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TMI Blog2024 (1) TMI 1335X X X X Extracts X X X X X X X X Extracts X X X X ..... of records to state what the Hon ble Courts have held on this aspect of the subject matter. Thus in the foremost, it is settled law that an exemption notification calls for a strict interpretation and no liberal constriction can be placed to extend the scope of the notification. In view of clear and appreciable differences as noted detailing the difference in technical parameters and usage considerations, the goods imported by the appellant viz. coke breeze is not entitled to the benefit of the exemption notification, 21/2002-Cus dt. 1.3.2002 and/or 12/20112-Cus dt. 17.03.2012 prescribing Nil rate of duty for import of metallurgical coke. The impugned orders therefore call for no interference as regards merits of the case. Extended period of limitation - penalty - HELD THAT:- As the importer had clearly declared the imported goods as coke breeze in the Bills of Entry filed at the time of import, the charge of suppression willful misstatement as levelled against the importer does not hold good and cannot be sustained. It is for the department to have allowed or dis-allowed the exemption benefit depending upon their understanding and interpretation of the subject notification, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-CUS dated 01.03.2002 and Notification No. 12/2012-CUS dated 17.3.2012 as the case maybe. Countervailing duty of Customs and education cess/ Customs education cess were paid by the importer - appellant as applicable. No basic custom duty was paid by them at the time of import, claiming exemption in terms of the notifications referred to supra as the goods were described as Metallurgical Coke. The following chart depicts the description of imported goods as declared on the Bill of Entry and the duty paid at the time of import. Sl. No. B/E Number-5935024 dated 07.02.2012 B/E-Numbers- 1.7165128-20.06.2012 2.7718474-21.08.2012 3.8790072-18.12.2012 1. Description of Goods imported Metallurgical Coke when imported by a manufacturer of Pig Iron or steel using a blast furnace or COREX technology. Metallurgical Coke Basis Customs Duty Nil* (as exempted) @ 5% Nil* (as exempted) @ 6% Countervailing Duty Education Cess and Customs Education Cess @ 3% + @3% @ 3% + @3% Notification Number (availed) *Not No.-21/2002-Cus Dated 02.03.2002 Sl. No. 71 *Not. No. 12/2012-Cus Dated 17.03.2012 Sl. No. 125 Upon investigations undertaken by the department, it came to notice that the imported goods were in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant has sought the benefit of this exemption notification for import of coke breeze vide the four Bills of Entry as indicated in table in para 2 above. The department on the other hand has denied the exemption on the ground that coke breeze is not metallurgical coke. Moreover, coke breeze can only be used in the sinter plant for preparing the burden material for use in the blast furnace (where only metallurgical coke and not coke breeze is utilizable). We note that the impugned order under challenge is essentially an ex-parte order, as though the appellant filed a detailed reply to the notice issued by the department, they failed to avail of the opportunity of personal hearing, that was afforded to the noticee. As to this contention we note that in para 3 of the order in original the learned Adjudicating Authority had granted initial hearing to the noticee on 31.01.2019 on which date the noticee failed to attend and requested for an adjournment by two months on the ground that the counsels were occupied with operations for the finalization of other matters. Thus the learned Adjudicating Authority granted another date, fixing the personal hearing on/for 26.02.2019 where again for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible corporate entity like the noticee. Since the Noticee operates under the self assessment regime, the onus of determining liability of duty rests on them. If the Department feels that such onus has not been discharged properly, a Show Cause Notice is issued asking them to explain their stand. Thus the first and the minimum obligation of the Noticee was to appear for personal hearing granted to them in obedience to the principles of natural justice accorded to them, which they have failed to do in the instant case. As they did not attend the Personal Hearings of which three opportunities have been accorded to them, I am proceeding to decide the case on merit on the basis of records available and their written submission, as the process of adjudication cannot be suspended indefinitely to suit the convenience of the Noticee. 