Custom, Excise & Service Tax Tribunal
Jsw Steel Ltd vs Commissioner Of Customs, Central ... on 9 September, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Application No. C/MA(Ors.)/96139/2014 & Application No.C/S/93023/2014 In Appeal No. C/85484/2014 and Application No. C/CO/91083/2014 In Appeal No. C/85484/2014 and Application No. C/MA(Ors.)/94269/2015 & Appeal No.C/85238/2014 (Arising out of Order-in-Original No.COMMR/11/2013-14 dt. 27.9.2013 passed by the Commissioner of Customs, Central Excise, Goa ) For approval and signature: Honble Mr. P.S.Pruthi, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial) ============================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
=============================================================
JSW Steel Ltd.
:
Appellant
VS
Commissioner of Customs, Central Excise & Service Tax, Goa
:
Respondent
And
Commissioner of Customs, Central Excise & Service Tax, Goa
:
Appellant
VS
JSW Steel Ltd.
JSW Energy Limited.
Sajjan Jindal Chairman & Managing Director
Jayant Acharya,Director
D.Ramesh Senior Vice President
V.P. Garg, Vice President
Ravindra Dattatreya Bhalerao
Madhav Mattathu Ramchandra Warrier
Sical Logistics Limited (CHA Division)
OM Freight Forwarders Pvt. Ltd.
H.M.Lageneles,
:
Respondent
Appearance
Shri V.K. Jain Advocate with
Shri Vishal Agarwal, Ms.Anisha Mandhania Advocate
Ms, Manya Bhardwaj, Advocate for Appellant
Shri V.K. Singh, Spl. Counsel for Department
CORAM:
Mr. P.S.Pruthi, Member (Technical)
Mr. Ramesh Nair, Member (Judicial)
Date of hearing : 09/09/2015
Date of pronouncement : 14/12/2015
ORDER NO.
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 us. At most they may give an indication regarding procedures followed in drawing and testing of samples.
1B. MA(ORS)/96139/14 in Appeal C/85484/14 is filed by the appellant for the reason that there was no application of mind by the Chief Commissioners while passing the Review Order under Section 129 D of the Customs Act . The file notings in this connection are sought to be placed on record under Rule 41 ibid. We allow this additional evidence to be placed on record We find that this matter is no longer res integra having been decided by the Honble High Court of Delhi in the case of Commissioner of Service Tax vs Japan Airlines International Co Ltd 2015 (40) STR. 420 Del). The Honble Court held that The Full Bench of this Court delivered a judgment dated 20th July, 2015[2015(39) S.T.R. 541(De,)] answering the aforementioned two questions as under.
16. Having regard to the aforesaid discussion, our decision, with respect to the two question of law, referred to us, is as follows:
(i) In so far as question no. 1 is concerned, the same is answered in favour of the Revenue. The Tribunal, as indicated above, cannot examine the issue beyond the factum as to whether or not a decision has been taken by a committee of commissioners to institute the appeal.
(ii) In view of the our answer rendered qua question no. 1 , question no.2 does not arise for consideration. In the any event, in our discussion hereinabove, we have clearly indicated that the act of appending of signatures by the members of the Committee of Commissioners, would suffice, as long as, the record placed before them, contains the necessary material and the reasons for approving the action to institute the appeal. 1C. Both the MAs stand disposed as above.
2. The issue which draws our attention is whether the coals imported by M/s. JSW Steel Ltd (JSWSL for short), the appellant in appeal C/85238/2014, i.e. for use in Corex Furnace and declared as weakly Coking/Soft Coking/Semi Soft Coking/Corex Coal are Coking Coal classifiable under tariff item 27011910 of the Customs Tariff Act and eligible for exemption from payment of customs duty under Sl. No 68 to notification No. 21/2002-Customs dated 1.3.2002 or these were in fact thermal coal/ Steam Coal classifiable under tariff items 27011920 and 27011990 leviable to Customs duty @5% Adv. The period 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-`-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 the said coking coals in India, the Appellant had been claiming exemption from payment of Customs duty in terms of S. No. 68/68A of Notification No. 21/2002-Cus dated 1.3.2002 extracted below:
S. No. Chapter or Heading No. or Sub-heading no. Description of goods Standard Rate Additional duty rate Condition no.
68. 2701
Coking coal of ash content below 12% [Nil]
-
-
68A.
