2004 (9) TMI 461 - AT - Customs

Demand of differential duty - Determination of ash content in imported coal - sample is in the form of chura or lump - Validity of sample drawing and testing methods - Applicability of exemption notifications based on ash content - Estoppel against the importers for not objecting to the sample drawing method initially - HELD THAT - Since the Notifications in question nor the chapter notes prescribed any particular method of testing, the laboratories such as CFRI and CRCL follow IS 1350 for testing the ash content in coal. The method of drawing coal samples is prescribed in IS 436, but the method so prescribed has not been followed in the present case. The respondents assailed the test reports on the ground that the test is vitiated when samples are not drawn in the manner prescribed in IS 436. It is an admitted fact that the officers who drew the samples of coal in the present appeals gathered 20 Kgs., of coal from the wharf and another 20 kgs. from the holds ship. The respondents representative was present when the samples were drawn. One set of samples was given to the respondents. The latter did not protest the manner in which the sample was drawn. It is only later when the test results were communicated the respondents wanted the samples to be drawn in accordance with IS 436 and sent for retest. The department by then was helpless inasmuch as the imported coal which was provisionally released on the execution of a bond were consumed by the importers and therefore was not available for drawing any fresh samples. The department then decided to send another set of samples lying with them to CRCL for retest. The report of CRCL was also not in favour of the Respondents. It is evident from the facts of the case that the respondents have been regularly importing coal of certain specifications and were aware that coal samples have to be drawn in a particular manner to determine the ash content. The respondents still did not object to the manner in which the samples were drawn in the presence of the representative. Thus, both the parties that is the Customs and the importers were adopting a method in vogue at the Port of Okha. If such a method was wrong it was incumbent on the part of the importers to protest against it. Instead they choose to clear the goods provisionally on execution of a bond and on payment of duty at a concessional rate. Clearly therefore it appears that the respondents are estopped from claiming that the samples should have been drawn in accordance with the procedure laid down in IS 436. As a general principle, one who knowingly accepts a benefit of a contract or conveyance is estopped to deny validity or binding effect on him of such contract or conveyance. The doctrine of estoppel is a branch of a rule against assuming inconsistent positions. Estoppel is frequently based upon the acceptance and retention by one having knowledge or notice of the facts of benefits from a transaction, which he might have rejected or contested. The respondents wanted to clear the goods at a concessional rate of duty and therefore did not object to the manner in which the samples were drawn. They enjoyed the benefit of such clearance but were found to be contesting the test results at such a time when the department could not extricate itself from the position earlier adopted by both the parties. The respondent s requests to draw sample in accordance with IS 436 nearly nine months after the goods had been cleared and consumed was to say the least an impossible task to be performed. All objections to the drawal of samples should have been made at an appropriate time. Thus, we hold that the Commissioner was wrong in holding that the coal should have been tested on as received basis. We hold that both CFRI CRCL distinguished tested the samples correctly in accordance with the Standard laid down in IS 1350. We also hold that gross air dried method is the correct way to test the ash contents and the results achieved are binding on both the parties. The appeals are allowed with consequential relief, if any.

Summary

Issues Involved:
1. Validity of the method used for drawing and testing coal samples.
2. Entitlement to the benefit of exemption notifications based on ash content.
3. Applicability of estoppel against the respondents for not objecting to the sampling method at the time of provisional assessment.

Issue-wise Summary:

1. Validity of the method used for drawing and testing coal samples:

The judgment discusses the procedural standards for drawing and testing coal samples as per IS 436 and IS 1350. The department did not follow IS 436 for drawing samples, and the respondents argued that non-representative samples render the test results unreliable. Despite this, the court noted that the respondents were present during sampling and did not object to the method at the time. The court held that the samples were tested in accordance with IS 1350, and the gross air-dried (GAD) method is universally recognized for testing ash content.

2. Entitlement to the benefit of exemption notifications based on ash content:

Notification 35/90 and Notification 23/91 exempt coking coal with ash content below 12% from certain duties. The imported coal was tested by CFRI and CRCL, both indicating ash content above 12%. The respondents contested the results, arguing the coal should be tested on an 'as received' basis rather than the GAD method. The court disagreed, stating that the GAD method was correctly used and binding on both parties. Consequently, the respondents were not entitled to the benefit of the exemption notifications.

3. Applicability of estoppel against the respondents for not objecting to the sampling method at the time of provisional assessment:

The court emphasized that the respondents, being aware of the sampling method used at Okha Port, did not object during the provisional assessment and accepted the samples without protest. The doctrine of estoppel was applied, preventing the respondents from later contesting the sampling method after benefiting from the provisional clearance. The court held that the respondents are estopped from claiming that samples should have been drawn as per IS 436.

Conclusion:

The appeals were allowed with consequential relief, if any, as the court found that the coal samples were tested correctly in accordance with IS 1350, and the GAD method was appropriate for determining ash content.