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TMI Blog2012 (4) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... demption fine of Rs.45 lakhs. He has imposed penalties of Rs.12 lakhs and Rs.5 lakhs on the appellant-company under Sections 114 and 114A of the Customs Act, 1962. He has also imposed penalties of Rs.5 lakhs and Rs.3 lakhs respectively under the said sections against the appellant-Managing Director. As the results of the NML test reports were not very clear, particularly with reference to the error margin, when the matter was heard on 8.9.2011, the Bench had directed the concerned scientist of NML to be present at the time of next hearing. He was accordingly present at the time of next hearing on 2.2.2012. 3. The impugned goods were sought to be exported under 5 shipping bills dated between 19.6.2008 and 25.6.2008. The goods were declared as "alloy steel billets of prime quality". Ordinarily, there is no duty on export of goods out of India except in a few cases. In respect of "non-alloy steel, ingots or prime form", export duty of 15% advalorem has been imposed vide Notification No.66/08-Cus. dt. 10.5.08. Appellant-exporter used to earlier export non-alloy steel only but since, after imposition of duty on such steel, they had filed the impugned shipping bills declaring the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Report No.20077 issued by NML dated 27.06.2008 that classified the samples as Non-Alloy Steel (page 3 of the Common Additional Paperbook-I). Today, after re-testing the samples as per order of this Tribunal, NML, vide letter dated 11.03.2010 (Page 363 of common Paperbook) has stated that classification of the samples into alloy and non alloy steel is not possible as there are various uncertainties in measurement. In the light of this, the impugned order is wholly unreasonable in even taking the other factors into account. ii. The deposition dated 02.08.2010 of the scientist-in-charge who had issued the test results categorically states that uncertainty / variation to an extent of 0.006 to 0.0012% in analyzing the boron content using the OES method is inevitable. (Page 388 of Common Paperbook) B. Burden of proof lies on the respondent: a. The impugned order has failed to take into account that as per various decisions of the Hon'ble Supreme Court, the burden of proving that a certain commodity falls in a particular tariff lies upon the revenue Department. The respondent in the present case has produced no iota of evidence to show that the steel billets were non-alloy steel. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the price. Therefore, a conscious decision was taken to include Boron which would not adversely affect the steel billets but would improve its ability to harden. D. Purchase of Ferro Boron before initiation of enquiry: a. Ferro Boron was purchased on 10.06.2008 and used from 11.06.2008 as stated by the Production Manager of the appellant unit in his statement dated 12.08.2008 (Page 243 of Common paperbook). The consignment in question therefore contained billets manufactured after 11.06.2008 as well. The enquiry from the Department was initiated only vide letter dated 25.06.2008 (Page 63 of Common paperbook) and it is therefore clear that Ferro Boron was purchased prior to initiation of enquiry itself. E. Uncertainty element to be applied in favour of the Assessee: a. The appellant submits that in the following case laws the Tribunal had held that tolerance limit, if any, has to be applied in favour of the assessee for the purpose of classification. i. 1996 [84] ELT 53- New Shorrock Mills Vs. Collector of Central Excise ii. 1998 [102] ELT 420 - Morarjee Gokuldas Spg. Wvg. Co. Ltd Vs. CCE iii. 1991 [53] ELT 138- Collector of Central Excise Vs. OCM [India] Ltd iv. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r contentions, having made a finding that in only in 31 samples the boron content was found to be less than 0.0008% and that the remaining samples had a boron content of 0.0008% or more, the impugned order has arbitrarily declared the entire lot to be non-alloy steel billets. This finding is preposterous, baseless and completely untenable. c. The case of the appellant has only been vindicated further in the second round subsequent to the remand as the inability to classify the goods as alloy or non-alloy and refusal to apply the tolerance limit to the goods is purely arbitrary and unjustified. In such circumstances, the respondent has not shown any reasons whatsoever to (i) penalize the appellant and (ii) to enhance the penalty over the amount originally issued as penalty against the appellant. This further evidences the arbitrary manner in which the respondent has sought to harass the appellant. d. Further, the impugned order is erroneous as it seeks to levy a personal penalty, which can be done only if there is a mala tide intention to evade duty. In the instant case, since it is clearly established that two views may be possible, the appellant cannot be imputed with a penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... das Spg.Wvg.Co.Ltd Vs CCE 3. 1991 (53) ELT 138 - M/s.Collector of Central Excise Vs 0CM (India) Ltd 4. 2005 (188) ELT 296 - M/s.New Shorrock Mills Vs Commissioner of Central Excise 5. 1991 (56) ELT 477 - M/s.Ramnarayan Mills Ltd Vs Collector of Central Excise 6. 1998 (111) ELT 862 M/s.Swami Samartha Shetkari Va Vinkari Sahakari Soot Girni Niyamit Vs CCE. 7. 2003 (156) ELT 768 - M/s.Kripal Springs (India) Ltd Vs Commissioner of Central Excise 8. 