and rejected them for valuation. However, he has held that the department has got few evidence of contemporaneous imports of similar goods in the form of import documents on record produced to demonstrate the rate of duty applied to them. In case of second-hand, old and used goods it is difficult to have the price of identical goods but there is always a possibility of havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty's argument regarding DGFT's clarification is not tenable because that was specifically for a particular case and not relevant to present case. He has relied on the present admission that the tyres are for trucks and buses. He has held that what is allowed under para 27 are new tyres and not second-hand tyres. He has held that it is also not correct to say that the old tyres are allowed as raw material under paras 22 or 23 of the Policy because, firstly these are not raw material as claimed, secondly even raw material if it is second-hand or old used and it is not specifically allowed, is not freely importable. Therefore, he has held that the arguments of the assessee regarding Advance Licence is also irrelevant because it is not true that only raw materials are allowed under Advance Licences and also they have not produced any advance licence to show that old & used uncut tyres are allowed to anybody as raw material. He has also held that since they had failed to produce the required import licence, the goods are liable to confiscation under Section 111(d) of Customs Act, 1962. 17. As regards the classification of the goods, the Commissioner has held that the judgment re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' plea on the evidence relied by the department had not accepted by the CEGAT, therefore, on remand proceedings, on failure to produce any contemporaneous evidence, therefore, the departments' charge on valuation is required to be dropped. He submitted that the department initially had held that Rule 7 is required to be adopted. However, in the impugned order the Commissioner has proceeded to assess the goods under Rule 6 which is again beyond the scope of enquiry and charge made out in the show cause notice. He submits that the para 27(1) permits import of used tyres/tubes cut into two pieces. He submits that the Supreme Court and the Tribunal in the matters pertaining to garments had directed the department to permit the party to cut the garments in two pieces. It is his contention that the goods have now deteriorated in condition due to exposure to natural conditions and it has lost its value for the purpose of retreading. It is his contention that whatever can be retrieved could be used only for remelting and re-processing and not for retreading. He submits that the department has now adopted the value by which the value of the goods would be much more than what was initially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry. He has based his findings on the fresh material and enquiry collected by the department. This portion of the order of the Commissioner to rely on fresh material is to circumvent the order of the Tribunal, which has held that the so- called market enquiry was no evidence at all. The Commissioner has while relying on this fresh material has again disregarded the Tribunal's judgment. Therefore, it has to be held that the Commissioner was totally unjustified in proceeding on the material which was not there on record. Had the department chosen to rely on the same, then they should have at least pointed out to the appellants, by issuing a fresh show cause notice by causing an amendment to the same. The matter was required to have been examined in the light of contemporaneous import. The import in the present case pertain to 18-3-1995, while the goods imported by M/s. Modern Rubber Industries vide Bill of Entry No. 1253, dated 3-6-1994 at Mumbai. The place of importation appears to be also from a different place and not from the same country of origin. Therefore, the Commissioner relying on some materials, which was not a part of the ad- judication is totally unjustified and illegal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Poysha Indl. Co. Ltd. v. Collector of Customs, as reported in 1996 (86) E.L.T. 141, the Tribunal on appreciation of facts and reasons held that it must follow that there was no materials to indicate that the invoice price did not reflect the normal price in international trade for import at the time and place of import. 27. In the case of Sushil Kumar Kayan v. Asstt. Collector of Customs, as reported in 1993 (68) E.L.T. 537 the Hon'ble Calcutta High Court held that burden of misdeclaration and undervaluation is on the department to prove with sufficient evidence relating to comparable goods imported in comparable quantity from same country of origin and it should be produced by the department otherwise the invoice value is required to be accepted. 28. The Commissioner has proceeded on the ground that the freight charge is high and therefore, the value of the old tyres cannot be accepted. This has been explained by the appellants that in the country of origin these tyres have been thrown out as scrap and for want of place they have just sold away at the price quoted by the suppliers. This contention cannot be disregarded and the Commissioner cannot proceeded to dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tyres of specific sizes and tariff rate for the tyres and tubes where size is mentioned under Notification No. 41/89, in view of the classification adopted by the Tribunal. Although the Tribunal has not given detailed reasons, nor looked into the points raised by the appellants, however, in keeping with the judicial discipline and following the ratio thereof, we hold that countervailing duty has to be charged under 4011.99 as referred to above. 