MR. MOHAMMAD SULAIMAN, MEMBER (TECHNICAL)/ CHAIRMAN.-(1). This appeal has been filed against the Order-in-Original No. 19/2002, dated 26.04.2002 passed by the learned Collector (Adjudication), Customs, Central Excise and Sales Tax, Rawalpindi.
2. The brief facts of the case are that the staff (AIB) Collectorate of Customs, Rawalpindi in pursuance of an information scrutinized the import record pertaining to "Refractory Bricks" of M/s. Askari Cement Co. Ltd., Islamabad, the appellant. During the scrutiny of subject record the staff observed that the said Unit imported 5279 Pcs of "Refractory Bricks" for use in their Cement Rotary Kiln having specification PERILEX-83, KORONEX-30, 40 & 70 from Germany vide import invoice No. 0014271 and 164161 and sought its clearance vide Bill of Entry No. 157/2001, dated 18.08.2001 and B/E No. 319/2001, dated 08.10.2001, respectively. The appellant declared the PCT classification of said goods as 6902.1090 and 6902.2090 which is chargeable to customs duty @10%. The said PCT classification is meant for the "Refractory Bricks" capable of over and above resisting temperature 1600C. In order to know the correct PCT classification and chargeability of customs duty accordingly, the matter along with import invoices and catalogues was referred to M/s. Fecto Cement Ltd., M/s. H.M.C., Taxila for seeking their expert opinion with regard to the capability of resisting temperature of the said goods. The reply given by them confirmed that the imported bricks have capable of resisting temperature ranging between 1250C to 1500C. Keeping in view the sensitivity of the issue and in the interest of justice, the matter along with representative samples of each value of imported Refractory Bricks were obtained from the importer and sent to "Pakistan Counsel of Scientific and Industrial Research" Laboratories Complex, Lahore for chemical analysis and also for determination of actual resisting temperature of the goods. M/s. PCSIR, Lahore intimated vide letter No. GXC/MS/03/2002/0085, dated 17.01.2002 that the operating and actual resisting temperature (working temperature) for the bricks under reference is ranging between 1250C to 1400C. As per expert opinion and analytical test report from M/s. PCSIR Laboratories Complex, Lahore regarding capability of resisting temperature of Refractory Bricks imported by M/s. Askari Cement Co. Ltd., it can safely be concluded that the imported Refractory Bricks were exactly classifiable against PCT Heading 6902.1010 and were chargeable to customs duty @ 30%.
Hence M/s. Askari Cement Ltd. Wilfully misdeclare the PCT classification of imported goods against Heading No. 6902.1090 and 6902.2090 and evaded the short paid customs duty and allied taxes to the tune of Rs. 1,225,996.00 (as per calculation sheet attached). Thus M/s. Askari Cement Co. Ltd.
Are alleged to have violated the provisions of section 32(2) of the Customs Act, 1969, punishable under section 156(1)(14) ibid. Subsequently, a show cause notice was served upon the appellant vide C. No. Cus/Coll/Adj7l/2002/3667-69, dated 11.04.2002. After affording opportunity of hearing to the appellant the leamed Adjudicating Officer passed the impugned Order-in-Original No. 19/2002, dated 26.04.2002, by which he ordered the appellant to pay duty/taxes amounting to Rs.
1,225,996.00 in Government treasury. He also imposed a penalty equal to the value of goods in respect of which an offence has been committed under section 156(1)(14) of the Customs Act, 1969.
The appellant felt aggrieved by this order and filed the instant appeal.
3. The learned counsel for the appellant submitted that the appellant imported Refractory Bricks, brand names PERILEX-83 and KRONEX-70, 40 & 30, from Germany. 'Perilex' and 'Kronex' bricks arrived in separate shipments. 'PERILEX-83' shipment was cleared under B/E No. 157/01 on 18th September 2001 and the mixed shipment of 'KRONEX-70,40 & 30' was cleared under B/E No. 319/01, dated 8th October 2001. The leamed Collector (Adjudication), in his 'Show Cause Notice' dated 11.04.2002 (para 3 line 4), has alleged, and in the impugned 'Order-in-Original No. 19/2002' dated 30.04.2002 (para 3 line 4), has held that both the aforesaid shipments of imported refractory bricks were classifiable under one PCT Heading 6902.1010. The respondent Collector alleged short-levy in respect of both the above stated consignments of Refractory Bricks on account of alleged mis- declaration of PCT No. That changed the applicable customs duty from 30% ad val to 10% ad val.
