THE HONOURABLE MR.JUSTICE S.MANIKUMAR and THE HONOURABLE MR.JUSTICE R.SURESH KUMAR C.M.A.No.1946 of 2017 C.M.P.No.10491 of 2017 M/s.Goyal Metal Industries (P) Ltd., III B.No.9, Mc Nichols Road, Chetpet, Chennai 600 031. .. Appellant versus The Commissioner of Customs (Imports), Customs House, 60, Rajaji Salai, Chennai 600 001. .. Respondent Prayer: Civil Miscellaneous Appeal is filed under Section 35G of Central Excise Act, 1944, against the Final Order No.42236 of 2016, dated 03.11.2016, passed by the CESTAT, Chennai.
For Appellant : Mr.J.Shankararaman For Respondent : Mr.S.Rajasekar, Jr.SC(C&CE)
JUDGMENT
(Judgement of this Court was made by S.MANIKUMAR, J.) Civil Miscellaneous Appeal is directed against the order of the Customs Excise and Service Tax Appellate Tribunal, Chennai, dated 03.11.2016 in Final Order No.42236 of 2016, by which, the Tribunal has upheld the adjudication order.
2. It is the case of the appellant that they have entered into a sale agreement with Gobal Allianz (UK) Ltd., for the purchase of 300-350 tons of MS Re-Rollable, consisting of Rails, at the price of USD 240.00 Per MT, on 02.12.2005, vide Sale Contract No.1102. Alex Stewart (Assayers) Ltd., has issued a Pre-Inspection Certificate No.019885, dated 05.01.2006, certifying the subject Goods, as metallic scrap/seconds/defective, as per the internationally accepted parameters for such a classification. Accordingly, the supplier had supplied 355.845 MT of Re-Rollable scrap, consisting of Rails, vide BL No.CPH0108953/003, dated 13.01.2006.
3. In the mean time, the Ministry of Finance (Department of Revenue), Central Board of Excise & Customs, issued Circular No.8/2006-Cus., dated 17-1-2006, classifying the subject goods as "rails", under chapter heading 7302, contrary to the established business practices and common understanding. According to the appellant, the same is contrary to a circular, issued, after a conference of Chief Commissioners of Customs, which considered the issue of classification on "used rails" and clarified that even though the items in question were in the form of rails, these bore markings of use and therefore could not be used as rails. Hence, suitable classification for used rails was considered to be scrap CTH 7204 and it was held that they are freely importable.
4. The appellant has further submitted that they have filed a Bill of Entry No.963002, dated 14.02.2006, for the import of 355.850 MTs of "re- rollable scrap", consisting of "used rails, claiming classification, under chapter heading 72043000 of the First Schedule to the Customs Tariff Act, 1975 and the declared assessable of Rs.38,77,250/-. While filing the bill of entry, the appellant has declared the classification of the disputed goods as "Re-rollable Scrap", consisting of rails claiming classification under CTH 7204 3000, with declared rate of duty @ 5% BCD + 16% CVD + 2% Cess on CVD + 2% Ed. Cess, declaring the unit value of goods as USD 240 / PMT. According to the appellant, the imported goods were subjected to First Check of Examination and upon examination of the same, the Customs (Docks), the examination authority, has declared that the goods were found to be "used rails", which are classifiable under CTH 7302 1010, with rates of duty 15% BCD + 16% CVD+ 2% CESS on CVD + 2% Ed. Cess.
5. The appellant has informed the assessing officer that they have imported 355.845 MT of Re-Rollable Scrap, vide BL No. CPH0108953/003 dated 13.01.2006 and that they have brought to the notice of the assessing officer that the subject goods were ordered for import, before the Customs Circular No.8/2006, dated 17.01.2006 was issued. In terms of the provisions contained in the Hand Book of Procedures, notified as per Para 2.4 of the Foreign Trade Policy (2005 Supplement), the relevant date for obtaining a license for a restricted commodity is the date of shipment for export into India. According to the appellant, in other words, license for restricted goods is mandatory, if the goods are restricted on the date of shipment for export into India. However, in the present case, the date of shipment of the goods for export into India was 13.1.2006 and as on that date, the 2005 circular was in place and in terms of circular 'Used Rails', merits classification as scrap and that there is no restriction for import of such scrap.