6.1 In support of his stance the learned Adjudicating Authority has gone by the decision of the Tribunal in the case of Joy Prakash Strips Ltd. vs. Commissioner of Central Excise and Customs Nasik 2009 (43) ELT 476 Tribunal, Mumbai , as well as that of the Tribunal in the case of Kishan Sahkari Chini Mills Vs. Commissioner of Central Excise Noida 2009 (241) EL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance and is used by foundries in furnaces for melting metal and in the preparation of molds. Foundry coke production uses a different blend of coking coals, longer coking times, and lower coking temperatures, relative to those used for metallurgical coke. The appellants also referred to the encyclopaedia of Metallurgy and Material by C.R. Tottle stating that Metallurgical Coke means A product of the process of high temperature carbonization of coal, during which the volatile hydrocarbons are removed by dry distillation Good metallurgical coke can be prepared from coal that contains not more than 30% or less than 20% of volatile material, the determination being made under standard condition . . They also refer to the Glossary of Terms pertaining to coal carbon product published by (IS 5451:2001 reaffirm 2011) stating metallurgical coke as:- This typically contains 85-88% fused carbon, 9-11% ash, and 2% volatiles . They thereby suggest, coke used for a metallurgical operation qualifies as metallurgical coke. The learned advocate further pleads that sintering is a process of metallurgical operations. To buttress his point the Ld. Advocate invites reference to the definition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lumps (sintering process). In the preparation of the lumps other materials like flu, dust and limestone/dolomite are also made use of. Thus, sintering involves heating of the mixture aforesaid wherein coke breeze used, acts both as a fuel as well as a reducing agent. Chemical equation of the sintering process can be illustrated as under: Fe 2 O 3 ─ Fe 3 O 4 ─ FeO 9. The learned advocate has argued that metallurgical coke is a genus of which coke breeze is a species. In support of this proposition he refers to glossary of terms/definition commonly used in iron and steel industry as brought out by the Ministry of Steel and takes us to page number 27 of the index of Relevant Provision Technical Material supplied at the time of the hearing. We note that coke therein is described as: COKE: Coke is the residual solid product obtained upon carbonization of coking coal. Depending upon property, coke is known as Hard Coke, Soft Coke and Metallurgical Coke. Metallurgical Coke: Not all coke can be used in metallurgical operations for which good quality coke made from specific blend of coking coal is essential. Such coke is classified as Met. Coke. Blast Furnace (BF) Coke: The ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng coke oven/coke oven battery, cooking time yield of variety of coke, what is stated in the glossary is enumerated hereunder: COKE OVEN/COKE OVEN BATTERY: Coking Coal is converted into coke in coke ovens which are silica refractory lined ovens/chambers. Coke Oven battery comprises of a large number of ovens, 50-70 in tandem. Such batteries are normally attached with By-product plant where in valuable constituents are recovered from the volatile/gaseous content of coal driven out during carbonization. Accordingly, such coke ovens are known as By-product coke oven battery vis- -vis Non- recovery type coke ovens, also known as Bee-hive type coke ovens. COKING TIME: Coking time is defined as the time required for conversion of coal to coke in the coke oven which varies in the range of 15-20 hrs. YIELD OF DIFFERENT VARIETIES OF COKE: Typical yield from one tonne of dry coal charge to coke is 75%. Depending upon size ranges, coke is classified into the following categories:- YIELD OF DIFFERENT VARIETIES OF COKE: Category Yield Use BF Coke (25/40-80mm) 85% Blast Furnace Nut Coke (15-25mm) 5% Sinter Plant/Ferro Alloy/Pig Iron Industry Coke Breeze (0-15mm) 10% Sinter Plant/ Cement Industry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industry. It states:- Metallurgical Coke is an industrial fuel obtained by the carbonization of coal. It is used to support a variety of industrial activities most importantly the production of iron and steel. Coke is consumed in steel industry blast furnaces to reduce iron oxides to molten iron, which is then converted into steel by further processing. A small share of total coke consumption occurs in iron foundries, ferro alloy furnaces and non ferrous smelters; the byproduct gases of coke production are separated and used to produce certain chemicals and energy, which is typically used by the producer or sold. 12.1. The footnote to the executive summary at serial no. 3 upon which the appellant relies, reads as: Metallurgical Coke is composed of several subsets, including, as primary subsets, blast furnace coke and foundry coke. Industrial coke and breeze, which are two other subsets, are classifications covering the undersized residual from the production of blast furnace and foundry coke. 12.2. It may be noted, and as pointed out that the report was prepared to analyze the effect of increasing imports from major world producers specifically including Japan, China, and the forme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d screened. Coke fines below 10 mm is screened which is also called coke breeze. Coke size 25-80 mm is called as BF Grade Coke, 10-25 mm called as Nut Coke and 0-10 mm called as Coke Fines or Coke Breeze. Since the coke breeze is a finer fraction of coke, the chemical composition of coke breeze so produced is almost the same as that of coke used in Blast furnace. Coke breeze/fines so produced during coke oven operation and crushing and screening of coke is mainly used in sintering process for production of Sinter which is further used in blast furnace as input raw material. Coke breeze is also used in EAF. During sintering operation, coke breeze is used. The function of coke breeze is to provide heat and partial reduction of iron ore fines. Reduction reactions for partial reduction of iron ore fines are metallurgical in nature. Reactions are Fe 2 O 3 ─ Fe 3 O 4 ─ FeO. These reactions take place with the help of coke breeze. As per Ministry of Steel s website, definition of Metallurgical Coke is provided as follows: Metallurgical Coke : Not all coke can be used in metallurgical operations for which good quality coke made from specific blend of coking coal is essential. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent properties and uses and identified as two distinct products, there is difference in leviability of duty (Basic Customs duty as well as Anti-Dumping duty). The said circular is extracted below: CBEC Circular No. 56/2003-Cus dt. 27.6.2003 Sub: Dutiability of Coke Breeze generated in the process of manufacturing of Pig iron/steel. I am directed to refer to the subject mentioned above and to say that Notification No. 21/2001 Cus (Sl. No. 71) dated 01.03.2002, upto 28.02.2003 provided concessional rate of customs duty on Metallurgical Coke imported for manufacture of Pig Iron/Steel using a blast furnace subject to the condition that procedure prescribed in Customs (Import of Goods at Concessional Rate of Duty for the Manufacturer of Excisable Goods) Rules, 1996, is followed. Similar, anti-dumping duty applicable on Metallurgical Coke of Chinese origin is also exempted vide Notification No. 69/2000-Cus dated 19.05.2000, provided it is imported for manufacture of Pig Iron/Steel using a blast furnace and the said procedure is followed. It has been brought to the notice of the Board that Coke Breeze generated in the process of charging Metallurgical Coke to the blast furnace is not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision on merits. 6 . 7 . 8 . Pramod Kumar AO (TU) 17. For arriving at a meaningful contention, it would therefore be necessary to examine the physical and chemical properties of the imported product. The learned Adjudicating Authority has incorporated the Load Part Analysis Certificate pertaining to the imported coke breeze under the four Bills of Entry referred to supra. The same is extracted hereunder: BE No.- 5935024 dated 07.02.12 7165128 dated 20.06.12 7718474 dated 21.08.12 8790072 dated 18.12.12 Moisture% 10.65 12.64 10.77 12.55 Ash % 14.36 16.60 18.77 18.39 Volatile Matter% 0.75 2.43 2.64 2.42 Sulphur% 0.47 0.65 0.69 0.66 Fixed Carbon% 84.84 78.22 78.59 79.19 Net Calorific Value 5614kcal1/kg. - - - Size (0-10mm)% 99.47 95 96.6 98.40 18. Thus from the size of the imported product being below 10mm it is obvious that the coke breeze is a product distinct from metallurgical coke which has a size of 40.80 mm. But is it the size size alone that needs to be ascertained. As pointed out by the learned Authorized Representative Sri Debnath, that in market parlance also the two products are known to be commercially distinct, ash metallurgical coke is regularly imported at various port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, formed from the cooling of coke oven gas and liquor from primary coolers contain tar and are sent to a tar decanter. An electrostatic precipitator is used to remove more tar from coke oven gas. The tar is then sent to storage. Ammonia liquor is also separated from the tar decanter and sent to waste water treatment after ammonia recovery. Coke oven gas is further cooled in a final cooler. Naphthalene is removed in the separator on the final cooler. Light oil is then removed from the coke oven gas and is fractionated to recover benzene, toluene and xylene. Some facilities may include an onsite tar distillation unit. The Claus process is normally used to recover sulfur from coke oven gas. The coke oven gas is also directly used as fuel in power plants and for heating after stripping it of noxious elements. The recovery value of the coke oven gas generally depends upon its calorific value and value of recovery in standard cubic meters. During the coke quenching, handling and screening operation, coke breeze is produced. It is either reused on site (e.g. in the sinter plant) or sold off site as a by-product. This is under both processes. The above highlights that breeze coke is a pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalysis, describes Coke Breeze and Metallurgical Coke as below:- Breeze: The undersize after separating the smallest size of grounded coke and it is usually less than 10 mm in size. Coke: The solid, agglomerated carbonaceous residue produced by the pyrolysis of coal in the absence of air. The Bureau of Indian Standards IS 5451:2001 (Reaffirmed 2011), in Glossary of Terms relating to Coal Carbonization Products (First Revision), mentions : Coke Breeze as-The finer sizes of coke below 6 mm is obtained by screening And Metallurgical Coke as-Typically contains 85-88 percent fused carbon, 9 to 11 percent ash and 2 percent volatiles. 