For the 'First Partial Shipment' imported vide B/E No. 157/01 the said short levy was alleged to be Rs.
698,021.00 and for the 'Second Balance Shipment' imported vide B/E No. 319/01 the alleged short levy had been adjudged to be Rs. 527,975.00. He argued that the appellant neither had knowledge nor any reason to believe that the PCT classification declared by him in the aforesaid Bills of Entry was false. He contented that the appellant imported refractory bricks from a world-renowned manufacturer and for placing the purchase order and for customs clearance of these goods. He relied upon the product description and their corresponding characteristics as given in Manufacturer's catalogue. Under Section 15 of the Sales of Goods Act, 1930, it is therefore the implied condition that what the appellant imported as PERILEX-83 bricks (B/E No. 157/01) corresponded with their chemical and physical characteristics described in its product brochure.
Similarly the bricks by the brand name of KRONEX-70, 40 and 30 (B/E No. 319/01) had the warranted character given in their respective brochures. He further contended that for declaring the applicable PCT classification in the Bills of Entry he relied upon the final temperature 'te' of the Refractoriness Under Load (hereinafter referred to as 'RUL') for the bricks of the respective brand as given by the manufacturer in their product brochures. He argued that the appellant earnestly believed, and still believe, that in case of the refractory bricks imported by the appellant 'te', and not 'ta', is the temperature that indicates the capability of the refractory bricks to resist temperature. That they based their belief on the information received by them, which demonstrated that "Refractoriness is a measure of fusibility of a material" and in the representative 'temperature range' the temperature 'te' marks the end of the softening range of the refractory brick under test. Therefore, relying on the value of 'te' in the refractoriness of the imported bricks given in the product brochure the appellant chose the applicable PCT classification and declared the same in the Bills of Entry. He further submitted that, according to the opinion of the Materials expert, the refractory brick is capable of resisting temperature beyond the range given as RUL in case the brick is tested without load. The Customs Tariff Code fails to explain the attributes of the term 'capable of resisting temperature' that the Code uses to discriminate between the applicable rates of duty in Chapter 69. The Code is also silent on the point as to how this qualifying term is to be construed in relation to the physical behaviour of the refractory bricks in response to rising temperature. He submitted that this term is not commonly employed by manufacturers, vendors and users of refractory materials to depict the material's capability to withstand the high temperature and corrosive environment of its use. He stressed that the terms 'safe operating temperature' or 'usual working temperature' (upon which the Hon'ble Collector based his determination in the impugned Order) are not synonymous with the term 'capable of resisting temperature upto 1600C. The Hon'ble Tribunal is requested to take cognizance of the distinction between these terms. Refractoriness of the material, in fact, is the closest index of its capability to resist temperature. In view of the vagueness of the statement used to qualify the distinction between the PCT classification, the Hon'ble Tribunal is requested to grant us the privilege of contra proferentem in the application of the qualifying statement "capable of resisting temperature uptol600C". The rule of law used in connection with the construction of written documents to the effect that an ambiguous provision is construed most strongly against the person who selected the language. As regards the applicable tariff classification, he argued that the leamed respondent has held that the refractory bricks imported by them, in two shipments, are correctly classifiable under one PCT Heading 6902.1010 and we have mis-declared on that account in the Bills of Entry Nos. 157/01 and 319/01. The appellant begs to differ here. Page 1574, Chapter 69 of 'Customs Tariff and Trade Controls-Part I' distinguishes between PCT Heading 6902.1090/6902.2090 declared by the appellant on the respective Bills of Entry and 6902.1010 adjudged applicable by the respondent Collector. He vehemently submitted that the 'chemical composition' of Refractory Bricks in question determines as to whether the PCT Heading 6902.1090 or 6902.2090 applies. PERILEX-83 bricks, of course, fall under PCT classification 6902.1090 by virtue of their chemical composition. On the other hand, KORNEX-70, 40 & 30 bricks are covered by PCT Heading 6902.2090 due to their chemistry. To that extent the respondent Collector is obviously in error in holding that the shipment of 'Perilex' bricks as well as the shipment of 'Kronex' bricks are to be classified under the same PCT Heading.
