CAAR held that goods ‘mill processed non-alloy ferrous waste metal goods wound in coil’ does not appear to be waste or scrap, and therefore, not classifiable under sub heading 72044900. These goods merit classification under subheading 72099000.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY FOR ADVANCE RULING, MUMBAI
M/s Uwas Recycler LLP filed an application on 14.06.2021, seeking an advance ruling for the classification of mill processed non-alloy ferrous waste metal goods wound in a coil.
2. The applicant is a limited liability partnership company primarily engaged as a merchant importer. The applicant intends to import mill processed non-alloy ferrous waste metal goods wound in coil from South Africa. The applicant has elaborated on the origin of the goods and their characteristics as follows:-
The said goods are re-rollable waste and are obtained as a result of the manufacturing of cold-rolled coils from hot-rolled coils. In a single stand cold rolling mill manufacturing, a hot-rolled coil is wound onto the entry reel and allowed to pass between 4HI or 6HI steel rolls for desired thickness. The hydraulic force is gradually applied so that the immediate application of the required force does not break the coil instantly. In such cases, some length of coil remains devoid of desired thickness because of limited application force and is therefore neither a hot-rolled nor a cold-rolled coil, having a non-uniform thickness at indefinite intervals. Such a coil has variable tensile strength and elongation properties. These coils are thus generated at an initial stage, and are cut at ends and wound in coil form, which is nothing but mill waste and do not serve the purpose for which they are meant. These coils thus so obtained, are used by unorganized steel manufacturers to re-roll them to get the desired configuration. The waste so generated have the following characteristics: a) non-uniform gauges at indefinite intervals. b) weight of the coils ranges from 200-800 Kgs, c) length of the coils varies from 15 to 20 meters, d) the product obtained is neither hot-rolled nor cold-rolled as tensile strength and elongation are different in the same coil. The applicant has submitted a test report of a certified and accredited lab that carried out a detailed inspection of the samples provided by the applicant and elaborated the specific parameters. It is further stated that such goods do not satisfy parameters for cold-rolled coil as prescribed under IS-513:2008. Thus, it is neither a hot-rolled coil nor a cold-rolled coil. Section note 8(a) (ii) of Section XV describes waste and scrap as metal goods definitely not usable as such because of breakage, cutting-up, wear or other reasons. The product satisfies the above definition owing to its non-uniform thickness at indefinite intervals, its tensile strength and elongation. The impugned product is a re-rollable scrap and is classifiable under tariff 72044900 as other waste and as per notification no. 02/2021-Customs, the basic customs duty on this product is 2.5%.
3. The applicant has further stated that this product is not a prime product and is used only by secondary steel manufacturers who in turn re-roll this waste in the desired configuration. The chartered engineer certificate to this end is also submitted. The chartered engineer visited one of the units of unorganised steel manufacturer of steel hinges. The chartered engineer has explained the re-rolling process undertaken at the said unit as follows:-
The manufacturing process of steel hinges requires a uniform cut length of steel strips, which are obtained from strips of non-uniform thickness. These non-uniform strips are cut from re-rollable steel coil of non-uniform thickness at different intervals. The desired thickness is achieved by passing the cut strips between rolls with a continuous flow of water-soluble oil.
4. In the CAAR – I form, the applicant has declared that they would import under the jurisdiction of the Principal Commissioner/ Commissioner of Customs, Indore.
Accordingly, their application was forwarded to the jurisdictional customs authorities for comments. The comments received are summarised as follows:-
The imported mill processed non-alloy ferrous waste will be further sold to unorganized steel manufacturers for re-rolling. The applicant seeks classification of the proposed import product under tariff heading 7204 of the Customs Tariff Act, 1975. The classification sought by the applicant for “mill processed non-alloy ferrous waste metals goods wound in coil” falls under Section XV which covers “Base metals and articles of base metals”. The description of the particular heading, i.e., 7204 is “Ferrous waste and scrap; remelting scrap ingots of iron or steel”. 72044900 is the subheading for “Other waste and scrap”. The justification for classifying the product under the said heading is that it is a re-rollable waste and arising out of the process of converting hot-rolled coil into cold-rolled coil. The hot-rolled coil is passed through a hydraulic press to change into desired/reduced thickness by gradually applying hydraulic force until the desired thickness is achieved/ received. Since the force is applied gradually which results in different thicknesses of output at different intervals until the desired thickness is achieved/ received and once the desired thickness is derived the coil length up to that stage is cut down and separated. The remaining cut coil has non-uniform gauges, different lengths, weight, thickness and can’t be used as prime material. Unorganized steel sector manufacturers use this uneven coil for sundry items and uniform thickness is achieved by re-rolling it again. Hence, this waste coil is classified as “re-rollable waste”. This waste comes in coil form for easy handling. It can’t be classified as a remelting scrap which attracts nil duty since the changes introduced in the Finance Bill, 2021 and it is used for re-rolling by unorganized sector and attracts 2.5% duty. As regards the further uses of the re-rollable waste coil a chartered engineer certificate is enclosed by the applicant which is self-explanatory. Further as per para 13.3 of IS 2549:1994 (Code for classification of processed ferrous scrap), which reads as, “It shall consist of crop and (front and back end cutting) of semi-finished or fmished products suitable for re-rolling of maximum and minimum sizes agreed upon between buyer and sellers”. Accordingly, goods to be imported are classifiable under heading 72.04.