23. International Union of Pure and Applied Chemistry (IUPAC) the world authority on chemical nomenclature, terminology, standardized methods for measurement, atomic weights and other critically evaluated data states: Coke Breeze is a by-product of coke manufacture and Coke Breeze is the residue from the screening of heat- treated coke. The particle size is less than 10 mm. Generally coke breeze has a volatile matter content of 3 percent. Source: PAC, 1995, 67,473 (Recommended Terminology for the Description of Carbon as a Solid (IUPAC Recommendations 1995) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts as separate entities, convincingly establishes the act that the said two products are known and understood as different products both in technical as well as the commercial sphere. 26. The US Energy Information Administration (EIA) official Energy Statistics from the US Government (as seen from the website http://www.eia.gov/coal/production/quarterly/pdf/t25p01p1.dpf) indicated the market sales and average price of the products Coke and Breeze. The following Table is reproduced: Note- The 3-4 times price difference between the two products. 27. The treatise on vocabulary, Interpretation of Words, Phrases and Commodities by MP Agarwal 3 rd edition, 2012 at page 33/refers to coke breeze as half burnt coke. It is of interest to note that the Condensed Chemical Dictionary Tenth edition, upon a reference to metallurgical coke directs to look up at the meaning of coke at page 660. Metallurgical coke see coke Whereas for breeze coke (page 147) it puts up a meaning, a definition. (Similar is the stated position, even in the 13 th edition of the book). This clearly establishes that in common parlance breeze coke is not considered the same as met coke or even placed in the category of me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clog the blast furnace and adversely affect the manufacturing process and the quality of product. Therefore, these fine particles are segregated/screened on the conveyor system before charging Metallurgical Coke to the blast furnace. With reference to the above, IS 439: 1989 and IS 437 : 1979 standards, records that metallurgical coke shall confirm to the specifications for Blast Furnace Coke or Foundry Coke. Blast Furnace Coke shall be in the size range between 100 and 25 mm. Foundry Coke shall be in the size range of + 100 mm. Coke Breeze will be less than 10 mm size. Notably it is not stated so for coke breeze thereby bringing out yet another important distinction between coke breeze and met coke. 31. As per the IS 439:1989 INDUSTRIAL COKE SPECIFICATION Low Ash Metallurgical Coke (LAM Coke) is the solid product of carbonization of coal/coal blends at temperature above 900 C. This includes blast furnace coke and foundry coke having ash content less than 15 percent. Low Ash Metallurgical Coke (LAM Coke/MET Coke) is solid carbonaceous material obtained from destructive distillation of low ash, low sulphur Bituminous Coal. Coke is formed when the coal is heated in the absence of ai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a by-product. 34. From the above it is clear that, Metallurgical Coke and Coke Breeze are commercially also understood to be two different products. They have different properties and uses. Metallurgical Coke is filtered to produce Coke Breeze during the process of charging of Metallurgical Coke to the blast furnace. These small particles cannot be charged to the blast furnace as they clog the blast furnace and adversely affect the manufacturing process and the quality of product. Therefore, these fine particles are segregated/screened on the conveyor system before charging Metallurgical Coke to the blast furnace. Coke Breeze is a different product usually of less than 10 mm size, which arises in the course of overall manufacturing process in which Metallurgical Coke is used as raw material. During the coke quenching, handling and screening operation, coke breeze is produced. Even the price variation between the two products is substantial ranging between 3-4 times, with coke breeze being dirt cheaper than metallurgical coke. 35. For ease of appreciation and understanding of the two products and their technical aspects, the distinguishing features of the two products can be summari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m carbonization of coal at high temperature. Coke oven coke is low in moisture and volatile matter and has the mechanical strength to support the blast furnace charge. It is used mainly in the iron and steel industry acting as heat source and chemical agent. OECD/IEA, 2008 5. U.S. International Trade Commission Washington, DC 20436, Metallurgical Coke base line analysis of the US industry and imports Publication 2745 March 1994, Investigation No. 332-342 Appendix E GLOSSARY. Coke Breeze The fine screenings from crushed coke used predominantly as a fuel source in the process of agglomerating iron ore. Usually coke breeze will pass through a inch screen opening. Metallurgical Coke A coke with very high compressive strength at elevated temperatures, used in metallurgical furnaces, not only as a fuel, but of the also to support the weight charge. 