2701Coking coal of ash content of 12% or more [Nil]
-
-
With effect from 1.3.2011, the said Exemption Notification was amended and an explanation was added to S. No. 68 of Notification 21/2002-Cus which was thereafter substituted on 17.8.2011 to provide that, for the purpose of the said exemption, coking coal means coal having max mean reflectance (MMR) of more than 0.60 and Crucible Swelling Index (or CSN) of 1 and above.
4. DRI initiated investigations into the coking coal imports. A Show Cause Notice was issued demanding Customs duty in respect of 151 consignments of soft/semi-soft/weakly coking coal imported by the Appellant between December 2006 to March 2011. DRI alleged that the coal imported by the Appellant was not eligible for the benefit of the exemption for coking coal, as the same was not actually used for coke making in the blast furnace but was instead used in the Corex furnace. It was alleged that as per the supplier of the Corex technology, the Corex process required non-coking coal, which is also how these coals were recorded in the Appellants internal records viz. business plan, balance sheet, process flow chart, documents offered to SEBI for public issue purposes, etc. It was alleged that the expression soft/semi-soft/weakly coking coal had been coined by the Appellant in the invoices in connivance with the supplier, and that what had been supplied was thermal/steam (non-coking) coal. It was contended that coal from the same source had been supplied to the Appellant as semi-soft coking coal, while to JSW Energy Ltd (JSWEL) Ratnagiri, it was supplied as steaming (non-coking) coal. To demonstrate that the price of coal imported by the Appellant was at par with the price of steaming (non-coking) coal, one invoice raised by IMR Metallurgical AG, Switzerland in favour of JSWEL was compared with three other invoices raised by IMR Metallurgical 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 Appellants 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 21consignments of coal wherein, on testing, the chemical examiner had 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 adjudicating authority did not see any merit in the confiscation of goods as well as the penalties imposed on various officials and the CHAs and set them aside.
6. Both appellant as well as Revenue have challenged the order, inter-alia, on the ground that the explanation effective from 1.3.2011 in Serial No. 68 of Notification 21/2002-Cus could not be given retrospective effect.
7. Heard both sides and considered the submissions.
8. The Ld. Advocate made the following contentions.
8.1 The issue is covered by the judgment of the Tribunal in their own case, reported in 2012(284)ELT680 (Tri-Chennai), wherein it was held that the exemption to coking coal under S. No. 68/68A of Notification No. 21/2002-Cus would also be available to coal suitable for use in admixture with other coal for making coke. It was held that the mere adoption of a new technology enabling the use of coal without first converting the same into coke in admixture with other coal cannot be a ground for denying the benefit of the exemption. It was further held that the criteria regarding 1 CSN and 0.60 MMR, which were introduced in the Notification granting exemption to coking coal with effect from 1.3.2011, cannot be given retrospective effect.
8.2 It was submitted that the investigations clearly proved that the soft/semi-soft/weakly coking coals were suitable for coke making in admixture with other coal as brought out in the statement dated 29.9.2011 of Shri B.M.Reddy, Deputy General Manager (Iron Making-Quality Management Centre). The investigations clearly established that the fines generated in the factory from the imported coking coals were, inter-alia, used as blends with other coking coal for making coke in the appellants coke plant as also third parties plants such as Padmavati Coke Pvt. Ltd. and IST Steel & Power Ltd as also stated by Shri Bhupinder Singh Khera, Associate Vice President (Raw Material Handling System) and Shri V.P. Garg, Vice President (Commercial), 8.3 The suitability of soft/semi-soft/weakly coking coal/PCI coal for coke making, albeit in admixture with other types of coking coals, has been recognized in
(i) Letter of the Commissioner of Customs, Guntur No C.N.1/01/09/2013 legal dated 27.5.2013.
