TMI Blog2012 (4) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... riff breakpoint earlier in the testing done by NML the first time. Under the circumstances, it cannot be held that the appellants have misdeclared the impugned goods in regard to the declared boron content. The arguments made on behalf of the department suggesting that the appellants should show that they had plant and machinery to produce boron steel and that they have not shown any proof that they have manufactured any standard grades of alloy steel etc. cannot be pressed against the appellants when the department has failed to discharge its initial burden to prove the alleged misdeclartion on the basis of chemical test undertaken at the NML. No reason to uphold the confiscation of the impugned goods, imposition of redemption fine and imposition of penalties on the appellant-company and the appellant-Managing Director. - C/437/2010 & C/438/2010 - 175-176/12 - Dated:- 2-3-2012 - Chittaranjan Satapathy, D N Panda, JJ. For Appellant: Shri V P Raman, Adv. For Respondent: Shri Parmod Kumar, SDR Per: Chittaranjan Satapathy: Heard both sides. The impugned goods were not allowed to be exported by the customs authorities holding them to be non-alloy steel. The ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether a particular steel product will attract export duty or not. 4. Under the import schedule, based on HSN, alloy steel is defined as follows:- Steels not complying with the definition of stainless steel and containing by weight one or more of the following elements in the proportion shown: - 0.3% or more of aluminum - 0.0008% or more of boron - 0.3% or more of chromium - 0.3% or more of cobalt - 0.4% or more of copper - 0.4% or more of lead - 1.65% or more of manganese - 0.08% or more of molybdenum - 0.3% or more of nickel - 0.06% or more of niobium - 0.6% or more of silicon - 0.05% or more of titanium - 0.3% or more of tungsten (wolfram) - 0.1% or more of vanadium - 0.05% or more of zirconium - 0.1% or more of other elements (except sulphur, phosphorus, carbon and nitrogen), taken separately. The criterion based on boron content is the least being 0.0008%. Appellants in this case claim that the impugned goods satisfied the criterion in respect of boron content and hence the impugned goods are to be considered as alloy steel and, therefore, the duty imposed on non-alloy steel will not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .(2003) 4 SCC 762 Polyglass Acrylic Manufacturing Co Ltd v. CCE, Vishakapatnam C. No deliberate misdeclaration/ concealment: a. The impugned order has erroneously concluded that the appellant has deliberately mis-declared the description of the goods as alloy steel with the view to evade Export duty and that the seller and the buyer inter-se never intended to transact a new commodity other than the non-alloy steel. It is pertinent to note that the appellant had nowhere concealed that they had specifically included boron to avail the benefit of Notification 66/08 dated 10.05.2008. To avail the exemption notification the appellant had not gone beyond the ambit of law. Tax planning cannot be termed as tax evasion. b. Further, the appellant had, right from the beginning consistently been saying that the purchase order for non alloy steel billets was altered to alloy steel billets with Boron content of 0.0008%. They had not concealed this fact nor had they contradicted it. The deposition of Mr. Rohan Mhatre (representative of the buyer) (Page 293 of Common Paperbook) clearly states that order was placed for alloy steel billets only. c. The impugned order has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise F. The view in favour of assessee to be taken into account: a. Assuming without admitting that two views are possible, the impugned order has failed to take into account the well established position of law that in such cases, the view in favour of the assessee has to be taken. The same is reiterated in the following cases: i. (1997) 10 SCC 291 Collector of Customs, Madras v. Lotus Inks ii. (2002) 7 SCC 591 Union of India Others v. Onkar S. Kanwar Others G. Re-testing of samples that had the required boron content unwarranted: It is pertinent to note that out of 76 samples, since 37 had already been certified as having the minimum boron content of 0.0008% to be classified as alloy steel. However the same were unnecessarily tested again. The appellant sent a letter dated 01 .07.2010 communicating its objections to the re-testing of the samples that had the required content of boron. (Page 383 of Common Paperbook) H. Enhancement of redemption fine and penalty unwarranted: a. The impugned order-in-original has failed to appreciate that the entire exercise of issuing the initial show cause notice dated 05.11.2008 was based on Repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying of uncertainty to the test results In Para 22 of the 010 dated 19.11.2010, the adjudicating authority has discussed that both the test laboratories viz. NML and KIDAO have mentioned about uncertainty of 0.0006 and 0.0003 respectively in the measurement of Boron content through Optical Emission Spectrometer in the alleged Alloy Steel exported by the appellant. Uncertainty can be applied both in the positive and negative directions and after applying uncertainty samples do not meet the minimum requirement of Boron content of 0.0008 to be classified as Alloy Steel. The appellant's objection for retesting of the entire consignment is not acceptable as they were present at the time of re-drawl of samples and did not object to the retestng of the entire consignment. The appellant's contention that 37 out of 76 samples which tested positive after first testing by NML were not required to be tested again is not acceptable as samples on application of negative uncertainty did not cross the qualifying value for classifying the product. Further, uncertainty is involved in testing Boron contents on each occasion, the drawl of samples from the entire consignment was required to arriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge variations found in the tests either for the presence of constituents / character of the constituent are same as in the case of M/s.New Shorrock Mills Vs Collector of Central Excise and ratio of the same cannot be applied to the instant case where multiple constituent are involved and percentage variation in the test results for the critical constituent required for classifying the product is more than 100%. C. Documentary evidences to show deliberate misdeclaration of export (1) Amendment of sale contracts and letter of credit after imposition of export duty At Para 16 of the OIO dated 19.11.2010, the adjudicating authority has discussed various sale contracts