5. The application was heard on 05.08.2021 in virtual mode. No one appeared on behalf of the Principal Commissioner/Commissioner of Customs, Indore. The applicant was represented by Shri Sunil Deshpande, authorised representative, who has taken me through their application. The end cuttings which would be imported by the applicant are wound on a coil. The length of such sheet doesn’t exceed 10-15 metres. He also clarified that the sheet is of variable thickness, but do not exceed 3mm He also explained that the test report submitted along with the CAAR-I application by the applicant is not of the consignment to be imported, but of the material already available in their warehouse.
6. The applicant vide letter dated 09.08.2021 made additional submissions. It was informed that UWAS RECYCLERS LLP has been allotted PAN no. AAGFU9198K and import-export code AAGFU9198K. The quotation of Paragon Steel Supplies Co.Ltd. appended with the CAAR-I form was to prove genuineness and to get clarification on tariff classification, and it is just for the illustration purpose. They intend to import said product from different countries regularly depending upon market situation and competitive prices. The applicant clarified that goods to be imported will be a re-rollable waste having a non-uniform thickness at indefinite intervals and weight varying from 200-800 kg. They prefer to import the above-mentioned goods over local purchases because of easier norms and procedures of supplier companies for compliance and competitive pricing. The lab report appended with the CAAR-I foiiii was of Choksi Laboratories Limited to get technical specifications of the goods to be imported.
7. The applicant was requested to clarify the following vide email dated 10.08.2021. The following reply was received on 17.08.2021:-
Q1. What is the composition of the product? Whether it is ferrous, iron, non-alloy steel, stainless steel or any other alloy steel?
A: Our product is namely mill processed non-alloy ferrous waste wound in Coil.
Q2. Whether imported are goods cold-rolled or hot-rolled? Is any further work carried out on the rolled product?
A: The product to be imported by us for which advance ruling is applied is neither a cold-rolled nor a hot-rolled. This waste gets generated in the process of manufacturing of cold-rolled coil from hot-rolled coil. The portion of the coil that does not become a fmal product because of not being properly rolled (because of non-uniform force) is generated at both ends of the main coil (fmal product). This portion is being cut/ separated and disposed of as a re-rollable waste as it is.
Q3. Whether all the goods imported in the form of the coil?
A: Yes, generally re-rollable waste that gets generated at the time of cold rolling in the cold rolling mill is in a form of small coils. Companies dispose of this material “as and where basis”.
Q4. What are the physical parameters of the goods – width, thickness and length?
A: The above re-rollable waste which is proposed to be imported by us namely mill processed non-alloy ferrous waste wound in the coil has the following physical parameters:-
Thickness- Our product does not contain any specific thickness and thus a particular thickness cannot be specified. Our product contains numerous thicknesses ranging from 0.30 mm to 4mm in each and every coil to be imported.
Width- each and every coil has a different width which may range from 900mm to 1400mm.
Length- The average weight varies from 200 to 800 kgs. Correspondingly, average length varies from 10 to 20 meters.
Q5. What is the Carbon content by weight?
A: The carbon content of our product to be imported varies from 0.04-0.30%.
Q6. Whether imported goods are clad, coated or plated? If yes, then with which metal/element?
A: The above re-rollable waste which is to be imported by us has no cladding or plating.
