1. In January 2002, the appellant imported two consignments at Ludhiana of sheet metal rest from Germany and sought clearance of the consignment upon payment of duty as applicable to items falling under Heading 7204 of the Customs Tariff. Customs authorities subjected the goods to examination and obtained the opinion of chartered engineer Shri J.S. Oberoi. His opinion dated 29.1.02 read as under: As requested by Customs Deptt. CFS (OWPL), Ludhiana, I visited the Import Section for inspection of Sheet Metal Rest, imported from Kallweit, Germany by M/s. Quick Car Wash Pvt. Ltd. Jalandhar vide Invoice No. 59379 dated 19.11.01.
After due inspection of the cargo alongwith Customs officials in the presence of party's representative, I have the following observation to certify: The material received is inform of sheets, mixture of Hot/Cold rolled and of varying length, width and thickness. The material is secondary/defective and approx. 50% of this is rusty.
Material seems to be rejection of some cold rolling mill and percentage of hot/cold rolled sheets shall be 50% each.
Length/width of sheets vary from approx. 2 ft. to 6 ft. and thickness from 1.5 mm to 5 mm.
As verified from the relevant market sources, wholesale rate of this material (average) i.e. cut length sheets shall be Rs. 13.25 per Kg.
2. A statement dated 4.2.02 was recorded from the Director of the appellant. That statement may also be read.: I Harman Paul Singh on 4.2.2002 tender my statement before the Superintendent of Customs, CFS OWPL, Ludhiana. I have been explained the provisions of Section 108 of the Customs Act 1962 that this statement of mine can be used against me or any other person in the Court of law and whatever I will state will be true. Today on 4.2.2002 being called upon by Superintendent Customs, I state that, I brought the Hot/Cold Rolled Sheets of Secondary/Defective, Rusty quality at this port because I was not in the knowledge that these goods cannot be imported at this port. The goods may be assessed at the rate which the department feels reasonable and is also accepted by me.
This is true statement of mine given voluntarily without any pressure, prejudice or greed.
3. Purportedly based on the above materials, the following Adjudication order was passed by Assistant Commissioner of Customs and communicated to the appellant:1311 dt.18.1.2002 Goods confiscated but allowed to be redeemed on payment of RF of Rs. 48,000/- and Personal1312 dt. 18.1.2002 Goods confiscated but allowed to be redeemed on payment of RF of Rs. 72,000/- and Personal Penalty of Rs. 35,000/- 4. In addition to confiscating the goods, the order also enhanced the value of the goods for the purpose of assessment. Goods were also ordered to be classified under Heading 7208 and 7209, against the claim for assessment under 7204 of the appellant.
5. The appellant filed an appeal against the confiscation and assessment before the Commissioner (Appeals). The Commissioner rejected the appeal with the following observations : At the time of personal hearing advocate of the appellant reiterated the submissions made earlier. I have carefully examined the case records. It is observed that issue involved in the present appeals is regarding classification and valuation of the goods imported by the appellant. Appellant has claimed classification of the impugned goods under Heading 72.04 whereas the department has classified the same under sub Heading No. 7208.90 and 7209.90.
Main contention of the appellant is that the BE's have been assessed in defiance to principles of natural justice as no speaking order has been passed. I find that as per statement of fats submitted by the appellant, Shri Harmon Paul, Managing Director of the appellant in his statement dated 4.2.2002, has stated that they brought hot/cold rolled sheets of defective/secondary, rusty quality. He further stated that the impugned goods be assessed at the rate which the department feels reasonable and is also acceptable to him. This shows that the issue was explained to the appellant by the Customs authorities before enhancing value and changing classification of the impugned goods.
Further, the appellant has not brought on record any evidence to counter the opinion given by Chartered Engineer, Shri J.S. Oberoi.
So the impugned goods have been correctly classified as hot rolled/cold rolled sheets as per the opinion given by Shri J.S. Oberoi. Accordingly, enhancement in assessable value is also justified as the goods were not of the description given by the appellant i.e. steel metal rest but were actually hot/cold rolled sheets.
