1. The appellant imported three consignments declared to be Heavy Melting Scrap and filed three Bills of Entry for their clearance. The consignments consisted of old, used and rusted pipes. On intelligence that the goods are misdeclared as HMS, the DRI Officers intercepted the containers and examined the goods. All the containers were found to contain old, used and rusted pipes. The appellant agreed to pay the differential i.e. difference between the duty leviable on pipes and the one leviable on scrap, and deposited the differential duty. The value of the goods was revised to US $ 150 per metric tone from US $ 110 per metric tone declared by the importer.
2. The Commissioner while adjudicating the case classified the impugned goods under Chapter heading 7304.29 as pipes, determined the value as US $ 150 per metric tone confirmed the differential duty, confiscated the goods in question under Section 111(m) of the Customs Act and imposed penalty on the importer. Hence this appeal.
3. The main contention of the appellant is that the imported goods consisted HMS, that the used old and rusted pipes cannot be classified as pipes as such pipes are not understood as pipes in the market, that the goods under import were used only as melting scrap; that proof to that effect was produced before the Commissioner; that what was contracted for was only scrap but not pipes; that certificates of experts in the field suggest that old, used and rusted pipes are known to be scrap only; that pipes should have definite cross section thickness and other parameters indicated in the I-S; that the impugned goods do not come anywhere near those specifications; that for the goods to be classified under a particular heading they should qualify for such classification and that the Commissioner erred in rejecting the transaction value, confiscating the goods and imposing penalties.
4. At the outset we observe that the appellant has not produced the copies of Bills of Entry on which examination report is recorded. We also observe from the Commissioner's order that the goods consisted of old used and rusted pipes. It is not clear how old, how used and how rusted are the pipes. We also notice that the entire consignment consisted of such pipes only. The question before us is whether the goods qualify for classification as HMS. It is not whether the goods are liable to be classified under 7304.29 as pipes under Customs Tariff. The related question is of valuation and confiscation.
6. The ld. Advocate relied on the decision of Punjab and Haryana High Court in Patiala Castings Pvt. Ltd. - wherein the High Court held that when imported goods consist of rusted, pitted and perforated and used and repaired earlier, they cannot be considered as usable pipes. We observe that in the absence of examination report in the present case it is not possible to come to any conclusion as to the state of the pipes under import. The only thing that is evident from the impugned order is that the pipes described as HMS are old used and rusted. Such pipes could be still used as pipes. The High Court was dealing with perforated pipes. Surely perforated pipes cannot be called as pipes as held by the High Court.
7. The appellant relied on the decision of the Tribunal in the case of Aggarwal and Co. v. CC, Kandla - 2005 (66) RLT 128 (CESTAT-Del.) wherein the Tribunal held that old and used pipes are part of consignment of scrap and if such pipes are found to be serviceable they can be cleared after mutilation. We observe that the Department's case is that the old used and rusted pipes are definitely usable as such and are therefore classifiable as pipes even when they are described as scrap. The appellant has not asked for mutilation and in fact seemed to have agreed that the pipes in question are usable as such and are therefore classifiable as pipes under the schedule.
8. The appellant further relied on the decision of the Tribunal in the case of Sujana Steels Limited v. Commissioner of Central Excise, Hyderabad - 2000 (115) E.L.T. 539 (T) : 1999 (34) RLT 672 (CEGAT). The Tribunal held that rusted and used pipes and tubes not usable as new pipes are covered by the definition of waste and scrap as given in Note 6 of Section XV of CTA, 1975 - Revenue has not discharged the burden on proof that the goods are understood by Indian Traders as pipes and tubes - classifiable under heading 7204.29. The Tribunal also held that import licence is not required when rusted and used pipes and tubes are imported as the same are melting scrap. The ld. JDR argued that iron and steel articles can be classified under 7204 only after they are prepared as waste as stated in page 1075 & 1076 of HSN, if not, they have to be classified in their respective headings. The Tribunal in Sujana Steel has overlooked this fact, he argued. The first principle of classification, he submitted, is that the goods under import should be assessed in the condition in which they are imported. The pipes in the present case have not been converted into scrap as defined in Note 6 of Section XV. We have carefully examined the rival contentions. We observe that Chapter heading 72.04 (Re-melting scrap) excludes articles, which with or without repair or renovation can be re-used for their former purpose (emphasis added) or can be adapted for other uses, it also excludes articles which can be refashioned into other goods without first being recovered as metal. Thus it excludes for example structural steel work usable after renewal of worn out parts, worn railway lines which are usable as pit props or may be converted into articles by re-rolling; steel files capable of reuse after cleaning and sharpening (page 1076 of HSN). It is clear from this heading notes under Chapter heading 72.04 that one has to apply the above test to consignments brought as 'melting scrap' when such consignments consist of articles of metal. It is not the appellants case that the impugned goods have passed the above mentioned criteria. Their only ground is that the pipes are old, used and rusted and are therefore classifiable as re-melting scrap. It is common knowledge that old pipes are sold in the market as such. In fact in the case of Patiala Castings - the High Court of Punjab and Haryana came to the conclusion that the worn-out, perforated, used and repaired pipes have attained the status of scrap, if we may call it so. A pipe basically conveys some material in the form of liquid of slurry from one place to another or it may be used as a pit prop. If the impugned goods cannot be used for such purpose then only they can be called as scrap and not because they are old, used and rusted. Even the definition of scrap contained in Note 6 of Section XV recognizes the fact that what is imported as scrap can be used for purposes other than for melting. The words definitely not usable as such occurring in the note denotes that the articles of metals should be such that they cannot be certainly used as such. We observe that whether a metal article brought as scrap is scrap or otherwise depends on the facts of each case. In the present case, the Commissioner finds the pipe as definitely usable as such. The appellants have not produced any evidence in the form of an examination report to disprove their finding. We therefore hold that the pipes in question are classifiable in the appropriate heading and cannot be classified as HMS.9. The next issue pertains to valuation of the impugned goods. The Commissioner rejected the transaction value on the ground that the goods in question were misdeclared. He then proceeded to determine the value of the goods under Rule 8 after ruling out the proceeding Rules of Customs Valuation Rules. He adopted the value of US $ 150 per metric tone on the basis of prices indicated contemporaneously for similar goods. The Custom Authorities noticed a price of US $ 150 for old and rusted pipes. The Commissioner adopted the same price and rejected US $ 110 per metric tone declared by the importers. The appellant did not contest this seriously except pleading that there is no mis-declaration and therefore, the transaction value of US $ 110 per metric tone should have been accepted. In view of our finding that the goods covered by the three Bills of Entry are classifiable under 7304.29 as pipes, we reject the contention that there was no mis-declaration. In all 16 containers of old, used and rusted pipes were imported. Nothing prevented the importer from declaring the full description of the goods instead of calling it HMS. Once the goods are mis-declared the transaction value can be rejected and the value can be determined in accordance with the Customs Valuation Rules.
10. The goods are liable to confiscation under Section 111(m) of the Customs Act as held by the Commissioner. We also observe that the fines and penalties imposed by the Commissioner are not excessive. We do not wish to interfere with the order of the Commissioner in this regard.