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2014 (8) TMI 246
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....I had sought to know whether either party had any objection to this Bench to hear the appeal (I and me refer to Member (Technical) wherever used). After ascertaining that both parties had no objection and at the request of both the sides, the Bench proceeded to hear the appeal. An Incidence has been cited wherein the Hon'ble Chief Justice of Supreme Court had recused himself on the advice of senior counsel Shri F.S. Nariman who was present in the Court. R.2. We find that the letter is based on incorrect information. It was not mentioned that the matter had been discussed with me by the Revenue. What was mentioned was that, I had heard about the issue and I had also heard that even one of the importers had informed the investigating officers that importers also are in agreement with the view taken by the Revenue about classification. This was a casual conversation, heard by me and there was no application of mind on the issue and I had no occasion to discuss or study the issue at all thereafter. Even though it was a casual conversation heard by me in the middle of a group of officers, yet I had offered to recuse since it has always been our endeavour to be not only fair but als....
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....y in their letter about future consequences and the fact remains that even the basis for the request for recusal is imaginary. R.6. In the letter it has been repeatedly said that they have no misgivings regarding the integrity or impartiality of the Bench but are only trying to prevent anyone from contending that the Hon'ble Bench ought not to have heard the matter. We do not find any justification for this apprehension or submission. R.7. Moreover, the recusal instance in the case of the then Hon'ble Chief Justice is not comparable since according to the news item enclosed to the company's letter, Justice Kapadia had declared that he and his wife investments in shares had a market value of Rs. 41 lakhs which in the Indian context, may not be considered a small amount. Moreover having interest in one of the private parties in dispute is entirely different from a casual conversation between officers not followed by a discussion about the issue nor considered in greater depth and cannot be compared with the case wherein there was a pecuniary interest. R.8 The Hon'ble Supreme Court in the case of Subarea Roy Sahara Vs UOI & ors. in the decision rendered on 06/05/201....
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....he High Court of Delhi, seeking the recusal of Mr. Justice Manmohan Sarin from hearing his personal case. Mr. Justice Manmohan Sarin while declining the request made by Mr. R.K. Anand, observed as under: "The path of recusal is very often a convenient and a soft option. This is especially so since a Judge really has no vested interest in doing a particular matter. However, the oath of office taken under Article 219 of the Constitution of India enjoins the Judge to duly and faithfully and to the best of his knowledge and judgment, perform the duties of office without fear or favour, affection or ill will while upholding the constitution and the laws. In a case, where unfounded and motivated allegations of bias are sought to be made with a view of forum hunting / Bench preference or brow-beating the Court, then, succumbing to such a pressure would tantamount to not fulfilling the oath of office." The above determination of the High Court of Delhi was assailed before this Court in R.K. Anand v. Delhi High Court, (2009) 8 SCC 106. The determination of the High Court whereby Mr. Justice Manmohan Sarin declined to withdraw from the hearing of the c....
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....beneficiary would be Government of India and no other individual which is another aspect considered to hold that certainly no substance in the aspersion cast by the learned counsel. In this case it is not even true that the matter was discussed and it was not even mentioned that the matter was discussed and there is absolutely no ground to take a view that even Government would benefit. Unlike the case before the Hon'ble Supreme Court where a decision had already been given and after the decision Hon'ble Supreme Court was compelling Mr. Subrata Roy Sahara to make the payments by ordering detention, in this case, we had not even heard the matter and only it is an apprehension on the part of the company which is yet to file an appeal before us and which was not even represented by anybody and which is not even making mention of the preliminary discussion in this regard we had which has been referred in the order referred to explaining why the final order is being passed even though stay applications were listed. We consider that it would be totally unfair and unethical on our part to refrain from pronouncing the order after spending considerable time in the order for which we....
