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TMI Blog2015 (12) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue 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 us. At most they may give an indication reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture 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 its Corex furnace from certain pre-approved and specified mines. On import of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermitted 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 relief on the ground of limitation where the provisional assessments were finalized after receipt of test reports. The adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia 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 precise and discriminatory between caking/coking coals on the one hand and non-caking coals on the other. The range of coke types determined as per Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessed Bills of Entry cannot be reopened under the proviso invoking the extended period of limitation and/or without challenging the test reports. Reliance is placed on the judgment of Magus Metals P lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 claims that for nearly 30 years, total has exported steam Coal from South Africa, primarily to Europe and Asia. Website of Billiton, another supplier of coal shows that JSWSL are using non coking coal for their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sked 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 specifications of the coal indicated in the contract, to the best of his knowledge some more parameters such as MMR, CSN, would be included in semi soft coking coal contracts. Essentially coal mined from the Total m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 point of time in their unit in the Coke Oven batteries for manufacture of coke except usage of Corex coal fines for PCI charge as well as for blending of Corex Coal fines with Coking Coal for coke making. Shri Arvind Raj Gopalan GM (Commercial) stated that the price of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 this, in respect of the blast furnace route, Coking coal is fed into Coke Ovens for manufacture of Coke, which is in turn transferred to Blast Furnace for manufacture of hot metal. Details of coal imported for use in COREX Furnace and quantity of fines generated as per records of M/s JSWL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contentions made by both sides that would enable us to analyze the issue in a comprehensive manner. The issue to be decided is spelt out in para 2 of this Order and needs no repetition. The matter needs examination from various perspectives to decide whether JSWSL mis-declared the description of the coal imported by them as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, in the ultimate analysis, what is imported is held to be coking coal in terms of the notification, then the above documents would certainly support the case of Revenue. We find that the appellant have submitted copies of reports of the Customs Chemical Laboratory, and this is not disputed by Revenue, which indicate that in a majority of the cases what was imported was 'weakly coking' coal and in a few cases even coking coal. In the light of this fact, the statement of Shri Dasu General manager (Ir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 coking coal have not been coined by them in connivance with the suppliers, but these expressions are in existence and recognized nationally and internationally. Therefore it would be useful to refer to some of the technical literature on the characterization and categorization of various kinds of coal. From the IS standards 770-1977, we find that in Table 2 of the standards, the bituminous coal is classified into categories such non-caking, weakly caking, medium to strongly caking, weakly to medium caking, stro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued 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 coking/weakly coking coal for use in the Corex furnace and that the invoices were manipulated in their description. A case of manipulation would have been made out only if the description in the invoices of the Principals had been 'non-coking coal.' In addition, it is to be noted that in a majority of cases, the Chemical Examiner himself had determined the imported coals to be weakly coking. 11.4 Revenue has also relied on the contracts and purchase orders to state that they did not mention the criteria of minimum CSN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 and sent to the Central Forensic Science Laboratory, Hyderabad. From the said seized hard disk record, a report dated 29.5.2008 tabulates the CSN of the various coals being used in the Corex process. The same is reproduced herein below for ease of reference: SBW Coal 1.5 Ensham Coal 1.5 Metropolitan Coal 1.5 Optimum Coal 1 Poitrel Coal 1.5 Total South African Coal 1 New South African Coal 1.5 Datong Coal 1 There is no challenge by Revenue to the above stated CSN values in respect of the coal imported from the mines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 CSN value as one or above and the reports declared the same to be weakly coking or coking coal. Government introduced the criteria of CSN one and above after the period of dispute. Both sides contend that this criteria cannot be applied for the period of dispute. To determine whether a coal imported is coking coal or not, there has to be some technical or scientific parameter to term coal as coking or non-coking. In the present case the only relevant parameter which has been discussed by both sides and is also figuring in the reports of the Customs Chemical Examinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Energy Markets and when sold to M/s. JSWSL is named 'Bespoke Optimum Semi soft Corex Coal'. According to us, even if it is a business description, it does give an