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TMI Blog2017 (11) TMI 1584X X X X Extracts X X X X X X X X Extracts X X X X ..... order has to be held as unsustainable - question of upholding penalties on the other appellants and the main appellant does not arise - appeal allowed - decided in favor of appellant. X X X X Extracts X X X X X X X X Extracts X X X X ..... s cited at [2012 (284) ELT 680 (Tri. Chennai) has also considered the report of the chemical examiner and laid down the law as to how the report need not be relied upon and the same view has been expressed by Mumbai Bench. 5. Ld. DR, on the other hand, draws our attention to the detailed findings recorded by the adjudicating authority. It is his submission that the imports of coal are made from different sources and the description given in the documents is not indicating as to whether the same are coking coal or otherwise. He would submit that Sl.No.68/68A of notification No.21/2002-Cus is extending/granting exemption only to coking coal of ash content below 12%. He would submit that the CRCL report, after analysis of the imported coal indicates that they are other than coking coal. It is his further submission that since the imported coal is not coking coal, exemption cannot be extended. He would also draw our attention to the analysis report of CRCL and submits that there is a difference between the test report filed by main appellant and the CRCL; does not answer specification of coking coal. He submits that the impugned order be upheld and appeals be rejected. 6. Heard both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry shall be substituted, namely :- Coking coal Explanation. - For the purposes of this exemption, Coking coalmeans coal having mean reflectance of more than 0.85 and Swelling Index or Crucible Swelling Number of more than 2; (xii) S. No.68A and the entries relating there to shall be omitted; Notification No.31/2011-cus. dt. 24.3.2011 [Amendment to Notification No.21/2002-Cus] (i) after S. No. 66 and the entries relating thereto, the following S. No. and entries shall be inserted, namely :- (1) 92) (3) (4) (5) (6) 66A 2701 Coal having Swelling Index or Crucible Swelling Number of 1 and above and mean reflectance of above 0.60, for use in the manufacture of iron or steel using Corex, Finex or PCI technolo Nil - 5" Notification No.77/2011-cue 17.8.2011 [Amendment to Notification No.21/2002] In the said notification, in the TABLE, - S. No.66A and the entries relating thereto shall be omitted. (ii) in S. No.68, in column (3), in Explanation, for the figures and words 0.85 and Swelling Index or Crucible Swelling Number of more than 2 the figures and words 0.60 and Swelling Index or Crucible Swelling Number of more than 1shall be substituted. 11. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally enlisted the coal with respect to the names of the originating mines such as Ensham/SBW/Helsenburg//Metro/Datong. From the records we find that these coals have weak coking property with CSN ranging from 11.5 as reflected in the report dated 29.5.2008, regarding the performance of New South African Coal in Corex technology, which was seized from the hard disk of Shri Arvind Rajagopalan. In the later part of our discussion we will have a look into the properties and parameters of coal specifications such as CSN which have a bearing on the determination of the nature of coal imported. Suffice here to say that since the coals did have some coking property, documents such as business plans and balance sheet may not truly reflect the nature of coal imported in the context of the customs notification. 11.1 The other set of documents relied upon by Revenue are the MoUs/Contracts/Agreements with the suppliers of coal. Whereas these documents referred to purchase of coking coal for use in manufacture of Coke, the suppliers have not referred to the coal imported for Corex furnace as weakly coking coal/soft coking coal/semisoft coking coal/Corex coal in the main Contract/MoUs. And thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile Coal Board under the Coal Mines Act 1952. 3. Coals other than coking or semi cooking or weakly cooking coal are non-coking coals. The same terms find mention in the Coal Mines Act 1952, Australian Coal Review Database, Platt which is a Journal of prices, McCloskey Coal Report etc. For example, in the McCloskey Coal Report Issue 365 of 24 July, there is a reference to prices of weak coking coal. Therefore the contention of the Ld. advocate that such coals imported belong to the genus of coking coals has merit. In our view, it cannot be said that there is no such thing as weakly coking coal. The absence of term coking in the Contracts does not rule out the import of weakly coking coal because the prices of weakly coking and steam coal could well be same. 11.3 The director of M/s Rawmet Commodities Pvt. Ltd. Shri Raju stated that the invoices issued by their Principals contained the description of goods as open coal in bulk, whereas the invoices issued by them contained the description of goods as semi soft coking coal. Further that the CSN number and MMR are not reflected in the quality certificates issued in respect of supplies to JSWSL as per the business transaction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue does not want to apply the notification amended in 2011 retrospectively so as to apply the criteria of one CSN to the coal imported by the appellant; but on the other hand it states that the purchase orders should have mentioned the criteria of CSN for purchase of soft/semisoft/weekly coking coal. Revenue has not been able to challenge the fact that the coal imported from mines did have CSN of one and above. Therefore we find the stand of Revenue not sustainable. Further the Coal Directory only mentions the ash content of such coals which implies that such weakly coking coals can be described in trade parlance/ documents without specifically giving the CSN no. 12. It appears to us that the main stand of Revenue is that the Corex technology does not require coking coal and the weakly coking coal said to be imported cannot get the benefit of the exemption. The question that arises is whether weakly coking coal which was imported can be used so for making coke when blended with other coal. It is conceded that the Corex technology uses 15 20% Coke and 80 85% non-coking coal. Revenue has relied on contracts of Sale for coking coal which contain CSN whereas the contracts for soft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coal in Bhilai steel Plant, which is a public sector unit, states that But in the middle of 2014 with non-availability of indigenous coal, DSP was left with the option of having to use hundred percent imported coal for some time. With no prior experience of using hundred percent imported coal, it became an unknown journey in terms of oven wall pressure and operational difficulties. With its 56 years of experiencing coke making, DSP coke plant managed the situation reasonably well by deploying various combinations of imported hard coal from Australia, USA and New Zealand and soft coal from Australia and New Zealand. Thus an unprecedented opportunity was available to us to experiment with what we had at hand. This indicates the usability of soft coal in coke making, vindicating the stand of the appellant. Revenue has not shown any technical reading to dispute this stand. 12.3 Another technical reference presented by the appellant is the extract from the book Elements of Fuels, Furnaces and Refractories by Om Prakash Gupta in which the coking coal classification systems in USA Australia and Japan are given. Although the classification indicates various parameters, the parameter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... coking on basis of various parameters determined. 12.4 The research paper published by the Steel Authority of India Ltd experiments with different qualities of coals ranging from high volatile soft coals to low volatile coals, where two of the five samples having CSN of one, were mixed to form blends with other coals which had CSN of 4.5 5.5. It was found that the blends with coals having CSN of one showed good coking potential. 12.5 The above literature submitted by the appellant goes to show that weakly coking coal can be used in blending and has coking potential and deserves to be treated as coking coal within the contours of the exemption notification. We find ourselves unable to agree with Revenues stand. 13. We now look into the depositions of various persons. The Regional Manager(Marketing) Mr Vineet Kohli stated that the brand name of coal sold is annotated with the description of the coals. For instance IIIawara Hard Coking coal, riverside Coking coal, Blackwater Weak Coking Coal, Black Water Soft coking Coal, that such annotation or any other reference to the coal as hardsoft, semi soft or weak coal is merely a business description of such coals as is understood in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace, PCI purpose and Steaming (Energy) Coal/Thermal Coal is imported for the purpose of use in boilers for power generation; that except the usage of coal there is no difference between the Steaming (Energy) Coal/ thermal Coal and Soft Coking/Semi Soft Coking/Corex Coal; that the nomenclature of the coal is based on the end use application and accordingly the suppliers of coals are furnishing their commercial invoices and other documents. We find that statements generally reveal that the coal imported is usable in blending of Coal/ fines with Coking Coal for coke making; that Soft Coking/Semi Soft Coking Coal is one type of coking coal having less coking properties (statement of Raju Rangachar). Notwithstanding this contention of the appellant, the fact remains that the exemption to coking is not linked to any end- use condition. Even the amendment of notification 21/2002 by notification 77/2011-Cus dated 17-08-2011 did not prescribe end-use condition. The appellant have rightly relied on judgements which lay down the law that wherever end use is contemplated, the notification necessarily has to provide a mechanism for the same. Reliance is also placed on the Supreme Court judgem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ast furnace and in the Corex furnace. 13.3 Revenue has relied on statements to prove that the API-4 index is the parameter for fixing of prices for steam coal as done by the appellant in respect of the coking coal imported. This is not denied by the appellant. It is further alleged by Revenue that these coals are imported for the purpose of use in Corex furnace, PCI purpose and steaming coal/thermal coal is imported for use in boilers for power generation; further that except the usage of coal there is no difference between the steam coal/thermal coal and soft coking/semi soft coking coal; that the nomenclature of the coal is based on the end use application and accordingly the suppliers of coals are furnishing their commercial invoices and other documents. The defence of the appellant is that in the price of coal in the contracts with IMR metallurgical which was linked to the API-4 index, there was a specific markup on the base price and the coking coal price was higher than that of the thermal coal. Argument of Special counsel is that the price difference between coking coal and thermal coal should be much higher in any case. Learned Special Counsel also drew attention to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not available. Even if we accept the contention of Revenue that the notification describing CSN of one and above cannot be applied retrospectively, we still find that the Chemical Examiner mentioned in the case of well over 100 B/Es with CSN of 1 and above that it has got the characteristic of coking coal (where CSN is 3.5 and above) or