2025 (11) TMI 316 - AT - Customs

Imported coke breeze held to be metallurgical coke under N/N.12/2012, entitled to exemption; confiscation and penalty set aside

CESTAT held that the imported coke breeze qualifies as 'metallurgical coke' for the purposes of N/N.12/2012 and is entitled to the claimed exemption, ... Classification of goods - coke breeze imported by the appellant qualifies as metallurgical coke or not - entitlement to exemption under S.No.125 of N/N.12/2012-Cus dt.17.03.2012 - HELD THAT:- It is found that coke, per se, has various industrial uses like steel productions and also in metallurgical process used for production of other metals like zinc, copper, etc. It is also used in foundries and also in chemical industries. Thus, a metallurgical coke is one which is used in a metallurgical process for production of iron and steel and other metals from metal ores. Some cokes are specifically suitable for particular purpose like Foundry or Ferroalloy industry but the fact remains that coke is essentially meant for metallurgical purpose. In the present appeal, there is no dispute that it is coke and not coal, however, the origin of this imported breeze coke is not known conclusively to either department or appellant but it could generally emerge either at the time of charging of metallurgical coke in BF or emerge as undersize coke in the process of coke making from coal in a coke oven battery. The test conducted by CRCL chemical examiner is not in accordance with IS 5451-2001 as it merely defines technical terms relating to coal carbonization products. Therefore, the technical characteristics given in the absence of any test conducted in CRCL in respect of all parameters cannot be relied upon by the department. The issue that one has to understand in this appeal is whether breeze is a metallurgical coke or not. There is no dispute that this is a coke as it is not being disputed by either side that it is not coke but coal or something else. Therefore, it is presumed that it has emerged either in the process of manufacturing of coke in the coke oven batteries abroad or it is from the screening of coke at the time of charging in the blast furnace. Nobody is disputing that its size, as such, cannot be directly fed into blast furnace. However, the said breeze, merely because its size being less than 10mm, cannot be said as one which has got no metallurgical property or use in the metallurgy industry - essentially metallurgy refers to science and technology of extracting, processing and application of metals and their alloys and it involves various aspects including extraction, processing, alloying, heat treatment etc., and is used in, inter alia, iron and steel production, aerospace, automotive mechanical devices. Thus, when the coke having metallurgical properties but of size less than 10mm, it is used for metallurgical purpose, like iron and steel making through sintering process, which is now accepted as better process to use all the waste and other undersized iron ore fines, dolomites, etc., and also cost effective and environment friendly. The notification has classified metallurgical coke under CTH 2704 00, which covers various types of coke and semi-coke including hard coke, soft coke, etc. Admittedly at 8-digit level, blast furnace coke or so-called metallurgical coke and breeze are under the same heading under ‘other’ category. If the notification refers to only 6-digit classification and not 8-digit, it essentially means all coke or semi-coke are of metallurgical nature, unless otherwise proved by its end use. The expression ‘metallurgical coke’ used in the N/N. 12/2012 (S.No.125) has to be understood in the sense that as long as product is coke and is used for metallurgical purpose, the exemption would be available - in this case, coke breeze has been used for metallurgical purpose only and not for any other purpose like non-metal extraction, etc. Thus, it would come under the expression of ‘metallurgical coke’. The ‘Chinese Coke Breeze’ imported by the appellant would be entitled to benefit of N/N.12/2012-Cus dt.17.03.2012. Further, since on merit itself they are entitled for the benefit under notification, confiscation and penalty would also not sustain - the impugned order is liable to be set aside - Apeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether imported 'coke breeze' qualifies as 'metallurgical coke' for purposes of exemption under the relevant Customs notification. 2. Whether the department's cross-application under section 129A(4) is maintainable where the department is not aggrieved by the adjudicating authority's order in any material respect. 3. What is the precedential value of an earlier Tribunal Bench decision adverse on the same question when a higher Court has observed the decision may not bind consideration in other proceedings. 4. The relevance and weight of (a) chemical examiner's laboratory report and application of BIS/technical standards, and (b) commercial/technical literature and end-use evidence, in construing the term 'metallurgical coke' in the notification. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Whether 'coke breeze' qualifies as 'metallurgical coke' for exemption Legal framework: Exemption is available only to goods falling within the expression 'metallurgical coke' as used in the notification; the notification contains no express definition of 'metallurgical coke' and must therefore be construed by reference to tariff language, technical literature, nomenclature, end-use and accepted industrial definitions. Precedent treatment: Coordinate Tribunal and departmental authorities have held metallurgical coke and coke breeze to be distinct; authorities cited by the parties support both strict nomenclature-based construction and end-use interpretation. Higher Court directions in a related appeal left substantive contentions open to be raised in an appropriate case, thereby not foreclosing merits consideration. Interpretation and reasoning: The Tribunal examined (a) laboratory reports and BIS/IUPAC/IAEA/Ministry of Steel glossaries and standards (IS 437/439/5451/3810 etc.), (b) chemical examiner's reliance on parameters (size, ash, volatile matter, strength), and (c) technical and commercial practice (size-based marketing nomenclature and sintering practice). The Tribunal found the chemical examiner and some standards equate 'metallurgical coke' with blast furnace/foundry coke by reference to particular parameter tables, but those standards primarily classify different types of industrial coke and specify size/quality ranges for various uses rather than supply an exhaustive legal definition of 'metallurgical coke.' The Tribunal accepted undisputed factual findings: coke breeze was not directly charged into the blast furnace