No Classification can be made during the Pendency of Misdeclaration Condonation Request: CESTAT [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that the classification as Heavy Melting Scrap (HMS), is improper when the assessee admitted misdeclaration of imported cut rails as heavy melting scrap and requested for condonation of misdeclaration.

The appellant, Indian Iron & Metals Pvt Ltd, filed a Bill of Entry for clearance of 288.300 MTS of Heavy Melting Scrap (CTH 72044900) declaring an assessable value of Rs. 64 lakhs. During the first-check examination, it was revealed that the cargo contained 87.350 MTs of Rail Material Scrap (CTH 73021090) with only the remaining 200.950 MTs of HMS.

Consequent to the admission of mistake and waiver of their right to Show Cause Notice by the appellant, adjudicating authority (i) rejected the declared value in respect of the 87.350 MTS of Rail Material Scrap and re-determined the same as Rs. 31 lakhs under Rule 5 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (ii) ordered the confiscation of the said goods under Sections 111(d) and 111(m) of the Customs Act, 1962 with redemption fine of Rs. 6 lakhs (iii) imposed penalty of Rs. 2 lakhs under Section 112(a) and (iv) ordered payment of duty and penalty under Section 125(2) of the Customs Act, 1962.

The Counsel appearing for the department contended that C.T.H 7302 specifically covers rails. HSN note on this heading provides that it covers all lengths of rails, all rails of the type normally used for railway or tramway track, irrespective of their intended use and there is no exclusion for used rails from CTH and Board clarification on vide Circular No. 8/2006-Cus dated 17.01.2005 also clarified that used steel rails were falling under CTH 7302 and not under CTH 7204 as ferrous waste and scrap.

The Amicus Curies brought to the notice of the Bench the decision of the Apex Court in the case of Commissioner of Customs (sea port-import), Chennai vs. Indo Deutsche Trade Links, holding that classification under 7204 for “used rails” declared as Heavy Melting Scrap on importation was improper and product was correctly classifiable under Heading 7302, when assessee itself in a letter to department admitted mis-declaring imported cut Rails as heavy melting scrap and requested for condonation of misdeclaration and admitted value declared to be under lower side and accepted its value for rectification.

The Two-Member Bench comprising Raju, Technical Member and Somesh Arora, Judicial Member concluded that “There is a lot of factual similarity in this case with the matter of Indo Deutsche Trade Links and hence is inclined to follow the order of the Supreme Court, in the matter and accordingly since the letter was not considered by the Commissioner (Appeals), we are inclined to allow the departmental appeal with consequential relief, on description as well as value accepted for assessment.”

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