6. It is the further case of the appellant that the revised Circular, dated 17.01.2006, only clarified that the Used Rails would not merit classification as scrap and it would merit classification only as used rails and therefore submitted that the requirement of license is applicable only for the shipment of goods made from the foreign country for export into India from that date onwards and the goods shipped before that date i.e., 17.01.2006, there would not be any requirement of such license. As such, the appellant requested the assessing officer to take a lenient view and at the time of adjudication, they have informed that the subject goods are restricted for import, as per the new circular.
7. The appellant also accepted the value enhancement for assessment of the subject goods @ USD.280 Per MT, vide their letter dated 23.03.2006. A personal hearing was given, in which, Shri.Subhash Chandra Goel, Director of the appellant-company, has explained the position, regarding clearing of subject goods. The appellant has clarified that the transaction was completed before the issuance of Customs Circular No.8/2006, dated 17.01.2006. Appellant, vide their letter, dated 10.04.2006, has provided the Contract of supply, Pre-Shipment Inspection Certificate No.8855, dated 05.01.2006, BL No.CPH0108953/003, dated 13.01.2006 and the intended use of the imported materials, as re-rollable scrap / melting purposes and prayed for waiver of fine and penalty.
8. The Commissioner of Customs (Imports), Chennai, respondent herein, after due process of law, passed an Order-in-Original bearing No.5142/2006, dated 27.04.2006, as follows:
"(i) I order assessment of the "Used Rails" under CTH/CETH 73021020 with appropriate duty @ 15% BCD + 16% + 2% Cess + 2%Cess, on the assessable value of Rs 44,49,583/- arrived at, by adopting the unit price of USD 280 (CIF) (applicable to used Rails) on 350.540 MTs of used Rails covered by B/E No.963002/14.02.2006.
(ii) I confiscate the impugned goods under Section 111(d) of the Customs Act, 1962 read with Section 3(3) of Foreign Trade (Development & Regulations) Act 1992. However, I give an option to the Importer, M/s.Goyal Metal Industries Pvt. Ltd., Chennai, to redeem the same, on payment of fine of Rs.8,00,000/- (Rupees eight lakhs only), under Section 125 of the Customs Act and on payment of applicable duties;
(iii) I Impose a penalty of Rs.2,22,000/- (Rupees two lakhs twenty two thousand only), under section 112(a) of the Customs Act, 1962, on M/s.Goyal Metal Industries Pvt. Ltd., Chennai.
(iv) The goods should be redeemed in 15 days of this order."
9. Being aggrieved by the said order, the appellant has filed Appeal No.C/176/2006, before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai and after hearing both sides, the Tribunal ordered as follows:
"3. What Revenue says is patent from para-3 of the Order-in- Original when examined with Bill of Entry copy made available today by appellant.
4. When the invoice and packing list is examined that shows that although the goods were declared as "scrap" that came in 12 x 20 ft. containers. Therefore, such a container establishes that goods were not scrap but rails.
5. Appellant has no evidence to establish that first check examination report was wrong. In absence of any evidence to repeal Revenue's argument, there is no scope to interfere with the adjudication order for which appeal is dismissed.
6. It may be stated that the goods covered by Chapter 73 and particularly 73021010 which contains "used rails" in its fold, was "restricted goods", during the relevant period in terms of para 2.17 of the EXIM Policy 2004-2009. Such goods were subject to licence. Present imports were made without licence and misdeclared. This also calls for upholding the adjudication order. We order accordingly."