(ii) Research paper 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-coking 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 Gray-King (LT) coke type, which is one parameter for classification of coals, with their group numbers when juxtaposed with the CSN reads as under:
Crucible Swelling Number (LT) Gray-King Assay Coke Type 0-0.5 A-B 1-4 C-G2 4.5-6 F-G4 6.5-8 G3-G9 8.5-9 G7 or above And Table 2 of Indian Standard:770-1977 shows that coal with Gray-King (LT) Coke Type, C-D-E which is weakly caking to medium caking and has CSN ranging from 1-4, is mainly used for blending for manufacturing coke. It was submitted that exemption to coking coal would apply to all species thereof and not alone to such coking coal which was actually used in coke making as was being contended in the Notice. Apex Court in the case of Gujarat State Fertilizer Co. v CCE 1997 (91) ELT 3 (SC), wherein exemption had been granted to fertilizer, held that the expression fertilizer is a genus which consists of various species of fertilizers such as chemical fertilizer, soil fertilizer, animal or vegetable fertilizer and that the exemption could not be limited only to a soil fertilizer. The ratio laid down by the Apex Court applies on all fours to the facts of the present case.
8.5 It is an undisputed fact, as is evident from the statement of Shri Madhu Ranjan, Vice President, R&D as also the statement of Shri Raju Rangachar, Director, Rawmet Commodities Pvt. Ltd. dated 17.8.2011 that coal with weak caking property was required in Corex process. Further, that coking coal imported by the appellant for its Corex Plant had weak caking properties with CSN of more than 1 and less than 3 clearly comes out from the statements of Shri AVRP Dasu, General Manager-4MT (Iron Making) dated 19.9.2011 and of Shri B.M. Reddy, Deputy General Manager-10MT (Iron Making-Quality Management Centre) dated 29.9.2011. The evidence resumed show that before approving the use of any soft/semi-soft/weakly coking coal from a particular mine, the same was first type-tested for its suitability for use in the Corex process. During the course of investigations, the hard disk of Shri Arvind Rajagopalan (GM Commercial) 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 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)ELT1072, affirmed by the Supreme Court in 2002(142)ELT A280
ii) State of Haryana V. DalmiaDadri Cement Ltd. 2004(178)ELT13(SC)
iii) Commissioner of Customs, New Delhi V. Sameer Gehlot 2011(263)ELT129(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 Ltd vs. Commissioner of Custom 2005-TIOL-1694-CESTAT. Therefore the adjudicating authority had rightly held that the demands were barred by limitation.
9. The submissions made by the Special Counsel for the Department are:
9.1 Whereas blast furnace uses 85% coke and 15% coal as fuel, Corex furnace uses 15-20% coke and 80-85% Non coking Coal as fuel. Power point presentation made by Shri R.T. Shrinivas Rao DGM, JSWSL at Wollongong, Australia on 25.10.2007 showed that Corex is the first commercially established and industrially proven smelting reduction process based on non-coking coal. Thus one of the major raw material used in the Corex Furnace is non coking coal.
9.2 During the period under reference, M/s JSWSL has not imported non coking coal for use in their corex furnace nor procured any non coking coal indigenously. The MOUs/Contracts/Agreements by JSWSL with suppliers for purchase of coking coal for manufacture of Coke for use in Blast Furnace are clearly titled as Coking Coal Contracts/Agreements. The specifications of these coals are matching with the specifications of Coking Coals being procured by Rastriya Ispat Nigam, SAIL etc. through international tenders/competitive bidding. These contracts also contain CSN and MMR. Whereas contracts for import of soft coking coal/ corex coal/semi soft corex coal do not contain any such detail and are based on the thermal value. For the purpose of showing to the Customs Authorities, the suppliers commercial invoices showed the coal sold for use in Corex Furnace as Weakly Coking/Soft Coking/Semi Soft Coking/Corex Coal. These contracts are similar to contracts entered into by M/s. JSWEL (Sister Concern of M/s. JSWSL) with their overseas suppliers for purchase of steaming /Non Coking/Thermal Coals (i.e. other than Coking Coals) for use in generation of power and are titled as Coal Contracts/Agreements. The pricing for both the contracts entered into by JSWSL and JSWEL is based on parameters as for Non Coking Coals such as thermal value.
