SUJANA STEELS LTD Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THIS appeal arises from the Order -in -Appeal No. 3/97, dated 24 -1 -1997 passed by the Commissioner of Central Excise (Appeals), Hyderabad holding that the goods described in the invoice and the Bill of Lading (BL) as MS scrap, the goods actually imported were found to be used pipes of varying lengths and therefore, he has held that they have to be assessed as they are presented for examination and not based on the description contained in the invoice and the Bill of Lading. This finding given is also not disputed by the appellants that the goods imported are used and rusted pipes. The appellants contended that it is melting scrap to be used in their electric arc furnace. Waste and scrap according to Note 6 of Section XV of the Customs Tariff Act means "metal waste and scrap from the manufacture or mechanical working of metals and metal goods definitely not useable as such because of breakage, cutting or ware or other reasons." He has noted that the goods did not satisfy definition of waste and scrap referred to above and therefore, their claim for classification under Heading 7204.29 which relates to waste and scrap of alloy steel other than of stainless steel read with relevant concessional notifications is not sustainable. He therefore, held that the goods falling under 7204 should satisfy the definition of waste and scrap as per Note 6 of Section XV. He has noted that Heading 73.04 relates to tubes, pipes and hallow profiles, seamless, of iron under the residuary category. He also did not find the need to refer the case to chemical examination or for expert opinion to find out whether they are pipes or scrap. He has noted that in International language they may be treated as scrap, as far as the Indian trade conditions are concerned, they may be treated as used pipes and tubes of circular cross section. He has noted that whether the price declared corresponds to the value of scrap in international market is not verifiable at this end, therefore, the adjudicating authority has not disputed value declared. He has also noted that as per 29 of the EXIM Policy 1992 -97 referred to by the adjudicating authority, all second hand goods need to be imported in accordance with the public notice or a licence issued under the said policy. Since the goods were imported without the authority of any public notice or import licence and since the goods described in the bill of entry varied from the description of the goods actually found, he did not find any infirmity in the order of confiscation under Sections 111(d) and 111(m) of the Customs Act, 1962. Therefore, he imposed penalty. He also upheld the finding of the adjudicating authority but since the goods are found to be in the midst of waste and scrap, they cannot be considered for segregation and mutilation. He also distinguished the large number of citations on the point that the goods may be released after mutilation and treating the item as scrap. The citations were in respect of other items on which similar view had been expressed by customs authorities.

(2.) WE have heard Shri S.S. Radhakrishnan, learned Counsel for the appellants and Shri S. Sankaravadivelu, learned DR for the Revenue.

(3.) THE learned Counsel submits that it is an undisputed fact that the items imported were discarded pipes and are not usable at all as they are rusted due to breakage, cutting or ware or other reasons and they are required to be classified only as scrap. He further submitted that even in terms of Note 6 of Section XV of the Customs Tariff the items satisfy the definition of waste as defined thereunder. He contended that the definition of waste and scrap clearly laid down that metal waste and scrap arising from mechanical working on metals and they should be definitely be not usable as such because of breakage or cutting or ware or other reasons and he submits that the item has lost its utility as pipe due to long usage and having been sold as scrap and therefore, it is definitely not usable as such because of breakage, cutting up, ware or other reasons. He further pointed out that the procedure adopted by the authorities to classify on the visual examination as pipes is not definitely reasonable and not as understood in the international trade. He pointed out that it does not satisfy note 6 of Section XV of the Customs Tariff as has been held by the Commissioner (Appeals). He pointed out that it has been imported for melting. He further pointed out that the authorities have also not raised the valuation and accepted the value of scrap. He referred to the Bill of Lading which describes the item as MS scrap including description in the invoice. He pointed out that the department has not produced any evidence to show that the items are fresh pipes and they can be used as such for the purpose of classification under Chapter Heading 7304.90 which relates to tubes, pipes and hallow profiles, seamless (other than cast iron or stainless steel). He pointed out that the department has not discharged their burden on classification. He pointed out to the judgment of the Bombay High Court in the case of Karendra Kumar and Co. v. SD Shahapurkar as reported in 1989 (42) E.L.T. 381 and that of Taiwan Bros (P) Ltd. v. C.C. as reported in 1992 (59) E.L.T. 323 wherein identification of the goods by visual examination has not been accepted by the Bombay High Court/Tribunal. He relied upon the judgment rendered in the case of Indian Cables Co. Ltd. v. C.C.E. as reported in 1994 (74) E.L.T. 22 (S.C.) wherein the Apex Court laid down the law pertaining to classification of goods inasmuch as that the goods are required to be classified in terms of the common parlance and the words used with reference to a particular trade or business are to be construed in that trade parlance. It was held that the Revenue should produce material evidence either oral or documentary to enter appropriate finding with regard to the aspect of classification. It was contended that the burden to show that certain goods fell under certain specific tariff item for the purpose of taxation lies with the Revenue. In this regard the appellants relied upon the following case laws :