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TMI Blog2023 (7) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... tingent upon presence of retarding extraneous matter - Anthracite coal is considered superior and relatively scarce; its characteristic of very high carbon permits deployment at the high end of the spectrum in sophisticated equipment. Bituminous coal is most widespread and is primarily used in heating for generation of thermal power; the oozing of the tarry substance, from which the name is derived, renders such coal unsuitable in direct application that would clog equipment. The sub-headings in chapter 27 of First Schedule to Customs Tariff Act, 1975 adopted definitions consistent with the standards developed, and accepted, over the long period of increasing dependence on coal for industry, transportation and energy. The evaluation of fixed carbon , at or more than 86% (on dry, mineral matter free basis) with volatile matter constituting the remaining 14% or less, as the determinant of anthracite bears the insignificance of heating value insofar as coal of this rank is concerned - The adjudicating authority has placed too much premium on the said expressions in the sub-heading notes without considering relevance to the certificate of sampling and analysis (CoSA) or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lculation, the investigators carried out a superfluous exercise beyond gross calorific value (GCV) on air dry basis (ADB) to contrive a measure that has no rationale. Without ascertaining the method by which gross calorific value (GCV) was determined for inclusion in the certificate of sampling and analysis (CoSA) issued at load port and in the absence of any finding that this was not directly deduced from bomb calorimeter and as content of moisture , ash volatile matter and fixed matter in coal sample will not, of itself, derive the heating capacity as kcal/kg , there is no reason to suppose that it was not steam coal to be classified elsewhere - Consequently, the formula devised for reverse working from moisture free mineral matter free basis gross calorific value (GCV) for computation in terms of any one or other description in sub-heading notes in chapter 27 of First Schedule to Customs Tariff Act, 1975 is not required to be worked out sequentially as the table in Annexure B has done to obtain outcomes that are inexplicable, unfounded and lacking in rationale. It is, thus, clear that, on as received basis (ARB) and air dry basis (ADB) , the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation and, in the scheme of design, goods under import must correspond, or as nearly as possible, to the descriptions at each level before such at the next subordinate level. It may not be out of place to also take note of the foundation statement, viz, 1. The titles of Sections, Chapters and sub-chapters are provided for ease of reference only; classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions: .. in The General Rules for the Interpretation of Import Tariff in the Customs Tariff Act, 1975. 3. The other, pertaining to sequence of onus should there be dissonance, is the rule of engagement laid down by the Hon ble Supreme Court in HPL Chemicals Ltd v. Commissioner of Central Excise, Chandigarh [2006 (197) ELT 324 (SC)] thus 28. This apart, classification of goods is a matter relating to chargeability and the burden of proof is squarely upon the Revenue. If the Department intends to classify the goods under a particular heading or sub- heading different from that claimed by the assessee, the Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... First Schedule to Customs Tariff Act, 1975. For our conclusion thus, we rely upon the General Explanatory Notes in the Customs Tariff Act, 1975, for elucidation of the architecture of the listing, making it abundantly clear that the descent of --- / ---- from - lies inevitably only through -- in the classification hierarchy. The decisions cited in support of this proposition of the appellant have not been rendered in similar context. 6. There also appears to be some conceptual commotion in the manner in which the tariff easement for coal used in generation of energy has been drawn up by policy makers for we find that, over a few years, the grant of exemption intended thus 184. Domestic producers of thermal power have been under stress because of high prices of coal. I propose to ease the situation by providing full exemption from basic customs duty and a concessional CVD of 1 per cent to Steam coal for a period of two years till March 31, 2014 by the Hon ble Finance Minister in Budget speech of 2012 and revision thereon 166. Steam coal is exempt from customs duty but attracts concessional CVD of one per cent. Bituminous coal attracts a duty of 5 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , for fitment as bituminous coal corresponding to tariff item 2701 1200 of First Schedule to Customs Tariff Act, 1975. Proceedings were initiated by notice dated 19th April 2013 for recovery of ₹ 29,35,83,216 under section 28 of Customs Act, 1962 along with interest as applicable. Learned Counsel for applicant informed that appellant had, during the course of investigations and under protest , paid ₹ 50,00,000, ₹17,47,97,225 and ₹ 11,37,89,966 on 30th March 2013, 12th April 2013 and 21st August 2013 towards duties of customs with ₹ 1,91,05,040 and ₹ 3,64,27,173 on the later two occasions towards interest, thus totaling remittance of ₹ 34,91,19,404. 