ARA GENERAL IMPEX Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE appellants had imported what was declared to be 'iron scrap (mixed)' and had filed two bills of entry dated 13.05.2002 for clearance of the goods, the declared total weight of which was 120.300 MTs. On the basis of specific intelligence regarding concealment of undeclared goods in the containers, the DRI detained the containers for detailed examination. On weighment, the total weight of the goods imported was found to be 128.486 MTs, showing an excess weight of 8.186 MTs vis -a -vis the declared weight. Subsequently, on detailed examination of the goods by a Chartered Engineer engaged by the Customs authorities, the containers were found to contain 300 used diesel engines of TOYOTA, IZUZU and MISSAN models. The Chartered Engineer reported thus: The engines examined were found used, and are in need of reconditioning, replacement of parts, fitment of missing parts and thorough overhauling before being put into use. About 40 to 50% of the engines were found with damaged or broken, exhaust manifolds/Inlet manifolds/Fuel injection pumps/starter motors/alternators etc. The nature of damage point to damage in transit or during destuffing. He assessed the value of TOYOTA, IZUZU and NISSAN models of diesel engines at Rs. 8,000/ -, Rs. 8,500/ - and Rs. 7,500/ - respectively. From the results of examination of the goods, it appeared to the authorities that the description and the value of the goods had been misdeclared by the importer and, therefore, the goods were liable for confiscation. Accordingly, the goods were seized and investigations continued. Statements of proprietor of M/s. ARA General Impex and his brother were recorded. The proprietor admitted the offence of misdeclaration and expressed his willingness to pay whatever duty was due on the goods in the form imported. He also requested for provisional release of the seized goods. However, DRI issued a show -cause notice to them proposing to (i) reject the transaction value declared by the importer (ii) fix the assessable value of the diesel engines at Rs. 23,25,500/ - under Rule 8 of the Customs Valuation Rules, 1988 and fix the assessable value of the iron scrap at Rs. 5,31,486/ - on the basis of the declared unit price of USD 130 PMT (iii) demand duty of Rs. 3,69,302/ - on such scrap under Section 28(1) of the Customs Act (iv) confiscate the diesel engines under Section 111 of the Customs Act (v) confiscate the scrap, which was found to have been used for concealment of the engines, under Section 119 of the Act and (vi) impose personal penalty on the noticee under Section 112 of the Act. The party had paid an amount of Rs. 12.5 lakhs during the course of investigations. The show -cause notice also proposed to appropriate this payment towards the demands raised therein. The above proposals were contested by the party in their reply to the notice. In adjudication of the dispute, learned Commissioner of Customs passed the following order: (i) I confiscate the Iron Scrap (Mixed) of quantity 83.266 MTs valued at Rs. 5,31,486/ - (C.I.F) under Section 119 of the Customs Act, 1962. However, I give the option to redeem the goods on payment of a fine of Rs. 53,000/ - (Rupees fifty three thousand only) in terms of Section 125 of the Customs Act, 1962. (ii) I extend the benefit of Customs Notification No. 21/2002 -Cus. Dated 1.3.2002 for assessing the Iron Scrap (Mixed) of 83.266 MTs which is to be assessed at the declared of US 130 PMT (CIF) subject to fulfillment of the end use conditions prescribed in the Notification. (iii) The assessable value of the seized 300 used diesel engines be fixed based on Chartered Engineer's certificate at Rs. 23,25,500/ - as indicated in the show cause notice under consideration and duty be charted at the merit rate applicable to Customs Tariff Heading 8408.20. (iv) 300 Nos. of used diesel engines valued at Rs. 23,25,500/ - are confiscated under Section 11(d), (i), (l) & (m) of the Customs Act, 1962. However, I give the option to redeem the goods on payment of a fine of Rs. 2,30,000/ - (Rupees two lakhs thirty thousand only) in terms of Section 125 of the Customs Act, 1962. (v) I impose a penalty of Rs. 75,000/ - (Rupees seventy five thousand only) on M/s. ARA General Impex, Chennai under Section 112(a) of the Customs Act, 1962, and (vi) The amount of Rs. 12,50,000/ - paid during the course of investigation be adjusted towards duty payment liabilities and adjudication levies as above.

(2.) WE have examined the records and heard both sides. It is submitted by learned Counsel that the entire material imported by the appellants qualified to be "Waste and Scrap" of iron in terms of the definition of this expression given under Note. 8 (a) to Section XV of the First Schedule to the Customs Tariff Act. This Section Note reads as under: Metal waste and scrap from the manufacture or mechanical working of metals and metal goods definitely not useable as such because of breakage, cutting up, wear or other reasons. It is submitted that, even according to the Chartered Engineer's report, the diesel engines were not useable as such on account of damages and, therefore, such engines should have been treated as 'waste and scrap' within the meaning of this expression given above. In that event, there was no misdeclaration by the appellants and, therefore, confiscation of the diesel engines by the Commissioner was not warranted. As regards the scrap imported along with the diesel engines, learned Counsel submits that it was not correct for the Commissioner to hold that this material was used for concealment of the engines. Its confiscation under Section 119 of the Customs Act was, therefore, not called for in the facts and circumstances of the case. Learned Counsel, on this basis, challenges the penalty also. Without prejudice to these submissions, learned Counsel has also a grievance that the fine imposed by the Commissioner in lieu of confiscation of the goods is excessive.

(3.) COUNSEL has relied on the decision of the Tribunal in the case of Commissioner of Customs, Amritsar v. ADDI alloys (P) Ltd. , wherein automobile engines imported by the party by declaring the same to be scrap were held not to have been misdeclared on the facts of that case. Learned Counsel has also challenged the valuation of the diesel engines, by relying on the Supreme Court's judgment in Tolin Rubbers Pvt. Ltd. v. Commissioner of Customs, Cochin . In relation to the Commissioner's finding that metal scrap has been used for concealing the engines, learned Counsel has relied on the decision of the Tribunal in Kamal Jain v. Commissioner of Customs, Calcutta 2001 (138) E.L.T. 614 (Tri. -Kolkata).