Benefits of Segregation can be allowed only if Imported Scrap Contains Impurities: CESTAT [Read Order]

In a recent ruling, the Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that benefits of segregation can be allowed only if imported scrap contains impurities.

 The question before the Tribunal was whether Deep Recycling Industries, the appellant, holding 100% EOU status, has properly availed the benefit of the exemption Notification No. 52/2003-Cus by showing wastage, which permitted the duty-free importation of brass scrap, in a legal and proper manner, or not, in the backdrop of circumstances.

The appellant has contested that the wastage norms have been fixed by the Norms Committee, which are in two stages, i.e. (i) wastage arising during the course of segregation, and (i) the wastage arising during the course of manufacture of the brass product.

The appellant contended that the wastages shown by them were all well within the stipulated limit prescribed by the norms committee. Therefore, there is no case for charging customs duty or ordering confiscation. The appellant has also contended that the segregation carried out by them is one of the many processes leading to the manufacture of the finished goods and therefore, classifying the same under the main brass scrap heading to charge duty and valuation, is incorrect.

The Commissioner held that in case the imported scrap is like “Honey Scrap” then there cannot be any waste coming out of the said scrap and the stage of segregation available in terms of the letter dated 04.05.2011 of the Foreign Trade Development Officer communicating the decision of norms committee cannot be applied.

The Commissioner (Appeals) allowed the benefit on all the issues however remanded the matter for verification of the fact if the brass scrap imported by the appellants was like brass scrap containing impurities like iron, steel, rubber, plastic, etc., or not. It was held that the benefit of segregation can be allowed only if the imported scrap contained impurities like iron, rubber, plastic, steel etc.

Prima facie from the clarification dated 10.05.2016, it was viewed by the two-member Coram comprising Raju, Member (Technical) and Somesh Arora, Member (Judicial that even the revenue believes that “honey grade” scrap also contains iron, steel, etc., as impurities and the circular dated 10.05.2016 was not produced before the original or first appellate authority and consequently there is no examination of the circular.

Further held that “the original Adjudicating Authority will examine the applicability of the circular dated 10.05.2016, and any other circular issued on the subject to the remand directions given in the impugned order and decide the issue afresh.”

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