Jsw Steel Ltd vs Commissioner Of Customs, Central ...

(Arising out of Order-in-Appeal No. GOA-EXCUS-000-APP-001-14-15 to GOA-EXCUS-000-APP-019-14-15 passed by the Commissioner (Appeals) Customs, Central Excise & Service Tax, Panaji Goa. )

For approval and signature: Honble Mr. P.S.Pruthi, Member (Technical)

Honble Mr. Ramesh Nair, Member (Judicial)

============================================================

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

=============================================================

JSW Steel Ltd. : Appellant

VS

Commissioner of Customs, Central Excise & Service Tax, Goa : Respondent

Appearance

Shri V.K. Jain Advocate, with Ms. Manya Bharadwaj, Advocate for Appellant

Shri V.K. Singh, Spl. Counsel for respondent

CORAM:

Mr. P.S.Pruthi, Member (Technical) Mr. Ramesh Nair, Member (Judicial)

Date of hearing : 28/09/2015 Date of pronouncement : 04/01/2015

ORDER NO.

Per : P.S. Pruthi

These appeals are against demand of duty on goods declared as coking coal, which on test by the Department, was found to be other than Coking coal. The dispute is regarding classification and rate of basic duty of customs. Period is from 01.03.2011 to 19.10.2012.

2. Coking coal is classifiable under tariff item 27011910 of the Customs tariff and during the period under reference was liable to Nil basic duty of customs in terms of Sl. no. 68 of exemption notification number 21/2002 Customs dt. 01.03.2002. Prior to 1.3.2011, coking coal was not defined either in the Customs Tariff or in the exemption notification. From 1.03.2011 onwards coking coal is defined as:

(i) From 1.03.2011 to 16.08.2011 Coking Coal means coal having mean reflectance (MMR) of more than 0.85 and swelling index number (CSN) of more than 2 (explanation added to S. No. 68 in notification No. 21/2002 Cus. by Notification 21/2011-Cus. dt. 1.3.2011).

(ii) From 24.03.2011 to 16.08.2011- Exemption i.e. NIL basic duty was also made available to Coal having swelling index or crucible swelling number (CSN) of 1 and above and mean reflectance of above 0.60, for use in the manufacture of iron or steel using Corex, Finex or PCI technology. This was subject to the condition that the importer follows the procedure set out in the Customs (Import of Goods at concessional rate of Duty for Manufacture of Excisable Goods), 1996. (S.No 66A added in Not 21/2002 vide Not 31/2011 dated 24.03.2011). Appellant has however not claimed exemption under this Sl.No.66A.

(iii) From 17.08.2011 onwards Coking coal means coal having mean reflectance of more than 0.60 and swelling index number of 1 and above (S.No 66A was deleted in Not 21/2002 and explanation against S.No 68 was amended vide Notification no 77/2011 dated 17.08.2011 read with corrigendum dated 25.08.11 )

3. Appellant imported goods declared as corex coal and sought benefit of NIL basic customs duty in terms of Sl. No 68 to notification number 21/2002- Cus. The goods were provisionally assessed pending test. Samples were drawn and sent to the Customs Lab in Goa Custom House. On test, the CSN of the goods covered under these appeals was found to be 0. Hence assessment was finalized denying the benefit of exemption and reclassifying the goods under tariff item 27011990 and levying basic duty @5% adv in place of NIL duty claimed by the importer.

4. The Ld advocate Shri Vipin Jain appearing for the appellant submits that The captioned Appeals have been filed against Orders-in-Appeal No. Goa Excus-000-App-001-19-14-15 dated 9.4.2015 to No GOA-EXCUS-000-APP-019-14-15 which disposed the Appeals filed by the Appellant against 19 Orders-in-Original finalizing assessment in respect of 23 Bills of Entry. In respect of 15 out of the 23 Bills of Entry which are covered by 15 different Orders-in-Original, benefit of Customs exemption available to coking coal in terms of S. No.68/66A of Notification 21/2002-Cus dated 1.3.2002,as amended, has been denied.

4.1. In each of the 15 consignments in question, the contract with its overseas supplier specifically provided that the coal being supplied should have a minimum CSN of 1. The load port test report from an independent third party agency also showed that the CSN was 1 or more in each of the 15 cases (except Bill of Entry No. 2 dated 1.3.2011 covered by O-I-O No. 80 where at the load port, the CSN was not tested).

4.2. Though the Chemical Examiner at Goa communicated to the Customs authorities, the results of the tests conducted on the coal samples immediately, the Customs authorities did not inform the appellant of the test results. And it was only after a lapse of considerable time, extending upto 2 years from the date of the test report, that these were furnished to the appellant at the time when the Bills of Entry were taken up for finalization. They could not seek re-test in view of the fact that due to weathering, the coking properties in the coal had been negatively impacted. Coking coal being perishable in nature, its properties deteriorate significantly with the passage of time. Relevant extracts of technical literature relied upon in this regard are as below:

1. Beneficiation of Weathered Coal by G.J. de Korte, Division of Mining Technology, CSIR.

Where coal in indeed weathered, the following effects may result:

The coking properties of the coal will be negatively affected..

