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2023 (7) TMI 447
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....re are three preliminary aspects, all legal, that may be relegated to insignificance only at the cost of erroneous perspective of the controversy itself. 2. The first of these stems from the structuring of the First Schedule to Customs Tariff Act, 1975, with international consensus of enumeration at the 'four digit' and 'six digit' level - referred to as 'heading' and 'sub-heading' - leaving further inclusions at the 'eight digit' level, referred to as 'tariff item', for national determination, and, more particularly, the overarching governance of the General Interpretative Rules to the Import Tariff in identifying the most apt tariff item therein. That hierarchical ordering of articles brooks no variation and, in the scheme of design, goods under import must correspond, or as nearly as possible, to the descriptions at each level before such at the next subordinate level. It may not be out of place to also take note of the foundation statement, viz, '1. The titles of Sections, Chapters and sub-chapters are provided for ease of reference only; classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, pr....
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.... the relative vagueness of the description corresponding to the tariff item that customs authorities preferred. We are unable to concede to this line of argument as the elongation of the codes, to afford uniformity on transition to 'eight digit' enumeration, by The Customs Tariff (Amendment) Ordinance, 2003 with effect from 1st February 2003 and so convenienced the proposition of the appellant, contrived 'sub-heading' descriptions, if only for want of progeny descriptions at the 'tariff item' level attributable to policy disinclination of the national administration, to be fastened thus; that, however, does not detract from its primal assignment as a 'subheading' amenable to comparison only with any other 'sub-heading' under the same heading in the First Schedule to Customs Tariff Act, 1975. For our conclusion thus, we rely upon the General Explanatory Notes in the Customs Tariff Act, 1975, for elucidation of the architecture of the listing, making it abundantly clear that the descent of '---' / '----' from '-' lies inevitably only through '--' in the classification hierarchy. The decisions cited in support of this proposition of the appellant have not been rendered in similar cont....
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....edule to Customs Tariff Act, 1975 and claiming effective rate of duty extended by notification no. 12/2012Cus dated 17th March 2012 (at sl. no. 123). Along with the declaration, 'certificate of sampling and analysis (CoSA)' from load port furnished by the consignor, M/s Century Exports Ltd, Hongkong and, as spelt out in the supply contract requiring compliance with American Society for Testing and Materials (ASTM)/ISO standards, evincing 'gross calorific value (GCV)' of less than 5810 kcal/kg on 'as received basis (ARB)' was submitted. The case of the customs authorities is that the 'gross calorific value (GCV)' of the coal, in reality, exceeded 5833 kcal/kg, the benchmark prescribed in subheading notes of chapter 27 of First Schedule to Customs Tariff Act, 1975, for fitment as 'bituminous coal' corresponding to tariff item 2701 1200 of First Schedule to Customs Tariff Act, 1975. Proceedings were initiated by notice dated 19th April 2013 for recovery of Rs. 29,35,83,216 under section 28 of Customs Act, 1962 along with interest as applicable. Learned Counsel for applicant informed that appellant had, during the course of investigations and 'under protest', paid Rs. 50,00,000, Rs.17,....
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.... of heading 2701) and 'steam coal' (at sl no.123, specific to tariff item 27011920 and subject to 'additional duty' of 1%) while charging 5% ad valorem (at sl no.124, across the spectrum of 'coal, whether or not pulverized, but not agglomerated'), only to be withdrawn from the following year, that customs authorities, till then oblivious to the 'hotter' distinction among coal types, save that of 'coking coal' with its exceptional status, as notification no. 66/2004-Cus dated 9th July 2004 imposed uniform 25% ad valorem on coal across the three sub-headings in heading 2701 of First Schedule to Customs Tariff Act, 1975. The appreciation of the technical aspects of coal typology in the impugned order must be viewed through that prism. 10. Learned Counsel for appellant submits that the quality standards, including that of 'gross calorific value (GCV)', are contractual aspects of a commercial transaction and that bills of entry had, with reference to 'certificate of sampling and analysis (CoSA)' of load port furnished by their suppliers, declared accordingly. These, he demonstrated, comprised four shipments in which the 'gross calorific value (GCV)', reported on 'as received basis (A....
