TaxTMI 
TaxTMI 
2015 (12) TMI 1389
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....ounsel ORDER Per P S Pruthi Revenue and M/s JSW Steel Ltd (appellant) have filed appeals C/85484/14 and C/85238/14 respectively against the same impugned Order dated 27.09.2013 passed by the Commissioner. Stay application has also been filed by Revenue against the impugned order. The appeals and stay are taken up together for decision. 1A. C/MA(ORS)/94269/2015 in appeal C/MA(ORS)/85238/14 is filed by the appellant seeking to place additional evidence on record under Rule 41 of the CESTAT Procedure Rules 1982. The MA has been filed on the ground that the cross examination of the Assistant Chemical Examiner who conducted the testing of samples was not allowed by the Commissioner. Therefore permission is sought to place on record the cross examination of the Chemical Examiners who conducted tests of samples of consignments which are not the subject matter of the present appeals. We note that generally one of the purposes of cross examination may be to verify whether samples are drawn and tested as per prescribed procedures. We allow the MA with the clear understanding that the documents now placed cannot be a basis for arriving at a decision in the present case before u....
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.... of import is Dec 2006 to Mar 2011. 3. The Appellant is engaged in the manufacture of Hot Rolled Coils, Sheets, Plates etc. falling under Chapter 72 of the Central Excise Tariff Act, 1985. It uses two different technologies viz. Blast furnace technology and Corex technology for manufacturing steel. The Appellant was the first company in India to adopt the Corex process, which is a newer and advanced technology for steel making vis-à-vis the conventional blast furnace route. In the latter method, iron ore, coke and other raw material are charged in the furnace for manufacture of steel whereas in the Corex furnace, coking coal with weak caking properties can be directly charged in the furnace without having to be first made into coke. By doing so, a steel manufacturer can do away with the need of first converting coking coal into coke in a coke oven, where hard coking coal (which is quite expensive) in admixture with soft/semi soft/weakly coking coal is used. The Appellant put up two Corex plants in 1998 and 2000 in its facility at Tornagullu. It also has two blast furnaces. It has been importing, as declared by them, soft/semi-soft/weakly coking coal for years, for use in ....
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....gical AG, Switzerland on the Appellant for the supply of semi-soft coking coal in bulk. 5. The adjudicating authority permitted cross examination of some of the witnesses whose statements were recorded in the course of the investigation, and also furnished at the Appellant's request, copies of the test results undertaken by the chemical examiner at the time of the import of the consignments in question in approximately 120 odd cases. He confirmed demand for Customs duty in respect of 21 consignments of coal wherein, on testing, the chemical examiner has found the CSN in respect of the same to be less than 1. Out of these 21 Bills of entry, 6 were shown as finally assessed in the SCN but Commissioner has, ex parte, determined them as provisionally assessed in the order. The demand in respect of the remaining consignments was dropped on the ground that the chemical examiner on testing, found that the CSN of the coals imported was 1 or more than 1 and that with effect from 1.3.2011, the exemption notification had itself introduced the criteria of 1 CSN by way of an explanation, which being clarificatory, was to be applied retrospectively. The adjudicating authority also gave re....
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...."Experience of Using 100% Imported Coal for Coke Making in Bhilai Steel Plant" (iii) Research paper published by the Steel Authority of India Ltd. which records that the blends with coals having CSN of 1 exhibited good coking behavior despite the poor coking nature of the coals. iv) CFRI newsletter of April-June 2004 observing that 5% to 10% soft coal can easily be blended with other high vitrinite coking coals and that the consumption of hard coals can be brought down to 35-38%. 8.4 The expression coking coal used in the exemption Notification is a genus and would cover within its ambit different species thereof such as prime/hard coking coal, semi-hard coking coal, medium coking coal, soft coking coal, semi-soft coking coal, weakly coking coal and PCI coal. Reliance was placed on the Ministry of Coal notifications defining Coals other than coking or semi-coking or weakly coking coals as non-cooking coals. The Coal Directory of India also contains the very same definitions of semi coking and weakly coking coal. Indian Standard :770-1977 for Classification and Codification of Indian Coals and Lignites lays down the tests and parameters for making classification more precis....
