TMI Blog2013 (9) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... metal was excluded from Heading 72.04. Confiscation of goods u/s 111(d) and 111(m) – Redemption fine u/s 125 – Penalty u/s 112(a) – Held that:- Confiscation of the goods and penalty imposed in the order becomes not maintainable – Decide in favor of assesse. - C/81/2010 - 926/2012 - Dated:- 13-9-2012 - Shri Ashok Jindal and Mathew John, JJ. Shri N. Viswanathan, Advocate, for the Appellant. Shri Alok Shukla, JCDR, for the Respondent. ORDER The appellants are manufacturers of steel castings. They imported 5 consignments of steel scrap at Chennai Port during March 2009. For one consignment they filed Bill of Entry No. 983187 dated 31-3-2009 declaring the goods as Foundry grade heavy melting scrap claiming classification under Heading 72.04 and concessional rate of customs duty as provided at Sl. No. 200 of Customs Notification No. 21/2002-Cus. This exemption was applicable to Melting scrap of iron or steel (other than stainless steel) falling under sub-heading 72.04 of the Customs Tariff Act. 2. On examination of the goods it was seen that the goods were cut pieces of rails. Revenue was of the view that such goods are classifiable under Customs Tariff Item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually mentioning it apparently because it has already been struck down by the Hon ble High Court of Madras in Madras Steel Re-Rollers Association v. Union of India - 2007 (217) E.L.T. 167 (Mad.) and Hon ble High Court of Punjab Haryana in Gurudev Overseas Ltd. v. C.B.E. C. - 2008 (229) E.L.T. 195 (P H). 6. The learned counsel also submits that the appellants had placed order for HMS scrap. The overseas supplier had supplied the goods considering the goods to be HMS scrap. The load port certification by authorized Inspection Agency in their certificate dated 9-2-2009 issued in terms of Para 2.32 of Hand-book of Procedures certified the goods to be HMS scrap and such goods are internationally recognized as HMS scrap only. 7. The counsel submits that Heading 73.02 proposed by Revenue is meant only for articles which can be used as rails. His contention is that the impugned goods could not have been used as rails. 8. The counsel for the appellant points out that the issue of classification of used rails was taken by the appellants in a meeting of EXIM Facilitation Committee held on 16-2-2012 by the Directorate General of Foreign Trade. As per the minutes of the meeting at S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... samples conforms non-alloy steel 18. Conformity to metallurgical properties tolerance Not applicable 19. Conformity to magnetic properties tolerance Not applicable 20. Other observations The material appears to be mainly comprising broken rails or length less than 2000 mm and a few containers consisted fixtures of different types. 21. Remarks The rails comprising of about 90% by weight can be considered as re-rolling scrap and the balance 10% by weight can be considered as melting scrap 22. Classification of material grade 90% by weight re-rolling scrap and 10% by weight melting scrap 23. Basis of classification Visual examination, chemical analysis 24. Documents attached (i) Photographs (ii) Endorsement (iii) Chemical Analysis 25. Conclusion :- Based on the visual examination of the material and chemical analysis of the representative samples, the material can be considered as mix of about 90% by weight as re-rolling (RR) scrap and the remaining 10% of the material can be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So he argues that the exclusion mentioned in Heading 72.04 will apply. According to HSN Notes only waste and scrap that can be used only for recovery of metal by melting will get classified under Heading 72.04 and therefore the goods has to be classified under Chapter Heading 73.02. He relied on the decision of the Apex Court in the case of LML Ltd. v. Commissioner of Customs - 2010 (258) E.L.T. 321 (S.C.) holding that HSN Explanatory Notes are safe guide to resolve dispute on Tariff classification as it is internationally accepted nomenclature and HSN Explanatory Notes are dependable guide for interpretation of Customs Tariff. It is his argument that if HSN Notes are taken into consideration then the goods cannot be classified under Heading 72.04. 12. He further draws our attention to the Notes under Heading 73.02 which is as under :- This heading covers iron or steel railway and tramway track construction material, whether of normal or narrow gauge. (1) Rails for railways or tramways are hot-rolled products. The heading covers all lengths of such rails including bullhead rails, flange (or flat-bottomed) rails, grooved tram rails, slot rails for electric tramways and conduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading as under : (x) Subject : Classification of used steel rails for re-rolling under CTH 7204 or 7302 and whether freely importable. 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 730210.10. This would also determine the importability of the said item i.e. whether the goods are freely importable under para 2.1 of the Foreign Trade Policy, 2004-2009 read with para 2.30 of the Handbook of Procedures, Vol. I, or whether it would be restricted for import and require specific license in terms of para 2.17 of the policy ibid. The waste and scrap of iron and steel is classified under 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich 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 pitprops 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 ail 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. 17. The last mentioned Circular dated 17-1-2006 has been struck down by the High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not based on HSN. (ii) Sujana Steels Ltd. v. CCE - 2000 (115) E.L.T. 539 (Tri.) classifying used and rusted pipes under 72.04 in preference to Heading 73.04. This decision does not examine the issue of difference between melting scrap and re-rollable scrap. (iii) Patiala Castings Pvt. Ltd. v. UOI - 2003 (156) E.L.T. 458 (P H). The decision is in relation to rusted, pitted and perforated pipes. This decision is focused on the release of the goods. It does not raise the issue that the goods could be re-rolled and for that reason would not be classifiable under Heading 72.04. (iv) A.P. Steel Re-rolling Mills Ltd. v. CCE - 2004 (175) E.L.T. 580 (Tri.-Bang.) - classifying assorted iron scrap in different forms and shapes under Heading 72.04. (v) CCE v. Rimjhim Ispat Ltd. - 2005 (183) E.L.T. 283 (Tri.-Del.) old and used rails classifying old and used rails under Heading 72.04. Here the argument considered is that only a small portion of the goods were found to of doubtful nature. The exclusion for re-rollable scrap under Heading 72.04 is not considered. (vi) Shriram Metals Alloys Pvt. Ltd. v. CC - 2006 (200) E.L.T. 274 (Tri.-Chennai) - classifying ribbed, rusted rods u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 23. Further we note that the heart and soul of this dispute is not whether the impugned item is rails or scrap. The actual dispute is whether the item is a melting scrap or re-rollable scrap for the purpose of Notification 21/2002-Cus. This issue is being fought by Revenue raising the classification of the goods mentioned in the Notification. In fact this dispute is not only in respect of used and cut pieces of rails but in respect of railway axles, used pipes and various other types of used articles which also could be re-rolled. The difference in the case of used rails is that the item is specifically mentioned in HSN Notes under Heading 72.04 for the purpose of excluding it. The meaning of the expressions melting scrap or re-rollable scrap are not defined in the Customs Tariff or HSN notes though the HSN notes makes a mention that waste and scrap which can be rolled into other products without melting to recover metal is excluded from Heading 72.04. 24. In the above background we take into consideration the following,- (i) The decisions quoted in Para 20 above classifying such goods in Heading 72.04 which decisions have come to stay and many other decisions also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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