TMI Blog2017 (11) TMI 1584X X X X Extracts X X X X X X X X Extracts X X X X ..... not arise - appeal allowed - decided in favor of appellant. - C/2674/2012, C/2722-2727/2012 - A/31811-31817/2017 - Dated:- 15-11-2017 - Shri M. V. Ravindran, Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical) Shri Vipin Jain, Advocate for the Appellant. Shri M. Chandra Bose, Addl. Comissioner/AR for the Respondent. ORDER [Order per: Bench] 1. All these appeals are directed against Order-in-Original No.52/2012-Cus, dt. 29.06.12. Since these appeals arise out of the very same Order-in-Original, they are being disposed of by a common order. 2. Appeal No.C/2674/2012 is filed by M/s JSW Steel Limited against confirmation of demand of differential customs duty, interest thereof and penalties imposed while the other appeals are filed by individuals against penalties imposed on them. 3. The relevant facts, after filtering out unnecessary details, are that the appellants herein (JSW Steel Limited -- main appellant) during the period 01.03.2009 to 31,03.2010 imported soft coking coal, semi soft coking coal, weakly coking coal, PCI coal under 19 Bills of Entry at Krishnapatnam Port and claimed exemption from payment of customs duty as co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also considered the report of the chemical examiner and laid down the law as to how the report need not be relied upon and the same view has been expressed by Mumbai Bench. 5. Ld. DR, on the other hand, draws our attention to the detailed findings recorded by the adjudicating authority. It is his submission that the imports of coal are made from different sources and the description given in the documents is not indicating as to whether the same are coking coal or otherwise. He would submit that Sl.No.68/68A of notification No.21/2002-Cus is extending/granting exemption only to coking coal of ash content below 12%. He would submit that the CRCL report, after analysis of the imported coal indicates that they are other than coking coal. It is his further submission that since the imported coal is not coking coal, exemption cannot be extended. He would also draw our attention to the analysis report of CRCL and submits that there is a difference between the test report filed by main appellant and the CRCL; does not answer specification of coking coal. He submits that the impugned order be upheld and appeals be rejected. 6. Heard both sides and perused the records. 7. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil - - 68A. 2701 Coking coal of ash content of 12% or more Nil - - Notification No.21/2011-Cus. dt. 1.3.2011 [Amendment to Notification No.21/2002-Cus] (xi) against S. No.68, for the entry in column (3), the following entry shall be substituted, namely :- Coking coal Explanation. - For the purposes of this exemption, Coking coalmeans coal having mean reflectance of more than 0.85 and Swelling Index or Crucible Swelling Number of more than 2; (xii) S. No.68A and the entries relating there to shall be omitted; Notification No.31/2011-cus. dt. 24.3.2011 [Amendment to Notification No.21/2002-Cus] (i) after S. No. 66 and the entries relating thereto , the following S. No. and entries shall be inserted, namely :- (1) 92) (3) (4) (5) (6) 66A 2701 Coal having Swelling Index or Crucible Swelling Number of 1 and above and mean reflectance of above 0.60, for us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l are quantities for all types of coals used in the Corex furnaces. The quantities shown under the remaining two categories i.e. Semi hard/ soft coals and hard coking coals are those which are used in the Blast Furnaces (through Coke ovens). By classifying in this session, I was not expressing any view on the nature of the coal. This statement of the main technical person reveals that the coal used in Corex technology has weak coking properties. As already observed above, the real test would be the nature of coal imported. A significant aspect to be noted in this regard is that the business plans specifically enlisted the coal with respect to the names of the originating mines such as Ensham/SBW/Helsenburg//Metro/Datong. From the records we find that these coals have weak coking property with CSN ranging from 11.5 as reflected in the report dated 29.5.2008, regarding the performance of New South African Coal in Corex technology, which was seized from the hard disk of Shri Arvind Rajagopalan. In the later part of our discussion we will have a look into the properties and parameters of coal specifications such as CSN which have a bearing on the determination of the nature of coal imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 and above. Therefore there is merit in the contention of the Ld. Advocate that only the non-coking coal is ineligible for the exemption. 11.2 We also find that the terms Semi coking and weakly coking coal are used in the Ministry of Coal Notification S.O. 453(E) dated 16 th June 1994. The same terms find place in the Coal Directory of India 2006 2007 published by the Ministry of Coal, Government of India while giving the ash content of such coals. A note below the Classification of such coals states 2. Semi-coking and weakly coking coals are such coals as were classified as Blendable coals by the erstwhile Coal Board under the Coal Mines Act 1952. 3. Coals other than coking or semi cooking or weakly cooking coal are non-coking coals. The same terms find mention in the Coal Mines Act 1952, Australian Coal Review Database, Platt which is a Journal of prices, McCloskey Coal Report etc. For example, in the McCloskey Coal Report Issue 365 of 24 July, there is a reference to prices of weak coking coal. Therefore the contention of the Ld. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of 2011. As a note of caution, we may emphasise that here we are not suggesting application of notification of 2011, retrospectively. At the same time we have discussed technical literature above which gives some guidance on the nature and properties of weakly coking/coking coals. As mentioned in paras above, we find that the business plan of the company enlisted the coals with respect to the names of mines such as Ensham/SPW /Helsenburg/Metro/Datong and such coals were having weakly coking property with CSN ranging from 1 to 1.5. This fact also comes out from the statement of Shri Raju. We find that, on the one hand Revenue does not want to apply the notification amended in 2011 retrospectively so as to apply the criteria of one CSN to the coal imported by the appellant; but on the other hand it states that the purchase orders should have mentioned the criteria of CSN for purchase of soft/semisoft/weekly coking coal. Revenue has not been able to challenge the fact that the coal imported from mines did have CSN of one and above. Therefore we find the stand of Revenue not sustainable. Further the Coal Directory only mentions the ash content of such coals which implies that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Non Coking Coals with CSN from 1 upto 6. 12.1 We have seen that the Coal Directory of India calls the weakly coking coals as blendable, meaning thereby that the same can be used in blend with coking coal to produce steel. The point is, therefore, that the soft coking coals imported and used in the Corex technology, are also usable in the Blast Furnace. We have also seen above that the IS standards indicate that weakly and medium caking coals can be used for blending. Thus, undoubtedly, the imported coals can be used for blending with coking coal as they have soft caking properties. And therefore there is no reason why they cannot be called coking coals as usable for making coke, especially when their CSN is one and above. Technically also, a coking coal has to be permeable by the very technology involved and the soft coking coal adds to this function. 12.2 The Research paper on the experience of using hundred percent imported coal in Bhilai steel Plant, which is a public sector unit, states that But in the middle of 2014 with non-availability of indigenous coal, DSP was left with the option of having to use hundred percent imported coal for some time. With no prior exper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing properties Even if the CSN factor is not applied retrospectively, the fact remains that the Chemical Examiner himself declared the coal to be weakly coking. And no convincing reason has been given to justify that weakly coking coal cannot be considered as coking coal, albeit weakly. The contention of Revenue is that in such eventuality, the other parameter of MMR should have been determined. We find that the onus is on Revenue to determine this parameter. The Chemical laboratory has concluded the coal to be weakly coking. The burden is on Revenue to determine the MMR factor which was not done for reasons best known to them. Apparently the Chemical Examiner was satisfied with the determination CSN and the Ash content, the latter being the only criterion in the Notification as it existed during the period in question and which met the requirement specified in the notification. And thus the Chemical Examiner cleared the samples as weakly coking on basis of various parameters determined. 12.4 The research paper published by the Steel Authority of India Ltd experiments with different qualities of coals ranging from high volatile soft coals to low volatile coals, where two of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have CSN more than one and less than three. He also stated that Corex Coals are indicated as Non-Coking Coals by their company in the business plans and the reason may be to avoid mixing Corex Coals with other coals. Mr Khera Associate Vice President stated that 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, 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 Gopalann GM( Commercial) stated that the price of Soft Coking /Semi Soft Coking/Corex Coal is based on API 4 index for coals originating from South Africa. That the Soft Coking/Semi-Soft Coking/Corex Coal are imported by them for the purpose of use in Corex Furnace, PCI purpose and Steaming (Energy) Coal/Thermal Coal is imported for the purpose of use in boilers for power generation; that except the usage of coal there is no difference between the Steaming (Energy) Coal/ thermal Coal an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on granting exemption has to be read strictly. Meanings cannot be read into the notification except what its wording simply states. End-use condition cannot be built into a notification when there is none. 13.2 Shri Dasu stated that the Corex Coals may be indicated as non-coking coals in the records to avoid contamination/mixing Corex coals with other coals. However he also categorically said that they were not bothered about CSN number as they knew that most of them are having CSN more than one and less than three. Shri Dasu being Manager who is in charge of Iron making can be believed as far as the statement is concerned. This statement shows that the CSN number of imported coal was one and above. We may point out that Revenue tends to take statements regarding commercial matters from technical people and vice-versa. Nevertheless even the technical person stated that coal may be indicated as non-coking coals in the records only to separate the goals used in the blast furnace and in the Corex furnace. 