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TMI Blog2019 (10) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... LME Prices - HELD THAT:- Applying the LME price minus discount band as per SMRI bulletin or DGIV Circular No. 14/2005 dt. 16.12.2005 is absolutely wrong. The Appellant has also relied upon the letter F. No. S/26 Misc-1040/2005 GrIV dt. 13.02.2006 of the Commissioner of Customs, Nhava Sheva wherein the Commissioner in reference to Valuation of Aluminium Scrap under Alert Circular No. 14/2005 issued under F. No. VAL/TECH/37/2005 dt. 16.12.2005 has stated that there is no linear correlation between the prices of Aluminium Metal and prices of Aluminium Scrap quoted in Metal Bulletin. It is also clear from the communication dated 29.10.2008 of the Institute of Scrap Re-cycling Industries, INC (ISRI) that the scrap price would depend on many factors and the LME based price cannot be applied blindly to imports of scrap for the purpose of valuation. The whole case is also based upon allegation that the differential amount was paid by the Appellant through Hawala Channels or transfer. However, in the show cause notice not a single person was identified or investigations were made as whom the differential value amount was handed over. Except naming Chaganlal no person has been named ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003 between Shri Tarun Jhingon and the officials of M/s US Zinc Ltd, USA and emails between the persons of M/s U.S. Zinc were relied upon to allege that the goods were Zinc skimming and not zinc ash containing higher zinc content. Also the test report dated 31.07.2006 of the Chemical Examiner, Vadodara was relied upon that the sample drawn from the factory of M/s SMRI showed the sample to be other than Zinc Ash. It was alleged that the invoice issued by exporter were indicating lower value and the balance amount was paid as cash advance to M/s U.S. Zinc through third parties by Hawala or Telegraphic Transfer outside India. Reliance was placed upon statement of Shri Tarun Jhingon, Indenter of Trendene India Pvt. Ltd. and Shri Sushil Agarwal, Partner of M/s SMRI. 1.2 In case of other varieties of Zinc Scrap namely Zinc Die cast scrap Saves and Zinc Dross, the Show Cause Notice relied upon the report dt. 10.01.2007 of Second Secretary (Trade), High Commission of India, U.K wherein it was reported that 11 consignments of Aluminium and Zinc scrap loaded at Barcelona Port, Spain and imported by SMRI consigned by M/s Sunberg Ltd., U.K were undervalued. It also relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was 70% to 80% and considering impurities content in the respective lot, the prices of the metal content therein could be the purchase price. He also stated that his business with M/s SMRI was only of around 300 MT, which is negligible quantity. Statement of Shri Haji Amin Gadawala, Chairman of Bibi Group of companies was recorded 17.1.2006 wherein he stated that he was acting as a follow-up agent of M/s Ala International Trading, Sharjah. The Indian buyers were importing Aluminium Scrap from M/s Shar Metals, Sharjah, M/s Aboura Trading, Jordan, M/s Namma Trading, Saudi Arabia, M/s Al-Sharif Metals, UAE and M/s Eta, Dubai. All the Indian buyers negotiated with M/s Ala International Trading, who in turn negotiated and arranged the consignments from the above-said entities and accordingly invoices were raised by the respective exporters and payment was directly made to them. He also submitted that the invoices raised against the respective contracts were not the actual prices / values negotiated. He was shown the comparison of imported invoices and LME prices, to which he stated, there has been under-invoicing. The show cause notice also placed reliance upon the search made in anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that M/s SMRI has imported Zinc Skimming from M/s U.S. Zinc by mis-declaring the same as Zinc Ash. That the Zinc content in Zinc Ash is only 35%, whereas the recovery of the pure metal in Zinc Skimming ranges from 60 to 65%. In trade parlance, the presence of pure metal is guiding factor for fixation of prices of scrap. It was, thus, proposed to reject the declared value under Rule 10A and to determine the value under Rule 3 (i) read with Rule - 9 (1)(e) of Customs Valuation Rules, 1988. (ii) A demand of duty of ₹ 43,71,891/- was proposed on Zinc Ash as detailed in Annexure A- III of the SCN, on the ground that the pure metal in the scrap is guiding factor for negotiating the price and that in case of Zinc Ash as per ISRI Norms the metal content is about 35%. It was proposed to determine the value of Zinc Ash on the basis of 35% of the LME price of virgin metal. (iii) A demand of ₹ 74,83,970/- on Zinc Dross detailed in Annexure A IV of Show Cause Notice was proposed on the ground that recovery of pure metal in terms of ISRI Norms is 75%. Hence it was proposed to value the same at 75% of the prevailing LME rate. (iv) A demand of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material to which a discount band was applied in terms of DGOV Circular supra on valuation. (x) In Annexure F to show cause notice duty demand of ₹ 31,02,341/- was proposed in respect of Aluminium and Zinc Scarp imported through Tuglaqabad port. The basis adopted for valuation was LME Price for virgin material to which discount band was applied in terms of DGOV Circular supra. 1.4 The show cause notice also proposed the confiscation of seized goods and in respect of goods which not be seized, it was proposed to Impose redemption fine. Penalty under section 114A/112 of the Customs Act was proposed upon M/s SMRI and u/s 112 (b) upon co-appellants. 