Case: M/S. Tata Chemicals Ltd Vs. Commnr. Of Customs(Preventive)Jamnagar

1. 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.2. On 4.2.1991, the appellants had entered into an agreement with Philbro Energy Company (situated in the USA) 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%.3. 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.4. The samples were not drawn in the presence of any employee of the appellants. It was alleged by the Department that the Inspector had drawn the samples in the presence of Shri K.M. Jani who was allegedly an employee of Bhagwati and Company, clearing agents appointed by the appellants. It is common ground that the sample so drawn had not been drawn in accordance with IS 436.5. 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%.6. 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.7. By an order dated 31.3.1995, 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.8. 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 in the followingIn view of the above discussion and after going through the comments of the Assistant Commissioner, Customs, Jamnagar as discussed in para 5.3 supra, wherein he was asked to give his comments on the submission made by the appellants during the course of personal hearing. It is seen that the Assistant Commissioner has accepted all the points raised by the appellants and he has not been able to controvert any of their submissions. I come to the conclusion that the appellants have substantial force in their arguments and therefore I held that nothing can be added into the notification and when notification does not prescribe the method of analysis for ascertaining the ash content in the coal, it should be ascertained on as received basis. I rely upon the ratio of the decisions cited by the appellants in this regard. The CFRI and CRCL have conducted analysis to ascertain the ash content on gross air dried basis, in spite of clear instruction of the Asttt. Commissioner, Customs, Jamnagar to give the report on as received basis, therefore, these reports should have been given on as received basis. I accept the plea of the appellants that these results can be converted into as received basis, which fact has also been accepted by the Assistant Commissioner as discussed in para 5.3 above, by applying the formula followed internationally. By applying the formula which is accepted all over the world and has been given by the appellants during the course of their submissions, the ash content on as received basis would be 11.8% and 11.6% in the case of M/s. BLA Industries and 13.9% and 11.4% in the case of M/s. Tata Chemicals Ltd. The formula for working out these results is as under:100 – Mar Mar: Moisture as received100 – Mad Mad: Moisture as dried.It is seen that in case of M/s BLA Industries results of both laboratories converted into as received basis gives ash content below 12% and in the case of M/s Tata Chemicals Ltd. Though the first result even after such conversion crossed 12% marginally, but the result of subsequent analysis conducted by CRCL after such conversion gives content of ash content below 12%. Therefore, after conversion on as received basis, which is the requirement of the law, the ash content in both the cases is below 12% and therefore both the appellants are entitled for partial concessional rate of Customs duty in excess of 5% as prescribed by Notification No.Revenue appealed to CESTAT who by the impugned judgment and order dated 24.9.2004 allowedappeal and set aside the order of the Commissioner (Appeals) basically on the ground that even though the samples drawn by the Inspector were contrary to IS 436, yet since a representative of the appellants was present, the appellants are estopped from turning around at a later stage inasmuch as they did not immediately object to the drawing of samples contrary to law.

Court's reasoning:
14. In our opinion, the expressionobviously means that the proper officer must have good reason to subject imported goods to a chemical or other tests. And, on the facts of the present case, it is clear that where the importer has furnished all the necessary documents to support the fact that the ash content in the coking coal imported is less than 12%, the proper officer must, when questioned, state that, at the very least, the documents produced do not inspire confidence for some good prima facie reason. In the present case, as has been noted above, the Revenue has never stated thatcertificate of quality ought to be rejected or is defective in any manner. This being the case, it is clear that the entire chemical analysis of the imported goods done by the Department was ultra vires Section 18(b) of the Customs Act.Clearly the samples drawn by the Inspector in the present case, have been drawn contrary to the express provisions of IS 436. On this count also, the samples being drawn not in accordance with law, test reports based on the same cannot be lookeds judgment has proceeded on the basis that even though the samples were drawn contrary to law, the appellants would be estopped because their representative was present when the samples were drawn and they did not object immediately. This is a completely perverse finding both on fact and law. On fact, it has been more than amply proved that no representative of the appellant was, in fact, present at the time the Customs Inspector took the samples. Shri K.M. Jani who was allegedly present not only stated that he did not represent the Clearing Agent of the appellants in that he was not their employee but also stated that he was not present when the samples were taken. In fact, therefore, there was no representative of the appellants when the samples were taken. In law equally the Tribunal ought to have realized that there can be no estoppel against law. If the law requires that something be done in a particular manner, it must be done in that manner, and if not done in that manner has no existence in the eye of law at all. The Customs Authorities are not absolved from following the law depending upon the acts of a particular assessee. Something that is illegal cannot convert itself into something legal by the act of a third person.