That it may be appreciated that for distinction between PCT headings 6902.1090 (30% ad val.) and 6902.2090 (10% ad val.), the Customs Tariff Manual classifies the Refractory Bricks on the basis of their 'capability to resist temperature'. The dividing line for the temperature resisting capability is 1600 degrees Celsius. Refractory bricks capable of resisting temperature beyond 1600C are to be classified and placed under PCT Heading 6902.2090 with CD chargeable at 10% ad val. The remaining bricks whose temperature resisting capability falls short of 1600C are classified under PCT Heading 6902.1010 with CD chargeable at 30% ad val. He next submitted that the appellant gathered data from the Refractory Bricks manufacturers-at home and abroad to find that they do not popularly describe their product's capability to resist temperature in terms of some ultimate temperature. Instead, the refractory manufacturers give the 'Refractoriness Under Load' (RUL) of their products to describe their temperature resisting capability. He submitted that according to the statement of material scientist filed, the refractory brick's 'capacity to resist temperature' is synonymous with its 'refractoriness' (line 7). Moreover, the 'refractoriness under load' of a refractory brick is far lower in temperature than its 'refractoriness without load'. He requested this Tribunal to take judicial notice of the facts stated in the said Scientist's statement to the effect that:-
(a) RUL, in fact, is an index of the brick's 'capability of resisting temperature' below or beyond the temperature prescribed in the Tariff Manual.
(b) The capability to resist temperature' of the Refractory Brick is far above its 'Refractoriness Under Load'.
He further argued that a Refractory Brick is said to be 'capable of resisting temperatures up to a certain limit' if it yields to the temperatures beyond the given temperature. The Refractory Bricks imported by them i.e. Perilex-83 and Kronex-70,40 & 30 yields at temperatures beyond 1600C and not before. It is appellant's stand that as per the published product brochures of manufacturer M/s. REFRATECHNIK, the refractoriness under load (RUL) of various bricks imported by them is as follows:-
(a) PERILEX-83: te >1700 C
(b) KRONEX-70: ta 1500 C te 1650 C
(c) KRONEX-40: ta 1400 C te 1650 C
(d) KRONEX-70: ta 1400 C Te1 620 C All brands of the refractory bricks imported by them have the temperature 'te' in the RUL test exceeding 1600C. The mere fact that the bricks, in accordance with the DIN specifications, have passed through the Refractoriness Under Load test carried out beyond 1600C leads to the logical conclusion that the imported bricks have, of course, resisted the temperature upto 'te'. It is so, because the bricks have not melted off at this temperature but merely softened to the extent that they can compressed by 10 mm under the test load. He requested this Tribunal to take cognizance of the fact that 'plasticity at higher temperatures' is the ordinary behaviour of refractory bricks. As the refractory bricks resist the temperature 'te' without 'yielding' (fusing) at this temperature, therefore, the bricks were capable of resisting temperature beyond the one that divides the two PCT classifications, one with a duty of 10% ad val. And the other with 30% ad val. He also requested Tribunal to take judicial notice of the dimensional behavior of the refractory bricks under increasing temperature depicted by the graph filed. It is obvious from the said 'behaviour graph' that the refractory bricks ordinarily behave as follows under increasing temperature:-
(a) Starting from temperature zero onwards these bricks expand under the effect of increasing temperature.
(b) After having expanded to a maximum, the bricks start shrinking in size as the temperature continues to increase.
(c) The two temperature values, termed 'ta' and 'te' in the product brochure indicate the RUL of the refractory brick, which in tum, is the measure of the brick's capability to resist temperature. The explanation of 'ta' and 'te' in this 'temperature- versus-change in size of the refractory brick' is given by the manufacturer as part of the testing procedure filed at page 46. According to this explanation 'ta' is the test temperature at which the brick sample is compressed 0.8% from the temperature of highest expansion. On the other hand 'te' is the final temperature at which the sample is compressed by 20%. Both these compression measurements are taken by placing the sample under a specified load. The Manufacturer's letter filed at pages 47 & 48 verifies the same.
