Mis-declaration of Nature of Imported Goods

PJ/Case Laws/2011-12/1359

Case: ASSISTANT COMMR. OF CUS., LUDHIANA Versus AMAN ALLOYS LTD

Citation: 2011 (271) E.L.T. 200 (P & H)

Issue:- Imported goods found to be usable material instead of HMS scrap – application for mutilation of imported material not tenable – Assessee liable to pay duty and redemption fine & penalty as goods were misdeclared.

Brief Facts:- Respondent-assessee imported material vide Bill of entry dated 26-4-2000 consisting of two containers. In the bill of entry description was as HMS classifiable under Chapter Heading 7204.49 of First Schedule to the Customs Tariff Act, 1975. Respondent claimed concessional rate of duty @ 5% in terms of Notification No. 16/2000-Cus, dated 1-3-2000. The goods were invoiced at USD 100 PMT by foreign supplier and the Assessing Officer loaded the value and assessed at USD 105 PMT.

On examination, the Customs Authority found that material consisted of TOR/Ribbed Steel Bars whereas HMS normally contains Girders, Channels, Pipes, Saria etc. Panchnama was prepared and goods were seized. It was alleged that consignment was not HMS but was IMS Rounds of different dimensions/diameter/length and these were fresh and unusable material.

The Assessee vide its letter dated 26-5-2000 requested the Revenue that if the department is of opinion that the material is serviceable, the mutilation under Section 24 of the Customs Act may be allowed.

After investigation, Show cause notice was issued for classifying goods as MS Rounds under heading 72.14 on which duty @ 35% was leviable and for confiscation of goods and imposition of penalty under Section 112 of the Custom Act.

Respondent filed Writ Petition before the High Court praying for release of said goods. This Court directed the Petitioner that they may file reply to the Show Cause Notice and this shall be disposed of by passing Speaking Order within three months from the date of receipt of reply.

The Adjudicating Authority ordered the goods to be classified as MS Rounds valued at Rs. 7.76 per Kg and further ordered confiscation of the goods but allowed redemption on payment of fine of Rs. 50,000/- and penalty of Rs. 25,000/-.

Respondent filed appeal before the Commissioner (Appeals) which was rejected.

Respondent further filed appeal before the Tribunal. The Tribunal allowed the appeal and directed that pending goods may be released to the Respondent after affecting mutilation under Customs supervision thereby rendering them as scrap. The scrap so generated after mutilation would be cleared on payment of appropriate customs duty on the loaded value of USD 105 PMT by classifying it under Chapter Heading 7204.49. The Tribunal further set aside imposition of penalty and redemption fine.

Revenue has filed appeal against the order of the Tribunal before the High Court.

Appellant’s Contention:- Revenue contended that the Tribunal has wrongly held that facts in the case of Collector of Customs, Bombay v. Flardik Industrial Corporation, 1998 (97) E.L.T. 25 (S.C.) are distinguishable. The Respondent in the present case has also declared description of the goods as scrap whereas on examination material has been found as fresh material. By filing application for mutilation, the Respondent cannot avoid their liability of enhancing of duty, fine and penalty.

It was contended that the Tribunal has wrongly relied upon the statement of the Respondent that Authorities in the case of identical placed importers have allowed mutilation. There is no evidence of permission for mutilation in the case of other importers.

Revenue contended that the decision of the High Court in the case of M/s. Dutt Multi Metals Limited deals with interim arrangement for release of goods and does not wipe out liability of the importer.

Respondent’s Contention:- Respondent heavily relied upon judgment of the High Court in the case of Patiala Castings Private Limited v. Union of India [2003 (156) E.L.T. 458 (P&H)]. It was contended that they have timely filed mutilation application so Commissioner has wrongly rejected their application.

Reasoning of Judgment:- The High Court held that the reliance placed by Respondent on the judgment in the case of M/s. Patiala Castings Private Limited is misplaced. This Court in various paras has found that goods imported by the said Petitioner were metallic scrap and not serviceable pipes. It had been found that the goods were rusted, pitted and perforated and had been even repaired whereas it is not case of the Respondent. The Respondent had also filed Writ Petition earlier but this Court did not allow mutilation of the goods and directed that the Respondent may file reply to Show Cause Notice. Therefore, the facts of the present case are totally different.

It was held that the present case is squarely covered by the judgment of the Supreme Court in the case of Collector of Customs, Bombay v. Hardik Industrial Corporation. The Tribunal had not found that goods were waste or scrap. The Tribunal had allowed appeal of Respondent only on the ground that they had no means to know in advance as to what is contained in the container. There is nothing on record to show that Respondent was unaware of the actual description of the goods. It cannot be assumed that assessee had been unaware of the description, as he himself had applied for first check. In the present case, duty was assessed on 26-4-2000 and thereafter during the course of examination, the goods were found to be TOR/Ribbed Steel Bars and Respondent applied for mutilation on 26-5-2000 much after the detection of offence. In these circumstances, it cannot be held that Respondent acted in a bona fide manner and were not liable to fine and penalty.

Apart from the above, a perusal of the case file shows that only those goods which are not usable because of breakage, cutting up wear etc. can be considered as waste and scrap. However, in the present case, the Chartered Engineer in his opinion has clearly opined that the goods are usable as such. It is clear that the usability and not the length is the criterion for deciding whether the goods are scrap or not. The goods reported in the present case were complete and contained MS rounds instead of HMS and could not be said to be waste material and, therefore, the Commissioner has rightly held that the invoice price for HMS is liable to be rejected as the importer has mis-declared the description as well as the value of goods with an intent to evade customs duty.

Impugned order of the Tribunal set aside. Orders of Lower Authorities upheld. Question of law answered against Assessee and in favour of Revenue.

Decision:- Appeal allowed.

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PJ/Case Laws/2011-12/1359

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