9.3 The statutory and other documents like Business Plans, Balance Sheet Cum Profit & Loss Statement of M/s. JSWSL, documents submitted to SEBI for public 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 also 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 2009-100 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 corex operations. Agreement dated 12.12.2001 between M/s JSWSL and M/s Jindal Tractwel Power Company Ltd (Now known as JSW Energy Ltd) is on the basis of calorific value of the Coal which matches with the specification of thermal coal. Price entered into by M/s JSWSL in respect of supply of Weakly Coking/Soft Coking/Semi Soft Coking/Corex Coal is based on the API-4 Index of Argus/ McCloskeys Coal price Index which is meant for thermal coal. This price Index has also been followed by M/s JSWEL for import of thermal coal.
9.4 Statements of Suppliers Shri Mahesh Vaidya DGM, Glancore India Pvt ltd, one of the suppliers of Coal stated that their principal company M/s Glancore International AG, Switzerland are supplying coking coal/steam Coal to M/s JSWSL, and M/s JSWEL. The coking coal contract and all relevant documents entered into by their principal company with JSWSL mention coking properties like CSN number, Mean Max reflectance(MMR) and fluidity for reference; whereas in case of steam coal contracts these parameters are not provided.
Shri Raju Rangachar, Director of M/s Rawmet Commodities Pvt Ltd, a company engaged in providing support services to their principals viz IMR Metallurgical Resources AG, Switzerland for whom JSWSL/ JSWEL are customers for purchase of coal stated that Coking coal is a coal having coking properties and used in metallurgical industry i.e. for manufacture of Coke or Steel; that Soft Coking/Semi Soft Coking Coal is one type of coking coal having less coking properties, generally steam coal and non coking coal do not have any difference; that the price of coals are based on coal quality; that in respect of Coking coals the price varies depending on crucial parameters like CSN/FSI Number, MMR, Moisture, percentage of Ash and Sulphur and in the case of Non-Coking /Steam Coal, the price varies based on the parameters like Gross Calorific Value, Moisture, Asch Content etc., that their principal company has been entering into only one type of contract for Semi soft Coking Coal and Steaming coal from Mine owners/traders etc., by describing the description of goods to be procured as Coal; JSWSL have requirement 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 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 mine is being supplied to thermal coal market internationally. Shri Vineet Kohli, Regional Manager (Marketing) BHP Billiton Marketing Services India Private Limited, New Delhi in his letter dated 28.01.2011 inter alia informed that generally the brand name of the coal sold by BHP Billiton from the originating mines is sometimes annotated with words such as hard, soft , semi soft, or weak to give an indication of its generic properties and use ; for instance Illawara Hard Coking coal, riverside Coking coal, Blackwater Weak Coking Coal, Black Water Soft coking Coal etc; 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. Thus depositions of overseas suppliers shows that:
(a) The description furnished in the invoices issued by the overseas suppliers are only general in nature based on the end use application but not based on the actual quality/specification of the goods supplied to M/s. JSWSL and M/s. JSWEL;
(b) The description in third party inspection certificate is based on the description by the exporters only.
9.5 Statements of Company personnel Shri Dasu, General Manager 4MT(Iron Making) JSWSL, Bellary stated that (1) Blast Furnace is a single vessel and Corex is two vessels (2) Blast furnace uses hot air at elevated temperature of 1000 to 1200 Degree Centigrade to burn the carbonaceous material whereas Corex uses pure oxygen at ambient temperature (3) Blast furnace uses 85% Coke and 15% Coal as fuel where as Corex Furnace uses 15-20% Coke and 80-85% Coal as fuel; that coal fines and lumps are being fed to power plant and 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 end 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 maybe to avoid contamination/mixing Corex Coals with other coals.
Shri Bhupinder Singh Khera, Associate Vice President (Raw Material Handling System) of JSWSL, Bellary 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, 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 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 and Soft Coking/Semi Soft Coking/Corex 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.