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....he sub-heading note in chapter 27 were to be the determinative criterion, separate description in the Indian tariff is redundant. 13. It was further contended that residual moisture is of no significance in determining values of coal and that of the several variants of 'gross calorific value (GCV)', viz., 'as received basis (ARB)', 'air dry basis (ADB)' and 'dry basis', the last is a theoretical measure as per Kentucky Geological Survey. In the absence of a proper understanding of the product, mechanical replication of the proposal in the notice by the adjudicating authority in the impugned order is, in his view, far too inadequate to be credible. He urged acceptance of the report of M/s Stewart Surveyors and Assayers Pvt Ltd which has endorsed the testing undertaken at load port. 14. He relied upon the decision of the Tribunal in Coastal Energy Pvt Ltd v. Commissioner of Customs, Central Excise & Service Tax, Nagpur [2014 (310) ELT 97 (Tri-Bang)], which also disposed off appeals of M/s Davangere Sugars Co Ltd and M/s Maruthi Ispat & Energy Pvt Ltd, and in particular to '69. As regards the submission that the burden of proof as to why the product is not s....
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....er issues really are not that important and are not required to be considered. Such a categorical submission was not made by the appellants in this case. A lot of technical points were urged regarding the difference between ARB and ADB, gross calorific value, calorific value etc. but the main point as to whether the load port report or the appellants test report was in accordance with bituminous coal or not was not mentioned.' to contend that, with the distinguishment of facts therein from that of the appellant, the findings would not also apply to them. It was also pointed out that the Bangalore bench had, and at the stage of disposal of application for stay, in Maheshwari Brothers & others v. Commissioner of Central Excise & Service Tax [misc order nos. 22821-22828/2014 dated 28.10.2014] found itself unable to arrive at the same categorical conclusion and deemed it appropriate to remand the matter back for fresh proceedings. He argued that the reference for constitution of a larger bench in Tamil Nadu Generation & Distribution Corporation Ltd v. Commissioner of Customs, Tuticorin [2015 (316) ELT 305 (Tri-Chennai)] was also indicative of the weak foundations of the ....
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....st mineral-matter free basis for coal analysis is calculated from the coal sample and expressed as though the natural inherent moisture is present but mineral matter has been removed...Moist coal does not include visible water on the surface.' [United States Energy Information Administration; https:/www.eia.gov] 17. He urged us to discard the contention of the appellant that the tests, carried out at their instance by the laboratory at Dahanu, indicating 'gross calorific value (GCV)' below threshold confirmed the ones at load port as the tests in India were, admittedly, in accordance with IS desiderata and only ASTM defined tests mattered. Reliance was placed on the decision of the Hon'ble Supreme Court in BK Industries v. Union of India [1993 (65) ELT 465 (SC)] holding that 'The Finance Minister's speech is not law. The Parliament may or may not accept his proposal. Indeed, in this case, it did not accept the said proposal immediately but only a year later. It is only from the date of repeal that the said levy becomes inoperable.' insofar as it was contended that the intent of exempting all coal deployed for power generation is evident in the Budget speech and....
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....re the specifications for standardizing test reports, i.e. 'volatile matter on dry, mineral-matter free' basis and 'calorific value on moist, mineral-matter free' basis which, according to the impugned order, requires re-adjustment according to the state of the sample. 20. It would, however, be misconception and, indeed, presumptuous for customs authorities to convince that standards, such as American Society for Testing and Materials (ASTM) and Indian Standard (IS), have been devised for ease of tax administration. The standards have existed, and guided by commercial imperatives, for decades in an uncoordinated trading universe and its availability for the customs tariff to draw upon for elaboration of the hierarchy of enumeration in the chapter for coal is only fortuitous. There is no formulation for 'steam coal' in the First Schedule to Customs Tariff Act, 1975 and, though, one does for 'bituminous coal', dichotomizing of 'steam coal' within that is not readily apparent thus opening up possibility for dispute for that very reason. And it has done so in this very instance. 21. Coal is a bounty of Nature that occurs as localised conc....