executed by the appellant with M/s. AL USAIMI for supply of Non Alloy Steel Grade (prime) of quality 3SP/PS, these contracts were signed before shipment of the impugned consignments and were for export of Non Alloy Steel Blades of Quality 3SP/PS which is a Russian steel grades for Non Alloy Steel. The price of said steel was negotiated at USD 950 per MT. A sequential reading of all sales contracts discussed in para 16 of the OIO, particularly the signed copy of the sales contract sent by the Met Gulf t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-mails the product to be exported was Non- Alloy Steel Grade. Therefore, filing of the shipping documents for export of alloy steel blade was with the clear intent of evading export duty and was in direct conflict and at variance with the description of export product agreed to in the sale contracts and the LCs and hence clearly a misdeclaration on the part of the appellants. D. Statements of various individuals showing non consumption of boron in manufacture of export product and deliberate attempt to misdeclare the export product to evade payment of export duty. (1) Deliberate misdeclaration of the export product to evade export duty (i) As per the statement of Shri. Rohan Anand Kumar Mhatre, General Manager, M/s. Mac Steel International Far East Ltd., India, Liasion office Mumbai, a representative of the appellant's buyer in India, till May 2008 they were buying / had made contract with the appellants for supply of Non Alloy Steel Grade. (ii) Shri. Rohan Anand Kumar Mhatre, General Manager when asked whether the buyer M/s.Mac Steel International Far East had really placed orders for supply of alloy steel with the appellant on the basis of which they have pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the source of Boron for production of alloy steel from 5th June to 10th June 2008, which have been exported by misdeclaring as alloy steel. (ii) Though the Production Manager of the appellant Shri. Sailesh Kumar Singh in his statement dated 12.08.2008 has stated that they started manufacturing Boron grade alloy steel from 5 th June 2008 by using the alloy steel scraps (Boron) up to 10th June 2008. However the same is not supported by any documentary evidence and same is also not acceptable for the reason that the percentage value of the other alloying constituents would have also increased in the same proportion as Boron which is not corroborated by such proportional increase in the value of other constituents in the test reports given by the NML. Further, they have not given any evidence to show that they have installed necessary plant and machinery to manufacture alloy steel as production of the same require different plant and machinery for controlling the percentage of various alloying elements. E. Fine and penalty is sustainable in the peculiar fact and circumstances of the case This is peculiar case in which the appellant in collusion with the buyers have mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant firm. 6. We have considered the submissions made by both sides in detail as also the case records and the clarification given by the concerned Scientist from NML at the time of hearing of the case. We find that as per the second test conducted by NML on 27.5.2010, 31 samples showed boron content less than 0.0008% whereas 42 samples showed boron content as 0.0008% or more, the highest being 0.0014%. The Scientist from NML clarified that the testing method gives rise to uncertainty to the extent of 0.0006%. We find that the 31 samples which were tested to be below 0.0008% were in the range of 0.0003% to 0.0007%. By applying uncertainty on the positive side, i.e. by adding 0.0006% to the test result, it is seen that all these 31 samples would also go above 0.0008%. It is well settled that when the error margin or tolerance limit is applied and the resultant value conforms to the declared value, no case can be held to have been proved against the assessee. The decision of the Tribunal in the case of New Shorrock Mills (supra) allowed the appeal of the assessee on this score. 7. What is surprising in this case is that the concerned Scientist from NML has indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes upto 200% which is of no use for the tariff purposes. We hope that the Board pays attention to this area and necessary testing facilities are made available so that the HSN based import tariff can be used for export duty purposes in the context of alloy steel with low boron content. 9. The test results obtained by the customs authorities in this case indicate that 42 samples satisfied the tariff breakpoint of 0.0008%. Other 31 samples would also cross the tariff breakpoint when the positive error margin of 0.0006% indicated by NML Scientist is applied. We also note that some of these 31 had crossed the tariff breakpoint earlier in the testing done by NML the first time. Under the circumstances, it cannot be held that the appellants have misdeclared the impugned goods in regard to the declared boron content. 10. There was a suggestion by ld. SDR that the negative error margin would take some of the samples below the tariff breakpoint, but obviously the negative error margins cannot be used just to prove the department's case. Only when, after applying the positive error margins, the value remains below the tariff breakpoint, can a case of misdeclaration be said to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duce alloy steel containing boron. These arguments cannot be wished away when the chemical test shows boron content in each of the samples and the error margin in the testing of NML prevents the goods from being characterized as having boron content lower than the tariff breakpoint. It has been argued on behalf of the department that what was entered for export was non-alloy steel conforming to Russian standard 3 SP grade, but we do not find any testing done in that regard to establish the same. The arguments made on behalf of the department suggesting that the appellants should show that they had plant and machinery to produce boron steel and that they have not shown any proof that they have manufactured any standard grades of alloy steel etc. cannot be pressed against the appellants when the department has failed to discharge its initial burden to prove the alleged misdeclartion on the basis of chemical test undertaken at the NML. 14. We also find that there is no inculpatory statement to the effect that no boron was used or that the impugned goods were free from boron. Consequently, we are of the view that the department's case is not proved beyond doubt and the benefit of dou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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