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....ed 29.5.2008 tabulates the CSN of the various coals, being used in the Corex process from the various mines, to be between 1 to 1.5 Further, on testing the chemical examiner had found the CSN to be 1 or more in the majority of the cases and had recorded that the coals imported by the Appellant were Coking Coal (Weakly coking/). 8.6 The exemption to coking coal was not linked to any particular end-use and that any coal which fulfilled the criteria of being a coking coal was eligible for the benefit of exemption. It is settled law laid down in the following judgments that where a notification contemplates an end use, the Central Government has to necessarily provide for a mechanism to monitor the said end-use. i) National Organic Chemical Indus. Ltd. v C.C., (Import) Mumbai 2000 (126) ELT 1072, affirmed by the Supreme Court in 2002 (142) ELT A280. ii) State of Haryana V. DalmiaDadri Cement Ltd. 2004 (178) ELT 13 (SC) iii) Commissioner of Customs, New Delhi V. Sameer Gehlot 2011 (263) ELT 129 (Tri.-Del) 8.7 Admittedly 115 out of 151 Bills of Entry were finally assessed after granting the exemption. It stands judicially settled that such finally asse....
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....c issue purposes, indicate that JSWSL were using 'Non Coking Coal' for production of hot metal in their COREX I & II Furnaces. The Coal Receipt registers of M/s. JSWSL als indicate receipt and use of Non-Coking Coal for Corex Furnaces. Shri Arvind Rajagopalan, G. M. (Commercial) in his statement admitted that business plans approved by the management Committee is the basis for procurement of Coals by M/s. JSWSL, that Web site of M/s JSWSL shows that Corex plant uses Non Coking Coal. File submitted (Raw material) contain details of coal fines generated and its consumption for the year 2006-07 to 2010-11. It also contains the details of sale of coal fines to JSWEL and others; coal fines generated during this period for use in other than Corex Furnace varied from 39.04% during 2006-07 to 52.73% during 2009-10 and 51.38% during 2010-11. Steel Ministry, Gov. of India website shows that M/s JSWSL are importing Non Coking Coal from Australia, South Africa and China for use in their Corex Operation. Website of the suppliers M/s Ensham Coal Sales Pvt. Ltd. M/s Total Group South Africa show different specifications for thermal coal and semi soft coking coal, Website of Total Group cl....
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....for inferior quality coal for use in their Corex Furnace apart from use of coal in coke oven batteries for ultimate use in Blast furnace; that they were regular suppliers of metallurgical coke to M/s. JSWSL. When asked specifically as to why CSN/FSI Number and MMR are not reflected in any of the quality certificates issued in respect of supplies to M/s. JSWSL for supply of coal termed as 'semi soft coking coal' and mentioned only Gross Calorific Value and other parameters which are suitable to steam coal, Shri Raju Rangachar stated that only the parameters required by M/s. JSWSL as per relevant contract were analyzed and certified. And that the similar type coal is being supplied to M/s. JSWEL as steaming (Non Coking) Coal/Steam Coal. That the invoices issued by their principal contained the description of goods as 'Coal in Bulk' whereas the invoice issued to JSWSL described the goods as 'Semi soft Coking Coal; that as per the contract, the price of the coal is determined based on AP14 index meant for thermal/steam coal used in the power generation. Shri Sandeep Bhargava, CEO of M/s. Rawmet Commodities Pvt. Ltd. stated that as regards the parameters/technical....
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....d hence the size of the coal is not much relevance, that as per Siemens VAI, the corex coals shall have the following properties Fixed carbon > 63% Ash < 8% Volatile matter < 27% Sulphur < 0.6% Size of Coal 6.3 mm to 50 mm Inherent moisture < 1% Gross Calorific Value > 7400 KCAL/KG (Air dried basis) About CSN number of coals used in Corex furnaces, he stated that as and user they are not bothered about CSN number as they knew that most them are more than one and less than three; that Corex Coals indicated as Non-Coking Coals in the business plans may be to avoid contamination/mixing Corex Coals with other coals. Shri Bhupinder Singh Khera, Associate Vice President (Raw Material Handling System) of JSWSL, Bellary stated the Coal fines of less than 6.3 mm size are not useful in Corex Furnace and the same are used in boilers for generation of Steam, power generation and for use as blend for coking coals for making of coke in Coke Ovens apart from Pulverized Coal injection (PCI) use; that the Coals imported for the purpose of Corex furnace have not been used at any ....
