2014 (8) TMI 246 - AT - Customs

Application for recusal - company came to know the fact that the case had already been discussed with the Judge by the Revenue - Held that - letter is based on incorrect information. It was not mentioned that the matter had been discussed with the Judge by the Revenue. What was mentioned was that, Judge had heard about the issue and also heard that even one of the importers had informed the investigating officers that importers also are in agreement with the view taken by the Revenue about classification. This was a casual conversation, heard by the Judge and there was no application of mind on the issue and he had no occasion to discuss or study the issue at all thereafter. Even though it was a casual conversation heard by the Judge in the middle of a group of officers, yet he had offered to recuse since it has always been an endeavour to be not only fair but also seen to be fair - At the cost of repetition, Court would like to make it clear that there was no discussion about the case with anyone leave alone Revenue officers before hearing - the request made by the company for recusal is rejected. Classification of goods - Bituminous Coal or Steam Coal - benefit of lower rate of duty - benefit of concessional rate of duty under Notification No. 12/2012 - Whether the coal imported by the appellants is to be charged to basic customs duty and CVD treating the same as Bituminous Coal or Steam Coal - Department s contention is that according to sub-heading Note 2 of Chapter 27, the steam coal imported by the appellants which answers to the definition of bituminous coal, has to be classified as bituminous coal and therefore, the lower rate of duty benefit extended to steam coal would not be available for the importers - Held that - Court cannot go by the history of taxation and we also cannot go by the trade parlance especially when a product is defined in the tariff. In fact, the learned sr. counsel fairly admitted that a statutory definition overrules trade parlance. Nevertheless, it was his submission that this case stands on a different footing and he would urge several more grounds in addition to the submissions hereinabove to support his contention that the impugned order classifying the product imported by the appellants as bituminous coal is not correct. The classification of goods in the schedule is governed by the principles laid down in the rules. The rules make it clear that titles of sections, chapters and sub-chapters are provided for ease of reference only and for legal purposes classification has to be determined according to the terms of the headings and any relevant section or chapter notes and provided such headings or notes do not otherwise require, according to subsequent rules. Rules 2 to 5 of rules for interpretation speak of heading all through. Therefore, Rule 6 would be relevant rule for our purposes since this rule comes into play when the dispute arises between two sub-headings and not between headings. This is in view of the fact that according to the tariff entries under chapter 2701, coal, whether or not pulverized, but not agglomerated is the main heading and Anthracite, Bituminous coal come under one category and coking coal and steam coal come under the category of other coal preceded by -- . Therefore Anthracite and Bituminous coal and other coal form 3 sub-headings and we have to determine which sub-heading is applicable. Burden to show that he is eligible would fall on the importer since Indian manufacturers are eligible for credit on inputs and input service or capital goods. Inputs may be excluded since coal is extracted from earth. Credit on capital goods or input service would be definitely available and therefore, even an Indian manufacturer would not be eligible for lower rate of duty straightaway. - importers could never have shown that they fulfilled the condition for claiming lower rate of duty under the Notification 12/2012-C.E. - condition is relating to not taking credit on inputs and input service and not relating to payment of duty on the inputs. We do not find any substance on this point since availment of Cenvat credit arises only when duty is paid. Burden of proof as to why the product is not steam coal is on the Revenue - it is not for the Department to show that what is imported is not steam coal. Department has to correctly classify the same. Once the Department depending upon the definition and specifications comes to the conclusion that the product is bituminous coal and it fulfills the definition given therein and in view of the settled law that when there is a specific definition available in the tariff, trade parlance is not relevant. What is required the Department is to show that what is imported fulfills the definition as given in the tariff and if in trade parlance the product has another name, that could not make a difference to the classification issue. In any case, it is nobody s case, that bituminous coal is always called as steam coal. In fact, steam coal is also bituminous coal but vice versa is not always true. Therefore if the Department is able to show that what is imported is bituminous coal, in our opinion, the Department need not travel further especially In view of the fact that bituminous coal can be coking coal or steam coal also and tariff has chosen to give them separate headings and therefore it becomes necessary to classify coal imported as coking coal or steam coal only if and when it does not covered by the definition of bituminous coal given in the tariff. Invocation of extended period of limitation - in trade parlance, the coat imported by the appellants is steam coal. In any case this has not been contested. Further even if the exemption notification was issued, for quite some time, the Department had not taken up the issue which would also show that even Departmental officers did not think of the issue in the beginning. All these aspects show that the issue is one of classification, technical in nature and therefore mens rea to evade payment of duty cannot be alleged. Therefore extended period cannot be invoked and no penalty could have been levied and can be levied on the appellants even in respect of demand for normal period. In the result, it is confirmed that the products imported by the appellants if they are as per the definition of bituminous coal, the question of going into trade parlance or consider the item as steam coal does not arise and therefore the differential duty demand in respect of coal imported which are according to definition of bituminous coal has to be upheld. Similarly, we also make it clear that appellants are not eligible for the benefit of CVD at lower rate as per the notification No.12/2012-C.E. - differential duty demands of BCD & CVD within normal period with interest as per law in all cases are upheld. There will be no penalty on any of the appellants in all the appeals. - Decided partly in favour of assessee.

