2015 Supreme(SC) 428

SUPREME COURT OF INDIA
A.K. Sikri, R.F. Nariman, JJ.
M/S. TATA CHEMICALS LTD. – APPELLANT
VERSUS
COMMISSIONER OF CUSTOMS (PREVENTIVE) JAMNAGAR – RESPONDENT
CIVIL APPEAL NOS.7439-7440 OF 2004 WITH CIVIL APPEAL NOS.7628-7629 OF 2004
Decided on: 14-05-2015

IMPORTANT POINTS
Action of Revenue subjecting the imported coal to further chemical analysis without disputing the CASCO certificate is ultra vires section 18(b) of Custom Act.
Test reports based on samples drawn contrary to law cannot be looked at.

Headnote:(a) Customs Act – Section 18(b) – ‘Deems it necessary’ – Proper Officer must have good reasons to subject imported goods to a chemical or other tests – Importer furnishing documents and CASCO’s certificate of quality certifying ash content of less than 12% – Revenue never disputing the said certificate – Yet subjecting the imported coal to further chemical analysis – Ultra vires section 18(b). (Para 14)

       (1969) 3 SCR 108; (1972) 1 SCR 175 – Relied upon

       (1976) 2 SCR 48; (1994) 6 SCC 205 – Referred

       (b) Customs Act – Method of testing – Not stated in the Act – Indian Standard Institution’s method applies – IS 436 – Samples drawn in a manner contrary to IS 436, that too, in absence of any representative of the appellant – Test reports based on such samples cannot be looked at. (Para 16, 17)

       1995 (77) ELT 32 (SC); 1963 Suppl. (1) SCR 586 – Relied upon

       Facts of the case:

       The appellants were engaged in the manufacture of soda ash and Coke. For the manufacture of Coke, they require coking coal which was imported by them. Notification No.35/90 exempted coking coal having an ash content below 12% from basic customs duty that was in excess of 5%. In addition, notifications 36/90 and 23/91 exempted coking coal with ash content of less than 12% from the whole of auxiliary duty and additional duty of customs.

       On 4.2.1991, the appellants had entered into an agreement with Philbro Energy Company for supply of 30500 metric tons, CIF, Okha of Low Ash Metallurgical Coal produced by M/s Kembla Coal and Coke, Australia. The contract specifically provided that the ash content was not to exceed 10.3% and that the sampling and analysis was to be done by an independent inspection agency of international repute, namely, M/s Cargo Superintendents Company (Asia) Pty. Limited (CASCO), at the loading port and that CASCO should give a certificate regarding analysis of the coking coal. In accordance with the aforesaid agreement, the appellants in Civil Appeal Nos.7439-7440 of 2004, namely, M/s. Tata Chemicals Limited imported 33462 metric tons and appellants in Civil Appeal Nos.7628-7629 of 2004, namely, M/s. B.L.A. Coke Private Limited imported 5000 metric tons of coking coal. Detailed sampling was done by CASCO while the coal was being loaded on to the ship and CASCO had meticulously followed British Standards equivalent to IS standards 436 and 1350. The two consignments were divided into samples of 3000 metric tons each and from each sample CASCO took samples weighing 470 kilograms each. The primary samples were passed through secondary sampling, crushing and tertiary treatment. 13 sample units were separately tested, their analysis report obtained and the average furnished in the form of a consolidated test report. This report stated that the moisture content was 7.2% and the ash content of the said coking coal was 9.8%.

       When the aforesaid consignment arrived at Okha, the appellants in both the appeals filed bill of entry dated 15.3.1991 and claimed exemption under the aforesaid notifications. Along with the bill of entry, the appellants also submitted the certificate of CASCO. It is important to note that the Department at no stage stated that they have not accepted the CASCO report or that the CASCO report was defective in any manner. However, the Customs Inspector at Okha apparently drew samples of 20 kilograms each – one from the vessel and one from the shore on 18.3.2001 and beat them with stones to crush them. The samples were then made into powder form.

       The samples so drawn, however, were sent to the Central Fuel Research Institute, Dhanbad, to be analysed. On 13.1.1992, the appellants were informed by the Superintendent of Customs that the test agency stated that the ash content in the samples was more than 12%. A copy of the report was subsequently furnished to the appellants which indicated that the ash content of the coal belonging to Tata Chemicals was 13.8% and that belonging to M/s. B.L.A. Coke Private Limited was 12.6%. On objection being made to the said report, the Superintendent Okha sent two samples to the Chief Chemist, Central Revenue Control Laboratory (CRCL) on 15.2.1992. CRCL in turn submitted its report after another delay of 10 months and reported that Tata Chemicals coal had an ash content of 12.21% and that of B.L.A. 12.33%.

       As a result of the ash content being more than 12%, show cause notices dated 4.1.1993 was issued to both the appellants and differential duty was demanded from both of them.

       The Assistant Collector demanded an amount of Rs.3,95,77,324/-from Tata Chemicals and an amount of Rs.59,136,771/-from M/s. B.L.A. Coke Private Limited.

       On an appeal filed to the Commissioner (Appeals) Ahmedabad, the Commissioner by an order dated 30.12.1997, set aside the order of the Assistant Collector

       Revenue appealed to CESTAT who by the impugned judgment and order dated 24.9.2004 allowed Revenue’s appeal and set aside the order of the Commissioner (Appeals).

       Finding of the Court:

       Impugned judgment is not sustainable.

       Result: Appeal allowed.