1. Being aggrieved with the order passed by Commissioner of Customs, vide which he has vacated show cause notice issued to the respondents, Revenue has preferred the present appeal.
[i] The respondents herein M/s. Tata Iron & Steel Company Ltd. filed five bills of entries for clearance of the goods described as "Non-alloy 100% Re-Rollable scrap consisting of Plate Cuttings" and claimed duty free clearance under Notification No. 204/92 against advance licence.
[ii] The examination of the goods covered by the said bill of entry by the Special Task Force revealed that the goods consisted MS/SS pipes which were serviceable in nature. Out of the total 23 containers, four containers were released as they were found to contain re-rollablc scrap, as declared in the bill of entry.
[iii] In respect of remaining 19 containers, a view was entertained that the same contained old and used seamless pipe, which were serviceable in nature. As such, 100% examination of the said containers was undertaken and sealed samples were drawn.
[iv] The said samples were sent to M/s. Geo Chem Laboratories Pvt.
Ltd. for testing, who side their test report/certificate dt.
17.8.1994 reported that the material was mild steel seamless pipes and mild steel welded pipes, medium carbon/manganese steel rods.
[v] That the said goods were provisionally released on 15.9.94 on the importer deposited an amount of Rs. 10.82 lakhs (Approximately) towards differential duty and on execution of Bank Guarantee for Rs. 3.75 lakhs.
[vi] During investigations the statements of various persons were recorded. It was deposed in the statements that the respondents have already fulfilled the expert obligation and the imported scrap would be converted into MS angles by M/s. DRM Steel Industries Pvt. Ltd. Director of M/s. DRM Steel Industries in his statement dt. 22.7.94 stated that the import order was for re-rollabel scrap and they were not informed by the supplier that pipes are also included in the scrap instead of plate cuttings.
3. On the above basis proceedings were initiated against the respondents by way of issuance of show cause notice dt. 3.2.95 raising demand of duty of Rs. 13,77,700/-, by denying them the benefit of advance licence duty free imports, for confiscation of the goods and for imposition of penalty upon them.
4. The said notice was adjudicated by the Commissioner who dropped the proceedings on the ground that the goods in question were scrap in terms of the definition of waste and scrap as per Note 6 (a) of Section XV of Customs Tariff Act, He also observed that as per SGS Certificates, 80% of the pipe pieces were found internally with a coat of thick oil, cement slurry and the balance pipes which was dried internally were found heavily rusted from inside and the pipes were found gas cut with pipes edge unfinished and irregular and in different lengths and about 5% of the pipes were found bend and no material/pipe classification marks were visible. He accordingly observed that a buyer of pipes to use them in definite length as pipes would not purchase such pipes for installation and due to the irregular edges and gas cuttings, and bends, the pipes cannot be fitted together for an end use since there quality is useless and unknown. Inasmuch as 80% of the pipes are choked and blocked with cement slurry, oil etc. they cannot serve the purpose of even conveying material through them which is an essential purpose /use of a pipe. As such, he held that these pipes cannot be considered to be serviceable pipes. The said order of the Commissioner is impugned before us.
5. We have heard Shri Pramod Kumar appearing for the Revenue and Shri D.B. Shroff Sr. Advocate and Shri Archit Jaikar Advocate for the respondents.
6. After going through the impugned order we find that the adjudicating authority has considered the docks examination reports in respect of various bills of entries which are verbatim reports indicating that the goods are pipes, round ribbed, bars and channels. He has held as under- From these examination reports by the Docks and the panel, it would appear that the serviceability of the old, pipes and other materials like round ribbed rods, angles channels have been arrived at because of the cut lengths which as per the reports are also not in even lengths that they appeared to be coated with corrosion resistant materials and that these items are not re-rollable material because they could be directly put to use in fabrication without subjecting them to further mechanical working and that they are not covered under Sr. No. 708 of the definition of re-rollable scrap as defined under the DEEC Exemption scheme of the Handbook Vol. -II of the EXIM Policy 1992-97.
From the above report of SGS it would appear that the goods were positively old and used rusty/heavily rusty pipes originating from an oil field and unless the end use was specified, commencing on the serviceability was not possible, and that 98% of the material was found to be only pipe pieces and therefore in their opinion the material did not seem to be in conformity with the cargo descriptive in the B/L No. AEL/KLT/047 dt. 04/05/94, wherein it was described as non-alloy 100PCT re-rollable scrap consisting of plate cuttings. On the face of the same, one is tempted to take the view that the goods are not covered as re-rollable scrap as per the opinion expressed.
However, temptations have to be resisted and the matter and the certificate are required to be taken and understood in its total perspective. Reliance should not be placed on the opinion of the examiners opinions as held in 1991 (52) ELT 66. In 1991 (56) ELT 685 the Tribunal in para 6 has held as: ...it is not the function of the chemical Examiner to preffer any opinion on classification of goods under the tariff schedule on with reference to eligibility for exemption under a notification. His duty is to exemption under a notification. His duty is to test goods for their characteristics, composition and properties and to communicate the results of the test to the authority competent to decide issues of classification.
