JUDGMENT
S.L Peeran, Member (J)
1. This is a Revenue appeal against Order-in-Original No. 109/97 dated 9.9.97 by which he has dropped the proceedings initiated by Revenue and has given directions by accepting the plea of the importer that the item imported was to be treated as ‘waste & scrap’. He has also given direction to clear the items under the supervision of the Excise Range officer and the same to be loaded in their furnace for melting purposes. He has directed that the concerned Central Excise Range officer shall issue the certificate to the effect that the impugned goods be re-melted in their furnace and shall produce the same to the custom house within 15 days thereafter. It is seen that the goods which were declared in the Bill of Entry as Heavy Melting Steel Scrap HMS-1 (other than Stainless Steel and Re-rollable Scrap) imported through Port of Madras was repurchased by the importer on highseas sales basis from M/s. V.K. Steel Enterprises. The value was declared as Rs. 2,23,331 on the strength of invoice dated 26.1.96 for US$ 5988.80 at the rate of US$ 160/MT C&F, Chennai raised in favour of M/s. V.K. Steel Enterprises. The department examined the goods and found the steel pipes seamless of length between 13 ft. and 19 feet and width 3/4″ to 2″ having been declared as “HMS Scrap”. The department contended that the item cannot be considered as scrap and initiated proceedings. However, before the Commissioner, they were able to satisfy that all these items were nothing but scrap and had no commercial value and cannot be used as such. They contend that the importer produced the evidence to show that the item was for melting purpose. The Commissioner accepted the pleas and under the supervision of departmental officers directed the item to be re-melted and a certificate be produced in this regard. The Superintendent of Central Excise Mofussil III Range has informed the Commissioner of Customs vide his letter dated 12.3.98 and has also issued a certificate certifying the use of the imported goods as heavy melting scrap in the factory of the appellant.
2. Revenue contends that there was a ciear mis-declaration in the matter as the goods were found to be steel pipes (seamless) of length between 13ft to 19ft and width 3/4 to 12 inches and as there was clear mis-declaration, the Commissioner ought to have directed for its confiscation and should have imposed fine and penalty.
3. We have heard Ld. DR Shri A. Jayachandran and Ld. Counsel Shri S. Murugappan in the matter.
4. Ld. DR pointed out that the Commissioner also relied on the Madras High Court judgment rendered in the case of Madan Lal Steel Industries v. UOI, which has been set aside by the Apex Court. He also relied on the judgment of Apex Court rendered in the case of CC, Bombay v. Hardik Industrial Corporation, 1998 (97) ELT 25 (SC) wherein the Apex Court has remanded the matter for de novo consideration to examine the nature of the goods, which had been directed to be released on mutilation. It is his contention that as the goods were steel pipes (seamless) of length indicated and that there was a statement given by Shri V.K. Garg that some of the steel pipes could be used for purposes of pushing the heavy melting scrap in the furnace, therefore, they were not scrap. This plea was countered by the learned Counsel on the ground that pipes were being used for pushing the scrap and ultimately due to very high temperature in the furnace, the pipes which are not usable as such and there was scrap which would also get melted. In this case, the Commissioner accepted the item to the waste & scrap and therefore directed to be melted in the presence of the Revenue officials and it has been done. Therefore, there was no mutilation in the case calling for order of confiscation and penalty and the judgments cited are distinguishable. He relied on the ratio of this Bench judgment rendered in Sujana Steels Ltd., v. CCE, Hyderabad 1999 (34) RLT 672, wherein the Tribunal clearly held that where the goods are not usable as such, there are not to be treated as fresh material and also noted the lack of evidence in the matter. Therefore, the facts of this case are clearly applicable to the present case and hence requires to be applied.
5. We have carefully considered the submissions made by both side and notice that the Commissioner was fully satisfied with the nature of the item being waste and scrap. Few pipes which were in length were not usable as such and were even being used to push the scrap in the heavy melting scrap furnace. Due to high temperature in the furnace, the pipes would also get melted ultimately. In this case, the statement given by Shri V.K. Garg has not been relied but the Commissioner directed the entire scrap to be sent to the furnace directly and re-melted in the presence of revenue officials and a certificate obtained from them. A copy of the certificate has also been filed before us to show that the entire imported item was scrap and it has been re-melted. In that view of the matter, we find that the facts are verifiable and there is no infirmity insofar as the facts are concerned. The Commissioner having found the item as “waste” and “scrap”, hence he did not order for its confiscation or for imposition of penalty. We cannot hold that the judgments cited in the matter of Madanlal Steel Industries has the applicability to this case in view of the fact that goods therein already been cleared and were later it was found to be sheets but they were not scrap as declared. Therefore, the goods being different and found to be not scrap, hence they were considered to be conf iscable and the Apex Court reversed the order. In the present case, the facts are clearly distinguishable in as much as that there is no dispute raised by the Commissioner with regard to the imported item being waste & scrap used for melting purpose and the same has been melted also under the supervision of revenue officials. Therefore, the findings given by this Bench in the case of Sujana Steels (supra) is clearly applicable to the facts of this case. The finding recorded in paragraphs 5 to 8 are noted herein below:
“5. On consideration of the submissions made, we notice that there is admission by the Revenue on the following points:
(a) That the items imported are used and rusted pipes.
