2019 (10) TMI 113 - AT - Customs

Tribunal rules in favor of appellants in Zinc & Aluminum scrap case, rejecting duty demands & penalties

The Tribunal ruled in favor of the appellants, M/s SMRI, in a case involving allegations of mis-declaration and under-valuation of Zinc and Aluminum ... Misdeclaration and undervaluation of imported goods - consignments of Zinc Ash, Zinc dross, Zinc scrap and Aluminum scrap of different grades - Allowability of discount on LME Prices - denial of request for cross examination of chemical examiner - HELD THAT:- When the goods on importation were found to be zinc ash and permitted to be cleared after testing and also that the chemical examination report of goods seized from factory is inconclusive, the goods would merit classification as Zinc Ash only. Even though there is communication from the Indian Consulate or the emails between the indentor and supplier, but in the light of the fact that the goods were found to be Zinc Ash during imports, we are inclined to hold that the charges of mis-declaration are not sustainable and hence no duty demand can be made. There is no evidence found at the end of the Appellant and the documents relied upon to support the allegation were of third party. Hence in such circumstances, the charges of misdeclaration and undervaluation does not sustain. Allowability of discount on LME Prices - HELD THAT:- Applying the LME price minus discount band as per SMRI bulletin or DGIV Circular No. 14/2005 dt. 16.12.2005 is absolutely wrong. The Appellant has also relied upon the letter F. No. S/26 – Misc-1040/2005 GrIV dt. 13.02.2006 of the Commissioner of Customs, Nhava Sheva wherein the Commissioner in reference to Valuation of Aluminium Scrap under Alert Circular No. 14/2005 issued under F. No. VAL/TECH/37/2005 dt. 16.12.2005 has stated that there is no linear correlation between the prices of Aluminium Metal and prices of Aluminium Scrap quoted in Metal Bulletin. It is also clear from the communication dated 29.10.2008 of the Institute of Scrap Re-cycling Industries, INC (ISRI) that the scrap price would depend on many factors and the LME based price cannot be applied blindly to imports of scrap for the purpose of valuation. The whole case is also based upon allegation that the differential amount was paid by the Appellant through Hawala Channels or transfer. However, in the show cause notice not a single person was identified or investigations were made as whom the differential value amount was handed over. Except naming Chaganlal no person has been named. There is no evidence as to how the Appellant came into possession of cash alleged to be differential amount towards scrap import neither there is any evidence of any cash being handed over to any person representing suppliers. In absence of same the allegation of undervaluation cannot be supported. The demands confirmed against M/s SMRI, confiscation of goods and penalties imposed upon M/s SMRI is not sustainable - For the same reason the penalty imposed upon co-appellants namely Shri Sushil Kumar Agarwal, Shri Surendra P. Kachhara and Shri Sanjeev Kumar Agarwal is also not sustainable - Appeal allowed - decided in favor of appellant. Issues Involved:1. Allegation of mis-declaration and under-valuation of Zinc and Aluminum scrap.2. Provisional assessments and their implications on duty demands.3. Methodology for determining the value of imported goods.4. Reliance on LME prices for valuation.5. Admissibility and reliability of statements and evidence.6. Additional duty of customs on non-manufactured products.7. Reassessment of values already enhanced at the time of assessment.8. Relevance of export declarations from New Zealand and Spain.9. Confiscation of goods and imposition of penalties.Issue-wise Detailed Analysis:1. Allegation of Mis-declaration and Under-valuation of Zinc and Aluminum Scrap:The Tribunal found that the goods imported by M/s SMRI were tested and found to be Zinc Ash at the time of importation. The Chemical Examiner's report from Nhava Sheva Port supported this finding. The Tribunal held that the subsequent test report from the factory was inconclusive and did not specifically state that the goods were Zinc Skimming. The Tribunal concluded that the charges of mis-declaration and under-valuation were not sustainable as there was no conclusive evidence to support the allegations.2. Provisional Assessments and Their Implications on Duty Demands:The Tribunal noted that the assessments for the goods covered by Annexures A-II, A-III, and A-IV were provisional, as evidenced by the Bills of Entry marked with 'Test Bond.' The Tribunal held that duty demands under Section 28 of the Customs Act could not be made for provisionally assessed goods. The adjudicating authority's findings to the contrary were deemed erroneous.3. Methodology for Determining the Value of Imported Goods:The Tribunal emphasized that if the declared value is to be rejected, the Customs Valuation Rules, 1988 must be applied sequentially. The Tribunal found that the adjudicating authority had overlooked contemporaneous import prices provided by the appellants and had instead relied on LME prices, which was not permissible. The Tribunal referenced the Pushpak Metal Corporation case, where it was held that value cannot be determined based on LME prices.4. Reliance on LME Prices for Valuation:The Tribunal reiterated that using LME prices minus discount bands for valuing scrap was not sustainable. The Tribunal cited several judgments, including Bharathi Rubber Lining & Allied Services Pvt. Ltd. and GKN Sinter Metals Limited, which rejected the use of LME prices for scrap valuation. The Tribunal also noted that the CBEC had accepted this position.5. Admissibility and Reliability of Statements and Evidence:The Tribunal found that the statements of the partners and indentors could not be relied upon as their cross-examination was either not allowed or the witnesses did not appear. The Tribunal referenced the Andaman Timber Industries and Vasudev Garg cases, which emphasized the necessity of cross-examination for statements to be admissible. The Tribunal concluded that the statements and emails relied upon by the adjudicating authority were not credible.6. Additional Duty of Customs on Non-manufactured Products:The Tribunal held that no additional duty of customs was payable on Zinc Ash, skimmings, and scrap as these were not manufactured products. The Tribunal cited several judgments and CBEC circulars supporting this position. The Tribunal also noted that the issue could be raised in reply to a notice under Section 28, even if not raised at the time of original assessment.7. Reassessment of Values Already Enhanced at the Time of Assessment:The Tribunal found that for 550 Bills of Entry covered under Annexure C, the values had already been enhanced at the time of assessment, and no further reassessment was permissible. The Tribunal cited judgments supporting the finality of such assessments in the absence of an appeal.8. Relevance of Export Declarations from New Zealand and Spain:The Tribunal agreed with the appellants that the export declarations from New Zealand and Spain were not authenticated and were irrelevant to the case. The Tribunal noted that these declarations did not pertain to the goods imported by the appellants and were not used for re-determining the values.9. Confiscation of Goods and Imposition of Penalties:The Tribunal held that the confiscation of goods and imposition of penalties on M/s SMRI and its partners were not sustainable. The Tribunal found that the charges of undervaluation were not proven, and thus, the penalties and confiscation orders were set aside.Conclusion:The Tribunal set aside the impugned order, allowing the appeals with consequential reliefs to the appellants. The demands for differential duty, confiscation of goods, and penalties were found to be unsustainable based on the evidence and legal precedents.