10. Against the order of the Tribunal, the appellant has preferred the present Civil Miscellaneous Appeals, on the following substantial questions of law, “Whether the respondent is right in holding that goods are "restrictive goods" in terms of para 2.17 of Exim Policy read with the Board's circular 8/2006 Cus dated 17/1/2006 which was not in vogue during the relevant date of shipment of goods from the port of export and accordingly, whether the respondent is right in confiscating the subject goods and in imposition of exorbitant fine and penalties"
11. Mr.J.Shankararaman, learned counsel for the appellant submitted that the bill of entry shows that the appellants declared the goods as "MS re- rollable scrap consisting of used rails". The consignment contained "used rails" meant as re-rollable scraps. He further submitted that pre-inspection certification issued on behalf of the supplier clearly indicates that the goods supplied was actually metallic scrap, as per the internationally accepted parameters". He further submitted that the said certification was issued in terms of Para 2.32 of the Handbook of the procedures (Vol-I) for unshredded, compressed and loose forms of metallic waste and scrap. At no point of time, the preshipment certificate issued at the loading port by the authorised agencies had been doubted or questioned by any of the customs officers or the adjudication/appellate authorities herein.
12. Learned counsel for the appellant submitted that finding of the Tribunal is totally illogical that the subject goods, declared as "Scrap" came in 12 x 20 feet containers, which establishes that that goods were not scrap, but rails, and no reason is assigned by the Tribunal, as to the conclusion, about the goods and its classification, based on the size of the container, in which the goods were stuffed and transported.
13. Learned counsel for the appellant placed reliance on the Bureau of Indian Standard, Code for Classification of Processed Ferrous Scarp, "RE- ROLLABLE STEEL SCRAP, which consists of used, old and salvaged ingots, bars, rods, angles, shapes and sections, rails and railway materials such as wheels, tyres, axles, sleepers, sleepers bars, fish plates and flat rolled products including plate cutting/shearing and materials obtained from breaking of old strips suitable for rerolling without undergoing process of melting and of length 2000mm max, width 800mm max, thickness/diameter 8 mm.
14. He further submitted that the appellant placed an order for the re- rollable scrap for re-rolling/melting purposes and what was imported is re- rollable scrap containing used rails. He also submitted that merely because, the consignment contained "used rails" that would not vitiate the fact that the goods imported were not re-rollable scraps. Re-rollable scraps do include rails which are used. Re-rollable scraps can be in any form, viz., ingots, bars, angles, shapes and section, rails etc., and such form of scrap will not alter the fact that those, where re-rollable scrap meant for re-rolling/melting purposes other than prime use. He therefore submitted that the contention of the respondent that the appellants have misdeclared the goods is not tenable and therefore, the charge of misdeclaration or misclassification cannot be confirmed against them.
15. Learned counsel for the appellant further submitted that besides customs examination, no other expert opinion has been obtained by the adjudicating authority, to ascertain the correctness of the declaration by the appellant, as to whether imported goods are supposed to be "used rails", other than re-rollable scrap. In the abovesaid circumstances, he submitted that the observation of the respondent that the classification of the goods were misdeclared and the subject goods are restricted goods requiring licence at the time of import is not sustainable. Hence, the charge of confiscation and imposition of the redemption fine and penalty on the appellant, are liable to be set aside.
16. Learned counsel for the appellant submitted that the observation of the Tribunal that the appellant had not produced ample evidence to disprove that the first check examination report was wrong and the effect of examination report is that "the goods found to contain USED RAILS", which are classifiable under CTH 7302 1010". He further submitted that the imported goods were found to contain used rails, however, such used rails, which are in the form of re-rollable scraps, clearly fall under the category of scrap classifiable under CTH 7204 3000 and certainly, not under CTH 7302 1010. The Board (CBEC), vide its Circular No.1/2005, dated 11.01.2005, has clarified that the issue of classification of 'used rails' in the conference of Chief Commissioners and it was decided that there is no reason to unilaterally change the classification from the heading 7204 to 7302. He therefore submitted that the classification of 'used rails' imported as scrap was under heading 7204 of Customs Tariff only during the relavant period and by Circular, dated 17.1.2006, the above position was reversed and it was clarified that such used rails merits classification under heading 7302 as rails and not as scrap under heading 7204.