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....lear that there was no discussion about the case with anyone leave alone Revenue officers before hearing. R.18. In view of the above observations, the request made by the company for recusal is rejected and we proceed to decide the matter before us in accordance with law. 1. In all these appeals, the issue involved is common and in all the cases only stay applications have been listed for hearing. The hearing first started in the case of M/s. Coastal Energy Pvt. Ltd. on 22/05/2014. On that date after matter was heard for some time, learned sr. counsel for the appellant sought adjournment and accordingly the matter was adjourned to 27/05/2014. On 27/05/2014, there was a request made by the AR for the Revenue that the Department would like to appoint Special Consultant and therefore the matter may be adjourned. As per the request made by him and as per the date sought by him with the consent of other side, the matter was fixed for hearing on 03/06/2014. On 03/06/2014, when the matter came up for hearing, both the sides were asked whether hearing should be proceeded at all since according to both the sides, matter had been heard in Ahmedabad for waiver of pre-deposit and grant of st....
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....r copy to the defence counsels also. On the part of the defence, it was submitted that they would submit their submissions if any on 10/06/2014. Accordingly on 09/06/2014, the written submissions of special consultant were received and submissions from the counsel for M/s. Coastal Energy were also received on 10/06/2014. 5. Shri V. Sridharan, learned sr. counsel, assisted by Shri G. Shivadass, advocate, on behalf of M/s. Costal Energy Pvt. Ltd., took us through the history of taxation in respect of coal on the first day and since this gives a background of the classification as well as duty structure in a broad manner, we consider it appropriate that the same should be briefly covered. There was no definition of different types of coal in British Tariff Nomenclature which was being followed all over the world prior to introduction of HSN. After the introduction of HSN, India followed the same in 1986. Also the world pattern of levy on coal continued. Certainly from 1994 onwards, there were two rates for coal. One rate was for coking coal and another for all types of other coals. This continued till 2011 when the present structure was introduced. The learned counsel sought our atte....
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....ided to the following fuels for power generation: * Natural Gas and Uquified Natural Gas; and * Uranium concentrate, Sintered Uranium Dioxide in natural and pellet form. Learned counsel submitted that this shows that the intention was to give relief to domestic power producers who are using steam coal and other fuels specified in the speech. In the budget 2013, the Hon'ble Finance Minister said as follows:- 166. Steam coal is exempt from customs duty but attracts a concessional CVD of one percent. Bituminous coal attracts a duty of 5 per cent and CVD of 6 per cent. Since both kinds of coal are used in thermal power stations, there is rampant misclassification. I propose to equalize the duties on both kinds of coal and levy 2 per cent customs duty and two per cent CVD. 8. Learned sr. counsel dealt with these two paragraphs and argued that from the observation of the Hon'ble Finance Minister what emerges is that the intention of the Government was to give relief to the power producers. However even though intention becomes quite clear, what emerges from the speech ....
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....was no dispute at all in the history of taxation of coal about steam coal. It was also submitted that the appellants M/s. Coastal Energy Pvt. Ltd. had been importing coal at least for the past 10 years and all through, they have been describing the coal as steam coal and the same was assessed as steam coal and no questions were asked. In view of the fact that throughout the period, coal was being assessed as steam coal and there was no dispute about classification and description etc, suddenly just because there was a differential rate of duty prescribed for steam coal, it was not appropriate for the Revenue to take a view that the coal imported by the appellants is bituminous coal only to deny the exemption which they entirely deserved since what they were importing earlier was steam coal and what they imported now is also steam coal. 10. In our opinion, we cannot go by the history of taxation and we also cannot go by the trade parlance especially when a product is defined in the tariff. In fact, the learned sr. counsel fairly admitted that a statutory definition overrules trade parlance. Nevertheless, it was his submission that this case stands on a different footing and he woul....
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....; also used in other industries of metal production. Anthracite is the least common and most expensive of the coals. It has some unique features: * the capacity, for instance, for a smokeless fire; * used for specific purposes. 13. On the basis of technical literature and various authoritative books, it was submitted that all coals of a quality that allows production of coke suitable to be used as a blast furnace charge is known as coking coal. Steam coal is a coal which is suitable for use in power generation and generation of steam. The basis of the two classifications are that one is based on metamorphism and other is based on end use. Therefore it is submitted that the two are not mutually exclusive and there is certain amount of overlapping between the two. 14. While there is a statutory definition of 'bituminous coal', there is no such definition for coking coal or steam coal. Since there is no statutory definition for steam coal or coking coal, the meanings accepted in trade parlance alone may be applied. 15. The main requisite for a coal to be suitable for the manufacture of coke is no ash conten....
