2023 (8) TMI 1101 - AT - Customs

Exemption form Customs Duty - import of consignment of Coking Coal from Indonesia - denial of benefit of N/N. 19/94-CUS dated 1-3-1994 on the ground that the ash content as per the said test report of CRCL, New Delhi was above 12% - HELD THAT - In this case, department was asked to disclose the sampling procedure by providing various opportunities. The department was also asked to disclose if any particular method of testing was evolved for checking of ash content in accordance with Customs Tariff or any particular procedure was formulated. It being a settled law, that if no procedure of testing is evolved the same can be done as per the ISI Standard which, in the case of coke required it be done not through random sampling but through systematic sampling as provided in IS-436 which required that a lot while it is being discharged be divided into a number of sub lots approximately of equal weight. A gross sample is then required to be drawn from each sub lots by drawing of samples from the same sub lots. In relation to requirement of testing of Coking coal which as per the appellant required reasons to be recorded under Section 18(b) in view of decision in case of Tata Chemicals 2015 (5) TMI 557 - SUPREME COURT by the proper Officer indicating why it deemed if necessary to do the chemical test - It is found that the department has not provided any reason as to why the commodity was subjected to chemical test other than the emphasized portion above. Despite affording opportunity, department has not brought on record any administrative instructions or any circular etc. which required the Coking coal was required to be subjected to chemical test. It has also not brought on record any file note indicating why Proper Officer deemed it necessary to conduct chemical test or other test. There is nothing on record that the sampling was done by the department by segregating lots and sub-lots and not randomly. Further, the date of sampling by CRCL has not been indicated by the department even while seeking explanation in the year 2013 from the CRCL authorities regarding their opinion as to what will happen to ash content of coal if coals samples are tested after long gap of time i.e. more than 11th months. It is found that as substantively found in the instant case also process of sampling is relevant to arrive at correct findings, it is held that the department has not been able to justify the process of sampling or the delay of more than 11 months in receipt of the report and that too by not indicating actual date of test. The belated communication by CRCL too is without any authoritative supporting material. Appeal allowed.

Summary

Issues Involved:
1. Validity of Load Port Test Certificate.
2. Legitimacy of Provisional Assessment and CRCL Test Report.
3. Adherence to Systematic Sampling Method.
4. Reliability of CRCL Test Report due to Delay and Lack of Proper Instrumentation.
5. Procedural Fairness and Adherence to Legal Standards.

Summary:

1. Validity of Load Port Test Certificate:
The Appellant imported "Coking Coal" and sought exemption from customs duty based on the Load Port Test Certificate, which showed ash content below 12%. The certificate was from PT. Superintending Company of Indonesia, indicating ash content of 9.98% (Air Dried Basis)/10.99% (Dried Basis). The department did not accept this certificate and resorted to provisional assessment.

2. Legitimacy of Provisional Assessment and CRCL Test Report:
The department issued a Show Cause Notice based on a CRCL test report showing 21.33% ash content, demanding differential duty. The Hon'ble Tribunal previously held that issuing the Show Cause Notice before finalizing the provisional assessment was premature. Upon remand, the Deputy Commissioner finalized the assessment based on the CRCL test report, denying the exemption and demanding differential duty.

3. Adherence to Systematic Sampling Method:
The Appellant argued that the sample sent to CRCL was a random sample, not drawn by systematic sampling as required by IS 436. The Hon'ble Supreme Court in Tata Chemicals Ltd v CC-2015 (320) ELT 45 held that in the absence of any reason to doubt the Load Port Test Certificate, resorting to provisional assessment and chemical analysis was ultra vires Section 18(b) of the Customs Act. The Tribunal noted that systematic sampling was not followed, making the CRCL test report unreliable.

4. Reliability of CRCL Test Report due to Delay and Lack of Proper Instrumentation:
The CRCL tested the sample after an 11-month delay and did not have the proper instrument for analyzing ash content before 2019. The Tribunal found the delay and lack of precise instrumentation made the CRCL test report suspect and unreliable. The department's reliance on a clarification obtained behind the Appellant's back was also deemed procedurally unfair.

5. Procedural Fairness and Adherence to Legal Standards:
The Tribunal emphasized that procedural fairness was not adhered to, as the Appellant was not given an opportunity to respond to the clarification obtained by the Deputy Commissioner. The Tribunal concluded that the department failed to justify the process of sampling or the delay in receiving the test report, leading to the acceptance of the appeal and setting aside the impugned order with consequential relief to the Appellant.

Conclusion:
The appeal was allowed, and the impugned order was set aside, providing consequential relief to the Appellant. The Tribunal pronounced this decision in the open court on 23.08.2023.