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....t of exemption has coloured fair determination of that critical aspect. 23. Leaving aside the handicap, unlike 'coking coal' having meaning assigned to it in the exempting notification, of lack of definition of 'steam coal' in the tariff and unavailability of policy inputs on intent of incorporating separate entry for 'steam coal', supposedly of impliedly low 'gross calorific value (GCV)' below subheading corresponding to 'others' in heading 2701 of First Schedule to Customs Tariff Act, 1975, it would appear that vagaries of distribution in coal formation, involving logistical complexities and deployment uncertainty, necessitated establishment of standards for contractual compliance in high stake commercial negotiations. We are, here, concerned with 'bituminous coal' and its most significant commercial characteristic, as incorporated in the tariff too, is 'gross calorific value (GCV)' or the heating potential. Traditionally designated as Btu, it is the heat required to raise the temperature of one pound of water by one degree Fahrenheit and is expressed as 'Btu/lb' or as 'kcal/kg' in the metric system. The accepted test procedure, known as 'proximate analysis' of a s....
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.... in the sub-heading notes without considering relevance to the 'certificate of sampling and analysis (CoSA)' or the significance of formula, and more especially, in conversion. Doubtlessly, the investigation, and we use the word advisedly as there has been no scrutiny of the tabulated information by the adjudicating authority who has merely approved the arrangement in Annexure B to the show cause notice, are happy with their mathematical reformulation which carries that derived 'gross calorific value (GCV)' beyond the threshold to reaches of higher duty liability. 25. A measure is no indication of the measuring system and to believe that all parameters in a test report emanate from a single test, amenable to cross-computation for deriving results, is delusional. Values are not the same as composition. This adjuring is necessary when an adjudicatory determination has, apparently, proceeded conversely. 'Gross calorific value' has a definitional standard that is not performed easily and, even if possible, lacks precision; for a kilogram or pound of water to be heated through a degree in Celsius or Fahrenheit scale for determining heating potential would be test of patience ra....
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.... FC = Fixed carbon, % VM = Volatile Matter, % M = Moisture A = Ash content, % S =Sulfur, % *The quantities are all on inherent moisture basis. 12. The values of Ash content, sulphur and Btu are to be applied on Air Dry Basis (ADB) as confirmed by the Joint Director, Customs and Central Revenue Control Laboratory (CRCL) vide letter F. No. JNCH/T.o./2012-12 dated 07.03.2013.' narrated in the show cause notice, that the 'conversion formula' for 'gross calorific value (GCV)' has been applied by deploying values post 'certificate of sampling and analysis (CoSA)' to arrive at the revisions. 27. However, the adjudicating authority has not ventured to consider the 'chicken and egg' analysis of the method adopted for measuring 'gross calorific value (GCV)' of coal. That this is a 'mathematical value', expressed in per kilogram terms to a specific outcome, viz., the raising of temperature of a kilogram of water by one degree on the Celsius scale - a theoretically cumbersome and haphazard process save for the invention by Marcellin Berthelot, the founder of organic chemistry - in bomb calorimeter appears to h....
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....er free' 'gross calorific value (GCV)' - obtained on bomb calorimeter to inclusion of 'inherent moisture' to qualify in the manner expressed in the sub-headings without having to convert to the British (BTU) system and to be reversed subsequently. The formulae, sourced from the World Coal Institute, intended for conversion of moisture factor among available measure - on air dry, dry and as received basis - without the need for the supplementary formulae in Annexure B to the show cause notice that the investigators have, incorrectly, presumed to be a chain of computations to arrive at the correct, as it were, heating value. 31. Without ascertaining the method by which 'gross calorific value (GCV)' was determined for inclusion in the 'certificate of sampling and analysis (CoSA)' issued at load port and in the absence of any finding that this was not directly deduced from bomb calorimeter and as content of 'moisture', 'ash' 'volatile matter' and 'fixed matter' in coal sample will not, of itself, derive the heating capacity as 'kcal/kg', there is no reason to suppose that it was not 'steam coal' to be classified elsewhere. Consequently, the formula devised for reverse working ....