1.5 The differential duty demands as proposed in the show cause notice were confirmed except the repetition of demand on same consignments by rejecting the declared values vide impugned order dated 26.03.2019 and penalties were also imposed upon M/s SMRI and all the partners. The seized goods lying at factory and Port which were released provisionally were also ordered to be confiscated. In respect of goods which could not be seized, the redemption fine was not imposed. Aggrieved the present Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and he has overlookedthe material facts. He points out from the submissions of reply to SCN dated 29.12.2018 that the Appellants had specifically shown that the bills of entry in Annexure A-II, A-III and A-IV were provisionally assessed pending test. He submits that the findings of the adjudicating authority that there is no evidence of execution of bond is also incorrect since the provisionally assessed bills of entry were clearly had inscription / mention as Test Bonds. He list out the Bills of entry and print-outs taken from EDI systems which clearly shows the assessment to be provisional. 2.2 He submits that in case of Aluminium Scrap even if the declared value is to be rejected, than too the demand has to be re-determined sequentially under Rule 5 and 6 based upon contemporary imports. The show cause notice itself states that wherever contemporary imports of similar goods were found, value is redetermined under Rule 6 and in rest of cases value is redetermined under Rule 8 of the Customs Valuation Rules 1988 by adopting the LME Prices of Virgin metal and applying discount bands to them. However not a single instance of contemporary imports at a higher price is dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Allied Services Pvt. Ltd. 2013 (287) ELT 124. He submits that in view of aforesaid two judgments, the demand cannot be re-determined under Rule 8 by adopting LME price of prime raw material and applying the discount bands. He also draws our attention to the communication of CBEC to the effect that while accepting the aforesaid decision of Pushpak Metal, the CBEC has categorically taken a view that recourse to LME price cannot be taken to substantiate the charge of undervaluation when contemporaneous import of almost same prices was available during the material time. He also submits that the adjudicating authority has erred in relying upon statement of Shri Sunil Agarwal for justifying recourse to LME prices. He point out that there is contradiction in statement dt. 29.05.2006 and 23.04.2007 of Shri Sushil Agarwal that Shri Sushil Agarwal, Partner of M/s SMRI in course of recording of his statement dt. 29.05.2006 was shown an alleged abstract of LME price of Aluminium Scrap as per which the Aluminium scrap was 80% of the LME price of Aluminium and his statement was obtained that the prevailing LME price formed the basis of negotiations and that normally the price of Aluminium scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the statement of indentors, he submits that those statements cannot be relied upon for the reason that they did not appear for cross examination. Similarly, no reliance can be placed on the alleged recovery of e-mails from the laptop of the indentor as no cross examination was given of panch witness and the officers who conducted the Panchnama. It is inconceivable that the activities alleged to have been undertaken, as recorded in the panchnama, could have been undertaken within a short term period during which the Panchnama is alleged to have been conducted. He relies upon the judgments in caseofMotabhai Iron Steel Industries 2015 (316) ELT 374 (GUJ), Basudev Garg Vs. CC 2013 (294) ELT 353 (DEL), Andaman Timber Industries Vs. CCE 2015 (324) ELT 641 (SC) to submit that in absence of cross examination, the statements cannot be relied upon. 2.6 He also submits that no additional duty (CVD) is payable in respect of Zinc Ash, Dross, skimmings, Scrap and Aluminium Scrap as it is a settled law laid down by the Apex Court in case of Hyderabad Industries Ltd. 1999 (108) ELT 321 (SC) that if an article is not liable to excise duty since it is not a manufactured product, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiva Overseas 2005 (181) ELT 213, Malhotra Impex vs CC - 2006 (203) ELT 561 and CC vs Paras Electronics - 2009 (246) ELT 231. As regard export declaration in respect of one consignment shipped from New Zealand and 11 consignments shipped from Spain, he submits that the declarations have no relevance as the same were not authenticated by the News Zealand Customs and Spanish Customs. Most of them are in respect of goods other than those imported by the Appellants and they are not consignees. He points out that in some declarations, the goods are Iron Steel scrap which are not imported by them. He submits that in any event, the values not been re-determined on the basis of these declarations and hence they have no relevance. 3. Shri T.G Rathod, Ld. Joint Commissioner (AR) appearing for the revenue reiterates the findings of the impugned order. He further submits that as apparent from the report from Consulate General of India, USA, the appellant had imported Zinc Skimming from M/s U.S. Zinc but misdeclared and undervalued the same as Zinc Ash. The sales detail form as well as mail retrieved from the laptop of indenter Shri Tarun Jhingon shows that the goods were having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemical examination report of goods seized from factory is inconclusive, the goods would merit classification as Zinc Ash only. Even though there is communication from the Indian Consulate or the emails between the indentor and supplier, but in the light of the fact that the goods were found to be Zinc Ash during imports, we are inclined to hold that the charges of mis-declaration are not sustainable and hence no duty demand can be made. There is no evidence found at the end of the Appellant and the documents relied upon to support the allegation were of third party. Hence in such circumstances , we are of the view that the charges of misdeclaration and undervaluation does not sustain. 