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....glomerated 2701 20 90 Other 17. In this regard, we would be failing in our duty if we failed to record our appreciation for the clarity brought about by the learned special consultant as regards the meaning of '-, --, ---, ----', Rules of Interpretation and meaning of heading, sub-heading etc. After he explained the procedure for classification and the logic in classification, issue became clearer than what they were. Before we proceed further we would explain his submissions as they were understood by us during the hearing as regards classification of the goods and while doing so, we would also consider the submission of the learned senior counsel that a definition is always subject to the context to the contrary whether so stated in the definition or otherwise. 18. First of all it would be appropriate to reproduce the sub-heading note (2) which is the main cause for the dispute in this case. "For the purposes of sub-heading 2701 12, "bituminous coal" means coal having a volatile matter limit (on a dry, mineral-matter-free basis) exceeding 14% and a calorific value limit (on a moist, mineral-matter-free basis) equal to or greater than 583....
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.... tariff provisions accompanying eight-digit number and the rate of customs duty. Above additional notes make it clear that the comparable items have to be identified by the number of digits accompanying the headings. It was submitted by the special consultant for Revenue that the number of digits and the dashes invariably tally and follow a pattern and the principles to be applied to headings, sub-headings and tariff items are taken note of and kept in mind while providing the number of digits. Even though he explained the logic behind the number of dashes behind each headings and the difference between heading, sub-heading and tariff item with illustration, we do not consider it necessary to go into the same except stating what exactly is understood with regard to the dispute before us in this case. 21. The submissions of the learned special consultant for Revenue leads us to the conclusion that in this case we have to treat Anthracite, Bituminous coal and other coal as equal sub-headings in view of the fact that the last two digits of 'Anthracite' and 'Bituminous coal' 2701 11 and 2701 12 are '00' and 2701 19 covering 'other coal' stand on the same footing and h....
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.... be applied. It was the submission that in this case the head notes need not be applied on behalf of the appellants. 24. We have already reproduced the sub-heading notes above. In the light of the above, we have to examine how the classification of the product has to be approached and what would be the result thereafter. 25. Coal has been first of all classified under the respective sub-headings (6 digits) depending upon whether the same is classified as 'Anthracite', 'Bituminous' or 'Other coal' which fall respectively under sub-headings 2701 11, 2701 12 or 2701 19. 26. To classify the imported coal under the correct sub-headings we have to look at the tariff description and sub-heading notes 1 & 2 of chapter 27. The sub-heading notes provided definitions of the expressions 'Anthracite' and the 'Bituminous' in technical terms. For the expression 'other coal' respective entry has not been defined. 27. In terms of sub-heading Note No. 2 of Chapter 27, for the purpose of 2701 12, "bituminous coal" means coal having volatile matter limit (on a dry, mineral-matter-free basis) exceeding 14% and a calorific value limit (on a moist, mineral matter free basis) e....
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....riding force on the respective headings and are therefore relevant in the matter of classification of goods under the Customs Tariff; that these section notes and chapter notes sometimes expand and sometimes restrict the scope of certain headings; that Rule-1 ibid gives primacy to the section notes and chapter notes along with terms of the headings and therefore they should be first applied for determining correct classification of goods; that if neither the heading nor section-notes or chapter-notes suffice to clarify the scope of a heading and if no clear picture emerges then only can one resort to the subsequent provisions of the GI Rules. From the above, it can be deduced that imported coal meeting the following two specific parameters of bituminous coal mentioned in sub-heading note (2) of Chapter 27: (i) volatile matter limit (on a dry, mineral-matter-free basis) should exceed 14% and (II) calorific value limit (on a moist, mineral-matter-free basis) should be equal to or greater than 5,833 kcal/kg has to be necessarily classified under heading 2701 12. Accordingly, at the eight digit level, goods covered in the present appeals should be reclassified under....