Summary

Issues Involved:
- Recusal of the Bench
- Classification of Coal
- Applicability of Exemption Notifications
- Levy of Additional Duty (CVD)
- Invocation of Extended Period for Demand

Issue-wise Detailed Analysis:

Recusal of the Bench:
The appellant requested the Bench to recuse itself, citing a letter from Asian Natural Resources (India) Ltd. alleging pre-hearing discussions with the Revenue. The Bench clarified that the letter was based on incorrect information and emphasized the importance of fairness and impartiality. The Bench had previously offered to recuse but continued the hearing after both parties expressed confidence in its fairness. The Bench referenced several Supreme Court judgments to support its decision not to recuse, highlighting that recusal should be exercised with caution and not at the mere request of a party. The request for recusal was ultimately rejected, and the Bench proceeded to decide the matter.

Classification of Coal:
The main issue was whether the coal imported by the appellants should be classified as "Bituminous Coal" or "Steam Coal." The Department contended that the coal met the definition of bituminous coal under sub-heading Note 2 of Chapter 27, which specifies volatile matter and calorific value limits. The appellants argued that historically, non-coking coal, including steam coal, enjoyed the same duty rate and that trade parlance should be considered. However, the Bench concluded that statutory definitions take precedence over trade parlance. The coal imported by the appellants met the criteria for bituminous coal and thus should be classified as such.

Applicability of Exemption Notifications:
The appellants argued that the exemption notification intended to benefit power producers using steam coal. The Bench examined the Finance Minister's budget speeches and found that the intention was to provide relief to power producers but also noted the issue of rampant misclassification. The Bench held that the statutory definition of bituminous coal must be applied, and the exemption notification did not extend to coal classified as bituminous coal.

Levy of Additional Duty (CVD):
The appellants contended that they were not liable for CVD as the coal was not a manufactured product. They relied on the Supreme Court decision in the Tata Iron and Steel Co. Ltd. case. The Bench, however, found that the processes undertaken for making coal marketable (cleaning, washing, sorting, grading) constituted "manufacture" under the Central Excise Act. Thus, CVD was applicable, and the appellants were not eligible for the concessional rate under Notification No. 12/2012-CE due to the inability to prove that no Cenvat credit was availed on inputs and input services.

Invocation of Extended Period for Demand:
The Bench considered whether the extended period for demanding duty could be invoked. It noted that the issue was highly debatable and technical, with the appellants classifying the coal as steam coal in trade parlance. The Bench found no mens rea to evade duty and ruled that the extended period could not be invoked. Consequently, no penalties were imposed on the appellants.

Conclusion:
The Bench upheld the differential duty demands of Basic Customs Duty (BCD) and CVD within the normal period with interest as per law but did not impose any penalties. The imported coal was classified as bituminous coal, and the appellants were not eligible for the concessional rate of CVD under Notification No. 12/2012-CE. The request for recusal of the Bench was rejected, and the matter was decided on its merits.