The presence of small amount of slag in the goods did not make the scrap classifiable under a different heading, and the classification was determined based on the nature of the imported goods.

Chitra Venkataraman, J.

1. The Revenue is on appeal as against the order of the Customs, Excise and Service Tax Appellate Tribunal, Chennai passed in Final Order No.816/2007 dated 29.6.2007, raising the following substantial question of law:-

"In view of the evaluation by chemical analysis of the subject goods by the scientists of NML had proved the presence of "slag" and "skull scrap" in the consignment samples tested as per the Inspection Report on the basis of which the goods came under Chapter 26 of the Customs Tariff Act Heading 2619 which ultimately confirmed the requirement of specific license for import and the respondents failed to declare the same in the Bill of Entry, whether the conclusion arrived at in the Final Order passed by the Hon'ble Tribunal not having expertise in the subject goods and chemical analysis report submitted by NML, would be legally enforceable and tenable?"

2. The assessee is an importer. The assessee filed a Bill of Entry through their Customs House Agent representative for clearance of 172.54 MTs of goods declared as 'Non-alloy steel melting scrap consisting of skull'. The goods were purchased by the assessee on high seas sale basis from M/s.Shree Ganesh Steel Rolling Mills Ltd., Singapore. The goods were examined under first check and during visual examination of goods, the Revenue found no discrepancy as regards description of goods. On being asked by the apprising group as regards the nature and origin of the scrap consisting of skull, by letter dated 16.11.2006, the assessee pointed out that skull was the material spilled over during the filling of the molten metal in the moulds through tundish and during such process, there would be some spillage on the ground too and also some quantity would get stuck in the tundish itself. Therefore, spillage and the material stuck in the tundish are called 'skull'. The skull removed from tundish as well as from the ground might included some amount of impurities in the form of refractories. The skull was again a melting scrap, which could be recycled. In support of its contention, the assessee submitted a test certificate of the supplier viz., M/s.MSM Enterprises (P) Ltd., Singapore. The certificate indicated maximum constituents of the scrap as Carbon (0.19%), Manganese (1.43%), Phosphorous (0.05%), Sulphur (0.05%) and Si (O.03%). The Revenue held that the test certificate did not specify the presence of other materials.

3. It is a matter of record that the Metallurgical Inspection Report pointed out that based on visual examination and chemical analysis, the material could be considered as non-alloy steel skull scrap suitable for melting and the percentage of recovery of iron from the scrap was about 80% by weight. The assessee claimed that the goods declared in the bill of entry were non-alloy steel melting scrap consisting of skull and the same fall under the heading 72.04. Whereas, the Revenue sought to assess it under the heading 26.19 treating it as slag. Inspite of the objection raised by the assessee that the materials were for melting purpose only, the Revenue treated the same as falling under heading 26.19. In the circumstances, the Revenue held that the goods were liable for confiscation under Section 111(d) of the Customs Act, 1962 r/w Section 3(3) of Foreign Trade (Development & Regulation) Act 1992 and also under Section 111(m) of the Customs Act. The Adjudicating Authority passed an order accordingly, allowing the importer to redeem the goods on payment of fine of Rs.4,00,000/- in terms of Section 125(1) of the Customs Act and imposing penalty of Rs.40,000/-each, on the assessee as well as on M/s.Shree Ganesh Steel Rolling Mills Ltd., under section 112(a) of the Customs Act.

4. Aggrieved by this, the assessee went on appeal before the Commissioner of Customs (Appeals), who upheld the order of the Adjudicating authority. Aggrieved by this, further appeal was filed by the assessee before the Customs, Excise and Service Tax Ap