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Cus – Aluminium content in Aluminium Dross is not prime metal for adopting value on the basis of value of prime metal appearing in London Metal Exchange; enhancement of value cannot be based upon comparison of value of prime metal as specified in LME without establishing transaction value to be incorrect: CESTAT

2019-TIOL-2469-CESTAT-ALL

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, ALLAHABAD
COURT NO. I

Customs Appeal No.70161 of 2017

Arising out of Order-in-Original No.02/PR.COMMRR./N.Cus/2017, Dated: 30.01.2017
Passed by Commissioner, Customs, Noida

Date of Hearing: 19.02.2019
Date of Decision: 19.06.2019

M/s RATAN ALUMINIUM RECYCLING PVT LTD
THROUGH ITS DIRECTOR – MR OM PRAKASH PALIWAL
PLOT NO.110, SECTOR – 25, FARIDABAD

Vs

PRINCIPAL COMMISSIONER OF CUSTOMS
NOIDA, CUSTOMS COMMISSIONERATE, CONCOR COMPLEX
P O. CONTAINER DEPOT, GREATER NOIDA, GAUTAM BUDH NAGAR
UP-201311

Appellant Rep by: Shri Priyadarshi Manish, Adv.
Respondent Rep by: Shri Mohd. Altaf, (AR)

CORAM: Archana Wadhwa, Member (J)
Anil G Shakkarwar, Member (T)

Cus – The assessee is manufacturer of Aluminum Ingots and for the said purpose they imported aluminum dross under the cover of two Bills of Entry – The said Bills of Entries were presented for first check basis along with documents like commercial invoice, packing list, Bill of lading and recoverable aluminium content stated to be around 21-22% – The said goods were examined by Revenue and samples were drawn for further testing by CRCL – Based upon the reports, the proceedings were initiated against assessee by way of issuance of SCN proposing enhancement of assessable value of goods based upon the calculation of recoverable percentage of aluminium and the prices as reflected in LME on the relevant date – As per the settled law, the transaction value is assessable value unless established to be incorrect – The aluminium content recoverable from dross cannot be adopted as a reason for enhancing the transaction value, for which sufficient evidences establishing that there was flow back of money from the importer to the supplier of goods are required – The latest decision of Supreme Court in case of Sanjivani Non-Ferrous Trading Pvt. Ltd. 2018-TIOL-447-SC-CUS has observed that transaction value has to be accepted as correct assessable value and the same cannot be enhanced on the basis of NIDB data – The assessee has admittedly not imported prime metal and the imported goods are aluminium dross – The aluminium contents found in aluminium dross cannot be considered to be prime metal so as to adopt the value on the basis of value of prime metal as appearing in LME – Reference can also be made to decision in case of Sonia Overseas Pvt. Ltd. – As such enhancement of value based upon the comparison of value of prime metal, as specified in LME, without first establishing the transaction value to be wrong, is not accordance with the settled law – As such the enhancement is set aside – As per proviso of Section 3(11) of Customs Act, additional duty of customs is leviable only when article is imported in India and is liable to payment of excise duty – Aluminium dross has been held to be non-excisable item by Supreme Court in case of M/s Hyderabad Industries 2002-TIOL-369-SC-CUS-CB – There is a Boards Circular being Circular 1027/15/2016-CX wherein by following the ruling of Supreme Court in case of M/s DSCL Sugar Ltd. 2015-TIOL-240-SC-CX and the High Court of Bombay in case of M/s Hindalco Industries Ltd. 2014-TIOL-2266-HC-MUM-CX it has been held that aluminium dross being waste product and not manufactured product are not excisable to duty of excise – Inasmuch as CVD leviable on imported goods is directly related to duty of excise required to be paid by the Indian manufactured goods and there being no duty of excise on the dross, no CVD is leviable on the imported aluminium dross – No justifiable reasons found to sustain the impugned order, same is accordingly set aside: CESTAT

Appeal allowed

Case laws cited:

