The classification of imported goods under the Customs Tariff Act and the validity of circulars issued by the authorities.

1. The petitioner has approached this Court praying for quashing of circular No. 8 of 2006 dated January 17, 2006 and letter dated May 19, 2006 issued by Assistant Commissioner of Customs, Ludhiana, whereby the request of petitioner made by letter dated February 15, 2006 for permission to mutilate imported used rails was rejected and it was directed that the same is required to be classified under CTH 7302 as disc.

2. Briefly the facts, as stated in the petition, are that the petitioner is a public limited company engaged in the trading of imported raw material i.e. waste, scrap and re-rollable material. In the process, different types of scraps are imported which includes used rails. These used rails cannot be used as such in India by Railways but is considered as a re-rollable scrap. By Circular No. 1 of 2005 issued by the authorities, it was decided that the used rails shall be classified as scrap under chapter heading 7204 as used rails cannot be used as such except as scrap. However, the classification made by the above referred circular was changed vide fresh Circular No. 8 of 2006 dated January 17, 2006, which is impugned in the present petition. It was clarified vide impugned circular that chapter heading 7204 would not cover used rails. It was further opined that the used rails will form part of chapter heading 7302 which specifically covers rails and as such include any used rails.

3. The waste and scrap falling under chapter heading 7204 is subjected to customs duty @ 5% and the rails falling under chapter heading 7302 are subjected to customs duty @ 12.5%.

4. According to the petitioner, the change was made, without any basis and reason therefor. It was further submitted that while issuing impugned Circular No. 8 of 2006, the authorities relied upon Section Note 8(a) to Section XV of the Customs Tariff Act, 1975 , which clarified that waste and scrap shall be such goods which are not useable as such because of breakage, cutting up, wear or other reasons. Still further it is submitted that during 2002- 2003, rails and part of rails falling under chapter heading 7302 were subject to levy of duty @ 30% and waste/scrap falling under chapter heading 7204 was subject to duty at the rate of 40%. Vide notification No. 21/2002-Cus. dated March 1, 2002, the Government prescribed concessional rate of duty for different products falling under chapter heading 1 to 99. Entry No. 201 of the said notification provides 25% rate of duty on re-rollable scrap falling under chapter heading 7204 subject to the condition that such re-rollable scrap consists of seconds and defectives or cuttings/rejected ingots/slabs/blooms/billets, bars, angels, shape and sections, rails, and railway materials, such as wheel, axles, sleepers, sleepers bars, fish plates and flat rolled products suitable for re-rolling without undergoing process of melting and of length 2000 mm. (maximum) width 800 mm (maximum), thickness/diameter 8mm. (minimum). In case of rails and railway materials, there will be no size restriction. Meaning thereby that the Government had extended the benefit of concessional rates of duty on used rails. It is further stated that in case there is apprehension of use of the goods imported for any other purpose, there is a provision for seizing the same. The problem arose to the petitioner on account of import of used rails after the petitioner entered into an agreement on April 22, 2006 with a UAE based exporter firm for the purchase of 2500 MT used rail scraps, which is meant for re-rolling.

5. In reply filed, the respondent contested the petition by raising plea of alternative remedy by stating that the classification of commodities under one head or the other and as to whether the same attracts high or low rate of duty has to be decided on the facts of each case for which the Tribunal would be the appropriate authority. The duty is leviable as per the classification of the goods imported which has no relation with its intended