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....s coking coal. Adjudicating Authority has erred in holding that coking coal with lesser CSN value can be called as soft or weak or medium coking coal and coking coal with higher CSN can be called as prime coking coal. Adjudicating Authority has erred in holding that criteria of CSN dated in year 2011 can be applied retrospectively for classifying coal as coking coal or otherwise. 9.9 Hon'ble Apex Court in case of DCL Polyester vs C.C.EX Nagpur 2005 (181) ELT 190 (SC)has held that scope of entry in tariff is matter of law, however whether a product comes within an entry is a mixed question of law and fact. 9.10 The case of investigation is that nomenclature of 'semi soft coal, soft cooking coal, Corex coal, semi soft coking coal' was given by M/s JSWSL and its suppliers with an intention to evade payment of duty and goods imported by them are non coking/thermal coal. The process flow chart prepared by M/s. JSWSL contained the details of process flow of raw materials in the manufacture of hot metal through Corex Furnace process as well as through blast furnace. It showed that non-coking coal is directly fed into Corex furnace for manufacture of hot metal. As against....
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.... - 2009 (237) ELT 225 SC. 9.13 As per Entry No. 66A inserted in the amended Notification No. 31/2011-Cus dated 24.3.2011, 'Coking Coal' means coal having mean reflectance of more than 0.85 and swelling index number of more than 2. The notification was further amended to provide CSN of 1 or more than 1. The notification is conditional; two conditions are to be jointly satisfied. In the instance case noen of the test reports showed the mean reflectance (MMR) values. Therefore in none of these cases the condition of the notification is satisfied. 9.14 As regards the reliance by JSWSL on the judgment of Hon'ble Tribunal in the case of Commissioner of Customs Trichy Vs. JSWSL (supra), the facts are different from the instant case in which JSWSL suppressed the facts and made misstatement to fraudulently claim the benefit of exemption and they all along knew that non coking/steam coal was imported. 10. We have given very careful thought to the submissions made by both sides during extensive hearings in this case when the Ld Advocate and Ld Special Counsel took us through the details at length. We have, in paras above, tried to bring on record all the significant conte....
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....ication NO. 77/2011-Cus dt. 17.8.2011 [Amendment to Notification No. 21/2002] In the said notification, in the TABLE, - (i) S.No. 66A and the entries relating thereto shall be omitted. (ii) in S. No. 68, in column (3), in Explanation, for the figures and words "0.85 and Swelling Index or Crucible Swelling Number of more than 2" the figures and words "0.60 and Swelling Index or Crucible Swelling Number of more than 1" shall be substituted." 11. The first question we address is whether documents relied upon can be taken to reveal that the coal imported was not coking coal. Revenue has relied heavily on statutory documents like the balance sheet and the documents submitted to SEBI for public issue. Revenue has also relied upon the business plans of the company which indicate that the coal imported for Corex technology was non-coking coal. In our view though documents are indicative, the ultimate test would be the nature of the coal actually imported and not what is reflected in the business plan etc. If, in the ultimate analysis, what is imported is held to be coking coal actually imported and not what is reflected in the business plan etc. If, i....
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....ions such as CSN which have a bearing on the determination of the nature of coal imported. Suffice here to say that since the coals did have some coking property, documents such as business plans and balance sheet may not truly reflect the nature of coal imported in the context of the customs notification. 11.1 The other set of documents relied upon by Revenue are the MoUs/Contracts /Agreements with the suppliers of coal. Whereas these documents referred to purchase of coking coal for use in manufacture of Coke, the suppliers have not referred to the coal imported for Corex furnace as weakly coking coal/soft coking coal/semisoft coking coal/Corex coal in the main Contract/MoUs. And these contracts are similar to contracts entered into by JSWEL for purchase of steam/non-coking/thermal coals for use in generation of power. And the pricing for both contracts is based on thermal value which is a parameter for non-coking coal. But the suppliers' commercial invoices showed the coal sold for use in Corex furnace of the varieties namely weakly coking coal/soft coking coal/semisoft coking coal/Corex coal. The defence of the appellant is that the expressions soft/semisoft/weakly cokin....
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.... advocate that such coals imported belong to the genus of coking coals has merit. In our view, it cannot be said that there is no such thing as weakly coking coal. The absence of term coking in the Contracts does not rule out the import of weakly coking coal because the prices of weakly coking and steam coal could well be same. 11.3 The director of M/s Rawmet Commodities Pvt. Ltd. Shri Raju stated that the invoices issued by their Principals contained the description of goods as "open coal in bulk", whereas the invoices issued by them contained the description of goods as semi soft coking coal. Further that the CSN number and MMR are not reflected in the quality certificates issued in respect of supplies to JSWSL as per the business transaction and requirement of the customer. From this we gather that there is no misrepresentation as such. The description given by the Principals is coal. It cannot be concluded that the coal supplied was not semi soft coking coal. The fact remains that, as also stated by Shri Raju, the company had requirement for inferior quality coal for use in their Corex furnace. Therefore in our view it cannot be held that the coal supplied was not semisoft c....