9.6 Brochure titled Competence in Iron making of M/s. Siemens VAI Metal Technologies Gmbh & Co., Linz, Austria indicates follows:
Corex is an industrially and commercially proved direct smelting reduction process that allows for cost-efficient and environmentally compatible production of hot metal directly from iron ore and non-coking coal. The process was developed to industrial maturity by Siemens VAI and is the only alternative to the conventional blast furnace route consisting of siner plant, coke oven and blast furnace It distinguishes itself from the blast furnace route by direct use of non-coking coal as reducing agent and energy source and iron can be directly charged to the process in the form of lump ore, pellets and sinter.
9.7 The price of coking coal procured by JSWSL from their overseas suppliers is 200% to 300% higher than that of soft coking coal, semi soft coking coal for use in Corex furnaces. Price of latter is equal to the price of Steam Coal/thermal Coal purchased by them and other importers. Therefore Coal imported by M/s JSWSL for use in their Corex furnace was in fact non coking coal and M/s JSWSL are not entitled to the benefit of exemption.
9.8 All the definitions referred to by Commissioner in the impugned Order point out to one single parameter i.e. the coal which is suitable for production of coke to sustain a blast furnace charge for manufacture of steel is called as 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 added in year 2011 can be applied retrospectively for classifying coal as coking coal or otherwise.
9.9 Honble 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 coking 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 show that in years 2009-10 and 2010-11 when their new power plant became operative, more than 50% of the Coal imported for COREX furnace has been sold as fines to M/s JSWEL.
9.11 The Contracts entered by JSWSL for import of Coals described as Soft Coking Coal/ Semi Soft Coking Coal/ Corex Coal are based on API 4 Index of Argus/McCloskeys which is meant for Coal Price Index Report for Thermal Coal originating from Richards Bay Coal Terminal of South Africa. Similarly the pricing of thermal/steam coal are also based on the AP1 4. However, the pricing of coking coal import for their blast furnace was based on the pricing prevalent at the Japanese Steel Mills.
The mine owner invoices showed the description as Coal, whereas the invoice of overseas supplier showed the same as Semi Soft Coking Coal admittedly without undertaking any operation viz. process/change The actual invoices issued by the mine owner to the respective trader were not submitted to the Customs at the time of import. Investigation showed that same overseas supplier supplied coal excavated from the same mine with same technical specifications to both JSWSL and JSWEL but with different descriptions in the invoices issued. The coal produced by Total SA and Sasol Coal South Africa is understood and treated as thermal Coal in trade parlance. The specifications in the agreements as well as in the load port certificate is akin to the internationally accepted standards for thermal coal specifications. There is nothing in the documents produced by M/s JSWSL to indicate that coal imported by them was other than thermal Coal.
9.12 For classification purposes the nature of goods are to be identified first; the article should be classified on the basis of popular sense and not in scientific and technical sense.
i) Dunlop India and Madras Rubber Factory Ltd. vs. UOI- 1983(13) ELT 1566(SC).
ii) Reliance Cellulose Products Ltd. Vs. Collector of Central Excise, 1997(93)ELT 646(SC).
iii) Commissioner of C.Ex. Nagpur Vs. Shree Baidyanath Ayurved Bhawan Ltd,-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 instant case none 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 Honble 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 Soft Coking Coal / Semi Soft Coking Coal/weakly coking /Corex Coal, etc. and availed full duty exemption applicable to Coking Coal falling under Customs Tariff Heading 2701 in terms of Notification No.21/2002-Customs dated 01.03.2002, as amended. The evidence relied upon by Revenue is four fold namely, the statutory and private documents of the appellant vis a vis the documents filed at the time of import, the statements of officials of the company, the statements of suppliers and lastly the technical literature on the subject presented by both sides.
Before discussing the evidence, we reproduce the relevant notifications below:
Notification No. 21/2002 Cus.
S. No. Chapter or Heading No. or sub-heading No. Description of goods Standard rate Additional duty rate Con-dition No. (1) (2) (3) (4) (5) (6)
68. 2701
Coking coal of ash content below 12% Nil
-
-
68A.