4.1 Further coming to the demands made in above Annexure II, Annexure A-III on Zinc Ash and in Annexure A-IV on Zinc Dross, we find that the demand has been made in respect of Zinc Ash by determining the value on the basis of 35% of the LME prices and in case of Zinc Dross 75% of the LME. The Appellant has contended that since the assessment were provisional, hence the demand under section 28 cannot be made. We find that though the Ld. Adjudicating authority in Para 291 of the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that if the declared value is to be rejected in that case the CVR, 2008 has to be applied sequentially i.e Rule 5 and 6 is to be applied. If the value of the contemporaneous goods are available, the same shall be basis for re-determining the prices. Whereas in the case of instant demands the prices of contemporaneous imports were same as that of Appellant and hence the LME Prices reduced by discount band could not have been basis for re-determining the prices and rejecting the declared value. The Appellant has pointed out that identical goods were imported in case of Pushpak Metal Corporation 2014 (312) ELT 381 which were imported during the same period and comparable with Appellant s import price. The said prices were upheld by the Tribunal and it was held that value cannot be determined on the basis of LME prices. Also that the said decision was accepted by the CBEC. The Appellant has annexed comparison sheet showing the prices in their case and in case of Baheti Metal which was reported as Puspak metal case supra. We find that when the prices in case of Pushpak metal case supra has been accepted by the revenue and the same are contemporary prices to the Appellant s import, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on value of the goods declared is ridiculously low, which of course the Assessing Authority has to justify, he must proceed to determine valuation of goods by following Customs Valuation Rules. The availability of evidence of contemporaneous import of the same goods obviously provides the best guide for determination of value of the import of goods but in the absence of evidence of contemporaneous import, reference to foreign journal for finding out correct international price of imported goods may not be irrelevant. 5.5 In the instant case, the proposition in the show cause notice is that the value of the contemporaneous imports indicated a higher price. If that be so, that should have been the starting point for determination of value of the imported goods and not some other basis. Further even when we take the values of the contemporaneous imports, the lowest of such value has to be adopted as provided for in Rule 6 and not the highest. In the instant case no such thing has been done by the assessing officer. 5.6 In view of the above, we do not find any infirmity in the observation of the Commissioner (Appeals) that the DGOV Circular cannot overrid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us material relied upon by the revenue for enhancing the price declared by them in the bills of entry, the Tribunal has observed thus : In the present case as mentioned above, even though there is a reference to contemporaneous import in the order passed by the Deputy commissioner no material regarding such import has been placed before us or made available by the appellant at any point of time. Therefore, assessment in this case has to be taken as having been made purely on the basis of LME Bulletin without any corroborative evidence of imports at or near that price which is not permissible under law. We, therefore, set aside the impugned order and allowed the appeal. 5 . Not being satisfied with the said order, the revenue is before us in this appeal. 6 . We have heard Mr. Biswajit Bhattacharya, learned Additional Solicitor General on behalf of the revenue. The assessee remains unrepresented. 7 . Learned counsel submits that since the LME bulletin is a true indicator of current international prices of metals, the adjudicating authority was justified in adopting the price of the said two metals as n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orroborative evidence of contemporaneous imports at higher price, we hold that enhancement of the value is not justified in the present case and accordingly set aside the impugned order and allow the appeal. The above Tribunal judgment stands upheld by the Apex Court as reported in Commissioner Vs. GKN Sinter Metals Limited - 2010 (254) E.L.T. A43 (S.C.)] Same analogy has been taken by the Tribunal in case of Bothra Metal Alloys 2013 (9) TMI 546. It is therefore absolutely clear that the redetermination of value based upon LME prices less discount band as per DGOV Alert Circular supra is not sustainable. 