C.C.E. & S.T., Noida V/s Sanjivani Non-Ferrous Trading Pvt. Ltd – 2018-TIOL-447-SC-CUS… Para 5

Agarvanshi Aluminium Ltd. V/s Commissioner of Customs (I) – 2013-TIOL-1332-CESTAT-MUM… Para 6

Sonia Overseas Pvt. Ltd. V/s Commissioner of Customs, Amritsar 2011 (270) ELT 259 (Tri.-Del.)… Para 6

M/s Hyderabad Industries V/s Union of India – 2002-TIOL-369-SC-CUS-CB… Para 7

M/s DSCL Sugar Ltd. reported as – 2015-TIOL-240-SC-CX… Para 7

M/s Hindalco Industries Ltd. V/s Union of India – 2014-TIOL-2266-HC-MUM-CX… Para 7

FINAL ORDER NO. 71128/2019

Per: Archana Wadhwa:

As per facts on record, the appellant is manufacturer of ‘Aluminum Ingots and for the said purpose they imported aluminum dross under the cover of two Bills of Entry dated 10 March, 2016 and 05 April, 2016. The said Bills of Entries were presented for first check basis along with documents like commercial invoice, packing list, Bill of lading and recoverable aluminium content stated to be around 21-22%.

2. The said goods were examined by the Revenue and samples were drawn for further testing by CRCL. As per the report of CRCL dated 04 April, 2016 and 25 April, 2016 the samples were found to be in the form of grayish pores metallic lump of irregular shapes and size having oxidized surface. It is composed of aluminium and it is oxidized with small amount of iron, led, silicon and water soluble salt. The quantity of aluminium was estimated to 77.8% and 71.1% respectively in both the samples. In respect of Bill of Entry dated 10 March, 2016 the aluminium contents were expected to be around 58%.

3. Inasmuch as the said report only gave the estimated quantity of aluminium in both the samples and had not expressed the view of recoverable aluminium, retesting was conducted and for the said purpose Joint Director of CRCL visited the manufacturing premises and supervised the process of extraction of aluminium from aluminium dross. However, the said process was undertaken not out of the samples drawn from the imported lots but otherwise. The report based upon the said process of recovery of aluminium metal in respect of Bill of Entry dated 10 March, 2016 was shown as 71% and in respect of Bill of entry dated 05 April, 2016 was to the extent of 54 %.

4. Based upon the above reports the proceedings were initiated against the appellant by way of issuance of show cause notice dated 08 July, 2016 proposing enhancement of the assessable value of the goods based upon the calculation of recoverable percentage of aluminium and the prices as reflected in the LME on the relevant date. The said proposals were made under the provisions of Rule 9 of Customs Valuation Rules. The notice was adjudicated and it was observed that since there is no contemporaneous imports so as to adopt value of the same, the method of calculation of assessable value was based upon the prime metal value as reflected in LME. Further as regards payment of CVD on the goods in question the issue was not discussed by the Original Adjudicating Authority. The Commissioner vide his impugned order rejected the transaction value declared by the appellant and enhanced the same in both the entries thus confirming the demand of differential duties in respect of both the bills of entries to the extent of Rs.3,22,127/- and Rs.11,72,624/-. He also imposed penalty of Rs.9 lakh on the appellant in terms of the provisions of Section 112(a) of the Customs Act and penalty of Rs.1 lakh under Section 114(AA) of the Act. Further the goods imported by the appellant were held liable to confiscation. Since the same were provisionally released, redemption fine of Rs.17 lakh was imposed on the appellant. The said order of the Commissioner is impugned before us.