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.... find the stand of Revenue not sustainable. Further the Coal Directory only mentions the ash content of such coals which implies that such weakly coking coals can be described in trade parlance/documents without specifically giving the CSN no. 12. It appears to us that the main stand of Revenue is that the Corex technology does not require coking coal and the weakly coking coal said to be imported cannot get the benefit of the exemption. The question that arises is whether weakly coking coal which was imported can be used so for making coke when blended with other coal. It is conceded that the Corex technology uses 15 - 20% Coke and 80 - 85% non-coking coal. Revenue has relied on contracts for Sale for coking coal which contain CSN whereas the contracts for soft coking coal / Corex coal executed by JSWSL do not contain such parameters but are based on thermal value similar to the contracts of JSWSL for purchase of steam / thermal coal. To address this issue, we have to see whether such coal imported for Corex technology could be termed as soft coking/ weakly coking coal. We note that during the course of investigations, the hard disk of Shri Arvind Rajagopalan had been seized an....
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....culties. With its 56 years of experiencing coke making, DSP coke plant managed the situation reasonably well by deploying various combinations of imported hard coal from Australia, USA and New Zealand and soft coal from Australia and New Zealand. Thus an unprecedented opportunity was available to us to experiment with what we had at hand." This indicates the usability of soft coal in coke making, vindicating the stand of the appellant. Revenue has not shown any technical reading to dispute this stand. 12.3 Another technical reference presented by the appellant is the extract from the book "Elements of Fuels, Furnaces and Refractories" by Om Prakash Gupta in which the coking coal classification systems in USA Australia and Japan are given. Although the classification indicates various parameters, the parameter of CSN shows that in Japan the CSN of semi-coking coal is 1 to 2 and of medium coking coal is 2.5 to 4. The present case seems to be entirely built around documents such as the Contracts describing the coal imported either just as coal or as non-coking coal. But the evidence in the form of tests conducted by the Customs Chemical Laboratory in majority of cases indicated the....
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....d that the blends with coals having CSN of one showed good coking potential. 12.5 The above literature submitted by the appellant goes to show that weakly coking coal can be used in blending and has coking potential and deserves to be treated as coking coal within the contours of the exemption notification. We find ourselves unable to agree with Revenue's stand. 13. We now look into the depositions of various persons. The Regional Manager (Marketing) Mr Vineet Kohli stand that the brand name of coal sold is annotated with the description of the coals. For instance Illawara Hard Coking coal, riverside Coking coal, Blackwater Weak Coking Coal, Black Water Soft coking Coal; that such annotation or any other reference to the coal as 'hard' soft, semi soft' or weak coal is merely a business description of such coals as is understood in general marketing parlance and developed over the decades by buyers and sellers in the international markets and is merely indicative and not determinative of the technical quality or specification of the coal; that Optimum coal being one such coal whose intrinsic geological properties can find application in metallurgical as well as....
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.... application and accordingly the suppliers of coals are furnishing their commercial invoices and other documents. We find that statements generally reveal that the coal imported is usable in blending of Coal/fines with Coking Coal for coke making; that Soft Coking/Semi Soft Coking Coal is one type of coking coal having less coking properties (Statement of Raju Rangachar). Notwithstanding this contention of the appellant, the fact remains that the exemption to coking is not linked to any end-use condition. Even the amendment of notification 21/2002 by notification 77/2011-Cus dated 17-08-2011 did not prescribe end-use condition. The appellant have rightly relied on judgements which lay down the law that wherever end use is contemplated, the notification necessarily has to provide a mechanism for the same. Reliance is also placed on the Supreme Court judgement in the case of State of Haryana vs Dalmia Dadri Cement Ltd 1998 (14) ECR 292 (SC) holding that "10...We are unable to accept the submission of Mr. Bana that, in order to get the exemption it must be shown that the goods in question, namely, the cement supplied by the assessee in this case was actually used in the ge....
