ORDER
T.K. Jayaraman, Member (T)
1. The appellants have appealed against the three impugned orders passed by the Commissioner of Customs & Central Excise, Hyderabad and the Commissioner of Customs, Chennai. The details of the appeals are given in the following tabular column :-
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S. Appeal Against OIO No. & Date of Amount
No. No. date SCN involved
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1. C/281/02 M/s.Magus 21/02 16-4-02 Value of goods
Metals dt. 21-8-02 confiscated Rs.
13,46,555/- and
Penalty Rs.
4,00,000/-
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2. C/282/02 K. Ravi Babu -do- -do- Penalty
Rs. 2,00,000/-
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3. C/283/02 Latha Rani -do- -do- Penalty
Rs. 1,00,000/-
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4. C/275/04 M/s. Magus 13/04 18-3-03 Value of Goods
Metals dt. 29-3-04 Rs. 54,65,457/-;
Diff. duty Rs.
20,87,670/- &
Penalty Rs.
20,87,670/-
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5. C/273/04 K. Ravi Babu -do- -do- Penalty
Rs. 5,00,000/-
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6. C/274/04 Latha Rani -do- -do- Penalty
Rs. 1,00,000/-
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7. C/493/04 M/s. Magus 3106/04 19-3-03 Diff. Duty Rs
Metals dt. 23-9-04 28,09,858/- &
Interest (not
quantified) R.F.
Rs. 5,00,000/- in
lieu of confisca-
tion.
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8. C/494/04 K. Ravi Babu -do- -do-
-----------------------------------------------------------------------
9. C/495/04 Latha Rani -do- -do- Combined pen-
alty of Rs.
28,09,858/- on
both
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The appellant’s unit is presently known as M/s. Magus Metals Pvt. Ltd. with Shri K. Ravi Babu as Executive Director and Mrs. Latha Rani as Director of the Company. The unit was originally known as M/s. R.R. Metals Pvt. Ltd. and it was established in 1992. The unit manufactures of Copper Cathodes, Zinc Sulphate, Copper Sulphate and Copper Oxychloride. They procure raw materials indigenously and also by import. All these appeals are in respect of the imported items. The appellant’s unit had been regularly importing goods declared to be ‘Copper Concentrate’ through Chennai Port. The goods were cleared by the Customs by accepting the declaration of the appellant as regards the description and value. After test report by the Chemical Examiner, Customs Laboratory, Chennai Customs House, the goods were classified under Customs Tariff Heading 2603.00 with basic duty of 5%. On the basis of intelligence received regarding mis-declaration of the goods, the DRI conducted investigations. The appellants filed two Bills of Entry on 24-12-2001 and 24-1-2001 at ICD, Hyderabad for clearance of the goods. The samples of the goods were drawn and sent to NMDC and EPTRI Laboratories for chemical analysis. On the basis of the above report, the Revenue came to the conclusion that : –
(1) The goods cannot be called as Concentrate of Copper. (2) The goods were actually hazardous coming under purview of Hazardous Waste (Management & Handling) Rules, 1989.
In view of the above, the goods require the license from DGFT. Further it was proposed to reclassify the goods under Chapter Heading 2620.30 at higher rate of duty. The goods said to be imported under the above Bills of Entry were detained. Show Cause Notices were issued to the appellant’s unit and also Shri Ravi Babu, Executive Director and Smt. Latha Rani, Director of the Company. In all, three show cause notices, two notices were answerable to the Commissioner of Customs & Central Excise, Hyderabad and one notice was answerable to the Commissioner of Customs, Chennai. The appeals in Sl. Nos. 1, 2 & 3 shown in the above tabular column relate to the show cause notices answerable to the Commissioner of Customs & Central Excise, Hyderabad and the goods are absolutely confiscated. As regards the appeals in Sl. Nos. 4, 5 & 6 relate to the show cause notice answerable to the Commissioner of Customs & Central Excise, Hyderabad, but the goods had already been cleared. As regards the appeals in Sl. Nos. 7, 8 & 9 relate to show cause notice answerable to the Commissioner of Customs, Chennai. In these cases also, goods had already been cleared. The Original Authority adjudicated the case and passed the impugned orders. The appellants have come before the Tribunal for relief.
