CESTAT Chandigarh ruled that the goods were correctly classified as HMS under CTH 72044900

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 10.03.2026

CESTAT Chandigarh ruled that the goods were correctly classified as HMS under CTH 72044900

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Chandigarh recently delivered a significant judgment in the case of M/s J.S. ​ Steel Traders vs. Commissioner of Customs, Amritsar. ​ This case revolved around the classification and confiscation of imported goods declared as “Heavy Melting Scrap” (HMS) but partially identified by customs authorities as “old and used gas cut drill pipes.” ​ The tribunal’s decision has set a precedent for similar cases involving the classification of imported goods under the Customs Tariff Act. ​

Background of the Case

M/s J.S. ​ Steel Traders imported 99.120 MT of cargo, declared as HMS under Customs Tariff Heading (CTH) 72044900, via Bill of Entry No. ​ 9767180 dated April 4, 2013. ​ The consignment, imported from M/s A.W. ​ Parker’s Enterprises, Australia, had a declared assessable value of Rs. ​ 22,25,199, with a duty payable of Rs. ​ 3,75,044. Upon examination by customs officers on April 10, 2013, it was found that 64.780 MT of the consignment was indeed HMS, but 35.000 MT consisted of “old and used gas cut drill pipes” of varying lengths and diameters. ​

The customs department alleged that the goods were misdeclared and classified incorrectly, claiming that the drill pipes were restricted items under Para 2.17 of the Foreign Trade Policy (FTP). ​ Consequently, the Additional Commissioner confiscated the 35.000 MT of drill pipes, imposed a redemption fine of Rs. ​ 1,30,000, and levied a personal penalty of Rs. ​ 80,000. The Commissioner (Appeals) upheld this decision, prompting M/s J.S. ​ Steel Traders to file an appeal with the CESTAT.

Arguments Presented

Appellant’s Arguments ​

The counsel for M/s J.S. Steel Traders argued that:

1. The imported goods were not drill pipes but heavy melting scrap (HMS) intended for metal recovery through melting. ​
2. The goods were not serviceable as drill pipes due to their varying lengths and diameters, and the absence of male and female conical heads on both ends. ​
3. The classification under CTH 72044900 was correct, as the goods were unusable in their original form and fit only for melting. ​
4. The customs department failed to provide expert opinions or documentary evidence proving the goods were serviceable or misdeclared. ​
5. Subsequent imports of identical goods by the appellants were cleared without any objections, indicating consistency in their declarations. ​

The appellants relied on several judicial precedents, including Global Shiptrade Pvt. ​ Ltd., Shiva Ispat Udyog, and Lucky Steel Industries, which established that old and used goods, if not serviceable, should be classified as scrap under Heading 7204. ​

Respondent’s Arguments

The Revenue argued that:

1. The goods were misdeclared as HMS, while a portion of the cargo consisted of old and used drill pipes, which are restricted under the FTP. ​
2. The goods were serviceable and could be reused for purposes such as fencing or structural support, and therefore did not qualify as scrap under Heading 7204. ​
3. The appellants did not possess the required authorization or license for importing restricted goods. ​
4. Misdeclaration was done with the intent to evade payment of applicable duties. ​

The Revenue relied on the HSN Explanatory Notes to Heading 72.04, which exclude articles that can be reused for their original purpose or adapted for other uses from the definition of “waste and scrap.” ​

Tribunal’s Observations

After hearing both sides, the tribunal made the following observations:

1. The customs department did not engage any expert or chartered engineer to examine the cargo, which could have provided clarity on the nature of the goods. ​
2. The department failed to provide documentary evidence proving that the goods were serviceable or could be reused for their original purpose. ​
3. Section Note 8 of the Customs Tariff Act defines “waste and scrap” as metal goods that are definitely not usable due to breakage, cutting-up, wear, or other reasons. ​ The tribunal found that the goods in question met this definition. ​
4. Judicial precedents, including Global Shiptrade Pvt. ​ Ltd. and Shiva Ispat Udyog, supported the appellants’ claim that old and used goods, in the absence of evidence proving serviceability, should be classified as scrap. ​

Final Decision

The tribunal concluded that the Revenue had not established a case of misdeclaration or provided sufficient evidence to support the claim that the goods were serviceable. ​ It held that the imported goods were correctly classified as HMS under CTH 72044900 and were not liable for confiscation. ​ Consequently, the tribunal set aside the impugned order and allowed the appeal, granting consequential relief to M/s J.S. ​ Steel Traders. ​

Key Takeaways

1. Importance of Expert Opinion: The tribunal emphasized the need for expert examination to determine the nature of imported goods, especially in cases involving technical classifications. ​
2. Adherence to Customs Tariff Act: The decision highlighted the significance of adhering to the definitions provided in the Customs Tariff Act, particularly for waste and scrap. ​
3. Judicial Precedents: The tribunal relied heavily on previous judgments to establish that old and used goods, if not serviceable, should be classified as scrap. ​
4. Burden of Proof: The judgment underscored that the burden of proving misdeclaration lies with the Revenue, which must provide concrete evidence to support its claims. ​

Conclusion

The case of M/s J.S. ​ Steel Traders serves as a crucial reference for importers and legal practitioners dealing with disputes related to the classification of goods under the Customs Tariff Act. ​ It reinforces the importance of expert opinions, adherence to statutory definitions, and the need for the Revenue to substantiate its claims with evidence. ​ This landmark decision is a step forward in ensuring fair and transparent customs practices in India.

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Source: CESTAT Chandigarh

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