17. Learned counsel for the appellant further submitted that the intention of the appellant was to import re-rollable scraps for rerolling/melting purposes and for that purpose only, the appellant had imported scraps, which was in the form of used rails. While placing such order for imports and shipment of goods from the place of export, there were no restriction in the FTP, either for import of re-rollable scrap comprising of such used rail as alleged and held by the respondent. It was only subsequently, the restriction for import of used rails has come into effect by way of Circular No.8/2006 Cus, dated 17/1/2006 and taking shelter under such circular, the respondent wants to classify the goods under CTH 7302 1010, in order to term the subject goods as "restricted goods", which are permitted to be imported only under a licence issued by the DGFT, under the FTP.
18. Learned counsel for the appellant submitted that the said circular, dated 17/1/2006, holding that the used rails must be classified as rails and not as scrap was challenged before this Court in Madras Steel Re-rollers Association and the said circular was quashed by this Court, vide W.A No 464 of 2007, dated 27.6.2007, which is reported in 2007 (217) ELT 167 (Mad). He therefore submitted that the appellant had acted bonafidely, based on the clarification contained in 2005 circular and there is no mis-declaration on their part with any malafide intention. Notwithstanding the above, he submitted that any Circular, which is oppressive in nature, has to be applicable prospectively and not retrospectively. In the present case, before the date of circular, the subjects goods were shipped from the supplier and he therefore submitted that imported goods are rightly classified under CTH 7204. In support of the same, he placed reliance on the decisions of the Hon'ble Apex Court in Suchitra Components Ltd., vs CCEx., Guntur reported in 2008(11) STR 430 (SC) and Commissioner of Central Excise, Bangalore vs Mysore Electricals Industries Ltd., reported in 2006(204) ELT 517 (SC).
19. Learned counsel for the appellant further submitted that the declaration of the appellants in the bill of entry classifying the goods under 7204 3000 was in the nature of a claim, made on the basis of the belief, entertained by the appellant and therefore, cannot be said to be a misdeclaration as contemplated by Section 111(d) of the Customs Act. As the appellant had given full and correct particulars as regards the nature and quality of the goods, the appellant has not resorted to wrong classification with any dishonest intention of evading duty.
20. Learned counsel for the appellant further submitted that the CESTAT failed to appreciate that Circular No.1/2005, dated 11-1-2005, dealt with issue of classification of "used rails" and clarified that even though the items in question were in the form of rails, these bore markings of use and therefore, could not be used as rails. He submitted that suitable classification for used rails was considered to be scrap CTH 7204 and it was held that they are freely importable.
21. Learned counsel for the appellant submitted that the Tribunal has erred to appreciate a crucial fact that the appellant had entered into the contract' for import in this case as early as 02.12.2015 and the goods were shipped on 13.01.2006 prior to the issue of said circular. Hence, he submitted that the licence requirement has been cast only with effect from 17.01.2006, which is much after the shipment of the goods, there was no licence requirement on the date of shipment of the goods, and therefore, the goods are not at all confiscable. For the abovesaid reasons, prayed to set aside the order of the Tribunal.
22. Inviting the attention of this Court to the Bill of Entry, dated 14.02.2006, Mr.S.Rajasekar, learned Standing Counsel for the Customs and Central Excise submitted that the appellant, through their Customs House Agent, has cleared the goods, as re-rollable scrap, consisting of rails and declared the assessable value, claiming the same, under classification CTA.No.7204, whereas, on examination by Customs (Docks), the goods were found to be used rails, classifiable under CTH No.7302. In the former CTH 7402, the rate of duty is at 5% BCD + 16 CVD + 2% Cess on CVD + 2% Educational Cess, whereas, the goods classifiable under CTH 7302, it was 15% BCD + 16% CVD + 2% Cess on CVD + 2% Educational Cess. Referring to Clause 2.17 of the General Provisions relating to Imports and Exports, Exim Policy for the years 2004-09, he submitted that used rails are restricted for import and therefore, dehors the Circular, dated 11.01.2005 and therefore, import requires licence.