2. Shri M. Narayanaswamy Naidu, learned Advocate appeared for the appellants and Smt. Shoba L. Chary, learned JCDR appeared for the Revenue.
3. The learned Advocate urged the following :-
(i) The Department has not produced any concrete evidence to show that the impugned goods are hazardous waste. The reports relied on by the Revenue are neither conclusive nor decisive. Such reports are untenable under law as held in the following case laws :-
(a) Karnataka Chem Syn Ltd. v. Commissioner [2001 (138) E.L.T. 697 (T-Bang.)]
(ii) Since the goods in question contained less than 1.25% lead and 0.1% of cadmium as per chemical analysis obtained from EPTRI as per the Hazardous Wastes (Management and Handling) Rules, 2000, the goods are not hazardous, even if they contain less than 1.25% lead and 0.1% cadmium respectively. Even though this was one of the grounds urged before the authorities, no finding has been arrived at by the Commissioners. Hence they cannot allege that the goods are not copper concentrate. He relied on the following case laws :-
(a) Thakurdas Sons v. CCE, Chennai [2002 (144) E.L.T. 139 (T)]
(iii) The appellants followed the proper procedure in clearing the goods provisionally. Only after the Chemical Examiner’s report, the assessments were finalised. Hence there is no misrepresentation or suppression of facts. He relied on the following case laws :-
(a) Ganapati International v. CC, West Bengal [2001 (130) E.L.T. 370 (T-Kol.)] (b) Porcelain Crafts and Components v. CCE, Calcutta [2001 (138) E.L.T. 471 (T-Kol.)]
(iv) The Test reports of EPTRI and NMDC were obtained only in respect of two consignments imported in December 2001 and January 2002. These reports cannot be relied upon for re-classification of the goods imported earlier. He relied on the following case laws :-
(a) Ansun System Consulting Pvt Ltd. [2005 (179) E.L.T. 511 (Tribunal) = 2005 (66) RLT 677 (CESTAT-Del.)] (b) Shalimar Paints Ltd. v. CCE, Calcutta [2001 (134) E.L.T. 285 (T-Kol.)] (v) In respect of the appeals in Sl. Nos. 4, 5 & 6, no personal hearing was granted. Hence principles of 'Natural Justice' have not been followed.
(vi) The demands in respect of the appeals in Sl. Nos. 4 to 9 are time barred because the goods were imported during the period from May 2001 to February 2002. All the show cause notices were issued on 18-3-2003. But the Department had facts of these cases when the first show cause notice dated 16-4-2002 was issued. No new facts have been brought on record to show that there was suppression or misrepresentation of the facts. Hence, extended period cannot be invoked as the authorities were aware of import of the past 18 consignments while they issued the first show cause notice dated 16-4-2002. He relied on the following case laws :-
(a) ECE Industries Ltd. v. CCE, New Delhi (b) Tuni Textile Mills Ltd. v. CCE, Vapi
4. The learned JCDR urged the points in the Order-in-Original. Citing HSN Notes, she submitted that the imported items are not at all Copper Concentrate. Normally when the naturally occurring ore containing copper components is subjected to various treatments for removal of foreign matter, the same becomes copper concentrate. In other words, the concentrate is obtained from the naturally occurring ore. However in this case, from the test result of NMDC, it appears that the imported items are only industrial waste. In view of the EPTRI report, the goods appear to be hazardous waste and require license from the licensing authority. She also referred to the density of imported material which is much lower than the density of the concentrate as per the NMDC report. She referred to some correspondences between the importer and foreign supplier indicating that the appellants purposely wanted the foreign supplier to declare the items as copper concentrate. In view of the above, she said that there is a clear suppression of facts and there is every justification for invoking the longer period.