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....statute or series of statutes relating to the subject matter. It is spoken of construction "ex visceribus actus". "It is the most natural and genuine exposition of a statute", laid down Lord Coke "to construe one part of a statute by another part of the same statute, for that best expresseth the meaning of the makers." To ascertain the meaning of a clause in a statute the court must look at the whole statue, at what precedes and at what succeeds and not merely at the clause itself, and, "the method of construing statutes that I prefer". Singha C.J observed "the court must ascertain the Intention of the legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with the other parts of the law, and the setting in which the clause to be interpreted occur." 36. On the basis of the above submissions it was argued that to ascertain the meaning of expression 'other coal' appearing in sub-heading 2701 19, the Revenue is considering coking coal and steam coal figuring under the 'other' category. According to the appellants this is a classic example of not reading various portions of an enactment together bu....
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.... that there can be coking coal of non-agglomerating quality is without any material and contrary to all technical literature produced by the appellants. According to the definition of International Energy Association (IEA) for coking coal, cited by the appellants in page 519 of Volume VI, coking coal is bituminous coal with a quality that allows the production of coke. Its GCV is greater than 5700 kcal/kg and lesser than 5833 kcal/kg on an ash-free but moist basis. Determination of GCV of coal based on an ash-free but moist basis and mineral matter free basis would depend upon ash and sulphur contents in the coal. 39. Learned special consultant referred to worksheet submitted by the appellant, according to which Calorific Value (Kcal/Kg) of 5829 on moist, mineral matter free (m,mmf) basis was equivalent to 5709 kcal/kg on moist, ash-free (maf) basis. This sample satisfies GCV parameters given by IEA for bituminous coking coal but under Customs Tariff, it would be classified under 'other coal' as GCV (m,mmf) was 5829 kcal/kg. This being coking coal as per the worksheet furnished by learned counsel, the sample would be meriting classification as 'coking coal' if it is agglom....
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....g coal and range of GCV and have come to the conclusion that the coal having GCV of 10500 Btu to 11500 Btu can be either agglomerating or non-agglomerating. 45. Another submission that was made and required to be examined is regarding the clause "unless the context otherwise requires" and it was submitted that in this case, 'context requires otherwise' and therefore, sub-heading notes should not be considered when it comes to classification of coking coal and steam coal. It was submitted that in view of the fact that coking coal and steam coal and bituminous coal can be classified as either of the two, it would be appropriate to first eliminate coking coal entry and steam coal entry and only when coal is not classifiable under both, the same is to be classified as 'bituminous coal'. It was submitted that only then the correct classification would have been made. 46. A point which was argued vehemently is the fact that by classifying steam coal or coking coal imported by the appellants as bituminous coal, the legislative intent of providing exemption of the coal used by power industry is defeated. Moreover, it was also submitted that a heading cannot be made redundant. In ....
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.... as being argued herein. Ambiguity arose because the definition of primary forms did not specify 'sheets' as one of the primary forms, though it was an admitted fact that in the context of vulcanized fibre, sheet form was one of the primary forms. The decision was rendered in the context of Central Excise Tariff, which was adopted from the HSN. The scope of the heading note was expanded taking note of the facts peculiar to the case. It did not do any violence to the Note. More significantly, with reference to the products viz. steam coal, forming the subject matter of the present appeals, sub-heading note (2) is not at all ambiguous since the same could fall either under 270112 or 270119 based on the GCV (m, mmf). 48. The next submission made was that notification benefit should not be denied. For a quite long time, steam coal being imported and traded by name only. In fact, coal mines in Indonesia and South Africa are known as steam coal mines. In this case, the intention was to examine steam coal imported by trader and by classifying the coal as bituminous coal, the intention of the notification has been defeated. We have already dealt with the Speech of the Finance Minister....