23. Drawing the attention of this Court to the nomenclature of the appeal, filed before CESTAT, Madras, Form (A-3), Column 8 - Issue Relates to Classification, Appeal grounds, Column 1 - Issues involved in the appeal - Issue relates to classification and Column 10(a) - Classification of re-rollable scrap and the memorandum of grounds, wherein, the appellant before the CESTAT, Madras, has contended that the goods imported by them, have to be classified as "used rails", though they were re-rollable scraps and re-classification by the Department, learned Standing Counsel for the Customs and Central Excise submitted that the crux of the issue goes to the root of classification, and the order impugned flows out of such dispute in classification and hence, the instant civil miscellaneous appeal is not maintainable. According to him, the appellant can agitate the matter only in the Hon'ble Supreme Court and not by way of an appeal to this Court, under Section 130 of the Customs Act. For the abovesaid reasons, he prayed for dismissal of the appeal.
24. Heard the learned counsel appearing for the parties and perused the materials available on record.
25. Circular No.1/2005-Cus, dated 11.01.2005, issued by the Government of India, Ministry of Finance (Revenue Department), Central Board of Excise and Customs, New Delhi, on the subject, "Classification of used rails for re-rolling under CTH 7204 or 7302 and whether freely importable." is extracted hereunder:
"Issue in Brief: This matter was discussed in the Tariff Conference of Chief Commissioners of Customs held at Shillong on 13th - 15th May, 2004 (Agenda Point T-2). The issue involved is whether the goods described as "used steel rails for re-rolling"are classifiable as scrap of steel under heading 7204 of the Customs Tariff Act, 1975 or as old and used rails of railway under heading 7302 10.10. This would also determine the importability of the said item, ie., whether the goods are freely importable under para 2.1 of the Foreign Trade Policy, 2004-2009 read with para 2.30 of the Head Book of Procedure, Vol.Ior whether it would be restricted for import and require specific licence in terms of para 2.17 of the policy ibid. The "waster and scrap" of iron and steel is classified under the heading 7204 of the Customs Tariff Act, 1975. Section Note 8(a) to Section XV of the Customs Tariff Act defines the term waste and scrap as "metal scrap and waste from the manufacture or mechanical working of the metals and metal goods definitely not usable as such because of breakage, cutting up, wear or other reasons." Explanatory Notes to HSN under heading 7204 mention that the heading covers waste/scrap of iron and steel as defined in Note 8(a) to Section XV. The note mentions details of the articles, which are covered under said heading. It also mentions that the waste and scrap is generally used for recovery of metals by remelting or for the manufacture of chemicals. However, the heading excludes articles, which with or without repair or renovation can be reused for former purpose or can be adopted for other uses; it also excludes structural steel works usable after renewal of worn out parts.
Decision: The Board considered the alternative headings of 72.04 and 73.02 for the item. The main point for discussion related to the policy restrictions on the import of used rails. Chapter 73 of the CTA 75 specifically covers articles such as rails. In the case under reference, even though the items in question were in the form of rails, these bore markings of use and therefore, these could not be used again in rails. Hence, suitable classification would be as scrap of CTH 7204 and not as articles under heading 7302. It has accordingly been decided by the Board that used steel rails for re-rolling were appropriately classifiable under CTH 7204 and these were freely importable."
26. On 11.01.2005, the department has stated that for the items in question, in the form of rails, which have marks of use and could not be used as rails, the suitable classification would be scrap of CTH 7204 and not articles under heading 7302. Board has decided that used steel rails for re-rolling were appropriately classifiable under CTH 7204 and that there were freely importable. Bill of loading, dated 13.01.2006 shows that the goods contracted between the supplier and the appellant as M.S.Re-rollable consisting of rails, heavy metal scraps.
27. Circular No.8/2006-Cus, dated 17.01.2006, on Rails - Used steel rails - Classification of [Heading 7302], issued by the Government of India, Ministry of Finance (Department of Revenue), Central Board of Excise & Customs, New Delhi, is as follows:
"I am directed to invite your attention to the Board has issued circular No.1/2005-Cus, dated 11.01.2005 [2005 (179) ELT T22] and doubts expressed on the issue of appropriate classification of “used steel rails” – whether under CTH 7204 as “ ferrous waste and scrap “ or under CTH 7302 as “used rails”.
