By TIOL News Service

MUMBAI, DEC 17, 2014: THE Commissioner of Customs, Central Excise & Service Tax, Panaji, Goa confirmed a differential duty of Rs.1,00,55,335/- on 13000 MTs of coal imported by the appellant on 27/04/2012 by classifying the same as 'bituminous coal' falling under CTH 2701 1200 and by denying the benefit of Notification No. 12/2012-Cus dated 17/03/2012. Apart from the above, interest along with penalty of Rs.10 lakhs has also been imposed on the appellant. The goods which were provisionally released have also been confiscated with an option to redeem the same on payment of fine of Rs.50 lakhs.

The reason for this change in classification from 'steam coal' to "bituminous coal" is that upon investigation by the Customs department it was revealed that the imported coal from South Africa had a volatile mater content of 39.26% and gross calorific value of 7827 kcal/kg.

Before the CESTAT the appellant submitted that as per the trade nomenclature, the product is known as 'steam coal' and not as 'bituminous coal' and as per the gradation of non-coking coal based on useful heat value, the coal imported by the appellant merits classification as 'steam coal'. It is also argued that the functional utility and the predominant usage of the commodity must be taken into account while classifying the product and if it is done, it can be seen that the product merits classification as 'steam coal'. Also the gross calorific value has to be determined on the basis of ash + moisture content and not on air dry basis and, therefore, computation of the volatile matter content and the gross calorific value by the department is incorrect. Furthermore, prior to 17/03/2012, the appellant had imported similar material which was declared as 'steam coal' and the duty was paid on that basis and the Revenue had never raised any objection. It is prayed that stay be granted.

The AR submitted that when the statute itself defined 'bituminous coal' as coal having a volatile matter content of more than 14% and a gross calorific value of more than 5833 kcal/kg classifiable under CTH 2701 1200 it is immaterial how the product is known in the market. The Tribunal decision in M/s. Finolex Industries Ltd., and M/s. Gupta Coal India Pvt. Ltd, Nagpur [Order No. S/1193-1194/14/CSTB/CI dated 20/10/2014], in an identical matter, ordering pre-deposit of the duty demand for the normal period is also adverted to.

The Bench observed -

++ As per the explanatory Note 2 to Chapter 27, '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 5833 kcal/kg. Any coal satisfying the above definition would merit classification as 'bituminous coal' under CTH 2701 12 notwithstanding the fact that the goods may be known otherwise in the commercial/trade parlance.

++ As held by the apex Court in the case of Indo International Industries vs. Commissioner of Sales Tax, Uttar Pradesh 1981 (8) ELT 325 (S.C.) "if any term or expression has been defined in the enactment, then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted".

++ In the present case, since the Customs Tariff defines 'bituminous coal' by means of certain specifications and if those specifications are satisfied, the goods will have to be classified as 'bituminous coal' only and not otherwise.

Noting that in an identical matter as cited by the AR, the Bench had taken a prima facie view that the coal satisfying the specifications defined in Note 2 to Chapter 27 is correctly classifiable under 2701 12 and not as 'steam coal' in view of the Tribunal decision in Coastal Energy Pvt. Ltd. & Ors - 2014-TIOL-1157-CESTAT-BANG, the Bench took a prima facie view that the appellant had not made out any case for waiver of the entire amount of adjudged dues.

The Bench also observed that the applicant had not pleaded any financial hardship and, therefore, in the absence of a prima facie case, the balance of convenience lay in favour of Revenue.

Accordingly, the entire duty demand of Rs.1,00,55,335/- belonging to the normal period was ordered to be paid as pre-deposit.

Choking coal in passing: Also read - Customs - Classification - Bituminous coal or Steam Coal - In view of conflicting decisions by Chennai and Bangalore Bench, matter referred to Larger Bench: CESTAT.

Incidentally, the present order was pronounced by the Mumbai Bench on 18th November, 2014 which also is the date on which the Chennai Bench passed the order as above 2014-TIOL-2503-CESTAT-MAD. So, do we have a modification application in the pipeline?

(See 2014-TIOL-2545-CESTAT-MUM)