1. The appellant imported 3 consignments of Zinc and filed 3 bills of entry dated 25.11.1998 before the Bombay Customs House. The goods were declared as 'Re-melted Zinc Ingots'. Invoice from American Trade Link, Inc., Houston was produced in support of the declared price f 600 U.S.$ per M.T.2. Consignments were assessed provisionally and cleared against bond.
Samples taken were sent to the Customs House Laboratory for testing.
Upon test, they were found to be of 99.4, 99.5, and 99.6% zinc. The chemical examiner opined as under: Sample is in the form of cut piece of rectangular ingot. It is mainly compound of zinc. The percentage of zinc in the sample as received 99.6. In the light Chapter heading 79.02/72.04 of H.S.N. It does not appear to be re-melted zinc ingot.
Show cause notice was issued to the appellant on 11.1.2000 alleging mis-declaration of value and proposing to enhance the value to 1500 U.S.$ per M.T. Basis for this enhancement of value was that Electrolytic High Grade Zinc had been imported in the same month by M/s. Jindal Iron & Steel Co. at that price.
3. The appellant contested the proposal pointing out that re-melted zinc under import cannot be compared with electrolytic high grade zinc.
The appellant also pointed out that even in the case of Electrolytic High Grade zinc, many imports had taken place, including by MMTC, around U.S.$ 1000 per M.T. Thus, the appellant's objection was two fold, first that comparison was not with identical or similar goods, and second that lower import prices should not be ignored.
4. In adjudication, the Commissioner rejected the appellant's objection and ordered assessment at the proposed high price of 1500 US$ per M.T.He also confiscated the consignment under Section 111(m) of the Customs Act, 1962 for the offence of mis-declaration of value of the consignment. Penalties on the importing firm and also on its Managing Director have been imposed. The present appeals are directed against that order.
5. Contentions of the appellant in the present appeal are also basically the same as the ones raised before the Commissioner. During the hearing of the case, learned Counsel for the appellant has submitted that, according to H.S.N. minimum zinc contents is 97.5% in zinc. Learned Counsel's submission is that zinc normally comes in 3 grades. He has relied upon the Encyclopedia of Chemical Technology, Third Edition, Volume 24. Much other material has also been produced to show that depending upon purity, use also varies. What is being emphasized by the learned Counsel is that zinc falling below purity of 99.90% cannot fall in the grade of Special High Grade. It is being pointed out that the appellant's consignments were below this cut off mark of 99.90%. Learned Counsel has also pointed out that as noted in the impugned order purity of the compared consignment is 99.9785%. The point made is that, grade of the zinc imported by the appellant and grade of zinc compared with being so widely different, the Commissioner was in error in comparing them.
6. As regards the report of the chemical examiner it is being pointed out that the reference made to Chapter headings 7902/72.04 of HSN is entirely incorrect. It is being pointed out that the note is in relation to zinc waste and scrap and as the appellant had not sought classification of the item as waste and scrap, that note is wholly irrelevant to the issue. Further, that note is not in relation to re-melted zinc at all.
7. Learned SDR has pointed out that the appellant's submission that the item is re-melted zinc does not appear to be correct. It is his contention that zinc is normally ordered with regard to purity and it was the appellant's submission that he had ordered zinc of 96% purity, but upon test of the present consignments purity has been found to be much higher (99.4% to 99.6%. In the circumstances, the submission of the learned SDR is that the case is required to go back to the original authority for fresh determination of correct value by comparing with the imports prices of comparable purity zinc.
8. It is clear from the material produced before us by both sides that zinc comes in several grades kirk - Othmer Encyclopedia of Chemical.
Technology Third Edition, Volume 24, Vitamins to Zone Refing, mentions the following grades and compositions:Grade maximum maximum maximum differencespecial high gradeb 0.003 0.003 0.003 99.990High grade 0.03 0.02 0.02 99.90Prime Westernc 1.4 0.05 0.20 98.0 a When specified for use in the manufacture of rolled zinc or brass, aluminum max = 0.005%.
fication of the electrolyte. High grade and special high grade are used for anodes in electrogalvanizing.
The encyclopedia also states that the above varieties are made from ore or other materials by distillation or electrolysis. But it is clear that the superior grades i.e. 'Special high grade" and high grade are of minimum 99.90% purity and above. The consignments imported by the appellant are below that purity at 99-4-6%.
9. Numerous chemical industries' literature mentions that re-melted zinc ingots are of minimum 99% zinc content while chemical specification would be 99-99.5% zinc.
10. From the above technical and commercial material it is clear that the appellants' imports conform to re-melted zinc ingots.
11. The Commissioner has compared the imported consignments with "Electrolytic High Grade zinc Ingots" with 99.975% for the purpose of valuation. Clearly, a comparison of incomparables.
12. From the import price date (print out) on record, two facts are clear. One that import at U.S.$ 1500 MT is the highest price for electrolytic high grade, while other imports are at U.S.$ 1000MT. The second is that imports of re-melted zinc ingots are many and those imports are also around U.S.$ 625 M.T.13. The above data bring out two glaring errors in the findings of the Commissioner. Rule 5(3) of Customs Valuation Rules stipulates that "In applying this rule, if more than one transaction value of identical goods is found, the lowest such value shall be used to determine the value of the imported goods." Therefore, even if the Commissioner was to apply the price of electrolytic high grade, he should have applied the lowest U.S.$ 1000 M.T. transaction value and not the highest U.S.$ 1500 M.T. value. The second is that the comparison should have been with the comparable re-melted zinc ingots. Upon that comparison, the Commissioner would have been reassured that the appellant's transaction value was a commercial value.
14. It is also to be noticed that one of the suppliers of re-melted zinc to other importers was American Trade Link, Inc., the same party who supplied to the appellant. That too from Russia as in the appellant's case. It is hard to understand why the Commissioner left such identical goods and chose the stray import at high value of much higher grade zinc, for comparison.
15. Coming to the learned SDR's contention that the matter should go back for determining the correct value, we find that there is no requirement for sending the case back. Firstly, it is clear that the case made by the Revenue is not sustainable. Secondly, the appellant's import price being somewhat close to the import price of identical goods, even on a prima facie basis, there is no case for rejecting the transaction value.
16. In the findings we have reached above, the impugned order is set aside and the appeals are allowed, with consequently relief to the appellants.
17. Before parting with this case, we feel compelled to note that the test report filed by Shri S.B. Singh, Chemical Examiner, in the present case, is most unusual. The responsibility of the chemical examiner is to determine the composition and other particulars and place the relevant technical material before the assessing authority, so that, the assessing authority can determine the correct classification. It is well settled that classification is entirely outside the chemical examiner's concern or area of expertise. In the present case, instead of placing any useful material about the grades of the metal in question or its uses, Shri Singh has chosen to make incorrect and tangential observations based on certain HSN Note. This had taken the case to unnecessary controversies. Such conduct is required to be stamped out. We, therefore, direct the Registry to send copies of this order to the Chairman, C.B.E.C., and Chief Chemical Examiner, Central Revenue Control Laboratory, so that appropriate action is taken to see that authorities stay within their area of expertise and responsibility and assist in passing proper orders.