2. The issue of classification has been re-examined by the Board with respect to the clarification issued under Central Excise Tariff vide circular No.27/89 dated 21.09.89. The Board decided that heading No.7204 read with Section Note 8(a) to section XV of the First Schedule to the Customs Tariff Act and explanatory notes of Harmonized Commodity Description and Coding System (HSN) cover only such waste and scrap as would generally be used for recovery of metal by re-melting or for the manufacture of chemicals. Such waste and scrap which is not for re-melting will have to be classified in the other appropriate headings of the tariff. Further, HSN notes to CTH 72.04, by example excludes structural steel work usable after renewal of worn-out parts; worn railway lines which are usable as pit props or may be converted into other articles by re-rolling; steel files capable of re-use after cleaning and sharpening. Accordingly, “used rails” would not be covered by chapter heading 7204.
3. Further, Board also noted that CTH 7302 specifically covers ‘rails’. HSN note on this heading provides that it covers all lengths of rails, all rails of the type normally used for railway or tramway track, irrespective of their intended use. There is no exclusion for ‘used rails’ from this CTH.
4. In view of the above and for the purpose of uniformity in classification, it is hereby clarified by the Board that the appropriate classification of “used steel rails” shall be under CTH 7302, and not under CTH 72.04 as ferrous waste and scrap. The instructions contained in para 8 of Board’s circular no. 1/2005 may be considered as modified accordingly.
5. The above instructions may be brought to the notice of all concerned for effective implementation. Please acknowledge receipt of this circular."
28. In Bill of Entry, dated 14.02.2006, the goods are described as MS Re-Rollable Scrap consisting of used rails and the duty payable is Rs.15,55,555/-. Appellant has written a letter, dated 23.03.2006 and 10.04.2006, to the Commissioner of Customs (Imports) and they are extracted hereunder:
23.03.2006 To The Commissioner of Customs (Imports) Group 3 & 4, Customs House, Chennai 600 001.
Dear Sir, Sub:- Import of Re-Rollable Scrap consisting of Rails in 13 x 20' Containers.
Ref:- 1. BL No.CPHO108953/003, Dated 13.01.2006.
2. Bill of Entry No.963002, dated 14.02.2006.
We wish to inform you that we have imported 355.845 MT of Re- Rollable Scrap consisting of Rails vide BL No.CPHO108953/003, Dated 13.01.2006. The Bill of Entry No.963002 was filed on 14.02.2006. The goods were ordered for First Check and the Examination Officer declared the goods as Re-Rollable Scrap consisting of Used Rails. The goods imported are the same as the examination report given by the Examination Officer.
We wish to bring to your kind notice that the Re-Rollable Scrap consisting of Rails were ordered for import by us before the Customs Circular No.8/2006, dated 17.01.2006 (ie., we have entered into a contract on 02.12.2005). Copy of the contract is enclosed for your reference. The goods were shipped during 1st/2nd week of January 2006 under BL No.CPHO108953/003, dated 13.01.2006. Since the Customs Circular was issued without any prior intimation to the trade and the user industry, we request your goodselves to kindly take a lenient view at the time of adjudication, as we had been informed that the Used Rails are restricted for import as per the new circular. Further, we hereby accept the value enhancement for assessment of the above bills @ USD 280 per MT.
We may be permitted for a personal hearing without issuing Show Cause Notice.
Thanking you, Yours faithfully, For Goyal Metal Industries Pvt. Ltd., Director.
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10.04.2006 To The Commissioner of Customs (Imports) Customs House, Chennai 600 001. Dear Sir, Sub:- Import of Re-Rollable Scrap consisting of Rails in 13 x 20' Containers.
Ref:- 1. BL No.CPHO108953/003, Dated 13.01.2006.
2. Bill of Entry No.963002, dated 14.02.2006.
3. Our letter, dated 23.03.2006.
4. Your F.No.S59/45/06 S8/302/06-Gr.3&4, dt.05.04.2006 We thank you for the opportunity given to us to explain our position regarding clearance of 355.845 MT of Re-Rollable Scrap consisting of Used Rails.