5. The contention of the appellant in the present appeal is that the goods were ferrous waste and should have been assessed as such, that too on the basis of transaction value. The learned Counsel for the appellant has contended that there is no evidence on record to establish the identity of the goods as hot rolling and cold rolling products as ordered by the authorities. He has taken us through the opinion of Shri Oberoi and has pointed out that Shri Oberoi has nowhere opined that the goods are hot-rolled or cold rolled sheets. According to the learned Counsel, the opinion of the expert is to the effect that the goods are actually ferrous waste. He would lay emphasis on the observations that the consignments are a mixture of hot/cold rolled secondary/defective materials and above all, approx. 50% is rusty and 50% materials seems to be rejection of some cold rolling mill.
6. According to the learned Counsel the varying dimensions of individual pieces also indicate that goods could be transacted only as waste and not as sheets.
7. Learned SDR would point out that the items are ferrous products of different dimensions and should get classified accordingly. He would also rely on the following HSN notes: The Heading covers waste and scrap of iron or steel, as defined in Note 8(a) to Section XV. Such waste and scrap or iron or steel is of a miscellaneous nature and generally takes the form of: (1) Waste and scrap from the manufacture or mechanical working of iron or steel (e.g., crop ends, filings and turnings).
(2) Articles of iron or steel, definitely not usable as such because of breakage, cutting-up, wear or other reasons; iron or steel waste and scrap is usually prepared by means of the following processes, in order to adapt it to the dimensions and qualities required by the users: (b) Compression into bales, particularly in the case of light scrap, using for example a hydraulic press.
(c) Fragmentation (shredding) of motor vehicle bodies and other light scrap, followed by separation (which may be magnetic) with a view to obtaining a high density product that is fairly clean.
(d) Crushing and agglomeration into briquettes of iron and steel filings and turnings.
Waste and scrap is generally used for the recovery of metal by remelting or for the manufacture of chemicals.
But the Heading excludes articles which, with or without repair or renovation, can be re-used for their former purposes 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 steelwork usable after renewal of worn-out parts; worn railway lines which are usable as pitprops or may be converted into other articles by re-rolling; steel files capable of re-use after cleaning and sharpening.
(a) Slag, dross, scalings or other waste from the manufacture of iron or steel, even if suitable for the recovery of the metal (Heading 26.19).
(b) Waste and scrap not usable directly in the iron or steel industry, since it is radio-active (Heading 28.44).
8. Upon perusing the record and considering the submissions of both the sides, we find in favour of the appellant. It is to be noted that the consignment is of mixed dimensions, 50% of it has been found to be rusted. It has also been noted that the material is secondary/defective. Materials of this description is clearly not capable of being sold as ferrous products. Therefore, we feel that the authorities were not justified in treating the consignments as not of metal waste. The HSN note relied upon by the learned SDR also does not seem to support a contrary view. There is also a mention that waste and scrap of iron and steel of a miscellaneous nature would not be usable as such. In the present case, there is no evidence that the goods in the consignments could be sold as ferrous products or used as such. It is difficult to plead that rusted iron is capable of use as iron sheets, particularly when the consignment has been found by the expert to be of 50% rusted.
9. In the above view of the matter, we are of the opinion that the classification claimed by the appellant was the correct classification.
10. The valuation done by the Customs authorities rejected the transaction value because of the finding that the goods are ferrous products and not waste. Since, we are of the opinion that the goods are actually waste, the valuation adopted on the basis that the goods are ferrous products cannot be upheld. There was no justification for rejecting valuation based on transaction value.
11. There is no legal provision relied upon by the authorities to show that ferrous waste is not freely importable. Therefore, there was no warrant for confiscation of the consignments also.
12. In view of what is stated above, the impugned order is set aside and the appeal is allowed with consequential relief, if any, to the appellant.