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....Once classification is determined as bituminous coal, the heading in the notification for the item to be exempted does not get covered at all because either tariff heading or description or both do not tally with the classification of the goods. Once the exercise of classification is completed, interpretation of the notification has to be on that basis and a notification cannot be interpreted independently unless there are specific situations exist which we have found in this case not to be in existence. 52. Learned sr. counsel also submitted that an interpretation beneficial to the importer has to be adopted. He drew our attention to the letter written by the Power Ministry to the Finance Ministry in this regard. The Power Ministry supported the case of the appellants. On the basis of the correspondence, no benefit can be extended nor intention of the Revenue can be arrived at. 53. Learned sr. counsel relied upon the decision in the case of Raymond Ltd. Vs. Union of India [2009 (240) E.L. T. 180 (Bom.)] to submit that legislative intention has to be taken into account. He relied upon the observations in paragraphs 54, 56 & 58. The observations were made with regard to exemption ....
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....VD becomes liable when the product arises because of manufacturing or production activity. He relied on the decision In the case of Commissioner of C. Ex. & Cus., Bhubaneswar-I vs. Tata Iron and Steel Co. Ltd. [2003 (154) E.L.T. 343 (S.C.)]. He submitted that in this case, even though this decision was rendered in the context of Sections 6 & 7 of the Coal Mines Act, 1974, this decision is applicable to the facts of this case also. He submitted that in that case, the Hon'ble Supreme Court took a view that no liability for a Central Excise duty on coal arise from coal mines is leviable and therefore, no question of additional customs duty equivalent to excise duty leviable under the Coal Mines Act. 57. Learned special consultant of Revenue submitted that this is not correct and the decision in the case of Tata Iron Steel Co. Ltd. (TISCO) cannot be applied to the facts of this case. Hon'ble Supreme Court in the decision in the case of TISCO (supra) took note of the fact that additional customs duty is leviable as provided under Section 3 of the Customs Tariff Act on the imported coking coal. After taking note of the fact that there was no dispute on the levy on basic customs ....
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....and "on all coke manufactured and dispatched", which would mean that coke is manufactured while coal is only raised. Hon'ble Supreme Court interpreted the words 'coal is raised and dispatched' and did not go into the question as to what are the processes undertaken in the coal mines. The Hon'ble Supreme Court also did not go into the question as to whether additional customs duty leviable as equal to the duty leviable under Central Excise Tariff is leviable or not. 58. We find substantial force in the arguments made by learned special counsel for Revenue which are as under : "(1) Both domestic coal and imported coal available in the market undergo substantial transformation form the stage of mining. Apart from leaning, washing, sorting, grading, preparation of coal of right sizes for further use is undertaken. The case of asbestos fibre, the subject matter in the case of Hyderabad Industries Ltd., is therefore not comparable. Coal in the marketable form has, thus, undergone production/manufacture as defined under the CEA, 1944. There is no case law directly on the aspect of excisability of coal under CEA, 1944. No dispute has been raised in respect ....
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....ven if we assume that bituminous coal when it is sold as bituminous coal itself also is crushed, sized and graded, the processes amount to manufacture since what is extracted will be coal ore and what emerges is specific category of coal which marketable and sold. Ore which is extracted in bulk and in large size may not be straightaway marketable unless quality parameters are verified, washed, crushed, graded in to size, etc. therefore, the decision in the case of TISCO (supra) and Hyderabad Industries Ltd. Vs. UOI [1999 (108) E.L.T. 321 (S.C.) relied upon by learned sr. counsel are not applicable to the facts of this case. We are not dealing with other three cases mentioned since we consider that the consideration of these cases is adequate to come to the conclusion. 60. The next submission made by learned sr. counsel was that even if CVD was held to be liable, benefit of Notification No. 12/2012-CE (Sl. No. 67) is available to them and this notification extends benefit of 1% concessional excise duty subject to the condition of not taking credit of input and inputs service. It was submitted in respect of the imported coal, no credit of Cenvat on inputs and input services were tak....