but was used in sintering to produce sinter, which was then used in the blast furnace; breeze is a coke product (not coal) and shares chemical origin with larger coke fractions, differing principally in particle size. Ratio vs. Obiter: Ratio - where an exemption hinges on the expression 'metallurgical coke' without express definition, interpretation must include commercial and technical reality: coke used in a metallurgical process (including sintering that produces feed for blast furnace) falls within the scope of 'metallurgical coke' if end-use in metallurgical extraction is established. Obiter - detailed critique of particular laboratory parameter application to equate metallurgical coke only with blast furnace coke grades. Conclusion: Coke breeze, though undersized and not directly charged into the blast furnace, was used in a metallurgical operation (sintering) that produced sinter subsequently used in iron making in the blast furnace. Therefore, on the basis of end-use and industrial practice, coke breeze falls within the ambit of 'metallurgical coke' for the purposes of the exemption notification and is eligible for the claimed exemption. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Maintainability of the department's cross-application under section 129A(4) Legal framework: Section 129A(4) permits filing of a memorandum of cross-objections by the party against whom an appeal is preferred 'notwithstanding that he may not have appealed against such order or any part thereof' but only where the party is aggrieved by the order appealed against. Precedent treatment: Statutory text and practice require the party filing cross-objections to be aggrieved by some part of the decision; where no part of the order is adverse to the party filing cross-objections, the cross-application is not maintainable. Interpretation and reasoning: The cross-application here sought to uphold the impugned adjudication in toto even though the department had not been aggrieved by the adjudicating authority's limited disallowance of confiscation/redemption fine in respect of certain cleared goods. The Tribunal found from the Form CA-4 and conduct that the department was not aggrieved by the order and therefore had no proper ground under section 129A(4) to file cross-objections; however, grounds in the cross were permissible to be treated as counter-arguments under Tribunal procedure rules to the extent consistent with SCN/OIO. Ratio vs. Obiter: Ratio - cross-application under section 129A(4) is not maintainable if the filing party is not aggrieved by the impugned order; such cross-filings may be treated as infructuous though their grounds may be considered as counter-arguments under procedural rules. Conclusion: The department's cross-application is infructuous and not maintainable; its grounds may be considered only as counter-arguments consistent with the original SCN and OIO. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Precedential value of earlier Tribunal Bench decision Legal framework: A coordinate Bench decision is persuasive but not binding; an earlier Tribunal decision adverse to the appellant may be examined but is not binding when a higher Court has qualified its effect or left substantive issues open. Precedent treatment: The Tribunal noted the higher Court's order disposing of a related appeal on limitation grounds while expressly permitting contentions to be raised in other proceedings; that order precludes reliance on the earlier adverse Tribunal findings as binding in subsequent proceedings on the merits. Interpretation and reasoning: Given the higher Court's disposal leaving substantive contentions open, the present Bench is obliged to consider the appellant's contentions afresh on merits irrespective of the earlier Tribunal ruling. Ratio vs. Obiter: Ratio - an earlier Bench decision adverse to a party does not preclude fresh consideration where a superior court has left issues open for adjudication in subsequent appropriate proceedings. Conclusion: The earlier Tribunal Bench decision does not bind this adjudication; the issue must be decided on its merits here. ISSUE-WISE DETAILED ANALYSIS - Issue 4: Weight of laboratory reports, standards and end-use evidence in construing the notification Legal framework: Classification and eligibility for notification exemption depend on the meaning of tariff/notification language; where no statutory definition exists, technical standards, laboratory tests, commercial nomenclature and end-use evidence are relevant aids to interpretation. Notifications are to be construed with regard to their language but in light of commercial and technical reality; strict construction applies to fiscal statute but does not override clear end-use and industry practice evidence. Precedent treatment: Department relied on chemical examiner and IS standards to equate 'metallurgical coke' chiefly with blast furnace/foundry coke; appellant relied on technical reports (NISST, USITC), Ministry of Steel glossary and industry practice showing that coke breeze is a subset of metallurgical coke used in metallurgical processes (notably sintering) and shares origin/chemistry with other coke fractions. Interpretation and reasoning: The Tribunal found the chemical examiner's conclusion flawed by equating 'metallurgical coke' solely with blast furnace coke grades and by over-reliance on size/grade tables designed to classify diverse industrial cokes for marketing and specific uses. Laboratory parameters are relevant to characterize composition/quality but do not alone determine whether a product is a 'metallurgical coke' in the absence of an express statutory definition. End-use evidence (uncontested use in sintering producing sinter subsequently charged into the blast furnace), industry glossaries and international technical literature demonstrate that coke breeze is a coke product used in metallurgical operations and therefore falls within the genus of metallurgical coke despite its fine size. Ratio vs. Obiter: Ratio - laboratory reports and standards are important but must be applied correctly and in context; where exemption depends on the commodity description and end-use, industrial practice and end-use evidence can determine eligibility. Obiter - criticisms of specific laboratory methodology and particular standard provisions. Conclusion: Chemical examiner's report and standards cannot be the sole basis to exclude coke breeze from 'metallurgical coke' where end-use and technical literature show coke breeze is a coke product used in metallurgical operations (sintering ? blast furnace). Proper construction requires recognising coke breeze as a subset/species of metallurgical coke for notification purposes when established to be used in metallurgical extraction processes.