coking coal (weakly coking). We observe that the Chemical Examiner in coming to the conclusion that it is weakly coking has not stated the specific parameter on basis of which he has come to this conclusion because the parameters tested apart from CSN also include Moisture, Ash, VM and Agglomerating property. The MMR has not been tested. It appears that the basis is CSN because wherever the CSN is less than 1, he has concluded the coal to be non-coking. The opinion of the Customs Chemical Examiner cannot be simply wished away without any substantial evidence to the contrary. The fact is that he has tested the coal to be weakly coking. Therefore we reject the appeal of the Department that the Commissioner dropped demands wrongly. Tribunal in the appellants own case Commissioner of Customs Vs JSW Steel Ltd - 2012(284) ELT 680(Tri-Chennai) held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 21-05-2013 of Director TRU addressed to the Commissioner Guntur in connection with a representation from the appellant. It stated (i) Prior to the budget 2011-12, Coking coal, having ash content below 12% as also Coking coal having ash content above 12% were fully exempted from basic customs duty (S. No.68 and 68A of Notification No.21/2001-Customs Dated 01.03.2002), while imports of non-coking coal attracted 5%. As coking coal was not defined in the notification, disputes arose as to the scope of coking coal, leading to large number of provisional assessments in the Custom Houses. In order to mitigate these disputes and after consultation with the Ministry of Coal, Ministry of Mines as well as Ministry of Steel, while retaining the exemption for coking coal, a definition of coking coal was provided in the Budget 2011-12, whereby coking coal was defined to mean coal having mean reflectance of more than 0.85 and Swelling Index or Crucible Swelling Number of more than 2 (Sl. No.68 of Notification No.21/2002-Customs ibid). (ii) On getting further representation from the domestic steel industry that manufacturers using Corex, Fines & PCI fuel injection technology could not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve and the CSN is one and above, was realized in the amended notification in 2011. But for the period in question, even this condition was absent As to the meaning of coking coal, the statements of the Technical persons in charge of the Iron/Steel making plants have much relevance. The relevant portions of the impugned Order in this regard are reproduced below : 17.1.11 M/s JSW Steel Limited as to whether the coals used by their company in Corex Furnace falls under the category of Coking Coal or not, Shri Dasu after perusing the definition of Coking Coal in McGraw-Hill Dictionary of Scientific and Technical Terms, stated that he has gone through the McGraw-Hill Dictionary of Scientific and Technical Terms and appended his dated signature on the same in token having perused the same; that the above dictionary contained the two different words and they are Coking and Coking Coal; that as per the dictionary, Coking Coal means the coal a very soft Bituminous Coal suitable for Coking; that as per the dictionary, Coking means destructive distillation of coal to make Coke; that from the above definition of Coking coal, coal used in manufacture of coke in Coke Ovens is called as Coking C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a very soft bituminous coal suitable for coking; that in terms of the said definitiony any coal which is used in coke making only be called as coking coal; that however, the coals imported by their company for use in Corex Furnace are suitable for blending with prime coking coal but not directly suitable for coke making; that hence the coals used in Corex Furnace can also be called as weak coking coals. The statements reflect that what was imported was coking coal even without placing reliance on technical parameters. Without basing our decision only on the parameters, we find that in the present case there was neither any restriction in the statute based on technical characteristics(other than ash content) nor any intention to deny the exemption ostensibly to weakly coking/ soft coking/ mildly coking coals during the period in dispute. Therefore the benefit of the exemption would be available. 15. We have held, in respect of the demands dropped by the Commissioner, that the coal imported by the appellant which is soft coking coal or mildly coking coal will get the benefit of notification which grants exemption to coking coal. As regards the 21 bills of entry in respect of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellants own case (supra) and a plain reading of the notification would, in our view, decide the issue in favour of the appellant. 15.2 An interesting aspect is that the appellant in one case of import at Goa, which is not related to the imports in the present case, requested for retest of samples in which the chemical Examiner at Goa found the CSN to be 1 in respect of four consignments. We are informed that on retesting the CSN of the same samples was found to be 5 to 5.5. The appellant requested for cross examination of the chemical Examiner. From the records of cross-examination, it transpired that the samples were not drawn in the manner prescribed in IS 436 nor was the procedure for testing prescribed in IS 1353: 1993 completely adhered to in as much as against three readings of CSN, only one reading of CSN was recorded. It has been held by the Hon'ble apex court in the case of Tata Chemicals Ltd. It Versus Commissioner - 2015 (320) ELT 45 (SC) that if samples are drawn contrary to the provisions of law, the test reports cannot be relied upon. We realize that the testing does not pertain to the consignments in dispute. But having noted the difference in the results of intern ..... X X X X Extracts X X X X X X X X Extracts X X X X
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