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2015 (5) TMI 557 - SUPREME COURT

2015 (5) TMI 557 - SUPREME COURT - 2015 (320) E.L.T. 45 (SC) - 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 - Apex court held 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 a .....

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r 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 CASCOís 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 posi .....

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Central Excise tariff is not mentioned, then the Indian Standard Institutionís 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 Tribunalís judgment has proceeded on the basis that even though the samples were .....

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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 abs .....

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cture of soda ash and Coke. For the manufacture of Coke, they require coking coal which was imported by them. Notification No.35/90 exempted coking coal having an ash content below 12% from basic customs duty that was in excess of 5%. In addition, notifications 36/90 and 23/91 exempted coking coal with ash content of less than 12% from the whole of auxiliary duty and additional duty of customs. 2. On 4.2.1991, the appellants had entered into an agreement with Philbro Energy Company (situated in .....

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rdance with the aforesaid agreement, the appellants in Civil Appeal Nos.7439-7440 of 2004, namely, M/s. Tata Chemicals Limited imported 33462 metric tons and appellants in Civil Appeal Nos.7628-7629 of 2004, namely, M/s. B.L.A. Coke Private Limited imported 5000 metric tons of coking coal. Detailed sampling was done by CASCO while the coal was being loaded on to the ship and CASCO had meticulously followed British Standards equivalent to IS standards 436 and 1350. The two consignments were divid .....

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, the appellants in both the appeals filed bill of entry dated 15.3.1991 and claimed exemption under the aforesaid notifications. Along with the bill of entry, the appellants also submitted the certificate of CASCO. It is important to note that the Department at no stage stated that they have not accepted the CASCO report or that the CASCO report was defective in any manner. However, the Customs Inspector at Okha apparently drew samples of 20 kilograms each - one from the vessel and one from the .....

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so drawn, however, were sent to the Central Fuel Research Institute, Dhanbad, to be analysed. On 13.1.1992, the appellants were informed by the Superintendent of Customs that the test agency stated that the ash content in the samples was more than 12%. A copy of the report was subsequently furnished to the appellants which indicated that the ash content of the coal belonging to Tata Chemicals was 13.8% and that belonging to M/s. B.L.A. Coke Private Limited was 12.6%. On objection being made to .....

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1995, the Assistant Collector demanded an amount of ₹ 3,95,77,324/- from Tata Chemicals and an amount of ₹ 59,136,771/- from M/s. B.L.A. Coke Private Limited. 8. On an appeal filed to the Commissioner (Appeals) Ahmedabad, the Commissioner by an order dated 30.12.1997, set aside the order of the Assistant Collector in the following terms:- 10. In view of the above discussion and after going through the comments of the Assistant Commissioner, Customs, Jamnagar as discussed in para 5.3 .....

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analysis for ascertaining the ash content in the coal, it should be ascertained on as received basis. I rely upon the ratio of the decisions cited by the appellants in this regard. The CFRI and CRCL have conducted analysis to ascertain the ash content on gross air dried basis, in spite of clear instruction of the Asttt. Commissioner, Customs, Jamnagar to give the report on as received basis, therefore, these reports should have been given on as received basis. I accept the plea of the appellant .....

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d. The formula for working out these results is as under: 100 - Mar Mar: Moisture as received 100 - Mad Mad: Moisture as dried. It is seen that in case of M/s BLA Industries results of both laboratories converted into as received basis gives ash content below 12% and in the case of M/s Tata Chemicals Ltd. Though the first result even after such conversion crossed 12% marginally, but the result of subsequent analysis conducted by CRCL after such conversion gives content of ash content below 12%. .....

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rawn by the Inspector were contrary to IS 436, yet since a representative of the appellants was present, the appellants are estopped from turning around at a later stage inasmuch as they did not immediately object to the drawing of samples contrary to law. 10. Shri S.K. Bagaria, learned senior advocate on behalf of the appellants argued before us that the Australian Company from whose mines the coking coal was sent, generally mined coal with an ash content of less than 12%. He referred to and re .....

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tificate, the entire sampling done by the customs authorities was invalid in law. He further went on to refer to the cross-examination of the Inspector who drew the samples and stated that the samples were drawn in the afternoon of 18.3.1991, the entire operation being completed by 1730 hours. No panchnama was drawn. 20 kilograms was taken from the shore and 20 kilograms from the vessel contrary to a minimum of 75 kilograms for six lots to be taken under IS 436. When cross-examined, the Inspecto .....

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the appellants were estopped because their representative was present when the sampling was done. He stated that no representative of either appellant was present. One K.M. Jani alone was present who admitted in his cross-examination that he did not work for the appellants Clearing Agent, namely, M/s Bhagwati & Company. Further the said Mr. Jani did not go together with the Inspector and no samples were actually drawn in his presence. 11. Shri Radhakrishnan, learned senior advocate appearin .....

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pply against the appellants. 12. Having heard learned counsel for the parties, it is important to first extract Section 18 of the Customs Act. Section 18 of the Customs reads as under:- Section 18. Provisional assessment of duty (1) Notwithstanding anything contained in this Act but without prejudice to the provisions contained in section 46- (a) where the proper officer is satisfied that an importer or exporter is unable to produce any document or furnish any information necessary for the asses .....

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r may direct that the duty leviable on such goods may, pending the production of such documents or furnishing of such information or completion of such test or enquiry, be assessed provisionally if the importer or the exporter, as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty finally assessed and the duty provisionally assessed. (2) When the duty leviable on such goods is assessed finally in accordance with th .....

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sionally assessed, require the importer to execute a bond, binding himself in a sum equal to twice the amount of the excess duty. 13. The Revenue has grounded its case in Section 18(b) which provides that imported goods can be subjected to chemical or other tests for the purpose of assessment of duty thereon where the proper officer deems it necessary to so subject the imported goods. 14. In our opinion, the expression deems it necessary obviously means that the proper officer must have good rea .....

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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. 15. Statutes often use expressions such as deems it necessary , reason to believe etc. Suffice it to say that these expressions have been held not to mean the subjective satisfaction of the officer concerned. Such power given to the concerned officer is n .....

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uggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income Tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The Court can always examine this aspect though the declaration or su .....

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P) Ltd. v. Union of India, 1995 (77) E.L.T. 32 (S.C.), where this Court held following Union of India v. Delhi Cloth & General Mills Co. Ltd., 1963 Suppl. (1) SCR 586, 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. IS 436 lays down:- 5. SAMPLING FROM SHIPS DURING LOADING OR UNLOADING 5.1 Sub-lots - For the purpose of sampling, the entire qua .....

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per the procedure laid down in Table 3. If not, the gross samples may be drawn during loading or unloading of the ship. For this purpose, the number of increments to be taken shall be governed by the weight of the gross sample and the weight of increment as specified in Table 3 for various size groups of coal. TABLE 1 NUMBER OF SUB-LOTS/GROSS SAMPLES ( Clauses 0.3.4.1 and 3.1 ) Weight of the Lot (Metric Tonnes) No. of sub-Lots/Gross Samples Upto 500 2 501 to 1000 3 1001 to 2000 4 2001 to 3000 5 .....

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