TaxTMI 
TaxTMI 
2026 (9) TMI 1679
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. J.R. Smelters Pvt. Ltd. (JRS), imported goods under Bills of Entry Nos. 616429 dated 02.09.2010 and 626444 and 626445 dated 14.09.2010 through M/s. Santon Shipping Services, Chennai, Custom House Agents (CHA), declaring the goods as 'Scrap Metal/Heavy Melting Scrap' under CTH 7204 4900. Acting on intelligence that used railway rails were being imported as heavy melting scrap to evade higher duty, officers of DRI took up investigation and the impugned consignments were examined. They were found to contain used rails, metal railway sleepers, bars, PR clips and re-rollable scrap, besides excess quantity in two consignments. The first consignment of 20 containers was seized under mahazar dated 17.09.2010, the goods being valued at about Rs. 1 crore and allegedly found materially different from the declared description. Investigation revealed that the clearances were handled by Shri Mahesh Varman, Partner, M/s. Swamy Agencies, who were allegedly handling the goods on behalf of the CHA as a proxy, and that Shri N. Dhanraj and Shri M. Mahesh Varman were allegedly the principal persons facilitating the import clearances of the said importer. It was also noticed that though examination w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated 02.09.2010 under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and re-determine the same as USD 2,00,125 CIF under Rule 3 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14(1) of the Customs Act, 1962. viii. I reject the total declared value of USD 34,342.55 CF and USD 33,959.20 CF for the goods imported under Bills of Entry No. 626444 and 626445 both dated 14/9/2010 respectively under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules and redetermine the same as USD 86,886.14 CIF and USD 77,795.58 CIF under Rule 9 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14(1) of the Customs Act, 1962. ix. I reject the total declared/assessed value in respect of the goods imported under 17 Bills of Entry under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and re-determine the same under Rule 3 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14(1) of the Customs Act, 1962. x. I confirm the demand of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x) supra (Rupees Fifty Four lakhs Fourteen thousand Two hundred and Sixty Five, along with interest payable as per Clause (x) supra) on M/s. J.R. Smelters Private Limited under Section 114A of the Customs Act, 1962. xv. I impose a penalty of Rs.5,00,000/- (Rupees Five lakhs only) on M/s. J.R. Smelters Private Limited under Section 114AA of the Customs Act, 1962. xvi. I order for appropriation of Rs.75,00,000/- (Rupees Seventy Five Lakhs Only) paid during the investigation by the importer towards duty and adjudication liabilities. xvii. I order for enforcement and appropriation of Bank Guarantee of Rs.33,80,000/-(Rupees Thirty Three Lakhs and Eighty Thousands only) executed by the importer towards adjudication liabilities. xviii. I impose a Penalty of Rs.5,00,000/-(Rupees Five lakhs only) on Shri. Pramod Singh, Director of M/s. J.R. Smelters Private Limited under Section 112(a) of the Customs Act, 1962. xix. I impose a Penalty of Rs.3,00,000/- (Rupees Three lakhs only) on M/s. Santon Shipping Services under Section 112(a) of the Customs Act, 1962. xx. I impose a Penalty of Rs.2,00,000/- (Rupees Two lakhs only) on Shri. Bose J. Fe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d steel scrap. Therefore, the goods were intended for melting/re-rolling and not for use as rails. D. The Appellant relies on Hinduja Foundries Ltd. v. Commissioner of Customs (Import), Chennai, 2013 (288) E.L.T. 571 (Tri.-Chennai), where used rails meant for melting were held classifiable under CTH 7204. Reliance is also placed on Indo Deutsche Trade Links v. Commissioner of Customs (Import), Chennai, 2014 (303) E.L.T. 442 (Tri.-Chennai). Though the latter decision was overruled by the Supreme Court, the Appellant submits that it is distinguishable because the importer there admitted the goods to be used rails and the merits were not examined in detail. E. Without prejudice, the Appellant submits that the goods would qualify as re-rollable scrap under CTH 7204, consistent with customs practice and BIS Standard 2549:1994, which includes rails and railway materials suitable for re-rolling. The Appellant contends that, where a statutory definition and trade practice exist, HSN Explanatory Notes cannot override them. Reliance is placed on O.K. Play (India) Ltd. Vs Commissioner of Central Excise [2005 (180) E.L.T. 300 (S.C.)], which holds that classification must cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 3.3 Ld. Counsel Shri R. Sethu Prabakaran, appearing for M/s. Santon Shipping Services and Shri Bose J. Fernando, Partner of the firm, submitted that: A. M/s. Santon Shipping Services was a licensed Customs House Agent and had filed Bill of Entry No. 616429 dated 02.09.2010 on behalf of JRS, declaring the goods as Scrap Metal (HMS 1 and 2). On examination, the goods were found to include used rails and railway metal sleepers and were seized. Bills of Entry Nos. 626444 and 626445 dated 14.09.2010 were also taken up for investigation and the goods therein were similarly seized. B. It was submitted that samples drawn from the consignments were tested by the National Metallurgical Laboratory, which, by report dated 13.10.2010, opined that the goods were not suitable for re-use but were fit for melting/re-rolling, with certain materials being suitable for re-rolling and the remaining material constituting Heavy Melting Scrap. C. Learned Counsel further submitted that, during investigation, statements were recorded from the importer, the Partner of the appellant firm and Shri N. Dhanraj and Shri M. Mahesh Varman, who were H-card holders of the appellant fir....