2015 (5) TMI 557 - SC - Customs

Chemical Analysis of Imported Coal Without Proper Sampling Violates Section 18(b) of Customs Act

M/s. Tata Chemicals Ltd. Versus Commissioner of Customs (Preventive) Jamnagar

The SC held that the chemical analysis of imported coal was ultra vires Section 18(b) of the Customs Act as the samples were drawn without following IS ... Denial of exemption on Coal import under Notification 35/90, 36/90 and 23/91 - Samples were rejected on ground of ash content being more than 12% - Samples were drawn in absence of any representative, in contravention of express provisions of IS 436 - Held that:- In our opinion, the expression “deems it necessary” obviously means that the proper officer must have good reason to subject imported goods to a chemical or other tests. And, on the facts of the present case, it is clear that where the importer has furnished all the necessary documents to support the fact that the ash content in the coking coal imported is less than 12%, the proper officer must, when questioned, state that, at the very least, the documents produced do not inspire confidence for some good prima facie reason. In the present case, as has been noted above, the Revenue has never stated that CASCO’s certificate of quality ought to be rejected or is defective in any manner. This being the case, it is clear that the entire chemical analysis of the imported goods done by the Department was ultra vires Section 18(b) of the Customs Act. The admitted position on record is that the samples drawn were not drawn in accordance with law and were drawn with no regard whatsoever to IS 436. That IS 436 would apply to the facts of the present case is made clear by our judgment reported in Bombay Oil Industries (P) Ltd. v. Union of India [1994 (12) TMI 81 - SUPREME COURT], where this Court held following Union of India v. Delhi Cloth & General Mills Co. Ltd.[1962 (10) TMI 1 - SUPREME COURT], that if the method of testing of any item of Central Excise tariff is not mentioned, then the Indian Standard Institution’s method should be applied. That this would apply to the Customs Act as well.Clearly the samples drawn by the Inspector in the present case, have been drawn contrary to the express provisions of IS 436. On this count also, the samples being drawn not in accordance with law, test reports based on the same cannot be looked at. The Tribunal’s judgment has proceeded on the basis that even though the samples were drawn contrary to law, the appellants would be estopped because their representative was present when the samples were drawn and they did not object immediately. This is a completely perverse finding both on fact and law. On fact, it has been more than amply proved that no representative of the appellant was, in fact, present at the time the Customs Inspector took the samples. Shri K.M. Jani who was allegedly present not only stated that he did not represent the Clearing Agent of the appellants in that he was not their employee but also stated that he was not present when the samples were taken. In fact, therefore, there was no representative of the appellants when the samples were taken. In law equally the Tribunal ought to have realized that there can be no estoppel against law. If the law requires that something be done in a particular manner, it must be done in that manner, and if not done in that manner has no existence in the eye of law at all. The Customs Authorities are not absolved from following the law depending upon the acts of a particular assessee. Something that is illegal cannot convert itself into something legal by the act of a third person. - Decided in favour of appellant. ISSUES: Whether imported coking coal with ash content below 12% is exempt from basic customs duty and auxiliary duties under relevant notifications.Whether the customs department was justified in rejecting the certificate of analysis issued by an independent internationally reputed inspection agency and conducting its own chemical tests.Whether the samples drawn by the customs authorities for testing were valid in law, given they were not drawn in accordance with Indian Standard IS 436.Whether the appellants are estopped from challenging the validity of samples drawn by customs on the ground that a representative was present during sampling.The scope and limits of the power of the proper officer under Section 18 of the Customs Act to subject imported goods to chemical or other tests. RULINGS / HOLDINGS: The exemption under the notifications applies to coking coal with ash content below 12%, and the certificate issued by the internationally reputed agency CASCO showing ash content at 9.8% was valid and not challenged by the department.The customs department's chemical analysis of the samples was 'ultra vires Section 18(b) of the Customs Act' because the department never demonstrated any good prima facie reason to reject CASCO's certificate or to deem it necessary to conduct further tests.The samples drawn by the customs authorities were invalid as they were not drawn in accordance with IS 436, which prescribes detailed procedures for sampling coal, including minimum sample weights and sampling methods; the customs samples were insufficient and improperly handled.The appellants were not estopped from challenging the sampling process because no representative of the appellants was present at the time of sampling, and estoppel cannot be invoked against a violation of law; 'there can be no estoppel against law.'The power under Section 18 of the Customs Act to subject goods to chemical or other tests requires that the proper officer 'deems it necessary' based on reasonable grounds and not mere suspicion, and such power must be exercised within legal restraints. RATIONALE: The Court applied the statutory provisions of the Customs Act, particularly Section 18, which allows provisional assessment and testing only if the proper officer 'deems it necessary' based on reasonable grounds.The Court relied on precedents establishing that expressions like 'deems it necessary' and 'reason to believe' require an honest and reasonable belief supported by material facts, not arbitrary or subjective satisfaction.The Court referred to Indian Standard IS 436 for coal sampling, holding that where the statute or notification is silent on the method of testing, the Indian Standard Institution's method applies, as previously held in related judgments.The Court rejected the Tribunal's finding on estoppel, emphasizing the principle that illegal acts cannot be validated by acquiescence or presence of a third party, and that no representative of the appellants was actually present during sampling.The Court emphasized that the customs authorities must comply with prescribed legal procedures and cannot rely on defective samples or tests conducted without proper legal basis.