COMMISSIONER OF CUSTOMS, PUNE versus M/S BALLARPUR INDUSTRIES LTD. on 21 September 2021

1. Admit.

2. These appeals by the Commissioner of Customs, Pune arisesfrom a judgment of the Customs, Excise & Service Tax Appellate Tribunal(“CESAT” or the “Tribunal”) dated 27 September 2017. The questionof law which has been formulated in the appeals is whether the Tribunalerred in setting aside the demand of anti – dumping duty on the product‘Styrene Butadiene Rubber’ (“SBR”) classified under the heading 4002of the First Schedule of the Customs Tariff Act, 1975and imported fromKorea.

3. A show cause notice[1] dated 23 May 2006 was issued to therespondent covering five Bills of Entry under which the product ‘Lutex-701’ was imported namely:

“(1) Bill of Entry No. 500271 dated18.03.05;

(2) BilI of Entry No. 500044 dated03.05.05;

(3) Bill of Entry No. 500110 dated13.06.05;

(4) Bill of Entry No. 500161 dated1 7.08.05; and

(5) Bill of entry No. 500162 dated17.08.05.”

Another show cause notice[2] dated 30 June 2006, covering sixBills of Entry’ was issued to the respondent under which the product‘Lutex – 780’was imported. The details of the Bills of Entry are:

“(1) Bill of Entry No. 500183 dated26.08.05;

(2) Bill of Entry No. 500034 dated27.04.05;

(3) Bill of Entry No. 500073 dated24.05.05;

(4) Bill of Entry No. 500109 dated13.06.05;

(5) Bill of Entry No. 500148 ·dated28.07.05; and

(6) Bill of Entry No. 500128 dated29.06.05.”

4. The allegation in the Show Cause Notice dated 23 May 2006 isthat the respondent mis-declared its goods as ‘Lutex – 701’ which on 1 Show Cause Notice F.No. ICD/Pimp- C’wad/BE-737/05-06 dated 23.05.2006.

2 F.No. ICD/Pimp-Chwd/SCN/204/06-07 dated 30.06.2006.

A

B

C

D

EFG

H

Atests were found to be SBR of 1900 series on which anti-dumping dutywas leviable. The notice proposed to confiscate the goods imported,collectively valued at Rs.1,19,16,267/- under Section 111(m) of theCustoms Act 1962; to demand anti-dumping duty of Rs.10,14,101/-;besides the levy of interest and penalty. The Show Cause Notice dated30 June 2006 alleged a similar mis-declaration of the goods declared asB‘Lutex 780’. Confiscation of the goods collectively valued atRs.2,10,57,783/- was proposed besides the demand of anti-dumping dutyof Rs.16,88,618/-, the levy of interest and penalty.

5. The Commissioner of Customs, Pune by orders dated 17October 2006, held that:C

(i) The goods were leviable to confiscation in terms of Section111(m) of the Customs Act 1962;

(ii) The goods were chargeable to anti-dumping duty; and

(iii) The respondent was liable to pay interest under SectionD28ABand penalty under Section 112(a) read with Section118(a) of the Customs Act 1962.

6. Appeals were filed before the CESAT by the respondent againstthe decision of the Commissioner. The CESAT allowed the appeals byits order dated 27 September 2017and came to the conclusion that theEShow Cause Notices could not be sustained.

7. The Tribunal has allowed the appeals on the basis of twofindings. The first finding is as follows:

“There is no whisper of any reason in the show-cause notice todisturb the classification claimed by the appellant. Therefore, theFclassification of the imported declared by the appellant under CTH40021100 remained untouched by this order. Anti- dumpingnotification indicates that the goods falling under customs headingNos.3903 and 4002 of the first schedule to the Customs TariffAct, 1975 were subject to levy of anti-dumping duty. Accordingly,Glevy was confined to the goods of heading 4002.19 since anti-dumping investigation was confined tothe goods covered byheading 4002.19.

Analysis

Therefore there cannot be any misconception about the productunder consideration. Notification no.2004-Cus dated 26.09.2004Hwas issued pursuant to sunset Review arising out of the final findings of the designated authority made on 02.06.1999. ThatAuthority confined his scope of investigation into the goods coveredby above tariff heading in the Sunset Review which was subjectmatter of levy of definitive duty. Therefore pleading of the appellantthat its goods having fallen under CTH 40021100 does not comeunder CTH 40021900 for levy of anti dumping duty for the reasonthat goods of CTH 4002 1100 were not subject matter ofantidumping investigation at any stage.”