Coking Properties

The swelling number of coking coals is reported to decrease rapidly with increasing degree of weathering. The coking value of coal is likely to be destroyed after a period of 3 years according to la Grange. It is recommended that coking coals never be stored for a period of more than a year.

2. Storage of Coal Samples by J.F. Fryer et al

From a practical standpoint, it is particularly important to bear in mind that increase in oxygen content of about 1% suffice to totally destroy the caking property of prime metallurgical coal

To prevent Oxidation of coal samples, it is suggested that temperatures during storage be kept as low as possible (though above 32 degree F) and the samples be stored in an oxygen free or substantially oxygen free atmosphere, or under water. 

3 Deterioration of Coking Coal Quality in Samples and Stockpiles by Dr. Ross Leeder, et al :

Coking coal is a perishable commodity as its quality properties can deteriorate due to exposure to air, increased moisture content and handling. These factors, which affect the quality of the coke product can occur during the sampling, mining, transportation, storage and utilization of these coals.

4. Coal Geology by Larry Thomas Exposure of coal to weathering in atmosphere or by oxygenated ground water, results in oxidation of organic and inorganic constituents in coal. Oxidation reduces the coal quality by altering the chemical and physical properties in coal, in particular the Calorific value is lowered and caking is eliminated.

4.3 Appellant had, in the course adjudication, also questioned the manner in which samples were drawn, as also the method of testing adopted by the Chemical Examiner at the Customs laboratory in Goa. The adjudicating authority held that it was not open for the appellant to question the manner of drawing of samples as the same had been drawn in the presence of the importer/representative CHA.

4.4 Respondent has overlooked the Appellants contention that it had been importing soft/semi-soft/weakly coking coal for years, for use in its Corex furnace, from certain pre-approved and specified mines. It is a matter of record that before any coking coal was approved for use in the Corex furnace, pilot consignments of the said coking coals from the specific mines were pre-tested for their suitability for use in the Corex furnace. Of the several parameters tested, one of the parameters that was tested was the CSN. Once the coal had been approved for Corex purpose, agreements for purchase of coal from those specific mines were entered into from time to time.

4.5 In respect of Bills of Entry covered by Orders-in-Original No. 85, 86, 88, 89, 90, 92, the assessment had been finalized by the adjudicating authority by adopting the CIF value as mentioned in the provisional invoice, instead of taking the value from the final invoice. The Respondent has, in respect of Bills of Entry covered by Orders-in-Original No. 87, 96 and 97 accepted the submission of the Appellant with respect to provisional invoice value having been applied while finalizing the assessment instead of applying the final invoice value, and has revised the assessment by adopting the final invoice values, which in these three cases was higher than the provisional values. In cases where the final invoice values were lower than the provisional invoice value, the Respondent has not corrected the assessments. Bill of Entry No. 3440661 dated 9.5.2011 where the provisional invoice value has been taken at the time of finalization of the assessment instead of the final invoice value.

5. The contentions of Ld Spl Counsel Shri V K Singh are:

Coal consignments covered in OIO number 80 to 86/2013 DC(A) dated 30.09.2013 and in four Bills of entry in OIO number 98/2013 DC(A) dated 30.09.2013 (Appeal number C/86355,61/14 and C/86372/14 Cus Mum have been imported prior to 16.08.2011. Between the period 01.03.2011 to 16.08.2011, to be eligible for NIL basic duty in terms of Sl. No. 68 to Notification number 21/2002 dated 01.03.2002 as amended by Not 21/2011, CSN of the coal should be more than 2. However in these cases, even the load port report shows CSN less than 2. ( i.e. 1.5, 1 and 0). Further, in one case of OIO 91/2013 the load port report shows CSN 0. Therefore in these cases appellant has no case.

5.1. As regards retesting, the submission is that there is no violation of principles of natural justice because the respondent failed to avail the opportunity of cross examination. Reliance is placed on the judgment of Honble Apex court in the case of Commissioner of Customs New Delhi vs Punjab Stainless steel Industries 2001(1320 ELT 16 10 (SC) and Honble Madras High Court judgment in the matter of Shree Ganesh Steel Rolling Mills Ltd vs Astt Commissioner of Cus Chennai 2006(132) ELT 76.

5.2. As regards non-calculation of differential duty on the basis of final invoices in some cases, it is submitted that these invoices have been taken into consideration and demand has been re-quantified at the time of appeal as is evident from findings contained in para 20--21 of the order of Commissioner (Appeals) and appellant has not produced any evidence in support of their contention.