8. I have considered all the materials placed before me for the subject product. I have gone through the submissions made by the applicant during the personal hearing and reply received from the jurisdictional Principal Commissioner/ Commissioner. The goods for which advance ruling is sought are mill processed non-alloy ferrous and cuttings wound in a coil. The applicant has given an explanation for the origin of such waste as a gradual application of force during cold rolling of a hot-rolled coil. Hot rolling means rolling at a temperature between the point of rapid recrystallisation and that of the beginning of fusion. The temperature range depends on various factors such as the composition of the metal/alloy. Generally, the final temperature achieved in hot rolling is about 900 °C. Cold rolling, on the other hand, is carried out over hot-rolled strip/sheet at ambient temperatures, i.e., below the recrystallisation temperature. Hot rolling and cold rolling are mechanical processes involved in the production of flat products.
9. Applying General Rule of Interpretation 1 “…. for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require…”. In the HSN classification system, section XV covers the base metals and articles of base metal, and chapter 72 pertains to goods of iron and steel. Chapter note 1(k) of Chapter 72 assigns the following expression to flat-rolled products- “Rolled products of solid rectangular (other than square) cross-section, which do not conform to the definition at (if) above in the form of
Flat-rolled products include those with patterns in relief derived directly from rolling (for example, grooves, ribs, chequers, tears, buttons, lozenges) and those which have been perforated, corrugated or polished, provided that they do not thereby assume the character of articles or products of other headings.
Flat-rolled products of a shape other than rectangular or square, of any size, are to be classified as products of a width of 600 mm or more, provided that they do not assume the character of articles or products of other headings.”
Flat products comprise strips, sheets and plates. These products characteristically have a width many times higher than their thickness in sharp contrast to long products where the sections are square or rectangular having a small ratio of width to thickness. The applicant stated vide email dated 17.08.2021 that they intend to import coils having a thickness in the range of 0.30 mm to 4 mm and width from 900 mm to 1400 mm These physical parameters satisfy the explanation given in the above chapter note. Therefore, impugned goods are liable to be viewed as flat products.
10. Flat products are used in important manufacturing sectors like in automobiles, railways, shipping, pressure vessels including boilers, pipes for conveying fluids, domestic appliances like that of manufacturing white goods, security & storage items, in construction like those in roofing, in packaging where tinplate plays important role. Strips and sheets are manufactured by hot rolling process, however, when they are required to have higher yield strength and to be used with closer tolerances of thickness and with smoother or brighter surface they are subjected to cold rolling. As elaborated by the applicant, the hot-rolled product undergoes cold rolling. This is nothing but the process involved in the manufacturing of cold-rolled products. To understand how cold-rolled steel strips are produced, IS 7226:1974 is referred. It states that cold-rolled strips are produced by cold rolling descaled hot-rolled strips between plain rolls. Further, the draft manual for certification of hot and cold-rolled steel flat products of BIS also states that, in the case of cold rolling operations, hot-rolled sheets are subjected to cold rolling. They are the raw material for cold rolling which is carried out at ambient temperature. General explanatory note IV (B) (1) of Chapter 72 confirms that the cold rolling is carried out at ambient temperatures, i.e., below the recrystallisation temperature. Therefore, the claim of the applicant that the impugned goods are neither hot-rolled products nor cold-rolled products is untenable and these are nothing but cold-rolled products. Flat-rolled products are classified under subheadings 72.08 to 72.12. The applicant informed that the intended product to be imported is not cladded/plated/coated. Therefore, these cold-rolled products are specifically classifiable under subheading 72.09 “Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, cold-rolled (cold reduced), not clad, plated or coated”.
11. The applicant states that as per the lab report the sample goods do not satisfy standards prescribed in BIS 513:2008 (Standards for cold reduced carbon steel sheet and strip). The inspection in the lab was carried out on a single coil provided by the applicant. Chemical and mechanical properties were inspected at starting and ending positions. Physical dimension, namely thickness, was measured at different intervals. The BIS 513:2008 standards cover the requirements of cold reduced low carbon steel sheets and strips for bending and drawing purpose and where the surface is of prime importance. The lab report was compared to BIS 513:2008 standards. It was observed that the sample satisfies prescribed chemical composition standards. The mechanical properties of the sample, tensile stress and yield stress, were within the range as prescribed. Elongation at ending position was up to the standard, however, it was below standard at starting position. It was also observed that the thickness of the coil varies at different intervals. Therefore, this coil may not be considered strictly as a prime cold-rolled sheet or strip. However, as stated earlier, the scope of this standard is related to requirements of cold reduced low carbon steel sheets and strips for bending and drawing purpose and where the surface is of prime importance. There are many other operations that can be carried out on sheet and strip, like shearing, blanking, stamping, embossing, spinning, roll forming, etc. Therefore, the impugned goods may not be considered as a prime product as per BIS 513:2008, it still can be used for other purposes as a cold-rolled sheet or strip.