Keeping this directive of the Higher Judicial body, I am bound to resist the temptation and reject acceptance of the opinions of the Dock Experts Panel and the SGS opinion, except so for as it relates to the characteristics, composition and properties i.e. the physical condition of the good.
7. While examining the definition of waste and scrap, and the applicability of the same to the consignment in question Commissioner held as under: (i) The waste and scrap as defined in note 6 (a) of Section XV of the Customs Tariff, is as under: Metal Waste and Scrap from the manufacture of mechanical working of metals and metal goods definitely not usable as such because of breakage cutting up, wear or other reasons.
(ii) The waste and scrap as covered under heading 72.04 which is defined us above, however, this heading excludes articles which with or without repair or renovations can be reused for their former purpose or can be adapted for other uses; it also excludes articles which can be re-fashioned as metal.
(iii) Since the material cannot be used for the purpose i.e. of pipes, being choked, pitted and having irregular ends and gas cuts and bends, and of different lengths, they cannot be classified as pipes. In any case, during the relevant period the HSN classification notes were not applicable for the purposes of Import Trade Control. The HSN & Tariff Notes are not applicable for licensing purposes.
The Chartered Engineers certificate produced clearly certifies that the imported cuttings of Mild Steel Seamless pipes and Mild Steel Welded pipes which has been imported in the subject consignment could be cut by gas cutting and re-rolled in the rolling mills and Angles, bars, and other structural can be manufactured out of them and that M/s. DRM have complete facility for manufacturing of Angles from such cuttings.
(iii) The show cause notice does not rely upon any evidence as to how the goods under question cannot be used for the declared purposes and therefore I am inclined to accept the certificate furnished.
(iv) In this view of the matter and since the party has submitted before me that part of the goods have already been converted and supplied to TISCO and the other parts are lying in the warehouse as their plant is shut down due to the labour problem, induce me to believe that the goods imported are for the purposes declared viz.
rolling into structurals and Angle etc.
(d) Mr. Moondhra's (Director of M/s. DRM) statement, relied in parts in the show cause notice, when read in totality, also helps the importer's case and not the department's case cannot place any reliability on the opinion expressed by the Assistant Marketing Manager of Tatas since he has not been questioned and confronted by the books published by his employer's parent company i.e. on how the book published by M/s. Tata Iron & Steel Co. Ltd. 1992 defining hollow sections, and how the goods in question are not hollow sections and therefore not covered by the licence. I would therefore rely on the totality of Mr. Moondhra's statement who is an experienced re-roller, to find the goods under import to be re-rollable scrap.
(e) I find that wherever the licensing authority do not want to permit the import of hollow sections for raw materials for re-rolling, they have, in the DEEC books given a definition, e.g. in DEEC Book (125587/CAL) specifies the scope of MS Re-rollable scrap and MS billets as permissible and confines it to all products other than 'hollow sections'. In the present case, there is no restrictions to the words 're-rollable scraps' or exclusions of hollow sections'. In this view of the matter, I am of the view that in the facts of this licence, hollow sections are permissible to be imported as re-rollable scraps.
(f) In this view of the matter, I find that the goods are covered by the understanding of the persons actually dealing in it to be re-rollable scrap and covered by the licences produced. I am not inclined to accept the propositions in the show cause notice of unlicensed imports under Section 111(d) of the Customs Act, 1962 and cannot sustain the same. The nondeclaration of hollow section for part of the cargo on the B/L and there from the BE's need not call for a confiscation, when in commerce and fact it is re-rollable scrap; mis-declaration is only venial, if at all, it is and does not induce me to take a cognizance in invoking Section 111(m) of the Customs Act, 1962.
8. On going through the above discussion and finding arrived at by the adjudicating authority and taking into consideration the grounds of appeal advanced by the Revenue, which do not effectively rebut the finding of the Commissioner that the pipes in question cannot be held serviceable pipas and have to be necessarily considered as waste and scrap. The Revenue's only grievance seems to be that the physical examination report, should have been accepted as authentic document instead of relying upon the Chartered Engineers Certificate they have also contended that if the gas cutting and then re-rolling the goods under rolling import was the only criteria to determine the serviceability, then even and prime serviceable article of mild steel are required to be held as waste and scrap.
9. We do not find any merits in the above contention of the Revenue, the adjudicating authority has held that the pipes were rusted heavily from inside and were having uneven edges and were choked and blocked with alloy and cement slurry. The Revenue has not advanced any evidence to counter the above findings of the adjudicating authority, in which case it has to be held that the lengths of pipes found in the imported material cannot be held to be pipes of serviceable nature and have been rightly to be waste and scrap in the light of the definition of the same as appearing in Note 6(a) of Section XV of the Customs Act. We find no infirmity in the view of the Commissioner and accordingly reject both the appeals filed by the Revenue.