The second finding is as follows:

“It may be stated that while issuing show-cause notice, learnedadjudicating authority had not examined the classification basedon the report of the Laboratory. The show-cause notice issued in2006 was to finalise the assessment only, without any proposal tolevy anti-dumping duty. There was no reference to the characterand nature of the imported product also therein. The NotificationNo.100/2004-Cus dated 26.09.2004 does not intend to levy anti-dumping duty on the product imported by the appellant.Accordingly, the show cause notice having no basis, both theappeals are allowed.”

8. The Commissioner of Customs, Pune is in appeal.

9. Before we deal with the submissions which have been urgedon behalf of the contesting parties, it is necessary to preface this judgmentwith a reference to Notification 100/2004-Cus dated 28 September2004.The Notification sets outthat on 30 July 2003 the DesignatedAuthority had initiated a sunset review in the matter of continuing anti-dumping duty on imports of SBR 1900 series falling under heading 3903or 4002 of the First Schedule to the Customs Tariff Act 1975 (referredto as the “subject goods”) originating in or exported from Japan, KoreaR.P. and the United States of America. The anti-dumping duty had beenimposed by the Government of India in the Ministry of Finance(Department of Revenue), by Notification No.73/2000-Customs dated22 May 2000. By a communication dated 29 April 2004, the continuationof the anti-dumping duty for an additional period for six months wasrequested pending the completion of the review. The Central Governmenthad extended the anti- dumping duty on the subject goods originating inor exported from the above countries by a Notification dated 26 July2004, for an additional period of six months up to and inclusive of 25

AB

C

D

EF

G

H

AOctober 2004. On a sunset review, the Designated Authority had renderedits findings on 27 July 2004 coming to the conclusion that:

“(i) subject goods, originating in or exported from subject countrieshas been exported to India below normal value, resulting indumping; B

(ii) the domestic industry is suffering material injury;

(iii) dumping of subject goods is continuing from the subjectcountries; and

(iv) the material injury to the domestic industry may continue andCintensify if anti-dumping duty is removed.”

Hence, in exercise of the powers conferred by sub-sections (1)and (5) of Section 9A of the Customs Tariff Act 1975 read with Rule 23of Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury)DRules 1995, the Central government imposed an anti-dumping duty asspecified in the following table:

E

F

G

COMMISSIONER OF CUSTOMS, PUNE v. M/S BALLARPURINDUSTRIES LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

Chapter 40 of the Customs Tariff Act 1975 is titled ‘Rubber andarticles thereof’. Tariff item 4002 and its relevant entries are given below:

4002Synthetic rubber and factice dervied from oils, in primary forms or in plates, sheets or strip; mixtures of any product of heading 4001 with any product of this heading, in primary forms or in plates, sheets or strip - Styrene butadiene rubber (SBR); carboxylated styrene-butadiene rubber (XSBR)4002 11 00 - Latex kg. 10% 4002 19 - Other 4002 19 10 - Oil extended styrene butadiene rubber kg. 10% 4002 19 20 - Styrene butadiene rubber with styrene content exceeding 50% kg. 10% 4002 19 30 - Styrene butadiene styrene oil bound copolymer kg. 10%

10. The respondent contends that its goods were classified underCTH 40021100 and were provisionally cleared. The respondent submitsthat the assessment was finalized by the order of the Commissioner ofCustoms, levying anti-dumping duty without there being any proposal inthe show cause notice for change in the classification. The Revenuecontended that anti-dumping duty was imposed in terms of NotificationNo.100/04 – Customs dated 26 September 2004 and anti-dumping dutywas correctly levied on the goods.

11. In the present proceedings, there is no dispute about the positionthat the product under consideration of the Designated Authority wasSBR of 1500, 1700 and 1900 series falling under CTH 4002.19 of theCustoms Tariff Act 1975 but not goods covered by the CTH 40021100.The Tribunal, as is evident from the two extracts of its decision whichhave been reproduced earlier came to the conclusion that:

(i) No basis was indicated in the show cause notice to disturbthe classification claimed by the respondent as the result ofwhich the declaration by the respondent that the goods fellunder CTH 40021100 “remained untouched”; and

(ii) While issuing the notice to show cause, the adjudicatingauthority had not examined the classification based on theLaboratory report.

12. Ms Aishwarya Bhati, Additional Solicitor General appearingon behalf of the appellant submits that both the underlying findings of theTribunal are flawed for the following reasons:

A

B

C

E

F

G

H

A(i)The notice to show cause dated 23 May 2006 contained aspecific reference to the fact that the test report by the IndianRubber Manufacturers’ Research Association (“IRMRA”)dated 6 March 2006 had revealed that the goods were foundto be SBR of 1900 series and since the goods originated inKorea R.P. they were subject to anti-dumping duty;B

(ii) A similar averment was contained in the show cause noticedated 30 May 2006;

(iii) The test reports of the IRMRA which were sought by therespondent also contained a similar finding that the goods whichCwere imported were SBR of the 1900 series;

(iv) The Commissioner had specifically considered and placedreliance on the tests reports of IRMRA; and

(v) The finding of the Tribunal that the notice to show cause didnot refer to the classification purportedly made by the importerDin the Bills of Entry is belied by the contemporaneous record.