2004 (167) ELT 175 - M/s.Ujagar Textile Inds Ltd Vs Commissioner of Central Excise. for applying uncertainty in the test measurements in their favour. The same is not acceptable as facts and circumstances of each case are different and totally distinguishable from the facts and circumstances of the instant case. In M/s. New Shorrock Mills Vs Collector of Central Excise, the citation that has been heavily relied upon by the appellant, the item in dispute was Cotton Polyester Blended fabric, in which there was a variation of approx 6-7% in polyester fibre, whereas, in the instant case, there are multiple constituents in the export product and there is huge variation in the content of distinguishing alloy element ie., Boron, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in some of these Sales Contracts M/s. Sumangala Steel (P) Ltd have tried to insert certain changes in description (so as to change it to Steel Billets Prime), composition to insert Boron element in the end while keeping percentages of other elements unchanged (though continuing to show quality as 3SP/PS, which is a Russian specification for Non-Alloy Steel), and in certain copies changes in Force Majeure clause regarding the liability of export duty if any levied by the Government of India, but with the same FOB price as that of Non Alloy Steel, though admittedly the price of Alloy Steel should be higher than that of Non-Alloy Steel. In any case, the last signed copy of the contract which was sent to Shri. Rajendiran, Managing Director of M/s. Sumangala Steels (P) Ltd on 8th June, 2008 is for supply of Non-Alloy Steel Billets of quality 3SP/PS and with no boron content. (2) The changes in the description of the product were communicated vide e-mail dated 08.06.2008 which is after signing of the original contract and imposition of export duty on the Non-Alloy Steel. The said changes were done with the clear objective of evading export duty on the goods. (3) Apart from above, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a Russian standard for non-alloy steel and the appellant had always been supplying to them 3SP grade of steel and not alloy steel at any time. (iv) He has also admitted that he had coordinated with M/s.SSPL for persuading them to be party in this modus operandi, being Indian counterpart of his company. Shri Rohan Anand Kumar Mhatre also accepted that for said acts of commission and omission, he had acted as per the instructions of his company Directors from his Head Office located at Hong Kong so as to continue getting business for his Company as it was necessary for the survival of their Mumbai Regional Office in light of the new provisions introduced by Indian Government thereby levying 15% duty on non-alloy steel. (v) He also agreed that one of their employee Shri Vinod Bane has sent e-mail instructing Ms.Salomi of the appellant to delete the word alloy from all the shipping documents since alloy steel attracted import tax in Philippines. (2) Consumption of boron as alloying element (i) Regarding consumption of Boron as alloying element in production of alleged alloy steel, the Managing Director of the appellant firm Sh.Rajendiran Sabanayagam, has himself mentioned th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also not adduced any positive evidence to prove that they have made necessary addition to the plant and machinery to manufacture alloy steel as same requires different plant and machinery to control the percentage of various metal constituents. Except Boron which has not tested positive in test results, the value of other alloying elements is no where close to the standard values prescribed for the same. The assessee has not provided any literature to contest that the alloy material manufactured by them conforms to any standard specifications of any standard grades of steel accepted and notified either by AISI or ISI. They have also not indicated the specific application to which such nature of alloy steel will be put use to. This only leads to the conclusion that Boron was never used in production before 11.06.2008 and use of alloy steel scrap as source of Boron for production up to 10.06.2008 is only an afterthought and an attempt to escape export duty and penal liabilities. Since the appellants have colluded to change the basic sale documents and the letters of credit after imposition of the export duty on the export product and have also deliberately misdeclared the descripti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e context of definition of alloy steel under the HSN, accurate quantification of boron in steel poses a special challenge for Customs administrations all over the world. This is because of the amount of boron required to render a product classifiable as alloy steel is very low (0.0008% or 8 ppm). This problem does not seem to have been addressed by the Indian Customs Administration whereas in other countries similarly applying the HSN, methods have been developed to determine the boron content accurately. For example, the "Customs and Border Protection Laboratory Bulletin" (Volume 12 Number 1) of the US Customs has published a paper on "Determination of boron in steel by Emission Spectrometry" authored by Yousuf Qureshi and Carson Watts which shows that by employing Optical Emission Vacuum Spectrometric Analysis, boron content in alloy steel can be accurately determined at levels ranging from 0.001% to 0.0026%. It is indicated in the paper that the analysis is straight forward, requires minimal sample preparation and results in correct characterization of a sample for tariff purposes. The paper also indicates that even for samples which have boron content near 0.0008% tariff breakp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port duty. The appellants had ample time to renegotiate the sale and if they have been able to persuade the customers to accept alloy steel with the minimum boron content and have reorganized their documentation, that alone would not prove a case of misdeclaration and evasion unless the impugned goods have indeed been misdeclared. As we have held above, the chemical examination does not point to lack of boron content in the impugned goods to the specified extent after applying the error margins. Under the circumstances, the charge of misdeclaration cannot be held against the appellants on the basis of changes made in the various documents. Instead of the department alleging that the appellants have taken advantage of low percentage of boron specified to convert non-alloy steel to alloy steel and uncertainty in the in boron content determined, the department could have either applied a different criteria for the purpose of charging export duty, or if the definition in the import tariff was to be applied, then arrangements should have been made for proper determination of boron content with far greater accuracy as is being done in other countries. 13. The appellants have also explai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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