5. We have gone through the rival contentions. The first show cause notice was issued on 21-8-2002. However, for the consignments cleared earlier in the year 2000-2001 & 2001-2002, the show cause notices were issued on 18-3-2003 and on 19-3-2003. As contended by the party, all the facts were available even when the first show cause notice was issued. Moreover the goods were cleared provisionally and assessments were finalised only on the basis of the test report by the Customs Laboratory, Chennai. In these circumstances, we hold that the demands in respect of all these orders are clearly time barred. The case laws relied on by the appellants are very relevant. Even otherwise, when the goods are cleared on the basis of test report by the Customs Laboratory, Customs House, Chennai, one cannot allege that there is suppression of facts. In any case, the test reports of EPTRI and NMDC cannot be made applicable to the earlier consignments. The case laws relied on by the learned Advocate are very relevant. In view of the observations stated above, we set aside both Orders-in-Original No. 13/04 dated 29-2-2004 passed by the Commissioner of Customs, Hyderabad and 3106/2004 dated 23-9-2004 passed by the Commissioner of Customs, Chennai. Hence the appeals, in Sl. Nos. 4 to 9 (total 06 appeals) mentioned at the above tabular column, are allowed.
6. In view of the above findings, we are now left with the appeals in Sl. Nos. 1, 2 & 3 arising out of the Order-in-original No. 21/2002 dated 21-8-2002, passed by the Commissioner of Customs, Hyderabad. The Commissioner in his order has held that the goods are hazardous in nature and prohibited. Hence he has confiscated them absolutely under Section 111(d) and 111 (m) of the Customs Act, 1962. Further he has ordered a destruction of the impugned goods, in the manner as prescribed in the Hazardous Wastes (Management and Handling) Rules, 1989 at the cost of the appellants. Further he has imposed a penalty of Rs. 4,00,000/- under Section 112(a) of the Customs Act, 1962 on M/s. Magus Metals Ltd. He has also imposed a penalty of Rs. 2,00,000/- on Shri K. Ravi Babu, Executive Director and Rs. 1,00,000/- on Smt. Latha Rani, Director of the Company under Section 112(a) of the Customs Act, 1962.
7. In coming to the conclusion that the impugned goods are hazardous, the Adjudicating authority has relied on a Test Report from EPTRI. We have gone through the EPTRI Test Report on record. The EPTRI means Environment Protection Training Research Institute. A comprehensive analysis report of EPTRI contains the following parameters :-
(i) Physical Parameters
(ii) Physico-Chemical Parameters
(iii) Chemical Parameters
(iv) Concentration of Inorganic Parameters [As per Schedule 2 & 3 of HW (M&H) A Rules, 2000]
(v) Concentration of Organic Parameters [As per Schedule 2 & 3 of HW (M&H) A Rules, 2000]
The analysis gives a percentage of various inorganic elements in the sample of the impugned goods. It indicates the percentage of copper as 49.8%. There is further indication of presence of Nickel, Zinc, Barrium, Iron, Manganese, etc. No organic substances have been detected. So far as, cadmium is concerned, it is ‘Below Detection Level (BDL). The percentage of lead appears to be 1.08%. There is a letter dated 21-1-2002 which says that the sample under investigation could have originated from a copper or copper compounds manufacturing/handling industrial operation. From the analytical results, it may be inferred that the material is hazardous as per class B3 of Schedule 2 & 3 of Hazardous Wastes (Management & Handling) Amendment Rules, 2000. Further the results indicate that the material might have originated, in general, from the list of materials described under Basel Nos. A1090, A1100, A1130 of Schedule-3 (Part-A), List-A of the above mentioned Rules. Further, as per the characterization results, the material could be bracketed with H13 of List of Hazardous Characteristics, Part-B of Schedule 3. There is a further letter dated 7-3-2002 in continuation of the earlier letter correcting one sentence from the earlier letter. The correct sentence reads as follows :-
“From the analytical results, it may be inferred that the material is hazardous as per Class B 3 of Schedule 2 of Hazardous Wastes (Management & Handling) Rules, 1989 and amendments thereof.
