By TIOL News Service

AHMEDABAD, FEB 15, 2014: THE petitioner imported coal in two consignments, on 16.1.2013 at Kandla and on 11.2.2013 at Pipavav Port in the State of Gujarat contending that the imported coal was steam coal classifiable under 27011920.

The Department, however, contended that the imported coal is bituminous coal attracting higher rate of duty.

At Kandla, the consignment was cleared provisionally on payment of duty treating it as steam coal whereas at Pipavav, the department insisted on collecting higher rate of duty treating the imported coal as bituminous coal and provisionally releasing it on such condition. Subsequently, pursuant to DRI inquiry, for the consignment cleared at Kandla Port also, the petitioner was required to deposit differential duty on provisional basis.

Later, a SCN dated 07.10.2013 came to be issued by the Commissioner of Customs, Kandla , alleging the following -

(i) Their claim for classification of impugned goods (as detailed in Annexure-B to this Notice) under Customs Tariff item / heading 27011920, should not be rejected and why the same should not be re-classified under Customs Tariff item/head 27011200 of the First Schedule to the Customs Tariff Act, 1975;

(ii) The 37,000.000 MTs imported Coal valued at Rs.22,17,69,407/- (declared Assessable Value) as detailed in Annexure-B to this Notice should not be confiscated / held liable for confiscation under the provisions of Section 111(d) and 111(m) of the Customs Act, 1962;

(iii) The Bill of Entry mentioned in Annexure-B to this Notice should not be finally assessed and as per correct classification, the Customs differential duty amounting to Rs.2,35,27,516/- (Rupees Two Crores Thirty Five Lakhs Twenty Seven Thousand Five Hundred and Sixteen only) on the 37,000.00 MTs of imported impugned Coal as detailed in Annexure-B to this Notice, should not be recovered from them under Section 18(2) of the Customs Act, 1962/the bond executed during the provisional assessment/Section 28 of Customs Act, 1962.

(iv) The said amount of Rs.2,35,27,516/- (Rupees Two Crores Thirty Five Lakhs Twenty Seven Thousand Five Hundred and Sixteen only) deposited by them vide TR6 Chellan No.109/12-13 dated 04.03.2013 towards payment of differential Customs duty in imports of Bituminous Coal vide B/E No. No.9035613 dated 16.01.2013 already Customs Cleared consignment, shown at Sr.No.1 of Annexure-B to this Notice should not be appropriated and adjusted towards their duty liability mentioned at (iii) above.

(v) Interest should not be recovered from them on the said differential Customs duty, as at (iii) above, under Sections 18(3) of the Customs Act, 1962/under section 28AA of the Customs Act, 1962.

(vi) Penalty should not be imposed on them under Section 112(a) of the Customs Act,1962."

The Petitioner is before the High Court challenging the validity of the SCN as being wholly without jurisdiction.

The petitioner submits that although they do not dispute the competence of the Commissioner to undertake final assessment and the classification of the goods, it is emphasized that the classification must be first completed under section 18 of the Customs Act, 1962 and only thereafter, any duty demand under section 28 of the said Act could arise.

The High Court observed that with respect to the central controversy between the parties, namely, whether the coal imported is bituminous coal or steam coal, the petitioner has not raised any contentions and incidentally two previous importers, under similar circumstances, had challenged the SCNs and the High Court had refused to interfere holding that at the show cause notice stage, it would not be appropriate for the Court to examine the highly disputed questions of facts and law.

The petitioner, thereafter, submitted that in the present case the petitioner had raised a contention not previously raised by the other importers namely, that there has been no finalization of the provisional assessment and, therefore, no duty demand could have been raised. Reliance is placed on the decisions of the Supreme Court in the case of   SeraiKella Glass Works Pvt. Ltd. v. CCE, (2002-TIOL-321-SC-CUS) and Commissioner of Central Excise & Customs v. ITC Ltd., (2006-TIOL-141-SC-CX) .

The High Court observed -

+ In the present case, facts are substantially different. The notice as reproduced hereinabove, first and foremost proposes to adopt certain classification which, in the opinion of the department, would be correct for the imported goods rejecting the classification canvassed by the petitioner. It is in this context that in para 24(1) of the notice calls upon the petitioner show cause why the classification of the imported goods under heading 27011920 should not be rejected and why the same should not be re-classified under the heading 27011200 of the First Schedule to the Customs Tariff Act, 1975. Further proposals are only consequential in nature and includes proposal for adopting correct classification and quantifying the differential customs duty on 37000 MT of coal imported by the petitioner. Proposal is also for recovery of the differential customs duty with interest.

+ In our opinion, this is not a case where recovery of duty under section 28 of the Act is preceded the finalisation of the classification. As a matter of fact, the very notice issued is for finalization of the classification on the basis of the proposal and the prima facie opinion of the department rejecting the classification presented by the petitioner. We do not find that the same is without jurisdiction.

The petitioner also contended that if the adjudication were to be undertaken by the Commissioner, the petitioner would lose its valuable right to appeal.

To this submission the High Court noted -

"…if there is no dispute about the competence of the Commissioner to issue show cause notice and adjudicate upon it, merely because by way of consequence, there is elimination of right of one appeal, that by itself would not convince us to hold that the show cause notice is without jurisdiction. Right of appeal is a creation of the statute. If the Commissioner under the provisions of the Act and the Rules framed thereunder is competent to adjudicate certain issues, merely because the noticee in such case may lose one stage of appeal would not render the action of the Commissioner per se without jurisdiction."

In fine, the petition was dismissed.

(See 2014-TIOL-194-HC-AHM-CUS)