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TMI Blog2011 (3) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... contents in each of the consignments and the content of metallic zinc in each of the consignment which are crucially required for assessing the value of the goods. The suggestion to fix the value of zinc skimming equal to 65% of the value of zinc of prime quality quoted on LME is nearly absurd. Thus having noticed the above factors it can be concluded that there is a case for giving stay on all the demands made by the impugned order. There is also a need to remit this matter to the original authority for reconsideration of the matter on more acceptable principles. - C/384-386/2010 - C/134-136/2011(PB) - Dated:- 24-3-2011 - S/Shri Ashok Jindal, Mathew John, JJ. S/Shri G.L. Rawal, Sr. Advocate, P.K. Mittal and Jagmohan Bansal, Advocates, for the Appellant. Shri B.L. Soni, SDR, for the Respondent. [Order per : Mathew John, Member (T)]. These Appeals and Stay Applications are against O-in-O No. 03/Cus/10 dated 30-4-2010 issued by Commissioner of Customs (Import), Amritsar which involved adverse consequences to the various Appellants. The main finding in the order is about undervaluation of imported goods. There is another issue of difference in quantity noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c Sulphate or Zinc Oride. 3.4 Metallic Contents - This expression refers to the quantity of metal zinc that can be extracted from the Zinc Skimming/Ash. For example, if the metallic content of particular consignment is declared as 45% then one ton of said raw material (Zinc Skimming or Ash) can produce 450 kgs. of Zinc Metal. 3.5 Total Zinc Contents - This expression signify the total zinc contents in consignment. For example; if the total zinc contents in the consignment are 70%, it means that 70% Zinc Contents are present in the consignment but, it does not mean that out of one ton said material 700 Kgs. of Zinc can be extracted. It actually means that so much amount of Zinc is present is some form in the consignment, may be in free form (recoverable as zinc metal) or may be in some compound form. The consignment having zinc contents 70% and metallic contents 45% signifies that 45% metal zinc is extractable as zinc metal and remaining 25% cannot be extracted as metal. 4. As per the chemical reaction, if 100 gm. of zinc skimming/ash having 65% to 70% zinc (Zn) contents is chemically reacted with sulphuric acid (H2SO4) and water (H2O) [i.e., dilute sulphuric acid], approximat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 crores are imposed. Interest under section 28AB is demanded on differential duty. There are also fine imposed in lieu of confiscation. 9.1 The main submissions of the Appellant is that the department at different stages suggested valuation of the impugned goods at 25% of the value of LME prices for zinc , 40% of such price and finally at 65% such price. No acceptable reasons are given for changing from one basis to another. The calculation of the department does not take into account the actual content of metallic zinc in the goods and content of zinc in other forms. The Appellants argue that they never manufactured prime zinc metal for which value is quoted on LME. Their main product is zinc sulphate which is produced by simply adding sulphuric acid to the material and does not involve costly processes for extracting prime metal zinc. They contend that the valuation method followed has no legal basis and hence the demands and penalties and fines are not sustainable. 9.2 However, they are not contesting allegation of undervaluation in the case 3 Bills of Entries listed in para-5 above. They have expressed their willingness to pay the differential duty on these consignments. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price of zinc for the impugned goods containing no metallic zinc is unreasonable. They relied on local market price of zinc ash/skimming or the goods like zinc sulphate manufactured by the Appellants from the impugned goods to come to this conclusion. The report suggests a basis of 25% of LME prices for ash/skimming containing no metallic content and incrementing the percentage of 25% by 4.5% for every slab of 10% of metallic zinc in the impugned goods. This implies that if dross containing 100% metallic content is imported its price should be taken as 70% LME price of zinc. This report reveals some understanding of the issues but still has some deficiencies like,- (a) The report does not consider the Customs Valuation Rules and does not indicate which rule forms the basis for the value suggested; (b) There is no data available about metallic content or zinc content in other form, in any of the import consignments for applying the formula. The only information available is that the impugned goods should have contained at least 65% zinc content in any form; (c) Though the Committee which prepared the report, had five members, the expertise of each of the members is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be based on the price at which zinc ingots manufactured by the Appellants are sold after making adjustments as provided in Rule 7(3)(b) of Customs Valuation Rules; (b) The value of other forms of zinc in these raw materials should be based on the value of zinc sulphate sold by the Appellants after making adjustments as provided in Rule 7(3)(b) of Customs Valuation Rules; (c) The percentage of metallic zinc and zinc in other forms in the two types of the goods namely, (i) zinc ash/zinc skimming (ii) zinc dross may be found out from the manufacturing records and account books maintained by the assessee for the relevant period and these percentages may be applied uniformly for all consignments for a period, say an year. (d) Any calculations made using the above principles cannot be used to claim any value less than the value declared at the time of import. 18. The Appellants undertake to furnish this data for the relevant period based on their records for verification by the department. They also undertake to pay differential duty based on such calculations. Interest and penalty which are legal consequence will follow. 19. The Adjudicating Authority should const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to the seller in India. (b) In such determination, due allowance shall be made for the value added by processing and the deductions provided for in items (i) to (iii) of sub-rule (1). 21.1 We are conscious of the fact it can be argued that the conversion of zinc oxide to zinc sulphate is more than the processing envisaged in Rule 7(3). This argument may apply to lesser degree in the case of metallic zinc in the goods to zinc ingots. But the provisions of Rule 9 and Rule 7(2) provides for a method as near to the methods prescribed, as possible can be used. 21.2 We have also noted the provisions in Rule 9(2) of the said rule which reads as under :- No value shall be determined under the provisions of these rules on the basis of the selling price in India of the goods produced in India . This provision would generally apply for goods produced in India or manufactured in India from indigenous raw material. This provision cannot be considered as bar to arrive at the cost of the imported raw material from the indigenous price at which the processed goods are sold, especially when no other reference is available and when the importer has no objection to adopt the metho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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