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iable to redetermination on the basis of evidence unearthed by DRI. C. The statement of Shri Bose J. Fernando established that M/s Santon Shipping Services permitted its H-card holders, including Shri Mahesh Varman and Shri N. Dhanaraj, to undertake Customs work using signed blank forms. Shri Bose attributed the duplicate presentation of Bill of Entry No. 616429 to the said persons and their assistant, Shri Chandrasekar. D. Shri Mahesh Varman's in his statement accepted that Swamy Agencies used Santon Shipping Services' CHA licence and signed blank forms. After rails were found at SANCO CFS, a second docket for the same Bill of Entry was allegedly presented at Gateway CFS, at the importer's request, to obtain an examination report. E. Shri N. Dhanaraj likewise admitted that Swamy Agencies operated through Santon Shipping Services' licence and blank documents. He confirmed that, after rails were detected at SANCO CFS, another docket was presented at Gateway CFS as though the containers were located there. F. The importer wrongly classified used rails and bails as ferrous scrap under CTI 72044900. Such goods are specifically classifiable under Head....
X X X X Extracts X X X X
X X X X Extracts X X X X
....past clearances, were mis-declared as 'HMS 1&2/Scrap Metal' and, upon examination, were liable to be treated as 'used rails/used metal railway sleepers/used rails or beams, re-rollable scrap, G.I. angles, light melting scrap and heavy melting scrap', as held in the impugned order or classifiable under CTH 7204 as Heavy Melting Scrap/ re-rollable scrap as stated by the appellant? (ii) Consequent upon the determination of the nature of the goods, whether the goods described as 'used rails/used metal railway sleepers/used rails or beams and G.I. angles', were correctly classified under Customs Tariff Headings 7302 and 7301 respectively as held in the impugned order, and whether such classification was supported by the tariff entries and the evidence on record? B. Valuation (iii) Whether the declared transaction values in respect of the 20 Bills of Entry were liable to be rejected under Rule 12 of the CVR 2007 and, if so, whether the values were correctly re-determined under the applicable rule of the CVR 2007, read with Section 14 of the Customs Act, 1962? (iv) Whether, in respect of the 17 Bills of Entry relating to past clearances, the rejection o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....In respect of 17 earlier Bills of Entry covering 2334.31 MT, the goods were similarly held to comprise 836.65 MT of used rails, 202.81 MT of used bails, 53.280 MT of light melting scrap and 1240.580 MT of heavy melting scrap. 6.1 At the outset, we note that the Appellant has admitted liability in respect of the reclassification of certain goods covered by Bills of Entry Nos. 616429, 626444 and 626445 and has also agreed to discharge the liability relating to the 17 past Bills of Entry on account of the alleged excess quantity. The Appeal Memorandum states as under: "10. I submit at the outset the appellant is ready to accept the additional duty liability of Rs.4,55,660 for the B/E 626444 and Rs.3,27,122 for B/E 626445 viz. total Rs.7,82,782 as detailed out in Para 5 above. 11. As far as B/E 616429 /02.09.2010 is concerned importer had declared USD170/MT for HMS. DRI had enhanced this value to the standard value usually adopted by the Group viz. USD 280/MT. The difference duty is Rs.4,81,972/- [Detailed working sheet in Annexure A]. Importer is ready to accept this additional duty liability. 12. The appellant is also ready to accept the duty liability o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e read as an absolute proposition that every used rail, irrespective of its condition and usability, falls under Heading 7302. 6.5 On the other hand, in Hinduja Foundries Ltd.(supra), the Tribunal considered the classification of used rails in the light of the competing entries. It held that the competing Headings were 72.04 (scrap) and 73.02 (rails). That Notes to Heading 73.02 do not specifically classify old and used rails cut into pieces, and the reference to "irrespective of their intended use" concerns uses such as overhead transporters and mobile cranes, not re-rolling or melting. The real issue is whether the goods constitute "melting scrap" or "re-rollable scrap" for Notification No. 21/2002-Cus. Earlier decisions have consistently classified old and used iron and steel articles no longer serviceable for their original purpose under Heading 72.04, and there is no change in the tariff or notification warranting a departure from that settled position. Treating used and cut rails differently from other used articles such as railway axles would be inconsistent, particularly when the DGFT has also classified such goods under Heading 72.04. Between Headings 72.04 and 73.02, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ged by Revenue the benefit of classification must go to the Appellant. 6.9 As regards G.I. Angles, the same reasoning applies with greater force. An identifiable angle/section is ordinarily covered by Heading 7216 and cannot be brought under Heading 7302 merely because it was found in a consignment declared as HMS. If, on the other hand, the material had become definitely unusable and constituted waste and scrap, Heading 7204 would require consideration. The classification must consequently follow the nature and condition of the goods actually established by the evidence. Again the burden not having been discharged by Revenue the benefit of classification must go to the Appellant. 