13. On the above premises it has been submitted that the testreports which were commissioned both by the department as well as theimporter from IRMRA indicated that the goods imported were SBR andthere is no challenge to these reports. In the circumstance, it has beenEurged that the Tribunal had ignored material evidence on the recordwarranting the interference of this Court in appeal.

14. On the other hand, Mr Surender Kumar Gupta, learned Counselappearing on behalf of the respondent urged that:

(i) The explanation provided by the respondent in the reply toFthe notice to show cause was to the following effect:

“3.4 SBR of 1900 series is essentially a dry polymer The Test Report of the Deputy Chief Chemist itself describesthe sample tested as:

G‘’the samples is in the form of white liquid. It is an aqueousemulsion of styrene butadiene .......... “ (Kindly refer toAnnexure 8)

The goods imported by us, which exists in a liquid form, arewidely used in the paper industry and known in common trade H

parlance as Latex. Unlike the former, SBR of the 1900 seriesis a dry polymer, which is incapable of existing in a liquid form.Unlike Latex, SBR of 1900 series has wide application in thefootwear industry and in the manufacture of “V” Belts. Thusthe two products are completely different in their physical stateor applicability though there are certain common chemicals intheir chemical composition.”

(ii) Moreover, according to the respondent, in its reply:

“3.8 Latex and SBR of 1900 are two separate products- As mentioned above, the product imported by us is “StyreneButadine Co-polymer”. The goods imported by us, which existsin a liquid form, are widely used in the paper industry andknown in common trade parlance as Latex. Kindly note that,SBR of the 1900 series is a dry polymer, which is incapable ofexisting in a liquid form. Unlike Latex, SBR of 1900 series haswide ·application in the footwear industry and in themanufacture of “V” Belts.”

In other words, while SBR of the 1900 series is a dry polymer, thegoods imported by the respondent were in a liquid form andhence,according to the respondent, fall for classification under CTH 40021100as Latex. In this context, reliance was sought to be placed on theVanderbiit Rubber Handbook and an opinion obtained from the Universityof Mumbai. On the above premises, it was submitted that the goodswhich were imported fall under CTH 40021100. It was urged that theliterature indicates that goods imported in a liquid form would fall forclassification as Latex and the opinions of experts demonstrate that theStyrene content is not decisive on whether or not the goods would fallfor classification as Latex.

15. The Tribunal has set aside the decision of the Commissionerof Customs on an evidently superficial evaluation of the issues raised inthe appeals. The Tribunal came to the conclusion that there is “no whisperof any reason in the Show Cause Notice to disturb the classification”claimed by the importer.This finding is contrary to the record. Paragraph3 of the Show Cause Notice dated 23 May 2006 is extracted below:

“3. Whereas, as per the test report No: RPT/0502588rt14478/205dated. 03.03.2006and Ref. No: IRMRA/RK/03-06/23-RDdated06.03.2006 (copy enclosed) received from Indian Rubber ABC

D

E

F

G

H

Manufacturers Research Association (IRMRA), the sample goodsfound as STYRENE BUTADIENE RUBBER of 1900 series.As per Anti-dumping duty Notification No:. 100/2004 dated28.09.2004, the goods i.e. STYRENE BUTADIENE RUDDERof 1900 series falling under heading 3903 or 4002 of the FirstSchedule to the Customs Traffic Act 1975, originated in, or exportedfrom, Korea R.P. are chargeable to Anti-dumping Duty @ US $0.0689 per Kg. In view of the fact that the goods covered underfive Bills of Entry referred as above ·are found as STYRENEBUTADlENE RUBBER of 1900 series as confirmed by IRMRATest Report dated 06.03.2006 and the goods are of Korea R.P.origin, the goods become chargeable to Anti-dumping duty @ US$ Q.0689 per kg as per Notification No: 100/2004 dated·28.09.2004.”