indication of the type of coal imported. It indicates that such coal is produced in the mines from where it is sourced. And because no technical specifications are prescribed in the documents, we cannot agree that the coal imported will not be the coal described as produced in those mines. This fact also addresses the contention of Ld Senior Counsel that in the absence of technical parameters, the trade pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 generation or distribution of electrical energy. It must be noted that the important words used in the relevant provisions are goods for use by it in the generation or distribution of such energy (emphasis supplied by us). On a plain reading of the relevant clause it is clear that the expression "for use" must mean "intended for use". If the intention of the legislature was to limit the exemption only to such goods sold as were actually used by the undertaking in the generation and distribution of electrical energy, the phraseology used in the exemption clause would have been different as, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the cross-examination of Shri Raju who stated that there were differences in technical specifications of some parameters in the case. And the coal supplied to JSWSL is not necessarily mine specific. IN our view no matter the high price difference, comparison cannot be made between prime/hard coking coal and soft/semisoft/weakly coking as the two are not comparable. Notwithstanding these factual details, it is still not established that the coal imported is not soft coking coal or that it cannot be mixed with the coking coal in the blast furnace to produce Coke. We have noted that no end use con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. 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 respondent(in that case) showed the description of the said coal as 'semi soft coking coal' in all relevant records with the sole intention of claiming it is as coking coal to take benefit of exemption under notification 21/2000 dated 1-03-2002. It was held by the Tribunal that "18. In the absence of a clear definition, we should go by natural meaning. One obvious natural meaning that can be given is that the expression means coal that is used for conversion into coke as argued by Revenue. We would have adopted such an interpretation but for the fact that the explanations in the notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... welling 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 Swelling Number of 1 and above and mean reflectance of above 0.60, for use in the manufacture of iron or steel using Corex, Finex or PCI technology (s. No. 66A of Notification No. 21/2002-Customs ibid). This exemption was based on end-use. This was notified on 24.03.2011. (iii) Thereafter, a representation was received from new Zealand High Commission seeking full exemption from customs duty on imports of weak coking coal for manufacture of steel using blast furnace technology . When the matter was examined, it was seen that most of the established manufactures of steel in India were using conventional "blast furnace technology" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Corex Furnace. When enquired specifically as to whether coke is manufactured in the Crex Furnace or not, Shri Dasu stated that in Corex Meltergasfier where the coal is fed from the top similar kind of reactions happening which are similar to that of Coke Oven and the coal is degasified in the absence of air and at an elevated temperature of greater than 1000 Centigrade; that after degasification, the Carbon and ash only remains in the form of cake/coke (which in generally term as 'char')' that the physical and chemical property of this char is similar to that of Coke, whose main function is to support the burden and to allow th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ildly 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 advocate is that the criterion of CSN one cannot be given retrospective effect. We agree with this contention as already held by the Tribunal in the appellants own case in Commissioner Of Customs vs JSW Steel Ltd 2012(284) ELT 680 (Tri-Chennai). The other contention is that the test reports were never furnished to the appellant till the adjudication stage. Therefore the appellants never had the opportunity to rebut the findings of the tests. The results were communicated after many years during the course of adjudication. With the passage of time, even if it is available in adequate quantity and preserved in appropriate condition for drawing samples wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of CSN, only one reading of CSN was recorded. It has been held by the Hon'ble apex Court in the case of Tata Chemicals Ltd. It versus Commissioner 2015(320) ELT 45 (SC) that if samples are drawn contrary to the provisions of law, the test reports cannot be relied upon. We realize that the testing does not pertain to the consignments in dispute. But having noted the difference in the results of internal tests by the appellant (not brought on record by revenue) and the testing in Govt Laboratory in the present case, the benefit of doubt must go to the appellants in view of our detailed findings from all angles. The onus was on Revenue tin the preceding paras o disprove the appellant's own reports. Noting the totality of evidence in favour of the appellant, we do not agree with the findings of the Commissioner in confirming the demand of duty in respect of 21 bills of entry. 16. In view of the detailed analysis above, we set aside the impugned Order to the extent it confirms the duty in respect of 21 Bills of Entry. Having set aside the duty demand, the question of confiscation and imposition of penalties against noticees does not arise. 17. Revenue appeal is dismissed. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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