6.10 The classification of the above goods are hence not dislodged by Revenue and the same as declared by the Appellant is hence sustained. 6.11 In the case of the goods contained in the 17 B/E's cleared earlier, the goods are not available for inspection and hence the classification as declared is to be accepted. Valuation 7. The next issue concerns rejection of the declared values and their re-determination. The adjudicating authority has rejected the declared values under Rule 12 of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to issue a speaking order where the reassessment is accepted by the importer. It does not dispense with the requirement to undertake a lawful reassessment in accordance with the Customs Act and the applicable Valuation Rules, nor does it extinguish the importer's statutory right to question the correctness of the assessment. 7.4 It is settled that the transaction value is the starting point of valuation. In Eicher Tractors Ltd. Vs Commissioner of Customs, Mumbai [2000 (122) E.L.T. 321 (S.C.)], the Supreme Court held that the price actually paid or payable is required to be accepted unless the conditions justifying rejection of the transaction value are established. The same was later reiterated by a three Judge Bench of the Apex Court in Century Metal Recycling (supra). 7.5 Rule 12 of the CVR 2007, is a provision enabling the proper officer to reject the declared transaction value where there is reasonable doubt regarding its truth or accuracy. Rule 12 is not itself a method for determining the substituted value. Once the transaction value is rejected, the value has to be determined in accordance with the sequential scheme of the Rules. 7.6 The Supreme Court in COMMISSION....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... are relied upon, the source and relevance of such material shall be disclosed to the appellants and they shall be given an opportunity to rebut the same. Exemption under Notification No. 21/2002-Cus. 8. The adjudicating authority has denied the benefit of Notification No.21/2002-Cus. (Sl. No.200) to the goods classified under Headings 7302 and 7301. 8.1 Since the classification itself requires reconsideration, the consequential question of exemption cannot be finally decided at this stage. The entitlement to exemption shall necessarily follow the classification and the precise description of the goods as ultimately determined. In Unichem Laboratories Ltd. Vs Collector of Central Excise, Bombay [(2002) 7 SCC 145], the Hon'ble Supreme Court held that, in the absence of any prescribed time limit for claiming an exemption, the benefit thereof may be claimed subsequently and must be extended if the notification is otherwise applicable. The adjudicating authority shall therefore reconsider the benefit of the notification after recording a fresh finding on classification. Demand of differential duty 9. The differential duty demand of Rs.54,14,265/- comprises the duty conse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....self recorded that the 17 consignments were already cleared and physically unavailable, no redemption fine has been imposed. That part of the order does not call for interference. Penalty under Section 114A 12. A penalty of Rs.54,14,265/- has been imposed upon J.R. Smelters under Section 114A, corresponding to the duty demand. 12.1 Section 114A is attracted only where the non-levy, short-levy or erroneous refund of duty is by reason of collusion or any wilful misstatement or suppression of facts. 12.2 The applicability of Section 114A must therefore be considered independently after the fresh determination of classification, valuation and duty liability. Penalty under Section 114AA 13. The penalty under Section 114AA also requires a separate examination. The provision is attracted where a person knowingly or intentionally makes, signs or uses, or causes to be made, signed or used, a declaration, statement or document which is false or incorrect in a material particular in the circumstances specified therein. 13.1 A finding of misdeclaration of the goods does not, without more, dispense with the requirement of identifying the declaration, statement or document a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r rejection of transaction value and applying the CVR 2007 sequentially; (ii) consequential determination of eligibility to Notification No.21/2002-Cus.; (iii) fresh computation of differential duty and interest; (iv) reconsideration of confiscation and redemption fine in respect of the goods that are available; (v) reconsideration of the penalty under Section 114A after recording a specific finding on the statutory ingredients thereof; (vi) reconsideration of the penalty under Section 114AA after identifying the particular false or incorrect declaration/document and the requisite statutory ingredients; and (vii) person-wise reconsideration of the penalties under Section 112(a), based upon the particular act or omission attributable to each person. For the sake of clarity, it is stated that, as the importer has admitted to the duty liability detailed in paragraph 6.1, the issue of duty on the said goods is final and no longer in dispute. Other issues, such as interest, penalties, and consequential liabilities, are left open to be decided in accordance with the findings and the specific directions given above. Insofar as th....