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Supreme Court of India
Commissioner Of Customs Pune vs M/S Ballarpur Industries Ltd. on 21 September, 2021Author: Hon’Ble Dr. Chandrachud
Bench: Hon’Ble Dr. Chandrachud, Vikram Nath, B.V. Nagarathna
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal Nos 5644-5645 of 2021
Commissioner of Customs, Pune … Appellant
Versus
M/s Ballarpur Industries Ltd. …Respondent
JUDGMENT
Dr Dhananjaya Y Chandrachud, J
1. Admit.
2. These appeals by the Commissioner of Customs, Pune arises from a
judgment of the Customs, Excise & Service Tax Appellate Tribunal (“CESAT” or the
“Tribunal”) dated 27 September 2017. The question of law which has been
Signature Not Verified
Digitally signed by
formulated in the appeals is whether the Tribunal erred in setting aside the demand
Sanjay Kumar
Date: 2021.09.21
13:50:39 IST
Reason:
of anti – dumping duty on the product ‘Styrene Butadiene Rubber’ (“SBR”) classified
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under the heading 4002 of the First Schedule of the Customs Tariff Act, 1975 and
imported from Korea.
3. A show cause notice 1 dated 23 May 2006 was issued to the respondent
covering five Bills of Entry under which the product ‘Lutex -701’ was imported
namely:
“(1) Bill of Entry No. 500271 dated 18.03.05;
(2) BilI of Entry No. 500044 dated 03.05.05;
(3) Bill of Entry No. 500110 dated 13.06.05;
(4) Bill of Entry No. 500161 dated 1 7.08.05; and
(5) Bill of entry No. 500162 dated 17.08.05.”
Another show cause notice 2 dated 30 June 2006, covering six Bills 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 dated 26.08.05;
(2) Bill of Entry No. 500034 dated 27.04.05;
(3) Bill of Entry No. 500073 dated 24.05.05;
(4) Bill of Entry No. 500109 dated 13.06.05;
(5) Bill of Entry No. 500148 ·dated 28.07.05; and
(6) Bill of Entry No. 500128 dated 29.06.05.”
4. The allegation in the Show Cause Notice dated 23 May 2006 is that the
respondent mis-declared its goods as ‘Lutex – 701’ which on tests were found to be
SBR of 1900 series on which anti-dumping duty was leviable. The notice proposed
to confiscate the goods imported, collectively valued at Rs.1,19,16,267/- under
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Show Cause Notice F.No. ICD/Pimp- C’wad/BE-737/05-06 dated 23.05.2006. .
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F.No. ICD/Pimp-Chwd/SCN/204/06-07 dated 30.06.2006.
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Section 111(m) of the Customs Act 1962; to demand anti-dumping duty of
Rs.10,14,101/-; besides the levy of interest and penalty. The Show Cause Notice
dated 30 June 2006 alleged a similar mis-declaration of the goods declared as
‘Lutex 780’. Confiscation of the goods collectively valued at Rs.2,10,57,783/- was
proposed besides the demand of anti-dumping duty of Rs.16,88,618/-, the levy of
interest and penalty.
5. The Commissioner of Customs, Pune by orders dated 17 October 2006, held
that:
(i) The goods were leviable to confiscation in terms of Section 111(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 Section 28AB and penalty
under Section 112(a) read with Section 118(a) of the Customs Act 1962.
6. Appeals were filed before the CESAT by the respondent against the decision
of the Commissioner. The CESAT allowed the appeals by its order dated 27
September 2017 and came to the conclusion that the Show Cause Notices could not
be sustained.
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7. The Tribunal has allowed the appeals on the basis of two findings. The first
finding is as follows:
“There is no whisper of any reason in the show-cause notice
to disturb the classification claimed by the appellant.
Therefore, the classification of the imported declared by the
appellant under CTH 40021100 remained untouched by this
order. Anti- dumping notification indicates that the goods
falling under customs heading Nos.3903 and 4002 of the first
schedule to the Customs Tariff Act, 1975 were subject to levy
of anti-dumping duty. Accordingly, levy was confined to the
goods of heading 4002.19 since anti-dumping investigation
was confined to the goods covered by heading 4002.19.