1. Contract of supply of the above material is much before the date of Customs Circular (ie., 17.01.2006)
2. Pre Shipment Inspection Certificate No.8855, dated 05.01.2006 issued by Apex Stewart (Assayers) Ltd.
3. Bill of Lading No.CPHO108953/003, Dated 13.01.2006. From the above, it can be seen that the above transaction was completed before the date of Customs Circular No.8/2006, dated 17.01.2006. In view of the above, we request you to kindly take a lenient view and waive the fine and penalty. Though the Bill of Entry was filed on 14.02.2006, the cargo has not yet been cleared and therefore, we are incurring huge demurrage at SICAL CFS.
We request your goodselves to kindly consider our appeal for waiver of Fine and Penalty.
We look forward to your kind co-operation in this regard. Thanking you Yours faithfully, For Goyal Metal Industries Pvt. Ltd., Director.
29. Admittedly, goods were shipped on 13.01.2006, before Circular, dated 17.01.2006 was issued. The adjudicating authority, vide order, dated 27.04.2006, ordered fine and penalty, as stated above. On appeal, the Tribunal, vide order, dated 03.11.2016, ordered as follows:
"6. It may be stated that the goods covered by Chapter 73 and particularly 73021010 which contains "used rails" in its fold, was "restricted goods", during the relevant period in terms of para 2.17 of the EXIM Policy 2004-2009. Such goods were subject to licence. Present imports were made without licence and misdeclared. This also calls for upholding the adjudication order. We order accordingly."
30. In Madras Steel Re-Rollers Association v. Union of India reported in 2007 (217) ELT 167, a Hon'ble Division Bench of this Court quash the Circular, dated 17.01.2006, as hereunder:
"12. Section 151A of the Customs Act confers the power to issue direction only with respect to classification of the goods and with respect to levy of customs duty so long as it does not affect the quasi-judicial power of the authorities. The Board has no power to interfere with the quasi-judicial powers of assessing officer or for that matter the appellate authority or revisional authority. In our opinion, the impugned Circular is beyond the powers conferred on the Board under Section 151A of the Act and the same is liable to be quashed and set aside. Accordingly, Writ Appeal is allowed and the impugned Circular, dated 17.01.2006, is set aside. It is needless to say that the assessing officer shall consider the classification in respect of the goods."
31. In Commissioner of Central Excise, Bangalore v. Mysore Electronics Industries Ltd., reported in 2006 (204) ELT 517 (SC), at Paragraphs 15 and 16, the Hon'ble Supreme Court held that re-classification can take effect only prospectively from the date of communication of show cause notice proposing re-classification. At Paragraphs 15 and 16, it held as follows:
"15. In the instant case, the assessee had filed a classification list effective from 01.03.1993, classifying the Single Panel Circuit Breakers under Heading No.85.35 and claiming concessional rate of duty at 5% under Notification No.52/93 dated 28.02.1993. The said classification list was approved by the jurisdictional Assistant Commissioner, on 10.06.1993. Thereafter, the assessee cleared the said goods in accordance with the approved classification list. When this approved classification was proposed to be revised to reclassify the Single Panel Circuit Breakers under Heading No.85.37 of the tariff, such re- classification can take effect only prospectively from the date of communication of the show cause notice proposing re- classification. In the instant case, the show cause notice was communicated to the assessee only on 31.12.1993. Therefore, as rightly urged by the learned counsel for the respondent, the reclassification can take effect only from 27.04.1994 and accordingly the differential duty can be demanded only from that date.
16. In view of the above, we see no reason to interfere with the order passed by the Commissioner (Appeals) and as confirmed by the Tribunal. The appeal is accordingly dismissed."
32. In Suchitra Components Ltd., v. Commissioner of Central Excise, Guntur reported in 2008 (11) STC 430 (SC), the Hon'ble Supreme Court held that beneficial circular to be applied retrospectively while oppressive circular applicable prospectively.