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....ng coal/thermal coal is imported for use in boilers for power generation; further that except the usage of coal there is no difference between the steam coal/thermal coal and soft coking/semi soft coking coal; that the nomenclature of the coal is based on the end use application and accordingly the suppliers of coals are furnishing their commercial invoices and other documents. The defence of the appellant is that in the price of coal in the contracts with IMR metallurgical which was linked to the API-4 index, there was a specific markup on the basic price and the coking coal price was higher than that of the thermal coal. Argument of Special counsel is that the price difference between coking coal and thermal coal should be much higher in any case. Learned Special Counsel also drew attention to the fact that the coal was supplied to the appellant and steam non-coking coal supplied to JSWEL at the same price. The response of Ld advocate is that this is only one solitary instance. And that no evidence has been shown that the coal supplied was from the same source or the dates of contracting were the same; therefore the comparison is untenable. Reliance was placed by Ld Advocate on t....
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....erve that the Chemical Examiner in coming to the conclusion that it is weakly coking has not stated the specific parameters on basis of which he has come to this conclusion because the parameters tested apart from CSN also include Moisture, Ash, VM and Agglomerating property. The MMR has not been tested. It appears that the basis is CSN because wherever the CSN is less than 1, he has concluded the coal to be non-coking. The opinion of the Customs Chemical Examiner cannot be simply wished away without any substantial evidence to the contrary. The fact is that he has tested the coal to be weakly coking. Therefore we reject the appeal of the Department that the Commissioner dropped demands wrongly. Tribunal in the appellants' own case Commissioner of Customs vs JSW Steel Ltd 2012 (284) ELT 680 (Tri-Chennai) held that in order to be eligible for the exemption, the criteria is not the actual use of the coking coal in Coke making but its suitability for such use. We find similar facts in that case. The allegation there was that the contract with the supplier namely CC Carbon Pvt Ltd Singapore was only for supply of "Jellinbah PCI coal" and not for supply of coking coal whereas the....
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....tion 21/2001-Customs Dated 01.03.2002), while imports of non-coking coal attracted 5%. As coking coal was not defined in the notification, disputes arose as to the scope of coking coal, leading to large number of provisional assessments in the Custom Houses. In order to mitigate these disputes and after consultation with the Ministry of Coal, Ministry of Mines as well as Ministry of Steel, while retaining the exemption for coking coal, a definition of coking coal was provided in the Budget 2011-12, whereby coking coal was defined to mean "coal having mean reflectance of more than 0.85 and Swelling Index or Crucible Swelling Number of more than 2" (Sl. No. 68 of Notification No. 21/2002-Customs ibid). (ii) On getting further representation from the domestic steel industry that manufacturers using Corex, Fines & PCI fuel injection technology could not avail of the benefit of exemption since they use certain 'weak' varieties of coking coal (having lower technical specifications compared to those prescribed), a separate entry was created during post-budget stage of 2011-12 to grant full exemption from basic customs duty to Coal having Swelling index or Crucible Swellin....
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....ions of the impugned Order in this regard are reproduced below: 17.1.11.....M/s JSW Steel Limited as to whether the coals used by their company in Corex Furnace falls under the category of 'Coking Coal' or not, Shri Dasu after perusing the definition of 'Coking Coal' in McGraw-Hill Dictionary of Scientific and Technical Terms, stated that he has gone through the McGraw-Hill Dictionary of Scientific and Technical Terms and appended his dated signature on the same in token having perused the same; that the above dictionary contained the two different words and they are 'Coking' and 'Coking Coal'; that as per the dictionary, 'Coking Coal' means the coal a very soft Bituminous Coal suitable for Coking; that as per the dictionary, 'Coking' means destructive distillation of Coal to make Coke; that from the above definition of Coking coal, coal used in manufacture of coke in Coke Ovens is called as Coking Coal; that in terms of the above definition also gies meaning of all coals which can form coke irrespective of the coke strength produced from the coal and other value can be termed as coking coals including the coals which use in ....
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.... coal; that however, the coals imported by their company for use in Corex Furnace are suitable for blending with prime coking coal but not directly suitable for coke making; that hence the coals used in Corex Furnace can also be called as weak coking coals..." The statements reflect that what was imported was coking coal even without placing reliance on technical parameters. Without basing our decision only on the parameters, we find that in the present case there was neither any restriction in the statute based on technical characteristics (other than ash content) nor any intention to deny the exemption ostensibly to weakly coking/soft coking/mildly coking coals during the period in dispute. Therefore the benefit of the exemption would be available. 15. We have held, in respect of the demands dropped by the Commissioner, that the coal imported by the appellant which is soft coking coal or mildly coking coal will get the benefit of notification which grants exemption to coking coal. As regards the 21 bills of entry in respect of which the demand has been confirmed by the Commissioner on the basis that the CSN was found to be between 0 and 0.5, the contention of the learned ad....