Therefore there cannot be any misconception about the
product under consideration. Notification no. 2004-Cus dated
26.09.2004 was issued pursuant to sunset Review arising out
of the final findings of the designated authority made on
02.06.1999. That Authority confined his scope of investigation
into the goods covered by above tariff heading in the Sunset
Review which was subject matter of levy of definitive duty.
Therefore pleading of the appellant that its goods having
fallen under CTH 40021100 does not come under CTH
40021900 for levy of anti dumping duty for the reason that
goods of CTH 4002 1100 were not subject matter of
antidumping investigation at any stage.”
The second finding is as follows:
“It may be stated that while issuing show-cause notice,
learned adjudicating authority had not examined the
classification based on the report of the Laboratory. The
show-cause notice issued in 2006 was to finalise the
assessment only, without any proposal to levy anti-dumping
duty. There was no reference to the character and nature of
the imported product also therein. The Notification
No.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 the
appeals are allowed.”
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8. The Commissioner of Customs, Pune is in appeal.
9. Before we deal with the submissions which have been urged on behalf of the
contesting parties, it is necessary to preface this judgment with a reference to
Notification 100/2004-Cus dated 28 September 2004. The Notification sets out that
on 30 July 2003 the Designated Authority had initiated a sunset review in the matter
of continuing anti-dumping duty on imports of SBR 1900 series falling under heading
3903 or 4002 of the First Schedule to the Customs Tariff Act 1975 (referred to as the
“subject goods”) originating in or exported from Japan, Korea R.P. and the United
States of America. The anti-dumping duty had been imposed by the Government of
India in the Ministry of Finance (Department of Revenue), by Notification
No.73/2000-Customs dated 22 May 2000. By a communication dated 29 April 2004,
the continuation of the anti-dumping duty for an additional period for six months was
requested pending the completion of the review. The Central Government had
extended the anti- dumping duty on the subject goods originating in or exported from
the above countries by a Notification dated 26 July 2004, for an additional period of
six months up to and inclusive of 25 October 2004. On a sunset review, the
Designated Authority had rendered its findings on 27 July 2004 coming to the
conclusion that:
“(i) subject goods, originating in or exported from subject
countries has been exported to India below normal value,
resulting in dumping;
(ii) the domestic industry is suffering material injury;
(iii) dumping of subject goods is continuing from the subject
countries; and
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(iv) the material injury to the domestic industry may continue
and intensify 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 23 of Customs Tariff (Identification,
Assessment and Collection of Anti-dumping Duty on Dumped Articles and for
Determination of Injury) Rules 1995, the Central government imposed an anti-
dumping duty as specified in the following table:
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Chapter 40 of the Customs Tariff Act 1975 is titled ‘Rubber and articles thereof’. Tariff
item 4002 and its relevant entries are given below:
4002 Synthetic 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 kg. 10%
exceeding 50%
4002 19 30 – Styrene butadiene styrene oil bound copolymer kg. 10%
10. The respondent contends that its goods were classified under CTH 40021100
and were provisionally cleared. The respondent submits that the assessment was
finalized by the order of the Commissioner of Customs, levying anti-dumping duty
without there being any proposal in the show cause notice for change in the
classification. The Revenue contended that anti-dumping duty was imposed in terms
of Notification No.100/04 – Customs dated 26 September 2004 and anti-dumping
duty was correctly levied on the goods.
11. In the present proceedings, there is no dispute about the position that the
product under consideration of the Designated Authority was SBR of 1500, 1700
and 1900 series falling under CTH 4002.19 of the Customs Tariff Act 1975 but not
goods covered by the CTH 40021100. The Tribunal, as is evident from the two
extracts of its decision which have been reproduced earlier came to the conclusion
that:
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(i) No basis was indicated in the show cause notice to disturb the classification
claimed by the respondent as the result of which the declaration by the
respondent that the goods fell under CTH 40021100 “remained untouched”;
and
(ii) While issuing the notice to show cause, the adjudicating authority had not
examined the classification based on the Laboratory report.
12. Ms Aishwarya Bhati, Additional Solicitor General appearing on behalf of the
appellant submits that both the underlying findings of the Tribunal are flawed for the
following reasons:
(i) The notice to show cause dated 23 May 2006 contained a specific reference
to the fact that the test report by the Indian Rubber Manufacturers’ Research
Association (“IRMRA”) dated 6 March 2006 had revealed that the goods were
found to be SBR of 1900 series and since the goods originated in Korea R.P.
they were subject to anti-dumping duty;
(ii) A similar averment was contained in the show cause notice dated 30 May
2006;
(iii) The test reports of the IRMRA which were sought by the respondent also
contained a similar finding that the goods which were imported were SBR of
the 1900 series;
(iv) The Commissioner had specifically considered and placed reliance on the
tests reports of IRMRA; and
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(v) The finding of the Tribunal that the notice to show cause did not refer to the
classification purportedly made by the importer in the Bills of Entry is belied by
the contemporaneous record.