13.3 Revenue has relied on statements to prove that the API-4 index is the parameter for fixing of prices for steam coal as done by the appellant in respect of the coking c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Glencore. And further cross-examination of Shri Mahesh Vaidya was not acceded to. In the facts of the case we, therefore, cannot attach any significance to such statement. We also view that the statement of Shri Vineet Kohli Regional Manager BHP that the Optimum coal is fed for metallurgical use is no conclusive proof because he stated that the coal is supplied for energy markets as well. The coal supplied is described as bespoke optimum semi soft Corex coalwhich does not rebut the contention that this is coal soft coking and can be blended with other coals apart from being as sold as energy coal. 14. On the basis of analysis in the preceding paras we come to the conclusion that the coal imported by the appellant was in the nature of weakly coking coals as also held by the Customs Chemical Laboratory in the vast majority of reports out of 150 Bills of Entry. There are as many as 35 cases where CSN is 3 and above. And in some cases it ranges from 3.5 to 7. Some reports are not available. Even if we accept the contention of Revenue that the notification describing CSN of one and above cannot be applied retrospectively, we still find that the Chemical Examiner mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been no clear intent about the characteristics to be satisfied. The criterion added by new explanation does not prescribe that the coal should have been used for conversion into coke and then used. The position is that the imported coke was suitable for use with other coal for making coke and coke making itself is for using coal in metallurgy and that the imported coal has been actually used in metallurgy without converting it into coke. We feel that adoption of a new technology enabling use of coal, which could be converted into coke in admixture with other coal, without conversion of such coal into coke cannot be a reason to deny the exemption. So we are not inclined to accept the argument of the Revenue that the goods imported could not be considered as coking coal for the purpose of customs duty for the reason that the goods were not converted into coke. 14.1 The intention of the Government in bringing about the change in the Not 21/2002 is brought out in the letter F No 336/3/2013-TRU dated 21-05-2013 of Director TRU addressed to the Commissioner Guntur in connection with a representation from the appellant. It stated (i) Prior to the budget 2011-12, Coking coal, hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide Notification No.77/2011-Cusotms, dated 17.08.2011 to mean coal having mean reflectance of 0.60 and above and Swelling Index or Crucible Swelling Number 1 and above irrespective of the technology used for manufacture of iron or steel [SI. No.68 of Notification No.21/2002-Customs ibid]. Simultaneously the entry relating to exemption of coal based on end use (Sl. No.66A of 21/2012-Customs) was omitted on the belief that the new definition would take care of all the coals used in the iron and steel industry, Irrespective of technology (Corex, Finex, PCI or Blast furnace Technology) used, since all these coals were presumed to have swelling index of I and above and Mean Reflectance of and above. We find that the intention of the government was never to base the criteria of coking coal on end use condition but to provide exemption to ail coals used in the Iron and steel industry irrespective of technology. The intention to provide exemption even to weakly coking coals as long as the MMR is 0.6 and above and the CSN is one and above, was realized in the amended notification in 2011. But for the period in question, even this condition was absent As to the meaning of coking coal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecifically as to whether the Char generated in the Corex Furnace have the same strength that of Coke manufactured out of Coke Ovens, Shri Dasu stated that the coke strength produced from the coke ovens depends upon mainly the type of coals used in the coke oven for manufacturing of Coke; that similarly the char strength depends upon the type of coals used in Corex plant. 17.4.5 Shri B. Mastan Reddy Deputy General Manager 10 MT (Iron Making) when asked to offer his comments specifically with reference to the coals used in Corex furnace by their company as to whether the coals used by their company in Corex Furnace falls under the category of Coking Coal or not, in the light of the definition of Coking Coal as per McGraw-Hill Dictionary of Scientific and Technical Terms, Shri B. Mastan Reddy stated that he has read the McGraw-Hill Dictionary of Scientific and Technical Terms and appended his dated signature on the same in token having perused the same; that in terms of the above dictionary, Coking Coalmeans a very soft bituminous coal suitable for coking; that in terms of the said definitiony any coal which is used in coke making only be called as coking coal; that however, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that their laboratory is having ISO 9001 standards. In the circumstances we do not find any reason to disbelieve the internal reports because these reports were recovered from the records of the appellant seized by DRI. Revenue has selectively chosen to ignore these records although it has relied on other private records to suit their case. In the face of two differing reports, the obvious way out would have been to test the samples again. But this is not possible now for reasons aforesaid. At the same time we find that the Ash content, which was the only criterion in the notification as it stood during the period in dispute, was met in the case of 21 B/Es. 15.1 The fact that Revenue itself disputes the applicability of CSN criterion of 1, the fulfillment of only criterion of Ash content during the relevant period, the detailed analysis by us in paras above, the absence of a precise definition of coking coal, the refusal to allow cross-examination of the Assistant Chemical Examiner, the decision of the Tribunal in appellants own case (supra) and a plain reading of the notification would, in our view, decide the issue in favour of the appellant. 15.2 An interesting aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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