8. As seen from the records, and also from submissions of Learned Authorized Representative, coal is categorized in the American Society for Testing and Materials (ASTM) standards by rank, according to the degree of metamorphism, or progressive transformation from lignite stage, which, by the range of physical and chemical properties, assist in predicting behaviour of coal at the stage of consumption. The certificate of sampling and analysis (CoSA) , in addition to gross calorific va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned Counsel for appellant submits that the quality standards, including that of gross calorific value (GCV) , are contractual aspects of a commercial transaction and that bills of entry had, with reference to certificate of sampling and analysis (CoSA) of load port furnished by their suppliers, declared accordingly. These, he demonstrated, comprised four shipments in which the gross calorific value (GCV) , reported on as received basis (ARB) , and the remaining seven, on air dried basis (ADB) , were below the threshold in the sub-heading notes relied upon in the show cause notice. He contended that no other construction, including that of inexpert testing organizations such as the Central Revenue Control Laboratory (CRCL), need be placed on technical compliance with the contracted type of coal, viz., steamed coal , intended for utilization in generating power. Drawing attention to the compilation of various indices in the tabular presentation of load port analysis, he submitted that no test, adverting to a different result, has been relied upon by customs authorities and that only a Parr formula, culled out of some reference work unrelated to the rubric of classification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he testing undertaken at load port. 14. He relied upon the decision of the Tribunal in Coastal Energy Pvt Ltd v. Commissioner of Customs, Central Excise Service Tax, Nagpur [2014 (310) ELT 97 (Tri-Bang)], which also disposed off appeals of M/s Davangere Sugars Co Ltd and M/s Maruthi Ispat Energy Pvt Ltd, and in particular to 69. As regards the submission that the burden of proof as to why the product is not steam coal is on the Revenue, it is felt that 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 fulfils 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 fulfils 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2828/2014 dated 28.10.2014] found itself unable to arrive at the same categorical conclusion and deemed it appropriate to remand the matter back for fresh proceedings. He argued that the reference for constitution of a larger bench in Tamil Nadu Generation Distribution Corporation Ltd v. Commissioner of Customs, Tuticorin [2015 (316) ELT 305 (Tri-Chennai)] was also indicative of the weak foundations of the case of customs authorities for alternative classification. 15. Learned Counsel also deprecated the manner in which the appellant was literally forced to remit ₹ 34,91,19,404 during the pendency of investigation towards alleged duty and interest liability even as it could well have awaited adjudicatory outcome. He contended that this undue haste was not warranted as the appellant had substantial investment in a project that was not going anywhere else and as the issue in dispute was of such technical determination as to even hint at any motive to the contrary. He submitted that the entire exercise of Revenue evidenced mala fides as declaration of steam coal in bills of entry for their regular imports in the past had not been objected to except with grant of exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Minister s speech is not law. The Parliament may or may not accept his proposal. Indeed, in this case, it did not accept the said proposal immediately but only a year later. It is only from the date of repeal that the said levy becomes inoperable. insofar as it was contended that the intent of exempting all coal deployed for power generation is evident in the Budget speech and he further contended that the decision of the Hon ble Supreme Court in Commissioner of Customs, Kolkata v. Rupa Company Ltd [2004 (170) ELT 129 (SC)] does not come to the aid of the appellant. We do not wish to make any comments on the marginalization of a significant element of parliamentary procedure for approval of ways and means for the government by reference to judgements, such as in re BK Industries, concerned with repeal of a levying law as opposed to a responsible statement by a high functionary of the State before the supreme collegium of citizen power on intent to grant exemption from levies through an executive empowerment and only because, to us, the dispute, as well as the resolution, lies entirely within the technical domain of estimation of values concatenated with the simplicity tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for steam coal in the First Schedule to Customs Tariff Act, 1975 and, though, one does for bituminous coal , dichotomizing of steam coal within that is not readily apparent thus opening up possibility for dispute for that very reason. And it has done so in this very instance. 