13. On the above premises it has been submitted that the test reports which were
commissioned both by the department as well as the importer from IRMRA indicated
that the goods imported were SBR and there is no challenge to these reports. In the
circumstance, it has been urged that the Tribunal had ignored material evidence on
the record warranting the interference of this Court in appeal.
14. On the other hand, Mr Surender Kumar Gupta, learned Counsel appearing on
behalf of the respondent urged that:
(i) The explanation provided by the respondent in the reply to the 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 describes
the sample tested as:
”the samples is in the form of white liquid. It is an aqueous
emulsion of styrene butadiene ………. ” (Kindly refer to
Annexure 8)
The goods imported by us, which exists in a liquid form, are
widely used in the paper industry and known in common trade
parlance as Latex. Unlike the former, SBR of the 1900 series
is a dry polymer, which is incapable of existing in a liquid
form. Unlike Latex, SBR of 1900 series has wide application
in the footwear industry and in the manufacture of “V” Belts.
Thus the two products are completely different in their
physical state or applicability though there are certain
common chemicals in their chemical composition.”
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(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 “Styrene
Butadine Co-polymer”. The goods imported by us, which
exists in a liquid form, are widely used in the paper industry
and known in common trade parlance as Latex. Kindly note
that, SBR of the 1900 series is a dry polymer, which is
incapable of existing in a liquid form. Unlike Latex, SBR of
1900 series has wide ·application in the footwear industry and
in the manufacture of “V” Belts.”
In other words, while SBR of the 1900 series is a dry polymer, the goods imported
by the respondent were in a liquid form and hence, according to the respondent, fall
for classification under CTH 40021100 as Latex. In this context, reliance was sought
to be placed on the Vanderbiit Rubber Handbook and an opinion obtained from the
University of Mumbai. On the above premises, it was submitted that the goods which
were imported fall under CTH 40021100. It was urged that the literature indicates
that goods imported in a liquid form would fall for classification as Latex and the
opinions of experts demonstrate that the Styrene content is not decisive on whether
or not the goods would fall for classification as Latex.
15. The Tribunal has set aside the decision of the Commissioner of Customs on
an evidently superficial evaluation of the issues raised in the appeals. The Tribunal
came to the conclusion that there is “no whisper of any reason in the Show Cause
Notice to disturb the classification” claimed by the importer. This finding is contrary
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to the record. Paragraph 3 of the Show Cause Notice dated 23 May 2006 is
extracted below:
“3. Whereas, as per the test report No: RPT/0502588rt
14478/205 dated. 03.03.2006 and Ref. No: IRMRA/RK/03-
06/23-RD dated 06.03.2006 (copy enclosed) received from
Indian Rubber Manufacturers Research Association (IRMRA),
the sample goods found as STYRENE BUTADIENE
RUBBER of 1900 series. As per Anti-dumping duty
Notification No:. 100/2004 ·. dated 28.09.2004, the goods i.e.
STYRENE BUTADIENE RUDDER of 1900 series falling
under heading 3903 or 4002 of the First Schedule to the
Customs Traffic Act 1975, originated in, or exported from,
Korea R.P. are chargeable to Anti-dumping Duty @ US $
0.0689 per Kg. In view of the fact that the goods covered
under five Bills of Entry referred as above ·are found as
STYRENE BUTADlENE RUBBER of 1900 series as
confirmed by IRMRA Test 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.”