He went on to say that the Customs Tariff Manual discriminates the bricks classifiable under PCT Heading 6902.1010 (CD 30% ad val.) from those classifiable under PCT heading 6902.2090 (CD 10% ad val.) by stating the distinction in words to the effect, "capable of resisting temperature upto 1600C". It was respectfully submitted that in the simplest words 'capability to resist' leads to ultimate failure the refractory brick remains capable to resist temperature until it fuses (destructive testing). This qualifying distinction is indicated by the RUL of the refractory bricks and not by their "Safe Operating Limit of Temperature" as opined by M/s. FECTO and M/s. HMC or their "Working Temperature" as opined by PCSIR. The respondent Collector (Adjudication), in the impugned Order, failed to apply his mind judicially and erred in his findings on three accounts:--
(a) Firstly; due to his reliance on the opinion of M/s. FECTO and M/s. HMC who are not qualified to render the opinion as to 'the meaning of words or terms used by particular classes of people' ino o o o terms of Article 63 of the Qanun-e-Shahadat Order, 1984. It is so, because they both lack the 'special means of knowledge thereon' and that both M/s. FECTO and M/s. HMC are merely the consumers of the product and lack necessary scientific facility to give a reliable opinion about the temperature resisting capability of the imported bricks,
(b) Secondly; for relying upon the report of PCSIR, who admittedly lacked the facility to test the refractory bricks for their RUL and instead gave their report about the Working Temperature of bricks which is not the same as the brick's 'Capability of Resisting Temperature'. PCSIR further admits (page 44) that their testing facilities are ASTM and BSS based having no test provisions to test refractory samples according to DIN specifications, and,
(c) Thirdly; by basing his opinion on the reports and views that show glaring discrepancy and lack of correspondence between temperatures stated by the three organizations for the same brand of bricks. Even in case of the same temperatures cited by M/s. HMC and PCSIR for KRONEX-30 & 40 the former states the temperature range as "safe operating limits of temperatures" whereas the latter states the same temperature range as "working temperature". The reports relied upon by the respondent Collector do not correspond with each other and are more like a wild guess by each at his own.
In support of his argument, he placed on file the expert opinion of Professor Dr. Manzoor H. Khan, a leading 'material scientist', who qualifies to render such opinion as relevant in accordance with Article 59 of Qanun-e-Shahadat Order, 1984. He also placed on record the documentary evidence in the form of product catalogue and the relevant information received from the Manufacturer.
With regard to being guilty of offence under section 32 punishable under section 156(1)(14), he argued that it has been laid in Finest Corporation v. Collector of Customs/Appraisement reported in PLD 1990 Kar. 338, that: "On a proper interpretation of S. 32 of the Customs Act, 1969 generally through direct evidential material, it would be difficult to establish knowledge; which not unlike 'intention' is related to a state of mind, in the context of wrongful acts, of commission or omission, referred to in the section and that, on principle, many a case falling under such provision, shall have to be decided on circumstantial evidence and on the basis of likelihood of the offender having 'reason to believe' that what he does or omits to do, is a violation, falling within the purview of the Section". He contended that the appellant needed refractory bricks for lining the Rotary Kiln of his Cement Plant. To withstand the 'fire-end to exhaust-end' temperature gradient within his Kiln, the appellant chosen for its lining the refractory bricks meeting the 'Test Standards' prescribed by the manufacturer of their Cement Plant M/s. F.L. Smith. Product Brochures of the internationally leading refractory manufacturers, including M/s. Didier and M/s. Reffatechnik GMBH, were consulted to make the choice. In view of the desired 'temperature resisting capability' of the bricks manufactured by M/s. Refratechnik, the appellant placed his purchase order No. ACL/PR/112 & 113
(325) dated 11th June, 2001. This import 'Purchase Order' consisted of an assortment of refractory bricks manufactured by M/s. Reffatechnik GMBH, Germany under the trade name of 'PERILEX-83' and 'KRONEX- 70, 40 and 30'. The ordered consignment came in two separate shipments - one shipment entirely of PERILEX-83 bricks and the other shipment exclusively consisting of the three types of KRONEX brand bricks. The shipment of PERILEX-83 was cleared under the Bill of Entry No. 157/01 of 18th September 2001 having an assessed value of Rs. 2,806,670.00. This consignment is confirmed by the Packing List N<^ 410711 of 23-07-2001 accompanying the 'First Partial Shipment'.