31. As regards the issue pertaining to licence, the appellants have not shown that they were holding any licence. They have also not produced any advance licence. However, it has been shown that the import of such goods was permissible after amendment in respective paragraphs, if the tyres were brought in two pieces in terms of the Handbook of Export and Import Policy, 1992-97 as issued on 30-3-1994. The Counsel has relied on the judgment of the Tribunal rendered in the case of Kakkar & Co. which has since been confirmed by the Hon'ble Supreme Court. In terms of these judgments the goods were directed to be released after the importer carrying out the mutilation of the same. At the relevant time the Handbook of Procedure itself per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the bead wire or in the body and included both tyres for LTV and HTV. 35. The department's case is that the importation requires licence and there was an undervaluation whereas the appellants have contested these allegations and claimed that the goods could be imported without licence as per para 22 of Import Policy 1992-97 and the declared value was correct, the goods have been over-assessed and were not liable to CVD. 36. Regarding licensing, I find that the relevant import policy has two provisions - one, in respect of second hand goods other than capital goods which could be imported only in accordance with a Public Notice or a licence issued in this behalf [vide clause (29)] and a provision regarding waste, scrap, seconds and defectives, waste paper and used rubber tyres/tubes cut into two pieces which could be imported without a licence. 37. Since the goods were evidently second-hand goods in the nature of used rubber tyres which were not cut into pieces, therefore, obviously, it is clause (29) which was applicable and a licence was required. Since the appellants did not produce any licence, the goods were liable to confiscation and imposition of fine and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness is that the goods are of the same class or kind or similar and comparable and they have been imported during almost the same period and at the same or nearby place and the enquiry is conducted in the nearest market. The use of the words `like goods' in Section 14 is significant and the words `time and place of importation' also used therein have to be construed in the context of international trade (also mentioned therein) as also the market for such goods at home. In the Customs Valuation Rules, again, Rule 2 defines the goods of the same class or kind as imported goods that are within a group or range of imported goods produced by a particular industry or industrial sector and includes identical goods or similar goods in Rule 2(b). Indeed, the words `similar goods' have been defined in Rule 2(a) and the interesting part is the emphasis on characteristics, components, functions, commerce and more importantly in the context of our case, quality apart from reputation and trade mark, the country of production and product by same or different person and all this shows that these definitions are of a wide amplitude and it is notworthy that the definition of `class' or `kind' is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of normal trade or business. 45. Insofar as CVD is concerned, they cannot be classified under 40.04 because the appellants' submissions themselves show that they are not really useless waste but intended for further use as second-hand goods and the classification has to be under 40.11 because this heading does not distinguish between new and used tyres and the CVD is leviable because it is required to be levied with reference to importation and not with reference to the conditions of and/or use (or non-use) of such goods; And, all that is required to be seen is whether similar goods were excisable and it cannot be said that tyres were not an excisable commodity. Obviously, once the goods after manufacture are used, they become second-hand goods but, that does not mean that they will not be leviable to countervailing duty. However, insofar as sub-heading 4011.99 is concerned, it is more appropriate because admittedly, these second- hand tyres which have been imported were not meant for use on motor vehicles or other vehicles mentioned in other headings but for retreading and rim size is not material and of no commercial significance for such goods. Further, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated : 23-3-1998 POINTS OF DIFFERENCE 51. In view of difference of opinion between Hon'ble Member (Judicial) and the Vice President, the matter is submitted to Hon'ble President for referring it to a Third Member on the following points : "Whether there was a violation of ITC provisions and importers were required to take out a licence and in absence thereof were liable to fine and penalty? Whether there is a misdeclaration in the bill of entry? Whether there is an undervaluation; And whether in the facts and circumstances of the case, the appeal was required to be disposed of in the terms proposed by Hon'ble Member (Judicial) or the matter was required to be remanded for de novo consideration in accordance with law in view of the observations and directions of the Vice President?" Sd/- Sd/- (S.L. Peeran) (S.K. Bhatnagar) Member (J) Vice President Dated 30-4-1998 Dated 24-3-1998 52. [Order per : K. Sankararaman, Member (T)]. - The difference of opinion matter was heard by me as the third Member when Shri A.C. Jain, learned Counsel appeared for the appellant and Shri H.K. Jain, learned Senior Departmental Representative appeared for the respondent Collector. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in proceeding on material which was not on record. The same should have been pointed out to the appellant by issuing a fresh show cause notice by causing an amendment to the same as observed by the Judicial Member, who had also observed that even the contemporaneous import relied upon by the Commissioner related to a Bill of Entry dated 3-6-1994 at Mumbai, the import also being from a different country. Learned Counsel pleaded that the order prepared by Judicial Member may be agreed to and pointed out that the order proposed by the Vice President has made out a new case beyond the show cause notice. The Tribunal cannot take such a step as held by the Supreme Court in Baboobhai Patel & Co. v. Collector of Customs - 1993 (68) E.L.T. 734, he stated. 53. Shri H.K. Jain learned SDR resisted the arguments advanced by the learned Counsel and supported the order of the learned Vice President. He pointed out that the difference in the two findings of the Bench is on the quantum of fine in lieu of confiscation. As regards the valuation question, one of the invoices referred to by the Commissioner in the impugned order had been given by the appellant company itself. As it is their own ..... X X X X Extracts X X X X X X X X Extracts X X X X
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