Paragraph 4 of the Notice contains similar allegations that:
“4. Whereas the goods imported in question were declared as
‘LUTEX 701’ in import documents and, not as ‘Styrene
Butadiene Rubber (SBR) of 1900 Series which has been
confirmed by Test Report dated 06.03.2006 from IRMRA. The
importer is regular importer of subject goods and are actual
users of the goods and therefore they should be well aware of
the description of the goods imported and the duty liability
thereon. Therefore it appeared that the Importer mis declared
the description of the goods as TUTEX 701 instead of as
Styrene Butadiene Rubber (SBR) of 1900 Series with the
intention to evade the Anti Dumping Duty. At the time of filing
of Dills of Entry, the Importer did not come up with full a.id
complete description of the goods imported. If the Importer
had declared the complete and proper description of the.
goods at the time of filing of Bills of Entry, the Anti Dumping
duty would have been levied at the time of provisional
assessment. Therefore it appears to be a case of suppression
of facts on the part of the Importer by not declaring proper
description of the goods and mis declaring the description of
the goods as ‘LUTEX-701’ against proper description as 4
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Styrene Butadiene Rubber (SBR) of 1900 Series. As importer
is an actual user of the goods ii question and was aware of
the Anti Dumping duty notification no: 100/2004 issued on
28.09.2004 at the time of filing of import documents, it
appears that the importer willfully did not declare the proper
and complete description of the goods in import documents
with the 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 of the test reports in
paragraph 6.2 of the order dated 17 October 2006, which is extracted below:
“6.2 As has been extracted at paras 4 and 5 supra, the said
Importer has heavily argued that the Test Reports of IRMRA
are Inconclusive and have sought for the cross examination
of the official of the IRMRA. For the reasons recorded here
under, I am not persuaded by these arguments of the said
Importer. As per the facts, it may be seen that, initially,
samples of Lutex 701 and Lutex 780 were drawn for tests to
be done by the Dy. Chief Chemist, CCRL Nhava Sheva to
ascertain (1) composition (2). percentage of Styrene, and (3)
whether the goods are Styrene Butadiene Rubber of 1900
series. The Dy. Chief Chemist CRCL vide his report dated
30th June, 2005, for the product, Lutex 701, informed that
“the samples In the form of white coloured liquid. It Is an
aqueous emulsion based on synth1tic resin – Styrene
Butadiene type solid contents = , 54.5°/o. For content of
Syrene, sample may be forwarded to some rubber testing
laboratory” Similarly, In his report dated 5th July, 2005,
relating to the samples of 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, sample may be forwarded to rubber
testing laboratory;”
16. The Commissioner also recorded in paragraph 6.4 that the importer had also
approached IRMRA independently for testing the samples of Lutex 701 and 780 in
their control. A similar finding was arrived at by IRMRA from the samples furnished
by the importer. Paragraphs 6.4 of the decision of the Commissioner reads as
follows :
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“6.4 It may be pertinent to again mention here that the said
Importer themselves had also approached the IRMRA for an
independent testing of the samples of Lutex 701 and Lutex
780 which were in their control and the said IRMRA, vide their
Evaluation Report dated 14.09.2006, for the same goods
under the control of the said Importer and which are also
covered under the First Notice and the Second Notice
conveyed the results thereof to the said Importer 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 the
Impugned goods tested on his own from the same laboratory
where the department had sent the goods for ascertaining the
Styrene content, in the imported Lutex 701 and Lutex 780, the
styrene content was reported to be above, 60%.”
None of the above findings have been displaced in the order of the Tribunal. The
Tribunal has not looked into the merits of the appeals at all on the facetious ground
that the show cause notice did not contain any basis to doubt the classification of the
goods and that while issuing the notice, the adjudicating authority had not examined
the classification based on the report of the laboratory. The findings of the Tribunal
are contrary to the record and cannot therefore be sustained.
17. At the same time, since the Tribunal has not considered the case of the
respondent in appeal on merits, we are of the considered view that it would be
appropriate to restore the proceedings back to the Tribunal for the purpose. In order
to facilitate a fresh decision on remand, we have recorded the broad submissions of
the contesting parties on the merits as well but leave open the matter for evaluation
by the Tribunal on remand. We accordingly allow the appeals and set aside the
judgment of the Tribunal dated 27 September 2017. Appeal Nos. C/70 & 71/07
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arising out of the orders in Original No.II/Cus/2006 and 12/Cus/2006 both dated 17
October 2006 of the Commissioner of Customs, Pune are restored to the file of the
Tribunal for determination afresh.
18. The appeals are disposed of in the above terms with no order as to costs.
…………..…………………………….J
[Dhananjaya Y Chandrachud]
..…………………………………………J
[Vikram Nath]
…..………..…………………………….J
[Hima Kohli]
New Delhi;
September 21, 2021
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