21. Coal is a bounty of Nature that occurs as localised concentrations and, by its very remoteness from places of deployment, implies voluminouos shipments with appropriate commercial stake. Coal draws worth from its combustion capacity by direct application of heat in manufacturing process or indirectly by generation of steam used for deriving energy of one sort or another. The heating capacity is proportional to carbon content which, being a natural element, not only varies from source to source but is also contingent upon presence of retarding extraneous matter. A contemporary handicap is the polluting potential of extraneous matter, particularly sulphur. Coal is, essentially, dead vegetation whose decay has been terminated by pressure of layering over that pushes existing debris further into the earth and, over a period of time, to such depths that it acquires its typical solidity. Thus, uncut pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riff too, is gross calorific value (GCV) or the heating potential. Traditionally designated as Btu, it is the heat required to raise the temperature of one pound of water by one degree Fahrenheit and is expressed as Btu/lb or as kcal/kg in the metric system. The accepted test procedure, known as proximate analysis of a sample is expressed as fixed carbon , ash , volatile matter and moisture content with ultimate analysis , which is not relevant here, isolating the elements that make up volatile matter in the coal sample. 24. The sub-headings in chapter 27 of First Schedule to Customs Tariff Act, 1975 adopted definitions consistent with the standards developed, and accepted, over the long period of increasing dependence on coal for industry, transportation and energy. The evaluation of fixed carbon , at or more than 86% (on dry, mineral matter free basis) with volatile matter constituting the remaining 14% or less, as the determinant of anthracite bears the insignificance of heating value insofar as coal of this rank is concerned. For the rest, it is gross calorific value of 5833 kcal/kg (on moist, mineral matter-free basis) that segregates bituminous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, apparently, proceeded conversely. Gross calorific value has a definitional standard that is not performed easily and, even if possible, lacks precision; for a kilogram or pound of water to be heated through a degree in Celsius or Fahrenheit scale for determining heating potential would be test of patience rather than a test of content. Hence the instrument known as bomb calorimeter has been engineered for that purpose. The retardants to heating potential of carbon in coal are moisture and volatile matter; the content of the former is determined by weight and of the latter by weight of the ash residue. These ascertainments serve the purpose of estimating the quantity of coal required for obtaining the desired energy level and not for determination of gross calorific value even if a series of experiments may assist in estimating commercial value of coal at a particular source. To perceive conversion formulas as capable of deriving values from composition percentage is neither mathematically acceptable nor scientifically credible. And that has occurred in the present dispute. 26. From what we have seen and heard so far, there is no controversy for the proximate analysis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... temperature of a kilogram of water by one degree on the Celsius scale a theoretically cumbersome and haphazard process save for the invention by Marcellin Berthelot, the founder of organic chemistry in bomb calorimeter appears to have been ignored; that such determination from a sample of powder, bereft of moisture and mineral matter, needed adjustment only for the missing element in the qualification was also equally ignored in the eagerness to carry out algebraic permutation for arriving at the desired result to charge higher rate of duty. Several fatal errors have been committed in the impugned proceedings in consequence. 28. In Annexure B of the show cause notice, adopted as a given in the adjudication order, gross calorific value (GCV) on air dry basis was converted, at a certain point, into gross calorific value (GCV) BTU by applying a factor of 1.8 without any reasoning for the same and, indeed, the objective of converting a measure in SI to a measure of the British system only to be reversed at a later stage by converse application of the same factor is mystifying to say the least. We can only conjecture that the investigators had a penchant for play ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not, of itself, derive the heating capacity as kcal/kg , there is no reason to suppose that it was not steam coal to be classified elsewhere. Consequently, the formula devised for reverse working from moisture free mineral matter free basis gross calorific value (GCV) for computation in terms of any one or other description in sub-heading notes in chapter 27 of First Schedule to Customs Tariff Act, 1975 is not required to be worked out sequentially as the table in Annexure B has done to obtain outcomes that are inexplicable, unfounded and lacking in rationale. 32. It is also disturbing that, in the circumstances of a technical dispute arising from entitlement to exemption accorded for a particular objective by the Government of India with deployment of imported goods for that purpose by the appellant not being in doubt at all, the customs authorities forced deposit of duty and interest without awaiting adjudicatory outcome. Section 28 of Customs Act, 1962 does not countenance such extra legal measures. A statutorily established agency of the State enforcing its writ thus without according respect to process laid down by law whittles away not only its authority but also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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