By TIOL News Service

MUMBAI, JULY 05, 2013: BASED on information that the appellants were claiming the benefit of Notification No.21/2002-Cus, Sr.No.190 C wrongly on import of steel coils by mis-declaring the same as non-alloy steel , S.I.I.B (Import), New Customs House, Mumbai undertook investigation and took over 11 live Bills of Entry and carried out a detailed scrutiny. The percentage content of other metals shown in the Mill test certificates were compared with chapter note (f) of Chapter 72, where Other Alloy steel is defined. In all the 11 Bills of Entry, the percentage of Manganese was found to be more than 1.65%, and the Titanium was more than 0.05% and on the examination of Mill test Certificates of these Bills of Entry also confirmed that goods imported vide the above Bill of Entry were alloy steel and the benefit claimed under notification No.21/2002 Sr. No. 190C thus was not correct.

Notification No.21/2002 Customs was amended vide Customs Notification No.56/2008 Cus. Dated 29.04.2008. (Prior to issuance of this notification, Steel Coils (non-alloy) were being cleared as per notification no. 21/2002 Sr. No.190B and after issuance of notification no. 56/2008 dated 29/04/2008,) and a new Sr. No. 190C was inserted and by virtue of this addition the rate of duty (Basic Customs Duty) on non-alloy steel was made @0% (Basic Custom Duty).

Admitting their mistake, they deposited Rs.3.01 Crores in respect of imports effected earlier and also deposited differential duty of Rs.80,32,473/- in respect of the live consignments.

Statements were recorded of various officials and who admitted to the mis-declaration.

The adjudication proceedings culminated in an order-in-original and whereby the benefit of notification 21/2002-Cus, sr. no. 190C was denied and the Customs duty demanded was confirmed.

Before the CESTAT the appellant referred to the definition of ‘other alloy steels' appearing in chapter note 1(f) of Chapter 72 which reads -

"(f) Other alloy steel:

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

and submits that Note 1 (f) is satisfied only if all the elements present in the imported coil are equal to or more than the limit prescribed in the Note 1(f) whereas as per the impugned order passed by the Commissioner for the coil to be classified as other alloy steel, it is enough if any one of the elements listed in Note 1(f) is more than the prescribed limit.

It is emphasized that the phrase “one or more” employed in the Chapter Note 1 (f) is ignored by the Commissioner inasmuch as the expression ‘one or more' means that if one of the listed elements is present in the imported coil and if that element is equal to or exceeds the limit mentioned in Note 1(f), the Note 1(f) is satisfied and the imported coil will be treated as ‘other alloy steels'. On the other hand, if the coil contains more than one element listed in the Note 1(f), then all the elements present in the imported coil should be equal or more than what is prescribed in the Chapter Note 1(f). If not, such coil will not be treated as ‘other alloy steel'. The imported coil cannot be said to be satisfying Note 1(f), if more than one element is present in the imported coil and only one element satisfies the criteria mentioned in Note 1(f).

The appellant also submitted that they have been adopting the same classification for many years and, therefore, the charge of mis-declaration is not sustainable.

The Revenue representative submitted that the interpretation of the appellant would lead to absurdity and would render the provisions redundant and as for mis-declaration it is submitted that the Bills of Entry were facilitated under RMS and under this system the practice of routine assessment, concurrent audit and examination has been done away with and the appellant being an ACP client which envisages voluntary compliance, the appellants failed to perform their obligations and requirements.

The Member (Technical) observed -

“5.1.2 In order to fall under the category of alloy steel one or more elements is needed in the proportion prescribed vide Chapter Note 1(f) of Chapter 72, in addition to steel which is not complying with definition of steel. Admittedly, one of the elements in the impugned goods is steel and it is not complying with definition of stainless steel also. Further, as recorded in para 3 of the impugned order, the percentage of manganese was found to be more than 1.65% and the Titanium was more than 0.05% which is as per the proportion prescribed under in the Chapter Note 1(f) of Chapter 72. Therefore, the impugned goods would rightly fall under the category of other alloy steel and not eligible for the benefit of Notification.”