2701Coking 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 coal means 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) (2)(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 use in the manufacture of iron or steel using Corex, Finex or PCI technology Nil
-
5;
Notification 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 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 (Iron Making) that the use of the nomenclature non-coking in certain records is to avoid mixing of Corex Coals with other coals, cannot be brushed away. During the cross-examination, in reply to specific questions he stated that the total coal that the company gets is either used in Corex or Coke ovens, so this distinction was made to know how much coal will be used in Coke ovens and how much in Corex. The coal used in Corex, we classify as non-coking coal because we went by the terminology used by the equipment supplier. Even though these coals have weak coking properties, we use this terminology because of the terminology being used by the suppliers. Further that the quantity shown under the category non-coking coal 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 1 1.5 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 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/weekly 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 as non-caking, weakly caking, medium to strongly caking, weakly to medium caking, strongly caking. And further in comparison with the IS standards 1353:1993 we note that the weakly caking, medium to strongly caking and weakly to medium caking categories have a CSN number which is greater than 1 whereas non-caking has a CSN less than1. In the remarks column in table 2, against strongly caking coal, the purpose of utilization is metallurgical Coke making. According to learned Spl counsel only such coal can be considered as coking coal. However we notice that against the weakly/medium caking coal varieties, the purpose of utilization is written as blending. This indicates that such coal can be used for blending with the strongly caking coal for steel making. We have already noted above that in a majority of the imports in question the CSN factor is 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 16th 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 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 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 and therefore could not be said to be coking coal. The contention of Ld advocate is that the records seized from the hard disk of Shri Arvind Rajagopalan GM Commercial, show that the coal was being procured from specific pre-approved mines and the coal source was tied up to suitability for use in the Corex furnace; which means that parameters such as CSN were tested and thereafter the coals were approved for the Corex process having CSN of one or more. Hence there was no need to mention the parameter of CSN in the purchase orders. Although this contention has weight, it may still be necessary for us to see whether the coals procured from the mines had CSN of one or more to entitle them to be termed as coking coal in accordance with a criterion like the criterion laid down in the amended notification 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 1to1.5. 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 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 of 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 by the appellant. We also note that in the cross-examination, Shri Bajpai General Manager M/s Siemens( who developed the Corex technology) on being asked regarding the PowerPoint presentation recovered by Revenue stated that, as shown in the presentation, the Corex Coals may have maximum CSN as six. As mentioned by the Commissioner in the impugned Order, M/s. Voest-Alpine IndustrieanlagenbauGmbh, Linz, Austria (VAI)who are the owners of the Corex technology suggest that Corex technology can take 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 experience of using hundred percent imported coal, it became an unknown journey in terms of oven wall pressure and operational difficulties. 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 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 Examination is CSN. Therefore, in our view some credence has to be given to the CSN factor. The technical literature seems to indicate that the coal imported by the appellant having CSN of one and above can be termed as weakly coking coal. The Gray-King coke type parameter is mentioned in para 8.4 above. As per IS standards this parameter indicates the caking property as well as the likely cokeability of a coking coal. In juxtaposition with the CSN, it reflects that coals with CSN 1 and above to have coking 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 the five samples having CSN of one, were mixed to form blends with other coals which had CSN of 4.5 5.5. It was found 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 Revenues stand.
13. We now look into the depositions of various persons. The Regional Manager(Marketing) Mr Vineet Kohli stated 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 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 parlance usage is important. We find that the business description indicated above is nothing but description in trade parlance. It is therefore not refutable that the coal imported is described as weakly or soft coal in trade parlance. Therefore the contention of the Ld Counsel that the classification should be as per popular understanding is also met.
13.1 The other statements relied upon by Revenue may be seen. Mr Dasu stated that as end user they are not bothered about CSN Number as they knew that most of coals imported 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 and Soft Coking/Semi Soft Coking/Corex 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.
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 1988(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, for example, goods actually used or goods used. We find from the above statements that they do not prove that what was imported was not soft coal or weakly coking coal. Neither is it true that coal imported cannot be mixed with Coke by the pulverised coal injection method or blended with coking coal for coke making. We are of the view that generation of fines and their use in power generation to a large extent still does not establish that what was imported was not weakly coking coal. The notification 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 coal imported. This is not denied by the appellant. It is further alleged by Revenue that these coals are imported for the purpose of use in Corex furnace, PCI purpose and steaming 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 base 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 JSEWL 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 conditions are provided in the notification; therefore usage cannot be a determining factor. In our view the same reasoning would apply against the Departments contention that coal fines were used for power generation.