A

B

C

Paragraph 4 of the Notice contains similar allegations that:

A

B

C

Paragraph 4 of the Notice contains similar allegations that:

“4. Whereas the goods imported in question were declared asD‘LUTEX 701’ in import documents and, not as ‘Styrene ButadieneRubber (SBR) of 1900 Series which has been confirmed by TestReport dated 06.03.2006 from IRMRA. The importer is regularimporter of subject goods and are actual users of the goods andtherefore they should be well aware of the description of the goodsEimported and the duty liability thereon. Therefore it appeared thatthe Importer mis declared the description of the goods as TUTEX701 instead of as Styrene Butadiene Rubber (SBR) of 1900 Serieswith the intention to evade the Anti Dumping Duty. At the time offiling of Dills of Entry, the Importer did not come up with full a.idcomplete description of the goods imported. If the Importer hadFdeclared the complete and proper description of the. goods at thetime of filing of Bills of Entry, the Anti Dumping duty would havebeen levied at the time of provisional assessment. Therefore itappears to be a case of suppression of facts on the part of theImporter by not declaring proper description of the goods and misGdeclaring the description of the goods as’LUTEX-701' againstproper description as4 Styrene Butadiene Rubber (SBR) of 1900Series. As importer is an actual user of the goods ii question andwas aware of the Anti Dumping duty notification no: 100/2004issued on 28.09.2004 at the time of filing of import documents, itappears that the importer willfully did not declare the proper D

E

G

H

and complete description of the goods in import documents withthe intention to evade the Anti dumping duty.”

A similar allegation was contained in the second show cause notice.The Commissioner of Customs specifically dealt with the contents ofthe test reports in paragraph 6.2of the order dated 17 October 2006,which is extracted below:

“6.2 As has been extracted at paras 4 and 5 supra, the said Importerhas heavily argued that the Test Reports of IRMRA areInconclusive and have sought for the cross examination of theofficial of the IRMRA. For the reasons recorded here under, Iam not persuaded by these arguments of the said Importer. Asper the facts, it may be seen that, initially, samples of Lutex 701and Lutex 780 were drawn for tests to be done by the Dy. ChiefChemist, CCRL Nhava Sheva to ascertain (1) composition (2).percentage of Styrene, and (3) whether the goods are StyreneButadiene Rubber of 1900 series. The Dy. Chief Chemist CRCLvide his report dated 30th June, 2005, for the product, Lutex 701,informed that “the samples In the form of white coloured liquid. ItIs an aqueous emulsion based on synth1tic resin - StyreneButadiene type solid contents = , 54.5°/o. For content of Syrene,sample may be forwarded tosome rubber testing laboratory”Similarly, In his report dated 5th July, 2005, relating to the samplesof Lutex 780 it was informed by the Dy. chief Chemist, CRCL,that “The· sample is in the form of white liquid. It. is an aqueous·emulsion of Styrene Butadiene, For content of Styrene, samplemay be forwarded to rubber testing laboratory;”

16. The Commissioner also recorded in paragraph 6.4 that theimporter had also approached IRMRA independently for testing thesamples of Lutex 701 and 780 in their control. A similar finding wasarrived at by IRMRA from the samples furnished by the importer.Paragraphs 6.4 of the decision of the Commissioner reads as follows :

“6.4 It may be pertinent to again mention here that the said Importerthemselves had also approached the IRMRA for an independenttesting of the samples of Lutex 701 and Lutex 780 which were intheir control and the said IRMRA, vide their Evaluation Reportdated 14.09.2006, for the same goods under the control of thesaid Importer and which are also covered under the First Notice A

B

C

D

E

F

G

H

Aand the Second Notice conveyed the results thereof to the saidImporter wherein the Styrene content was observed to be 64.44%and 66.75% respectively for Lutex 701 and Lutex 780.”

In this background, the Commissioner held:

“6.5 Thus, It may be seen that when the said Importer got theBImpugned goods tested on his own from the same laboratory wherethe department had sent the goods for ascertaining the Styrenecontent, in the imported Lutex 701 and Lutex 780, the styrenecontent was reported to be above, 60%.”

None of the above findings have been displaced in the order ofCthe Tribunal. The Tribunal has not looked into the merits of the appealsat all on the facetious ground that the show cause notice did not containany basis to doubt the classification of the goods and that while issuingthe notice, the adjudicating authority had not examined the classificationbased on the report of the laboratory. The findings of the Tribunal areDcontrary to the record and cannot therefore be sustained.

17. At the same time, since the Tribunal has not considered thecase of the respondent in appeal on merits, we are of the consideredview that it would be appropriate to restore the proceedings back to theTribunal for the purpose. In order to facilitate a fresh decision on remand,Ewe have recorded the broad submissions of the contesting parties on themerits as well but leave open the matter for evaluation by the Tribunalon remand. We accordingly allow the appeals and set aside the judgmentof the Tribunal dated 27 September 2017. Appeal Nos. C/70 & 71/07arising out of the orders in Original No.II/Cus/2006 and 12/Cus/2006both dated 17 October 2006 of the Commissioner of Customs, Pune areFrestored to the file of the Tribunal for determination afresh.

18. The appeals are disposed of in the above terms with no orderas to costs.

GAnkit Gyan

Appeals disposed of.

H