7. From the above judgments it is absolutely clear that applying the LME price minus discount band as per SMRI bulletin or DGIV Circular No. 14/2005 dt. 16.12.2005 is absolutely wrong. The Appellant has also relied upon the letter F. No. S/26 Misc-1040/2005 GrIV dt. 13.02.2006 of the Commissioner of Customs, Nhava Sheva wherein the Commissioner in reference to Valuation of Aluminium Scrap under Alert Circular No. 14/2005 issued under F. No. VAL/TECH/37/2005 dt. 16.12.2005 has stated that there is no linear correlation between the price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .t. scrap except in the case of Varsha Plastics. In Varsha Plastic also, the Hon ble Supreme Court held that the availability of evidence of contemporaneous import of the same goods obviously periods the best guide for determination of value of the import of goods. But in the absence of evidence of contemporaneous import, reference to foreign journals for finding out the correct international prices for the purpose of Section 14 of the Customs Act is not irrelevant. Since contemporaneous import prices were available in the present case as being noted but not accepted by the Commissioner in the Order-in-Original, departmental case for undervaluation become weak and appeal in Supreme Court is not merited We find from the communication dated 29.10.2008 of the Institute of Scrap Re-cycling Industries, INC (ISRI), wherein they have stated as under : We have been asked to explain how aluminum scrap prices are determined. Please be advised that ISRI, as a trade association, does not become involved in scrap pricing. However, our understanding of the market is that scrap prices are determined through negotiations between buyers and sellers, based upon then cur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed goods. In his statement dated 29.5.2006 on being shown an alleged abstract of LME prices of Aluminium Scrap, which showed price of Aluminium scrap as 80% of the LME price he had stated that the prevailing LME prices formed the basis of negotiation and that normally, the prices of Aluminium scrap were negotiated at 80% of the LME. However in his statement dated 23.04.2007, he has stated that the import price of Aluminium Scrap was negotiated by applying different discount bands ranging from 5% to 35% to the LME price of various grades, viz. Trump, Tense, Taldon, Trob etc., which corresponded to the discount band provided in Alert Circular No. 14/2005 dated 16.12.2005 of the Director General of Valuation. In such a case, we are inclined to accept the submission of the Appellant that initially the investigating officers were attempting to apply 80% of the LME, but later on realizing that even the Director General of Valuation was not recommending valuation of 80% of the LME, the statement of Shri Sushil Agarwal was recorded to match the discount band, as per DGOV Circular. In such view of the facts, we do not find any reason to rely upon the statement of Shri Agarwal to support the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly to come out at such examination and cross-examination. This reasoning of the adjudicating authority is highly erroneous since it cannot be assumed that the cross examination of a person would not bring any material not already available. Our views are based upon the judgment of the Hon ble apex court in case of Andaman Timber Industries 2015 (324) ELT 641 (SC) , wherein the apex court held as under : 6 . According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee cannot be used without giving them opportunity of cross examining the witness as it is valuable right of accused/ noticee in quasi judicial proceedings which can have adverse consequence for them. The Adjudicating authority had allowed cross examination of indentors and even they were also issued notice, none of the indentor was made available for cross examination. In such circumstances when these persons could not be produced for cross examination, their statements could not have been relied upon. Especially in case of Mihir Bhatt, Ehsan Amin Gadawala where the only evidence was their own statements stating undervaluation. In case of other persons also in the light of above facts, the adjudicating authority should have allowed the cross examination. In absence of the opportunity to cross examine the above persons, we are of the view that no reliance can be placed upon their statements. Our views are supported by the judgment of Hon ble High Court of Gujarat in case of CC Vs. Motabhai Iron Steel Industries 2015 (316) ELT 374 (GUJ) wherein the Hon ble High Court has held that no reliance can be placed on the statement of such witness who has not subjected himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 25.04.2016, Slugs India Ltd Vs. CCE - 202 (278) ELT 611, CC vs Tata Iron Steel Co. Ltd - 2004 (165) ELT 386 (SC), Bhushan Steel Ltd vs CCE - 2012 (284) ELT 713, Shri Ram Agro Chemicals (P) Ltd vs UOI - 2009 (234) ELT 218 (P H), CC vs L. Madanlal (Aluminium ) Ltd 2010 (258) ELT 107, Karnataka Chemical IndusCorpn. Ltd vs CC 2005 (183) ELT 207.The adjudicating authority also held that since the issue of non-payment of Additional duty was not raised at the time of assessment, hence cannot be raised in reply to show cause notice under section 28. The contention of adjudicating authority is not sustainable as when notice under section 28 is issued to an assessee, he can contest the whole assessment to say that duty is not payable for a reason not taken up at the time of original assessment. He is entitled for all reliefs/ exemption associated with the assessment. The issues is well settled by the Tribunal s order in case of Decora Ceramics P. Ltd. 1998 (100) ELT 297, Lili Foam Indus. P. Ltd. 1990 (46) ELT 462, Bakeman Home Products P. Ltd. 1997 (95) ELT 278. 13. Further, we also find that in respect of 550 Bills of entries covered under Annexure C, value was a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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