12. As per the applicant, section note 8 (a)(ii) provides an explanation for classifying their goods as waste and scrap. Further, the 8-digit classification as stated by the applicant is 72044900. Subchapter 72.04 covers ferrous waste and scrap; remelting scrap ingots of iron or steel. Section note 8(a) of Section XV covers waste and scrap:
i) all metal waste and scrap
ii) metal goods definitely not usable as such because of breakage, cutting-up, wear or other reasons.
Such waste and scrap of iron or steel is of a miscellaneous nature and generally takes the form of (1) Waste and scrap from the manufacture or mechanical working of iron or steel (e.g., crop ends, filings and turnings). (2) Articles of iron or steel, definitively not usable as such because of breakage, cutting up, wear or other reasons. As per HSN explanatory notes, waste and scrap are generally used for the recovery of metal by remelting or for the manufacture of chemicals. Further, it is clarified that the heading excludes articles which, with or without repair or renovation, can be reused for their former purposes or can be adapted for other uses; it also excludes articles that can be refashioned into other goods without first being recovered as metal. Thus, it excludes, for example, structural steelwork 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 reuse after cleaning and sharpening. As per the applicant, the impugned goods are not used for the recovery of metal by remelting. Further, with repair, renovation or re-rolling these goods can be adapted for other use. Hence impugned goods cannot be treated as metal waste and scrap and are not classifiable under subheading 72.04. Consequently, they are not eligible for benefit of sr.no. 369 of notification no. 02/2021-Customs dated 01.02.2021.
13. IS 2549:1994 (Code for classification of processed ferrous scrap) provides standards for the classification of processed ferrous scrap in the form it occurs in a steel manufacturing plant. Paras 13.1 to 13.3 cover re-rollable steel scrap. The relevant paras are reproduced below.
13.1 Re-rollable steel scrap: It shall consist of seconds and defectives or cuttings/rejected ingots/slabs/blooms/billets, bars, rods, angles, shapes, and sections, rails and railway materials such as wheels, tyres, axles, sleepers, sleeper bars, fish plates and flat-rolled products suitable for re-rolling without undergoing process ofmelting and length 5000 mm (max), width 800 mm (max), thickness 8 mm (minimum). In case of rails and railway materials there will be no size restriction.
13.2 Re-rollable steel scrap, used and salvaged: It shall consist of used, old and salvaged ingots, rods, angles, shapes, and sections, rails and railway materials such as wheels, tyres, axles, sleepers, sleeper bars, fish plates and flat-rolled products including plate cutting/shearing and materials obtained from breaking of old ship suitable for re-rolling without undergoing process of melting and length 2000 mm (max), width 800 mm (max), thickness 8 mm (minimum). In case of rails and railway materials there will be no size restriction.
13.3 Re-rollable steel scrap, crop ends: It shall consist of crop ends (front and black end cuttings) of semi-finished or finished products suitable for re-rolling of maximum and minimum sizes agreed upon between buyer and sellers.
The applicant has stated that the waste goods they intend to import are classifiable as per para 13.3. The applicant has submitted that the length of the coil will be of 10-20 metre.
Thus, conditions, as mentioned in para 13.1 and in para 13.2 are not satisfied. Further, it is difficult to get such a high length of scrap from crop and (front and back end cuttings) of a coil. Therefore, para 13.3 does not appear to be applicable to this product. This further substantiates the discussion of previous para, that the goods cannot be considered as waste and scrap.
14. As discussed in para 10, the impugned item is essentially a cold-rolled product.
Thus, it is classifiable under subheading 72.09 “Flat-rolled products of iron or non-alloy steel, of a width of 600 mm or more, cold-rolled (cold reduced), not clad, plated or coated ‘. The width of the goods to be imported is in the range of 900 to 1400 mm and thickness in the range of 0.03 to 4 mm. Under this subheading the 8-digit classification depends upon the thickness of the coil. Therefore, depending upon the thickness of the goods to be imported, an appropriate 8-digit classification may be applied under subheading 72.09. In case of uneven thickness, the goods would be classified under residual tariff heading 72099000.
In view of the above-mentioned discussions, I hold that the goods “mill processed non-alloy ferrous waste metal goods wound in coil” does not appear to be waste or scrap, and therefore, not classifiable under sub heading 72044900. These goods merit classification under subheading 72099000.