(b) Appellants imported the goods for melting purpose in their factory in the induction furnace in terms of the concessional rate of duty under Notification 36/96 dated 23.7.96 (Item SI. 116) which carries import basic duty of 5% additional duty CVD of 5% and special duty of 2% ad valorem.
(c) That these are old and used pipes.
(d) That in international language they are to be treated as scrap. However, as far as Indian trade conditions are concerned, they will be treated as used pipes and tubes of circular cross section.
(e) The Collector (Appeals) has accepted the price of the goods to the value of scrap in international market as can be seen from para 7 of his order. The above are in terms of the order passed by the Collector (Appeals) in paras 4 to 7 of his order.
6. The definition of waste and scrap in terms of Note 6 of Chapter XV of the Customs Tariff Act is as follows:
“metal waste and scrap from the manufacture or mechanical working of metals and metal goods definitely not usable as such because of breakage, cutting or ware or other reasons”
The Collector (Appeals) has held that it does not satisfy the above definition. He has not elaborated as to how it does not satisfy the definition except to say in one sentence that it does not satisfy the definition of waste and scrap. Probably the Collector (Appeals) after quoting the above definition has not applied his mind and to understand the connotation of those words. The terms “Metal goods not definitely not usable as such because of breakage, cutting or ware or other reasons” is required to be understood by us in the context of the understanding of the materials imported by the appellants. For the purpose of classifying the same the Revenue has not brought on record the understanding of Indian Trade parlance. For the purpose of understanding of the goods as scrap, the Collector (Appeals) noted in para 7 of his order that:
“Although in international language they may be treated as scrap, as far as the Indian trade conditions are concerned, they will be treated as used pipes and tubes of circular cross section. Whether the price declared corresponds to the value of scrap in international market, in not verifiable at this end. The adjudicating authority has also not disputed the value declared.”
7. The above paragraph clearly indicates that the Revenue has not proved the understanding in the Indian trade of the goods viz. pipes and tubes of circular cross section. Having accepted the international market to the value of the scrap, the question of it being considered as ‘pipes and tubes of circular cross section’ does not arise. All the documents show in the declaration as ‘MS scrap’. The contention of the importers that it is to melt the goods in the induction furnace has not been disputed by the Revenue. (The definition of waste and scrap as can be seen from Note 6 of Chapter XV of the Customs Tariff clearly recognises metal goods definitely not usable as such because of breakage, cutting or ware or other reasons, are required to be treated as metal scrap. The present goods admittedly are used and rusted pipes and it is not usable as “tubes, pipes and hallow profiles, seamless, of iron (other than cast iron) or steel” as described under chapter 7304.90. This heading as described in this heading has to be understood as those which are used ‘as such’, to mean those which are in the condition as understood in the market for sale on the basis of its manufactured price. Further it seems that the goods are not usable as new ones. The goods which have exhausted its use and have rusted and are not usable as new ones cannot be equated. The Revenue having accepted the price as that of scrap cannot for the purpose of classification consider the same to be new ones. Therefore, there is inherent contradiction in the finding itself, clearly demonstrating non-application of mind and such findings have to be considered as perverse and not acceptable in the eye of law. The reasons further being is that the onus of classification is on the Revenue. The same has not been discharged to show that the goods are fresh and new material to be used as pipes. The same having been accepted as scrap for international purposes cannot in the absence of evidence of Indian trade parlance and understanding be called as ‘pipes or tubes’ for classification under heading 7304. The appellants being the importers, have usage of the item in the induction furnace, are required to be considered as the one of the users having Indian trade understanding. The appellants’ trade understanding has to be considered as that of Indian trade market and the appellants have declared as such and produced evidence. Such evidence cannot be rejected as not sufficient unless the Revenue counters it with other trade understanding of other users, which should be contradictory to the appellants’ understanding. Such exercise not having been done by the Revenue, therefore, the appellants’ understanding as that of trade understanding of the Indian traders cannot be rejected. The understanding of the Revenue officials cannot be accepted as understanding of the Indian Trade and therefore in terms of the ratio of the judgments of the Hon’ble Supreme Court in the case of Indian Cable Co. Ltd. v. CCE Calcutta (supra) and Union of India v. Garware Nylons (supra), the burden of proof has not been discharged by the Revenue and hence the declaration given by the appellants and the report of physical examination showing the goods to be rusted and used pipes are to be treated as having satisfied the definition of waste and scrap under Note 6 of Chapter XV of Customs Tariff Act and they are not new and fresh goods in terms of the value also. Therefore, the appellants have proved their case and their declaration ought to have been accepted. For such import of goods as waste and scrap, licence is not required and hence the goods are not confiscable.
8. The appellants are also entitled for a certificate for clearance of the goods without demurrage in terms of the ratio of the judgment cited by the Counsel for the appellants as detention of their goods is not based on any evidence and it was due to total non application of mind and therefore the Customs authorities are bound to issue the certificate for non imposition of demurrage in the matter. In this view of the matter, the appellants succeed and we allow the appeal with consequential relief. 6. Respectfully following the ratio of the above judgment, we do not find any merit in this appeal. Therefore, the appeal of the revenue is rejected. Ordered accordingly.