5.3. As regards difference in CSN values found on retesting of samples pertaining to Bills of entry not covered in the present dispute, the Commissioner opined that even the revised results showed CSN values lower than those determined at load port as well as in-house by the appellant. In one particular case of Bill of Entry No. 7315865 dt. 6.7.2012 regarding imports at Marmagoa, on re-testing at CRCL Delhi, the CSN was found to be same as that of the test report of Customs Lab Marmagoa. The period of this import (July 2012) is close to the periods in respect of consignments covered by the 19 appeals.

5.4. The test reports had been made available to the appellant in respect of each consignment but the appellant did not seek retest even in those cases where delay in handing over the test reports to them was minimal.

5.5. The contention that the load port report was accepted for the purpose of MMR is factually incorrect.

6. We have carefully considered the facts of the case and submissions made by both sides.

Firstly, we find merit in the contention of the Ld. Advocate that the Commissioner (Appeals) overlooked their challenge that the samples of coal have to be drawn in accordance with IS 436. In the case of Tata Chemicals Ltd. Vs. Commissioner of Customs (Preventive) 2015 (320) ELT 45 (S.C.), the Honble Apex Court observed that It is common ground that the samples so drawn had not been in accordance with IS436. The Commissioner ought to have given his finding as to whether the analysis done in Custom House Laboratory as per IS 1350 and IS 1353 were appropriate or whether IS436 should been followed for drawl of samples. The letter from the chemical examiner stating that samples were tested in accordance with IS specifications is with reference to only one specific consignment which is not amongst the present consignments.

6.1. The Commissioner has referred to the test done in respect of other consignments which are not covered in the present dispute. In those 4 cases the Customs Lab Marmagoa determined the CSN value to be one whereas the CRCL laboratory New Delhi redetermined the CSN to be 5 to 5.5. We do not understand the Commissioners dismissal of this fact by stating that the CSN value was still less than the value of 7 & 8 determined in-house by the appellant in respect of those consignments. The fact remains that the CSN on re-testing increased from 1 to 5 or 5.5. This does throw doubt on the method of drawing samples as well as the testing method and does not inspire confidence in the procedures followed.

6.2. We note that the Honble Supreme Court in the case of Tata Chemicals Ltd. (supra) held that the words deems it necessary in Section 18 (1) (b) mean that the proper officer must have good reason to subject imported goods to a chemical test, otherwise the chemical analysis of imported goods done by the department is ultra vires of Section 18(b) of the Customs Act. This judgment needs to be considered by the Commissioner (Appeals) to arrive at a proper finding.

6.3 The Commissioner has not been able to justify why the test reports were not handed over to the appellant immediately but were handed over after long periods. The delay assumes significance especially when the load port reports of testing by a reputed agency showed CSN of 1 and above. Commissioner has merely held that the appellant should have sought re-testing where the delay in handing over the test report was minimal. The Commissioner has not discussed the periods of delay. Whereas the Ld. Advocate has submitted sufficient technical material to support the contention that delay may lead to deterioration of the properties of coal including CSN values. The Commissioner needs to indicate whether samples of coal have been retained and in what condition. He should have clearly stated the delay that occurred in handing over the reports to the appellant in each case and the impact the delay would have caused if a re-test were to be done. The right of re-test may lose significance due to passage of time. Even if cross examination was not sought by the appellant, the Commissioner needs to counter the technical literature submitted by the appellant with his own supporting evidence.

6.4 A contention raised by the appellant was that the MMR had not been tested by Customs and therefore, apparently, the MMR value in the load port report has been accepted. The contention appears to be that if the MMR value in the load port report is acceptable, then the CSN value should also be acceptable. The Commissioner ought to have appropriately justified his finding on this issue.

6.5 We also note that exemption was claimed by the appellant, in respect of some of the consignments in question, under the exemption for steam coal. The Commissioner (Appeals) does not discuss this issue in respect of consignments for which such exemption was claimed. The appellant also disputes the quantification of demand and the Ld. Advocate contends that the finding at para 20 of the Commissioners order is not correct. We have seen the concerned appeals. We note that there is a contentious dispute between the two sides regarding quantification in some cases.

6.6. Another contentious point is that, in cases where the final invoice value is higher than the provisional invoice value, the former was adopted. Whereas in cases where the final invoice values were lower than the provisional invoice value, the final invoice value was not adopted. This is unjust on the part of Customs and without legal basis.

7. In view of our above observations, we find there are contentious issues on which findings have not been given or given without adequate reasoning. There are issues in respect of which the matter has been skirted by the Commissioner. Therefore, in our considered view, the case needs to be considered afresh by the Commissioner.

8. In view of the above, we remand the case to the Commissioner (Appeals) for a fresh decision by passing a reasoned Order on all contentions raised by the appellant. Needless to add, an opportunity of personal hearing shall be given. All issues are kept open.

9. Impugned Orders are set aside by way of remand.

(Pronounced in court on 04/01/2016)

(Ramesh Nair) Member (Judicial)

(P.S.Pruthi) Member (Technical)

SM.

11

Appeal No. C/86354 to 86372/2014-Mum