The Member (T) also observed that the appellants were working under the RMS/ACP and had failed to fulfill the obligations and requirements of the said programme by not declaring the complete description and specification as to whether the goods were alloy steel or non-alloy steel. He, therefore, upheld the charge of mis-declaration. Imposition of redemption fine was set aside on the ground that the goods were not physically available nor they were cleared on any bond/BG. Penalty on the CHA was held to be not sustainable and hence set aside.

The Member (Judicial) recorded the following order -

“I do agree with the conclusion drawn by the ld. Member (Technical) Shri S.K.Gaule that the impugned goods would rightly fall under the category of other alloy steel and not eligible for the benefit of Notification. Before arriving at the conclusion, I want to mention that during the course of arguments, the ld. advocate for the appellants has taken a stand that the impugned goods are not “other alloy steels” as defined in Chapter Note 1(f) of Chapter 72. Chapter Note 1(f) of Chapter 72 defines “other alloy steel” which states that steels not complying with the definition of stainless steel and containing by weight one or more of the following elements in the proportion shown. From the above, the expression “one or more” means that if one of the listed elements is present in the imported coil and if that element is equal to or exceeds the limit mentioned in Note 1(f) above, then Note 1(f) above is satisfied and the imported coil will be treated as “other alloy steels”. If the coil contains more than one element listed in the Note 1(f) above, then all the elements present in the imported coil should be equal or more than what is prescribed in the Chapter Note 1(f) above. If not, such coil will not be treated as “other alloy steel”. For example, if the goods contain only manganese apart from steel and if manganese is 1.675% or more, then it will qualify as other alloy steel. But if out of 16 elements mentioned in Chapter Note 1(f) of Chapter 72 and all the elements are to be in the proportion shown in Chapter Note 1(f) of Chapter 72 or more, then it will qualify as other alloy steel. For example, if the imported coils are having 2 elements viz. manganese and titanium and if both are more than the prescribed proportion as mentioned in Chapter Note 1(f) of Chapter 72 i.e. 1.65% or more of manganese and 0.05% or more of titanium them it will be called as other alloy steel. If element of manganese is 1.65% or more but titanium is less than 0.05% then it will not qualify as other alloy steel and vis-à-vis i.e. if titanium is more than 0.05% and manganese is less than 1.65% then also it will not qualify as other alloy steel. Therefore, the expression “or more” is relevant to define other alloy steel otherwise the expression “or more” shall become meaningless and redundant.

In the case in hand before us as recorded in para 3 of the impugned order the percentage of manganese is more than 1.65% and titanium is more than 0.05% thus the imported coil qualifies the definition of other alloy steel as per Chapter Note 1(f) of Chapter 72. Therefore, the ld. Member (Technical) has rightly held that the impugned goods are other alloy steels and not eligible for the benefit of the Notification. Therefore, the following order is passed:

Redemption fine of Rs. 2,46,00,000/- on the importer and penalty of Rs.5,00,000/- on the CHA are set aside. The impugned order is modified to that extent.

Appeals are disposed of in the above terms.”

The following difference of opinion is placed before the President, CESTAT in terms of s. 129C(5) of the Customs Act, 1962 :-

1. Whether to qualify as ‘other alloy steel' minimum one element in the proportion prescribed in Chapter Note 1(f) of Chapter 72, ( in addition to steel), is essential as held by Member (Technical) in para 5.1.2 of the order

OR

2. Whether to qualify as ‘other alloy steel' not only one element is essential in proportion prescribed but if there are more than one element (in addition to steel) all should be in proportion prescribed in Chapter 1(f) of Chapter 72, are essential, as held by the Member (Judicial.)

In passing: Academic interest!

“…I feel there is some substance in the submissions of the learned Advocate that the final order is a concurring order only in so far as the conclusion to remand the matter is concerned. The two orders of the Member (J) and Vice President are otherwise differing in their route, contents, the reasoning and observations as also the directions to the lower authorities. It would, therefore, be in my opinion , more appropriate to treat it as a difference of opinion case and forward it to the President for reference to a Third Member .” …Third Member on reference [GTC Industries vs. Collector of Central Excise, Bombay - Misc. Order Nos. 123 & 124/95-C and 117 & 118/96-C, dated 22-8-1996 in E/ROM/3/95-C and E/Misc./149/95-C in Appeal No. E/5493/92-C]

(See 2013-TIOL-1013-CESTAT-MUM)