Case Law Details

Case Name : ESSA Exports Vs Commissioner of Customs (CESTAT Chennai)
Appeal Number : Customs Appeal No.41548 of 2014
Date of Judgement/Order : 03/01/2024
Related Assessment Year :

ESSA Exports Vs Commissioner of Customs (CESTAT Chennai)

Introduction: In a notable decision, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Chennai provided substantial relief to ESSA Exports in a case concerning the import of goods declared as “Heavy Melting Iron Scrap.” The dispute arose when the Department contested the nature of certain goods, leading to confiscation and penalties. The CESTAT Chennai, after careful consideration, deemed the seized goods to be ‘scrap,’ altering the original order.

Detailed Analysis: ESSA Exports filed a Bill of Entry for the import of goods declared as “Heavy Melting Iron Scrap of 46.47 MTs.” Upon examination, the Department found an excess quantity of 3.862 MTs and identified 22 MTs as secondary quality rusted pipes. Disputes ensued regarding the classification of these pipes as ‘scrap.’ The original authority enhanced the value of the goods, ordered confiscation, and imposed penalties. The Commissioner (Appeals) reduced the redemption fine and penalty but did not provide absolute relief.

The pivotal point of contention was the nature of the 22 MTs of goods. The Department claimed these were serviceable pipes, not ‘scrap,’ based on visual examination. However, the Commissioner (Appeals) noted the absence of expert opinion supporting this conclusion and emphasized that pipes could be part of scrap.

ESSA Exports had, in good faith, requested mutilation of the goods before clearance to establish their intent to import only scrap. This request went unconsidered by the authorities.

The CESTAT Chennai, analyzing the case, observed the lack of evidence establishing that the imported goods were not scrap but serviceable pipes. The Commissioner (Appeals)’s finding that the Department provided no expert opinion on the quality of the pipes supported the contention that the goods could be considered ‘scrap.’ The CESTAT considered the appellant’s request for mutilation as indicative of their intention to import scrap.

Additionally, the tribunal questioned the enhancement of the value of the goods, emphasizing the Department’s failure to prove that the items were not scrap.

Conclusion: In a conclusive decision, the CESTAT Chennai modified the impugned order, setting aside the enhancement of the value of the 22 MTs of goods and the confiscation. The redemption fine and penalty were also nullified. The tribunal recognized the bonafide request for mutilation as a gesture of the appellant’s genuine intent to import scrap. The ruling serves as a reminder of the importance of expert opinions and evidence in cases where the nature of imported goods is in dispute. ESSA Exports secured relief, emphasizing the need for a thorough examination and substantiated claims in customs-related matters.

FULL TEXT OF THE CESTAT CHENNAI ORDER

Brief facts are that the appellant filed Bill of Entry for import of goods declared as “Heavy Melting Iron Scrap of 46.47 MTs”. On examination, it was found that the total quantity was 50.332 MTs and out of this, 22 MTs were found to contain secondary quality rusted pipes. The Department was of the view that these rusted pipes are serviceable and cannot be considered as ‘scrap’. After due process of law, the original authority rejected the declared value and enhanced the value of 22 MTs of goods and ordered for confiscation of the same with option to redeem the goods on payment of redemption fine of Rs.3 lakhs. A separate penalty of Rs.95,000/- was imposed under Section 112 (a) of the Customs Act, 1962. Aggrieved by such order, the appellant filed appeal before the Commissioner (Appeals) who reduced the redemption fine from Rs.3 lakhs to Rs.1,50,000/- and the penalty was reduced from Rs.95,000/- to Rs.50,000/-. The appellant is now before the Tribunal against such order.

Confiscation Invalid Department Unable to Prove Imported Goods Were Serviceable Pipes, Not Scrap

2. The learned counsel Sri G. Derrick Sam appeared and argued for the appellant. It is submitted that during the examination of the goods, it was alleged by the department that there was an excess quantity of 3.862 MTs. The appellant is not contesting the excess quantity alleged by the department and accepts the same. The contention is confined to confiscation of 22 MTs of goods which is alleged to be rusted pipes serviceable in nature and also enhancement of declared value of these 22 MTs. Ld. Counsel adverted to page 4 of the impugned order to submit that the department has not produced any expert opinion to establish that the 22 MTs of goods are not scrap and are in the nature of serviceable pipes. The Department relying on visual examination has concluded that the goods are serviceable in nature and cannot be considered as ‘scrap’. It is submitted by the counsel that there is a finding by the Commissioner (Appeals) that in the absence of expert opinion regarding quality of the pipes whether they are serviceable pipes by themselves, they cannot be considered to be not ‘scrap’. In spite of such finding, the Commissioner (Appeals) has only reduced the redemption fine and penalty without giving the absolute relief to the appellant.

3. Further, that the appellant had requested for mutilation of the goods as early as vide their letter 27.12.2011 so as to render the goods as ‘scrap’ before clearance of the goods. The said request was not considered by the original authority or the Commissioner (Appeals). It is prayed that the redemption fine and penalty imposed may be set aside.

4. Ld. A.R Sri N. Sathyanarayanan appeared and argued for the Department. It is submitted that the goods imported (22 MTs) are in the nature of pipes and are completely serviceable in nature and therefore the finding of the authorities below that these are not scrap is correct. The order of confiscation and the imposition of redemption fine and penalty is legal and proper. It is prayed that the appeal may be dismissed.

5. Heard both sides.

6. The first issue is whether the 22 MTs of goods imported as ‘scrap’ is liable for confiscation or From page-4 of the impugned order, it is seen that the department has concluded that the goods are not scrap and are in the nature of serviceable pipes only on visual examination. The Commissioner (Appeals) has observed that the department has not adduced any documentary evidence in the nature of expert opinion so as to arrive at the conclusion that the goods are not scrap. The said observation is reproduced as under :

“I find that neither the investigation nor the LAA had completed the process of investigation or adjudication. In the absence of any expert opinion regarding the quality of the pipes and whether they are serviceable pipes as themselves, it cannot be said that they are not scrap. A pipe can be a scrap but a scrap cannot be a serviceable pipe. This aspect should have been studied by the LAA. The LAA had merely taken into account the fact that the pipes were found and, therefore, it constitutes a misdeclaration. He never analyzed the aspect whether the pipe itself a par of the scrap or not.”

7. When there is such categorical finding by the Commissioner (Appeals) and the Department has not adduced any evidence to show that the goods imported are not scrap but are serviceable pipes, in our view, the confiscation is not justified. Further, it is also seen that the appellant had requested for mutilation of the said quantity of goods before home clearance. The said request has not been considered by the department. The request for mutilation of the goods would show bonafides of the appellant that they intended only to import scrap and not pipes which are to be reused.

8. It is also seen that the value of 22 MTs of goods has been enhanced by the original authority from USD 370 per MT to USD 600 per MT which, in our view, is incorrect as department has not established that the goods are not scrap.

9. From the foregoing, we hold that confiscation of goods as well as enhancement of value cannot be justified. In the result, the impugned order is modified to the extent of setting aside the enhancement of value of 22 MTs of goods as well as confiscation of the same. The redemption fine and penalty imposed are also set The impugned order is modified accordingly. The appeal is partly allowed in above terms.

(Dictated and pronounced in court)

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