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....ufacturer at all to take Cenvat credit. 63. Learned special consultant for Revenue submitted that condition in the notification has been deliberately worded so that benefit would accrue only to the domestic coal manufacturer vis-a-vis importer of coal. Eligibility to credit under Rule 3 or Rule 13 of Cenvat Credit Rules, 2004, in respect of the inputs / input services used for manufacture of goods is available only when the goods are manufactured in India. He submitted that CVD of 6% is payable if an Indian manufacturer is not able to show that he has not availed any Cenvat credit. He submitted that on the same analogy, an importer of coal would be required to pay CVD at the rate of 6% unless he shows that Cenvat credit has not been availed. He also submitted that 6% duty is applicable because on the coal imported, duty under Section 3 of the central Excise Act is additional customs duty under Section 3 of Customs Tariff Act and is not on the inputs used in the manufacture of coal. However, even though this submission looks natural and looks very attractive, the Tribunal decisions cited by learned counsel for the appellant have not exactly agreed with this submission. The view tak....
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.... Revenue also relied upon the decision in the case of Motiram Toltaram vs. Union of India [1999 (112) E.L.T. 749 (S.C.)] . The relevant paragraphs 2, 3, 11 & 12 relied upon by learned special consultant are reproduced below:- "2. The appellants imported consignments of polyvinyl alcohol on which additional duty under Section 3 of the Customs Tariff Act was sought to be imposed. The contention of the appellants before the authorities was that polyvinyl alcohol when manufactured in India from Vinyl acetate monomer, on which appropriate amount of duty has been paid, is subjected to a concessional rate of excise duty of 10% ad valorem , instead of the normal duty of 40%, and, therefore, the appellants should also be required to pay the additional duty at this reduced rate. 3. When the case came up for hearing before the CEGAT, it came to the conclusion that the appellants were not entitled to the benefit of the notification whereby reduced rate of duty could be paid. It was held by the Tribunal that Excise Notification of Exemption could not apply while determining the duty payable under Section 3 of the Customs Tariff Act. One other reason given....
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....1997 (94) E.L.T. 460 (S.C.) = 1997 (7) SCC 47] and the appellants would be entitled to the benefit of the Notification in question. We are unable to agree with this contention. Vinyl acetate monomer is an Item which is manufactured in India and a rate of excise duty is leviable thereon. On the polyvinyl alcohol which has been imported, vinyl acetate monomer has not been subjected to the appropriate amount of duty payable under the Indian law. It is only if this payment had been made that the Notification No. 185 of 1983 would have been applicable. Appropriate amount of duty would mean the duty payable under the Central Excises and Salt Act or under the Customs Tariff Act. Because this condition had not been satisfied in the present case, therefore, the appellants are unable to get the benefit of the said Notification." The above decision was submitted as not applicable by the appellants on the ground that the decision in the case of Motiram Tolaram dealt with the condition that duty payment of inputs was only condition to be fulfilled for availment of benefit of exemption. In the present case, the condition is relating to not taking credit on inputs and input service and not relat....
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....istics would definitely not fall under bituminous coal and in such situations steam coal is classified as steam coal and not as bituminous coal. In this regard, we had already mentioned and referred to the submission by the special consultant that in Vishakhapatnam, in respect of 533 Bills of Entry leading to the issue, in respect of 133 Bills of Entry no demand was raised since Department accepted that the coal imported was steam coal and not bituminous coal. 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 fulfills 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 fulfills the definition as given in the tariff and if in trade parlance the product has another name, that coul....
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.... Maruthi Ispat & Energy Pvt. Ltd., He relied on the test report submitted to submit that all the test reports, the data in respect of volatile matter and gross calorific value and as received basis has been taken. It was his submission that Department has not cited the standards prescribed for steam coal that certificate of sampling received from the overseas supplier could be compared with such standards. We have already dealt with this issue when we were dealing with the classification issue and therefore we do not consider it necessary to deal with the same. 74. As regards the submission that when chapter note refers only to the particular calorific value limit, how the Department has adopted gross calorific value, the determination of calorific value is according to the standard literature. Further detailed arguments were also pressed as regards the tests conducted and whether it should be as determined basis or as received basis. The objection was that if the Department conducts the test on the basis of ADB (As Determined Basis) instead of ARB (As Received Basis), it would represent the samples of imported coal with its natural and inherent moisture level. However, in all the....