The shipment of KRONEX-70, 40 & 30 was cleared under the Bill of Entry No. 319/01 of 8th October 2001 having an assessed value of Rs. 2,122,943.00. This consignment is confirmed by the Packing List No. 410711 of 10.09.2001 accompanying the 'Second Partial Shipment (Balance)' (regrettably filed in reverse). For 'PERILEX- 83' shipment imported under B/E No. 157/01 the appellant declared the PCT Heading for this consignment correctly as 6902.1090 because of (a) the 'chemistry' and (b) the 'temperature resisting capability' of these refractory bricks. For mixed shipment of 'KRONEX-70, 40 & 30' imported under B/E No. 319/01 the appellant declared consignment's PCT Heading correctly as 6902.2090 because of (a) the 'chemistry' and (b)'temperature resisting capability' of these refractory bricks. The appellant declared the PCT classification of the aforesaid consignment of bricks based on the final temperature 'te' of the refractoriness of the respective bricks under load.
This temperature is above 1600C for all of the imported brands of bricks and is given as such in the product brochures. On these grounds he prayed that the impugned order may be set aside.
4. On the other hand, the Departmental Representative opposed the contentions raised by the leamed counsel for the appellants and prayed that the instant appeal may be dismissed.
5. We have given anxious consideration to the submissions made by both the parties and examined case record. In this case the Collector of Customs, Central Excise & Sales Tax (Adjudication) has depended on the reports of the 3 institutions i.e. Heavy Mechanical Complex, Texila, M/s. FECTO Cement Ltd., Sangjani, Distt. Islamabad and M/s. Pakistan Counsel of Scientific & Industrial Research (PCSIR) Lahore. However, the main emphasis has been placed on the report of M/s. PCSIR. We have gone through the reports of M/s. PCSIR in detail and we find that the reports clearly state that the resisting temperature of all the types of refractory bricks imported by M/s. Askari Cement are above 1600C. The Collector (Adjudication) has mis-read the report wherein the temperature called actual capable temperature (working temperature range) is shown to be below 1600C. From a careful study of the literature produced by the appellants and the respondents it is clearly established that it is refractoriness under load (RUL) of the refractory bricks and not the so-called safe operating temperature as mentioned by Heavy Mechanical Complex and M/s. FECTO Cement and the working temperature range mentioned by M/s. PCSIR the correct indicators of the refractoriness of these bricks. This is also quite clear from the report of the M/s. PCSIR itself which gives both the temperatures in the same report. The Collector (Adjudication) has conveniently left out the resisting temperature (refractoriness) and picked up the actual capable temperature to change the classification of the bricks from 6902.1090 to 6902.2090 and 6902.1010 to 6902.2010.
This is obviously mis-construed. The wording used in the PCT clearly states the words, "capable of resisting temperature upto 1600C" for 6902.1010 and 6902.2010 have been used. This clearly shows that the reports have not only been mis-read but also wrongly prepared by the 3 laboratories.
What they were required to check was whether the bricks in question can resist temperatures above 1600C under load. No such report is available on record. On top of that the report of M/s. PCSIR clearly states that the bricks in question can resist temperatures above 1600C.
6. The upshot of the above discussion is that the bricks in question are clearly classifiable under PCT Heading 6902.1090 and 6902.2090 @ 10% adval. In appeal No. 7(280)CU/ffi/2002 of M/s. Bestway Cement Limited, Islamabad, also PERILEX-83, one of the types of bricks in question was clearly held to be so ' classifiable by this Tribunal. The appeal is accepted and die Order- in- Original is set aside.
7. Ordered accordingly.
8. Announced.