33. Clauses 2.7 and 2.17 of Chapter 2 of General Provisions regarding imports and exports, are extracted hereunder:
34. For the purpose of import, as per Clause 9.11, the following date would be reckoned,
35. Though the adjudicating authority has referred to the bill of entry, dated 14.02.2006 and held that the appellant has mis-declared the goods imported, as per the general provisions regarding imports and exports, Clause 9.11, the date affixed on the bill of lading shall be taken into consideration for the purpose of import, which in the case on hand, is 13.01.2006 and in such circumstances, Circular, dated 11.01.2005 would be applicable, wherein, the Board has held that the used steel rails for re-rolling are classifiable under CTH 7204 and that they were freely importable.
36. On the contention of the learned counsel for the revenue that import-export policy was in vogue between 2004 and 2009, and that the appellant did not possess any licence, at the risk of repetition, let us consider the issue before the Board and the decision taken, "Issue in Brief: This matter was discussed in the Tariff Conference of Chief Commissioners of Customs held at Shillong on 13th - 15th May, 2004 (Agenda Point T-2). The issue involved is whether the goods described as "used steel rails for re-rolling"are classifiable as scrap of steel under heading 7204 of the Customs Tariff Act, 1975 or as old and used rails of railway under heading 7302 10.10. This would also determine the importability of the said item, ie., whether the goods are freely importable under para 2.1 of the Foreign Trade Policy, 2004-2009 read with para 2.30 of the Head Book of Procedure, Vol.Ior whether it would be restricted for import and require specific licence in terms of para 2.17 of the policy ibid. The "waster and scrap" of iron and steel is classified under the heading 7204 of the Customs Tariff Act, 1975. Section Note 8(a) to Section XV of the Customs Tariff Act defines the term waste and scrap as "metal scrap and waste from the manufacture or mechanical working of the metals and metal goods definitely not usable as such because of breakage, cutting up, wear or other reasons." Explanatory Notes to HSN under heading 7204 mention that the heading covers waste/scrap of iron and steel as defined in Note 8(a) to Section XV. The note mentions details of the articles, which are covered under said heading. It also mentions that the waste and scrap is generally used for recovery of metals by remelting or for the manufacture of chemicals. However, the heading excludes articles, which with or without repair or renovation can be reused for former purpose or can be adopted for other uses; it also excludes structural steel works usable after renewal of worn out parts.
Decision: The Board considered the alternative headings of 72.04 and 73.02 for the item. The main point for discussion related to the policy restrictions on the import of used rails. Chapter 73 of the CTA 75 specifically covers articles such as rails. In the case under reference, even though the items in question were in the form of rails, these bore markings of use and therefore, these could not be used again in rails. Hence, suitable classification would be as scrap of CTH 7204 and not as articles under heading 7302. It has accordingly been decided by the Board that used steel rails for re-rolling were appropriately classifiable under CTH 7204 and these were freely importable."
37. Further, Circular, dated 17.01.2006, has been struck down by this Court. Though the learned standing counsel for the customs and central excise contended that at the time of import, a licence was required for the import of subject goods, claimed as restricted goods, in terms of Clause 2.7 of the General Provision relating to Imports and Exports, in terms of Clause 2.17, all second hand goods, excepting the second hand capital goods, shall be restricted for imports and may be imported only in accordance with the provisions of this policy ITS (HS), Handbook (Vol.I), Public Notice or a licence/certificate/permission issued in this behalf. Public notice in the form of Circular, dated 11.01.2005 has been issued by the Central Board of Excise and Customs, New Delhi and import made as per the bill of lading, dated 13.01.2006, is covered by the said circular.
38. Though by inviting the attention of this Court to the nomenclature and the grounds of appeal, learned standing counsel for the customs and central excise, submitted that as the issue pertains to classification and hence, instant appeal is not maintainable, we are not inclined to accept the said cotnention for the reasons, stated supra. Import is covered by Circular No.11/2005 and that there is no mis-declaration. Duty has been paid, as per the Tariff.
39. In the result, the substantial questions of law, are answered, in favour of the appellant. Civil Miscellaneous Appeal is allowed. No costs.
Index: Yes
Internet: Yes skm
(S.M.K., J.) (R.S.K., J.) 06.10.2017
S.MANIKUMAR, J.
AND R.SURESH KUMAR, J.
skm
C.M.A.No.1946 of 2017
06.10.2017