5. After hearing both the sides duly represented by learned advocate Shri Priyadarshi Manish appearing on behalf of the appellant and learned AR Shri Mohammad Altaf appearing on behalf of the Revenue and after going through the impugned order, we find that the appellants had filed the bills of entry declaring the goods as aluminium gross with recoverable quantity of aluminium ranging from 21% to 22%. All other documents like invoice, packing list , bill of lading etc were filed along with the said filing of bills of entries and the goods were presented for fist check examination. The appellants main contention is that the value has been enhanced based upon the report of CRCL indicating the recoverable quantum of aluminium much higher. During the course of cross examination, the Joint Director of CRCL has clearly stated that all steps regarding the extraction of aluminium has not been conducted by them and such process of extraction supervised in the assessee’s factory was not out of the sample drawn from the imported material. As such it stand contended that the report of the CRCL is not final and cannot be made basis of enhancement of value. Otherwise also we find that Revenue has not doubted the correctness and genuineness of the transaction value of the goods. As per the settled law the transaction value is the assessable value unless established to be incorrect. The aluminium content recoverable from the dross cannot be adopted as a reason for enhancing the transaction value, for which sufficient evidences establishing that there was flow back of money from the importer to the supplier of the goods are required. The latest decision of the Hon’ble Supreme Court in the case of C.C.E. & S.T., Noida V/s Sanjivani Non-Ferrous Trading Pvt. Ltd. reported at 2019 (365) E.L.T. 3 (S.C.) = 2018-TIOL-447-SC-CUS has observed that transaction value has to be accepted as correct assessable value and the same cannot be enhanced on the basis of NIDB data.

6. We also further note that the enhancement of the value stand done by adopting the value of the prime metal i.e. Aluminium as reflected in London Metal Exchange (LME). The Tribunal in the case of Agarvanshi Aluminium Ltd. V/s Commissioner of Customs (I) reported as 2014 (299) ELT 83 = 2013-TIOL-1332-CESTAT-MUM has held that valuation cannot be enhanced based upon LME price. In the present case we note that the appellant has admittedly not imported prime metal and the imported goods are aluminium dross. The aluminium contents found in the aluminium dross cannot be considered to be prime metal so as to adopt the value on the basis of the value of the prime metal as appearing in LME. Reference can also be made to Tribunal decision in the case of Sonia Overseas Pvt. Ltd. V/s Commissioner of Customs, Amritsar reported as 2011 (270) ELT 259 (Tri.-Del.) As such we are of the view that enhancement of value based upon the comparison of the value of prime metal, as specified in LME, without first establishing the transaction value to be wrong, is not accordance with the settled law. As such we set aside the enhancement.

7. As regards the applicability of CVD, we note that the matter was taken up before the Hon’ble Delhi High Court by way of filing writ petition and vide order dated 08 March, 2018 the Hon’ble Delhi High Court has directed to consider the leviability of CVD.

As per proviso of Section 3(11) of the Customs Act, additional duty of customs is leviable only when article is imported in India and is liable to payment of excise duty. Aluminium dross has been held to be non-excisable item by the Hon’ble Supreme Court in the case of M/s Hyderabad Industries V/s Union of India reported as (1999) 5 SCC 15 = 2002-TIOL-369-SC-CUS-CB . There is a Boards Circular being Circular No.1027/15/2016-CXdated 25 April, 2016 wherein by following the ruling of Hon’ble Supreme Court in the case of M/s DSCL Sugar Ltd. reported as – 2015-TIOL-240-SC-CX and the Hon’ble High Court of Bombay in the case of M/s Hindalco Industries Ltd. V/s Union of India reported as 2015 (315) E.L.T. 10 = 2014-TIOL-2266-HC-MUM-CX it has been held that aluminium dross being waste product and not manufactured product are not excisable to duty of excise. Inasmuch as the CVD leviable on imported goods is directly related to duty of excise required to be paid by the Indian manufactured goods and there being no duty of excise on the dross we are of the view that no CVD is leviable on the imported aluminium dross.

8. In view of the above, we find no justifiable reasons to sustain the impugned order. The same is accordingly set aside and appeal is allowed with consequential relief to the appellant by setting aside the confirmation of demand of duty and interest, imposition of penalty and redemption fine.

(Order Pronounced in the open Court on 19.06.2019)

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