6. CBEC Circular no. 56/2003 dated 27.06.2003. (F.No. 528/50/2003-Cus (TU), CBEC, Ministry of Finance, Department of Revenue Tariff Unit, Government of India). It has been stated that in the process of charging Metallurgical Coke to the blast furnace, some amount of fine/small size particles (0 to 12mm), commonly known as Coke Breeze, are gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% MAX 4 VOLATILE MATTER (DRY BASIS) 5.0% MAX 4 SULPHUR (DRY BASIS) 0.60% MAX. 5 PHOSPHOROUS (DRY BASIS) 0.030%% MAX. 6 MICUM 40 82% MIN 7 MICUM 10 7% MAX 8 CSR 62% MIN 9 CRI 23% MAX 10 +80 MM Size 6% MAX 11 -30 MM Size 4% MAX 10. Coal Data: A Reference , February 1995 Energy Information Administration , Office of Coal, Nuclear, Electric and Alternate Fuels, U.S. Department of Energy, Washington, DC 20585, Coal Terminology and Related Information Coke Breeze: The term refers to the fine sizes of crushed coke that will pass through a Vi-inch or -inch screen opening. It is commonly used for sintering (agglomerating) iron ore, a process in which fine ore is mixed with coke and ignited to produce semifused lumps of ore. Coke: Coke is a combustible residue consisting of residual ash and fixed carbon made from bituminous coal (or blends of bituminous coal) from which the volatile constituents are driven off by baking in an oven at temperatures as high as 2,000 degrees Fahrenheit. The Process is called carbonization. Coke is hard and porous, has a grey, submetallic luster, and is strong enough to support a load of iron ore in a blast furnace. It is used chiefly as a fuel and reducing agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of -3+1 mm. represents the most favourable particle size for Coke breeze in the sintering process. Coke is mainly used as fuel and as a reducing agent in smelting iron ore in a blast furnace. The carbon monoxide produced by its combustion reduces iron oxide (hematite) in the production of the iron product. Consumption pattern of Coke Breeze:-Coke Breeze is a common backfill material used in cathodic protection. It is a Type 1 carbonaceous backfill material. Coke breeze backfill has low resistivity and low ash content. Consumption pattern of Met Coke i) Pig Iron Industry 75% ii) Foundry 15% iii) Ferro-Alloys 5% iv) Others 5% Pictorial Depiction of Coke Breeze and Met Coke. 36. The following pictorial representation demonstrates the usage of coke breeze- as can be seen therein for utilization of coke breeze, a precursor process of sintering is necessitated in order to make the coke, blast furnace worthy, for production of the molten iron. As can also be noted from the said picture apart from production of sinter, the said sintering process also results in generation of solid waste (sludge) as well as other gaseous effluents that are quite different from the blast furnace effluents. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the case law analysis on this aspect of the matter does not actually arise. Language employed in statute is the determination of legislative intent (UOI Dharmendra Textile Processors 2008(231)ELT 3 (SC). Nonetheless, it may be apt for sake of records to state what the Hon ble Courts have held on this aspect of the subject matter. Thus in the foremost, it is settled law that an exemption notification calls for a strict interpretation and no liberal constriction can be placed to extend the scope of the notification. Reliance for the proposition can be placed on- (i) Radiant Cables Pvt. Ltd., (2017 (348) ELT 558 T). For the premise if metallurgical coke is eligible for exemption, coke breeze would not automatically follow. (ii) BPL Ltd., Vs. Commissioner of Central Excise, Cochin-II (2015 (319) ELT-556 SC). (iii)Rajasthan Spinning and Weaving Mills, Bhilwara, Rajasthan Vs. Collector of Central Excise, Jaipur, (1995 (77) ELT 474 SC). (iv)Commissioner of Central Excise, New Delhi Hari Chand Shri Gopal Ors. (2010(260)ELT 3 SC). For the premise the onus is on the person seeking benefit to establish his eligibility. (v) Novopan India Ltd., Vs. CCE, and Customs (1994 (Supp(3) SCC- 606) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing met coke and not coke breeze in this case) and when the wordings are clear they alone have to be given effect to and not any intendment. The case of Jindal Vijayanagar Steels Ltd, Vs. Commissioner of Customs, Mangalore, as referred to by the appellant too has no applicability as it was in the context of Notification No. 20/99-Cus dt. 28.2.99 which had a specific condition all by way of, for use in . we find no such stipulation concerned with the notification referred to in the present matter. The case of Sandur Micro Circuits Ltd, Vs. Commr. Of Central Excise, Belgaum-(2008(229)ELT 641 SC), is in the context of conflict between a circular and a notification. There being no such conflict in the present case, the citing of this case law is completely extraneous and of no bearing to the present matter. The appellants have cited the case of Fisheries Pvt. Ltd., Vs. (UOI- 2011(266)ELT422 SC) to suggest that natural justice was denied to them, however we note and as stated in para 6 of our order ample opportunities were given to noticee who chose to forego the same. They are not entitled to cry hoarse now on this aspect. As for the appellant s reference to the case of Flock India Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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