By TIOL News Service

CHENNAI, DEC 11, 2014: NETIZENS may recall the decision by the Bangalore Bench in case of Coastal Energy Pvt Ltd & Others VsCCE - 2014-TIOL-1157-CESTAT-BANG wherein the Tribunal upheld the demand on coal imported by classifying the same as Bituminous Coal under Customs Tariff 2701 1200 and rejected the contention of the importers that it is classifiable as Steam Coal. In subsequent order in case of Maheswari Brothers VsCCE - 2014-TIOL-2502-CESTAT-BANG, the Tribunal ordered pre-deposit of duty and interest.

The issue has come up before the Chennai Bench of the Tribunal recently. While disposing the stay applications filed by a number of appellants, the Bench observed that there is a conflict between decisions in case of Tamil Nadu Newsprint & Papers Ltd. Vs Commissioner of Customs, Tuticorin - 2009-TIOL-1851-CESTAT-MAD and Maheswari Brothers - 2014-TIOL-2502-CESTAT-BANG and placed the matter before the President for constitution of Larger Bench.

The crux of the controversy is note 2 of sub-heading note to Chapter 27, which reads as under:

2. For the purposes of sub-heading 2701 12, "bituminous coal" means coal having a volatile matter limit (on a dry, mineral-matter-free basis) exceeding 14% and a calorific value limit (on a moist, mineral-matter-free basis) equal to or greater than 5,833 kcal/kg.

The Tribunal elaborately discussed the computation of calorific value limit (on a moist, mineral-matter-free basis) as mentioned in the above note. The Tribunal found that as per ASTM (American Society for Testing), there are different types of moistures present in coal like equilibrium moisture, inherent moisture and residual moisture which has a bearing on arriving at Calorific Value limit and the methodology adopted by the revenue is prima facie not correct.

The Bench observed:

We find that there is no dispute that a calorific value limit on a moist in sub-heading Notes 2 of Chapter 27 of CTA would cover the inherent moisture of the coal. Further, the Department calculated C.V. limit on a moist, on the basis of Load Port Report, air dry basis. To sum up, if sample of coal is tested in Residual Moisture, then, the denominator would be low and C.V. limit would be higher. In other way, if the sample of coal is tested in inherent moisture, then, the denominator would be higher and the C.V. limit would be low. On perusal of ASTM terminology, it is noticed that inherent moisture in coal, the moisture that exists as integral part of the coal in its natural state, including water in pores. The characteristics of inherent moisture is available in natural state of coal at the time of excavation from the mines. The other term "residual moisture" is remaining in the sample after air drying. As per para 5.1, Moisture, of ASTM, Air-dry basis moisture is the low in weight resulting from the partial drying of coal, and residual moisture is that remaining in the sample after air drying. The effect is that if sample is tested at the stage of Air dry basis moisture, the weight would be less and C.V. limit would be higher. The case of the applicants is that sample of coal on load port report and discharge report, as relied by the revenue is containing residual moisture and the C.V. limit is much higher. After going through the ASTM parameter, prima facie, we are unable to accept the view of the Revenue that Load Port Report is based on inherent moisture. We find that ASTM prescribed procedure, on samples not meeting the criteria, inherent moisture may be estimated by determining equilibrium moisture in accordance with Test Method D 1412.

We have also noticed that the similar issue came before the Tribunal in the case of Tamil Nadu News Print & Papers Ltd. (TNPL) Vs CC Tuticorin - 2009-TIOL-1851-CESTAT-MAD in respect of classification of non-coking coal. In that case, the appellant claimed classification of non-coking coal under sub heading 2710.19 of the Customs Tariff, which was declared in the invoices and purchase bills. The department proposed to classify the goods under Heading 2701.12 as Bituminous coal on the basis of survey report undertaken for valuation purpose. The survey report was determined on gross calorific value on an air dried basis since the payment terms were determined on such value. The Tribunal allowed the appeal filed by the appellant.

It is seen that the Chennai Bench of the Tribunal categorically held that if the department had a doubt about the description of the goods and the classification, they should have carried out a chemical test which was not done in the present appeals. During the course of hearing before us, the Ld. Advocates submitted that in few cases, samples were drawn and tested but, it was not relied upon by the adjudicating authority. Be that as it may, we find that the adjudicating authority proceeded on the basis of survey report prepared on Air Dried Basis as in the case of TNPL (supra).

We are of the view that the decision of Bangalore Bench of the Tribunal in the case of Maheswari Brothers & Others and M/s.Coastal Energy Pvt. Ltd . (supra) are contrary to the decision of the Chennai Bench of the Tribunal in the case of TNPL (supra).

In view of the conflicting views, the Tribunal referred the matter to the President for constitution of Larger Bench to resolve the issue. The Tribunal also waived pre-deposit in all the cases.

(See 2014-TIOL-2503-CESTAT-MAD)