We have gone through the Hazardous Waste (Management and Handling) Rules, 1989. These rules have been made by the Central Government under Environment (Protection) Act, 1986. The hazardous waste is defined in Rule 3(i). ‘Hazardous Waste’ means :-
“(a) Waste Substances which are generated in the process indicated in Column 2 of Schedule 1 and consists of wholly or partly of the waste substances referred to in Column 3 of the same schedule;
(b) Waste substances which consists wholly or partly of substances indicated in Schedule 2, unless the concentration of the substances is less than the limit indicated in the same schedule; and
(c) Waste substances indicated in Part A, List ‘A’ and ‘B’ of Schedule 3 applicable only to Rule 12, 13 and 14 unless they do not posses any of the hazardous characteristics in Part B of the same schedule.”
The EPTRI Test Report letter dated 7-3-2002 indicates that the impugned goods fall under Class B 3 of Schedule 2. Class B 3 of Schedule 2 reads as follows :-
“Waste containing principally organic constituents, which may contain metals and inorganic materials.”
When we read the analysis report, no organic material has been noticed. No organic constituents had been detected. The test results in each case indicate in ‘ND’ (Not Detected) whereas B 3 of the Schedule 2 is for wastes contain principally organic constituents. Moreover, Schedule 3 of the Rules lists various hazardous characteristics. They are as follows :-
"H1 Explosives H3 Flammable liquids H4.1 Flammable solids H4.2 Substances or wastes liable to spontaneous combustion H4.3 Substances or wastes, in contact with water emit flammable Gases H5.1 Oxidizing H5.2 Organic Peroxides H6.1 Poisonous (Acute) H6.2 Infectious substances H8 Corrosives H10 liberation of toxic gases in contact with air or water H11 Toxic (delayed or chronic) H12 Ecotoxic H13 Capable by any means, after disposal, of yielding another material, eg., leachate which possesses any of the characteristics listed above."
The EPTRI Test Report does not indicate any of the hazardous characteristic which the impugned goods possesses. It is also not clear how H13 would be applicable to the relevant goods. A perusal of the Rules indicate that the Schedule 3 gives a list of wastes to be applicable only for imports and exports. The list B 1070 contains the following description :-
“Waste of copper and copper alloys, (excluding copper cake and copper residues containing less than 1.25% lead and 0.1% cadmium respectively) in dispersible form, containing Schedule 2 constituents to an extent that they exhibit hazard characteristics indicated in part B of this schedule.”
Even if the impugned goods are considered as waste of copper and copper alloys and if the percentage of copper is below 1.25% and cadmium is below 0.1%, it would not come in the category of B 1070. The implication is that this is not a waste requiring subject license and clearance from the Ministry of Environment (Protection). The Adjudication order does not discuss this aspect at all. We have already seen that the level of cadmium in the sample of the impugned goods is ‘Below Detection Level’ (BDL). In our view, the reliance of EPTRI Test Report to come to a conclusion that the goods are hazardous is misplaced for the reasons stated above.
7. The Order-in-Original contends that the impugned goods are not copper concentrate, and there is a mis-declaration. The conclusion is based on a test result of the sample by National Mineral Development Corporation Ltd. (NMDC). The chemical analysis indicates that the percentage of copper is to be nearly 40%. The Report of Mineralogical Studies is as follows :-
“The sample is soft, friable, solely grey in color and soils the fingers with silky luster. This is non-reactive to water and characterized by hygroscope nature and dissolves only in conc. HNO3. This sample is characterised by lower density values and the relative density is ranging between 1.0 to 2.50. Naturally occurring copper ore minerals density ranges 3.5 to 5.5. The ore microscopic examination of this sample reveals that this sample consists of very fine submicroscopic size material due to which the identification of mineral phases is not possible. Based on the specific gravity of the sample it is not showing presence of any naturally occurring copper bearing minerals which are having higher densities i.e. more than 3.5”.
