2016 (3) TMI 655 - AT - Customs

Classification of coking coal - whether the product is other than Coking coal - validity of test report - Held that - samples drawn by the department were not in accordance with IS436. 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. The Hon ble Supreme Court in the case of Tata Chemicals Ltd. Vs. Commissioner of Customs (Preventive) 2015 (5) TMI 557 - SUPREME COURT 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. 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 and has not discussed the periods of delay but forget to consider that delay may lead to deterioration of the properties of coal including CSN values. He needs to indicate whether samples of coal have been retained and in what condition and 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. The Commissioner ought to have appropriately justified his finding on the issue that if the MMR value in the load port report is acceptable, then the CSN value should also be acceptable. Also he does not discuss the issue in respect of consignments for which such exemption was claimed quantification of demand. He failed to discuss the point 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. Therefore, as there is so many flaws in the Commissioner (Appeals) order, the order is not valid and the case needs to be considered afresh by the Commissioner. - Matter remanded back

Issues Involved:
1. Classification and rate of basic duty of customs on imported goods declared as "coking coal".
2. Appropriateness of sample drawing and testing methods.
3. Delay in communicating test results and its impact on the right to re-test.
4. Acceptance of load port test reports.
5. Discrepancies in final invoice values versus provisional invoice values.
6. Quantification of demand and exemption claims.

Detailed Analysis:

1. Classification and Rate of Basic Duty of Customs:
The primary issue revolves around the classification of imported goods declared as "coking coal" and the applicable rate of basic duty. The goods were tested by the Department and found not to meet the criteria for "coking coal" as defined in the relevant exemption notifications. Consequently, the goods were reclassified under tariff item 27011990, attracting a 5% duty instead of the NIL rate claimed by the importer.

2. Appropriateness of Sample Drawing and Testing Methods:
The appellant challenged the sample drawing process, asserting that it should have adhered to IS 436 standards. The Commissioner failed to address whether the analysis done in the Custom House Laboratory followed IS 1350 and IS 1353 standards or if IS 436 should have been applied. The Tribunal noted that the dismissal of the appellant's challenge by the Commissioner was inappropriate, citing the Supreme Court's observation in Tata Chemicals Ltd. Vs. Commissioner of Customs (Preventive), which emphasized the necessity of proper sample drawing procedures.

3. Delay in Communicating Test Results:
The appellant argued that the delay in receiving test results prevented them from requesting a re-test, as the coking properties of coal deteriorate over time. The Commissioner did not adequately address the periods of delay or their impact on the coal's properties. The Tribunal highlighted the need for the Commissioner to specify the delays and their significance, considering the technical literature provided by the appellant.

4. Acceptance of Load Port Test Reports:
The appellant contended that the load port test reports, which showed a CSN of 1 or more, should be accepted if the MMR values from the same reports were accepted. The Commissioner failed to justify why the CSN values from the load port reports were not accepted, despite accepting the MMR values.

5. Discrepancies in Final Invoice Values versus Provisional Invoice Values:
The appellant pointed out inconsistencies in the adoption of invoice values. In cases where the final invoice value was higher than the provisional value, the former was adopted. However, when the final invoice value was lower, the provisional value was retained. The Tribunal found this practice unjust and without legal basis, requiring correction.

6. Quantification of Demand and Exemption Claims:
The appellant disputed the quantification of the demand and claimed exemptions under the exemption for steam coal for some consignments. The Commissioner did not address this issue adequately. The Tribunal noted the need for a thorough examination of the quantification dispute and exemption claims.

Conclusion:
The Tribunal found that the Commissioner (Appeals) failed to provide adequate reasoning and findings on several contentious issues. Therefore, the case was remanded to the Commissioner (Appeals) for a fresh decision, with instructions to pass a reasoned order addressing all contentions raised by the appellant. An opportunity for a personal hearing was also mandated. The impugned orders were set aside by way of remand.

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