ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 11.03.2026
CESTAT Chennai Sets Aside Customs Duty Demand on Imported Coal
This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email idΒ intelconsul@gmail.com or on his Mobile +91-9999005379.
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Chennai, recently delivered a significant judgment in the case of M/s. β JSW Steel Ltd. vs. Commissioner of Customs, Trichy Commissionerate (Customs Appeal No. β 42447 of 2015). β The case revolved around the denial of exemption under Notification No. β 21/2002-Cus (as amended by Notification No. β 12/2012-Cus) for coal imported by M/s. β JSW Steel Ltd. under Bill of Entry No. β 5919332 dated 06.02.2012. β The Tribunal ruled in favor of the appellant, setting aside the impugned order and granting consequential relief.
Background of the Case
M/s. JSW Steel Ltd., engaged in the manufacture of iron and steel, imported Hard Coking Coal of Australian origin through Karaikal Port under six Bills of Entry between 30.08.2011 and 28.03.2012. β The company declared the goods as “Coking Coal” under CTH 2701 19 10 and claimed exemption from Basic Customs Duty under Sl. β No. 68 of Notification No. β 21/2002-Cus. The goods were provisionally assessed under Section 18 of the Customs Act, 1962, pending test reports. β
Samples of the imported coal were sent to the Chemical Examiner at the Custom House, Chennai, who reported Crucible Swelling Number (CSN) above 1 but did not report Mean Reflectance (MR) due to the lack of testing facilities. β Based on the CSN values from the Customs Laboratory and MR values from the load port surveyorβs certificate, the Assistant Commissioner finalized the provisional assessments and extended the exemption. β
However, the Commissioner of Customs issued a Show Cause Notice (SCN) on 13.06.2013, proposing denial of exemption for all six Bills of Entry. β The SCN alleged that MR had not been ascertained from the Customs laboratory and that CSN values from the load port reports were unreliable. β Subsequently, remnant samples were sent to the Central Institute of Mining and Fuel Research (CIMFR), Dhanbad, which reported a CSN of 0.5 and MR of 1.59 for Bill of Entry No. β 5919332. Based on this report, the Commissioner denied exemption for this specific Bill of Entry while dropping proceedings for the remaining five. β
Aggrieved by the order, M/s. β JSW Steel Ltd. filed an appeal before the CESTAT. β
Key Issues for Determination β
The Tribunal identified two primary issues for consideration:
- Whether the impugned order traveled beyond the scope of the Show Cause Notice by relying upon CIMFR test reports not referred to therein. β
- Whether the coal imported under Bill of Entry No. β 5919332 satisfied the conditions of exemption under Notification No. β 21/2002-Cus as amended. β
Tribunalβs Observations and Findings β
1. Scope of the Show Cause Notice β
The Tribunal emphasized that adjudication must strictly adhere to the allegations and grounds contained in the Show Cause Notice, as it forms the foundation of the proceedings. β Upon examining the SCN, the Tribunal noted that it did not reference the CIMFR reports, which were obtained after the issuance of the notice. β The impugned order, however, relied heavily on these reports to deny the exemption. β
The Tribunal referred to several landmark judgments, including CCE v. Ballarpur Industries Ltd. (2007), CC v. Toyo Engineering India Ltd. (2006), and Caprihans India Ltd. v. CCE (2015), which establish that adjudication cannot introduce new grounds or evidence not mentioned in the SCN. β The Tribunal held that the reliance on CIMFR reports, which were not part of the SCN, constituted a jurisdictional defect and rendered the impugned order legally unsustainable. β
2. Satisfaction of Exemption Conditions β
The exemption under Notification No. β 21/2002-Cus required the coal to meet two conditions:
- Mean Reflectance (MR) above 0.60. β
- Crucible Swelling Number (CSN) of 1 or above. β
The Tribunal noted that contemporaneous evidence at the time of import included:
- A Certificate of Quality from ACIRL Quality Testing Services Pty Ltd, reporting CSN of 1.5 and MR of 1.75. β
- A Test Report from the Chemical Examiner, Customs House, Chennai, reporting CSN of 3. β
Both reports confirmed that the imported coal met the exemption criteria. β The Tribunal observed that the CIMFR report, which reported a CSN of 0.5, was conducted more than two years after the samples were drawn. β The Tribunal acknowledged the appellantβs argument that coal properties deteriorate over time due to oxidation and weathering, which could affect the CSN values. β It also noted that the storage conditions of the remnant samples during this period were not recorded, raising doubts about the reliability of the CIMFR report. β
The Tribunal referred to judgments such as Dunlop India Ltd. v. Union of India (1983), Ruchi Soya Industries (2006), and Godrej Industries Ltd. (2017), which establish that goods must be assessed in the condition they were imported and that belated testing cannot override contemporaneous evidence. β Furthermore, the Tribunal highlighted that the burden of proof for claiming exemption lies with the importer, and M/s. β JSW Steel Ltd. had successfully discharged this burden through valid contemporaneous test reports. β
Based on these findings, the Tribunal held that the coal imported under Bill of Entry No. β 5919332 satisfied the exemption conditions under Notification No. β 21/2002-Cus as amended. β
Final Decision
The CESTAT concluded that the impugned order had traveled beyond the scope of the Show Cause Notice by relying on CIMFR reports not referred to therein. β Additionally, the Tribunal found that the imported coal met the exemption conditions based on contemporaneous evidence. β Consequently, the Tribunal set aside the Order-in-Original No. β 01/2015 dated 10.09.2015 to the extent it denied exemption and confirmed the demand for differential duty and interest under Section 28 and Section 28AA of the Customs Act, 1962. β
The appeal filed by M/s. JSW Steel Ltd. was allowed, and the company was granted consequential relief in accordance with the law.
Key Takeaways
- Adjudication Must Stay Within the Scope of the SCN: The Tribunal reaffirmed the principle that adjudication cannot introduce new grounds or evidence not mentioned in the Show Cause Notice. β
- Contemporaneous Evidence Prevails: The decision highlights the importance of assessing goods based on their condition at the time of import and relying on contemporaneous evidence over belated test reports. β
- Burden of Proof: While the burden of proving eligibility for exemption lies with the importer, valid contemporaneous evidence can effectively discharge this burden.
Source: CESTAT Chennai
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