13.4 The statement of Shri Mahesh Vaidya GM Glencore India Pvt Ltd was countered by the Ld advocate stating that the appellant had not imported any consignment of soft/semisoft/weakly coking coal from 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 coal which 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 the case of well over 100 B/Es with CSN of 1 and above that it has got the characteristic of coking coal (where CSN is 3.5 and above) or coking coal (weakly coking). We observe that the Chemical Examiner in coming to the conclusion that it is weakly coking has not stated the specific parameter 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 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 notification prior to the period of import and later to the period of import provide certain technical characteristics and do not provide for monitoring that coal is to be used actually for conversion into coke before using it in metal extraction. During the period of import there was no explanation at all. We note that even after 1-3-2011, the Government has been changing the criteria to define the expression evidencing that there has 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, having ash content below 12% as also Coking coal having ash content above 12% were fully exempted from basic customs duty (S. No.68 and 68A of Notification No. 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 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. 66 A 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 manufacturers of steel in India were using conventional blast furnace technology wherein coal is first converted into coke before being used in the manufacture of steel. It transpired that M/s Tata Steel, Steel Authority of India and RINL using this technology import weak coking coal having a reflectance of 0.6 and above from New Zealand. Accordingly, with the concurrence of the Ministry of Steel and Ministry of Coal, the definition of coking coal in Sl. No. 68 of Notification No. 21/2002-Customs ibid was amended 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 [Sl. 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 0.6 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 all 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, the statements of the Technical persons in charge of the Iron/Steel making plants have much relevance. The relevant portions 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 gives meaning of all coals which can form coke irrespective of the coke strength produced from the coal and other values can be termed as coking coals including the coals which they use in Corex Furnace. When enquired specifically as to whether coke is manufactured in the Corex 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 the gas to penetrate upwards and liquids to penetrate downwards. When asked to furnish about records maintained for char in the plant of M/s JSW Steel Limited, Shri Dasu stated that the Char is produced in the Meltergasfier, which serves the purpose of Coke in Blast Furnace and there are no quantification of amount of char generated in the Meltergasfier as the same is being consumed in the process of generation of heat required for melting solid iron to liquid iron in the Meltergasfier. When enquired specifically 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 Coal means a very soft bituminous coal suitable for coking; that in terms of the said definition, any coal which is used in coke making only be called as coking 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 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 which is not likely, the quality of coal would have changed due to impact of weathering. The learned advocate relied on a piece of technical literature - Deterioration of coking coal quality, samples and stockpiles, issued by the Division of Mining Technology, CSIR South Africa which says that the CSN number is reported to decrease with increased degree of weathering. It has been brought on record by the appellant that the internal test reports in respect of these 21 bills of entry clearly show that the CSN was one or more than one. The Ld. advocate submits 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 is that the appellant in one case of import at Goa, which is not related to the imports in the present case, requested for retest of samples in which the chemical Examiner at Goa found the CSN to be 1 in respect of four consignments. We are informed that on retesting the CSN of the same samples was found to be 5 to 5.5. The appellant requested for cross examination of the chemical Examiner. From the records of cross-examination, it transpired that the samples were not drawn in the manner prescribed in IS 436 nor was the procedure for testing prescribed in IS 1353:1993 completely adhered to in as much as against three readings of CSN, only one reading of CSN was recorded. It has been held by the Honble 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 appellants 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. Appellants appeal is allowed with consequential relief, if any, in accordance with law.
Stay application and Cross-objection also stand disposed of.
(Pronounced in court on 14/12/2015) (Ramesh Nair) Member (Judicial) (P.S.Pruthi) Member (Technical) SM.
57Application No. C/MA(Ors.)/96139/2014 & Application No.C/S/93023/2014 In Appeal No. C/85484/2014 and Application No. C/CO/91083/2014 In Appeal No. C/85484/2014 and Application No. C/MA(Ors.)/94269/2015 & Appeal No.C/85238/2014