The contention of the adjudicating authority based on HSN notes and also Chapter Notes (Chapter 26 of the Tariff) is that the copper concentrates are normally obtained from the naturally occurring copper ore after subjecting them to various processes. Since the NMDC test report shows that there is no presence of naturally occurring copper mineral, the impugned goods are not copper concentrate. The appellants had been importing similar goods in the past through Chennai Port. The goods had been provisionally cleared after drawal of samples. The samples were tested in Customs House Laboratory, Chennai. The test reports indicate that the goods imported may be considered as copper concentrate. The report of Chemical Examiner, Chennai Customs House reads as follows :-
“The sample is in the form of brown coloured moist cake. It is composed of oxides of copper and acid insoluble matters. It may be considered as copper concentrate. Percentage of the sample is 27.1%.”
In fact, prior to the detention of the impugned goods, 18 Bills of Entry were filed and all the goods were finally assessed on the basis of the report of the Chemical Examiner. In any case, the normal procedure followed is that the samples are sent to the Chemical Examiner, Customs House Laboratory, Chennai. The Chemical Examiner, Chennai is proper authority for testing the goods. In the Customs Department, there are Laboratories in all the major Customs Offices. There is a Chief Chemist who is the head of the entire Laboratory establishment. The Chief Chemist is heading the Central Revenue’s Control Laboratory, New Delhi. As far as the impugned goods are concerned, no samples have been sent to the Chemical Examiner at Chennai. It is not understood as to why the Revenue has dispensed with the services of the Chemical Examiner who is the proper officer to test the samples and who has all along tested the goods imported by the appellants. If the Revenue had any doubt regarding the test results of the Chemical Examiner, Chennai, they could have appealed to the Chief Chemist, New Delhi. But in this case they have totally by-passed the Departmental facilities and sent the samples to EPTRI and NMDC. It is not the case of Revenue that the Customs Laboratory does not have adequate facilities to test the sample. The Hon’ble Supreme Court in the case of Reliance Cellulose Products Ltd. v. Collector of C. Excise, Hyderabad has held that the Test report of Chemical Examiner and Chief Chemist of the Government, unless demonstrated to be erroneous, cannot be lightly brushed aside on the basis of opinion of some private persons obtained by the assessee. No doubt, in the present case, the Revenue has not obtained the Test Results from private persons. Further there is no reason as to why they dispensed with the Departmental Laboratory. The appellants had been importing similar goods earlier. The Revenue used the present Test Reports of EPTRI and NMDC to demand differential duty on past consignments. Unless it is proved that the test results of the earlier consignments by the Chemical Examiner, Chennai were wrong, they cannot be brushed aside. In other words, on the basis of NMDC report, the classification cannot be changed when the goods were classified as copper concentrate on the basis of test results. Every officer of the Laboratory has a minimum qualification of Masters Degree in Chemistry. It is very hard to believe that the personnel of the Customs Laboratories are not capable of testing whether a given sample is a copper concentrate or otherwise. The foreign suppliers have also declared that the goods as copper concentrate. The Revenue has not produced any evidence to show that there is a collusion between the appellants and the foreign suppliers to declare that the goods are copper concentrate. The NMDC Report is not very conclusive to hold that the impugned goods have not originated from naturally occurring copper. In case of doubt, these points could have been ascertained from the Chemical Examiner, Chennai and also from the Chief Chemist, New Delhi. In view of our above observations, the Order-in-Original No. 21/2002 dated 21-8-2002 has no merit. There are no grounds for imposition of penalty on the appellants. The goods, in these circumstances, are not proved as hazardous and they may be released treating them as copper concentrate.
8. We allow all these 09 (nine) appeals.
(Pronounced in the Court on 4-4-2005)