2014 (12) TMI 731 - AT - Customs

Import of Low Ash Metallurgical Coke/Low Ash Low Phosphorous Coke - Reliability of test reports - Benefit of exemption Notification No. 35/90- Cus - Confirmation of duty demand u/s 28 r.w.s 28AA - Held that - Goods were imported in July, 1990 and November, 1990. As per the test report furnished by the Chinese supplier and the Testing Agency in Japan, who conducted the test at the behest of the importer, the phosphorous content was found much lower than the 0.035%. The goods were again tested by the Customs laboratory in Goa at the time of importation and as per the Colour Test Comparison method, the phosphorous content was found to be less than 0.035% and the goods were provisionally cleared. After clearances by the customs, the assessee once again got the goods tested by M/s SGS (India) Pvt. Ltd., who also found the samples to be contain phosphorous less than 0.035%. As against the test reports by various agencies, Revenue wants to rely on the test report of the CRCL, which conducted the test in 1993 almost two years after the samples were drawn. There is nothing on record to show that the samples, which were drawn, were kept in airtight containers or the samples were drawn in accordance with ISI 436 prescribed for drawal and testing of the samples. In other words, there is no evidence adduced by the Revenue to show that the samples were representative and the sample could not have deteriorated with the passage of time. The Chief Chemist who was cross-examined had also accepted that only the samples kept in airtight containers would not deteriorate. However, there is no evidence forthcoming in this regard adduced by the Revenue. Benefit of doubt has to go to the appellant as the Revenue has failed to discharge the burden cast on it to show that the appellants are not eligible for the benefit of exemption Notification No. 35/90- Cus - demand of customs duty has been confirmed by the adjudicating authority under Section 28 of the Customs Act which is incorrect. If the contention of the department is that the goods were assessed provisionally earlier and they are being finally assessed now, then the duty demand should have been confirmed under Section 18 of the Customs Act and not under Section 28. - impugned order is not sustainable in law - Decided in favour of assessee.

Summary

Issues:
Customs duty demands confirmation, Compliance with Tribunal's directions on sampling and testing procedures, Reliance on test reports, Finalization of Bills of Entry, Post-audit demands sustainability, Drawal of representative samples, Applicability of exemption Notification No. 35/90-Cus, Section 28 vs. Section 18 of the Customs Act.

Customs Duty Demands Confirmation:
The appeal challenged the Order-in-Original confirming customs duty demands against the appellant for importing Low Ash Metallurgical Coke and Low Ash Low Phosphorous Coke. The impugned order was based on the finalization of Bills of Entry under which the imports were made, leading to the duty demands totaling a significant amount. The appellant contested the demands, leading to the appeal.

Compliance with Tribunal's Directions on Sampling and Testing Procedures:
The Tribunal had previously directed the adjudicating authority to provide the appellant with the procedures followed for sampling and testing, which were not fully complied with. The appellant argued that the failure to provide these procedures undermined the fairness of the assessment process.

Reliance on Test Reports:
The appellant presented test reports from recognized testing agencies showing phosphorous content below the threshold for duty exemption. However, the adjudicating authority did not give credence to these reports, leading to a dispute over the reliability of the test results.

Finalization of Bills of Entry and Post-Audit Demands Sustainability:
The Bills of Entry were provisionally assessed, and after final assessment, forwarded for post-audit. The appellant contested the sustainability of demands issued much later, alleging no suppression and questioning the validity of demands made post-finalization of assessments.

Drawal of Representative Samples:
The appellant raised concerns about the drawal of samples, highlighting discrepancies in the sampling process, including the lack of adherence to prescribed standards and doubts about the representativeness of the samples tested.

Applicability of Exemption Notification No. 35/90-Cus:
The appellant claimed the benefit of duty exemption under Notification No. 35/90-Cus, citing the phosphorous content in the imported coke. The dispute revolved around the eligibility for this exemption based on the test results and compliance with the notification's conditions.

Section 28 vs. Section 18 of the Customs Act:
The adjudicating authority confirmed duty demands under Section 28 of the Customs Act, which was challenged by the appellant. The argument centered on the correct legal basis for the duty demands and the implications of the chosen section on the validity of the assessment.

In a detailed analysis, the Tribunal found discrepancies in the sampling and testing procedures, noting the lack of evidence to support the reliability of the CRCL test report conducted years after the import. The Tribunal emphasized the importance of representative samples and adherence to prescribed standards for drawal and testing. The appellant's reliance on multiple test reports showing compliance with phosphorous content requirements was considered valid, especially in the absence of contrary evidence from the Revenue.

The Tribunal highlighted the distinction between provisional and final assessments, questioning the sustainability of post-audit demands issued long after the finalization of Bills of Entry. The benefit of doubt was given to the appellant due to the failure of the Revenue to disprove eligibility for the duty exemption claimed. Additionally, the Tribunal corrected the legal basis for the duty demands, noting the incorrect application of Section 28 instead of Section 18 of the Customs Act.

Ultimately, the impugned order was deemed unsustainable in law, leading to its set aside and the appeal being allowed in favor of the appellant. The detailed analysis considered various legal and procedural aspects, emphasizing the importance of compliance with prescribed standards, reliability of test reports, and correct application of legal provisions in customs duty assessments.