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CESTAT Bangalore Upholds JSW Steel’s Exemption Claim: Importance of Proper Sampling Procedures in Customs Coal Imports
Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 12.06.2026

CESTAT Bangalore Upholds JSW Steel’s Exemption Claim: Importance of Proper Sampling Procedures in Customs Coal Imports

This Short Article has been prepared & written by Advocate Ravi Shekhar Jha-Delhi High Court, New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com .

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Bangalore recently delivered a significant order in the case of JSW Steel Ltd. concerning the classification, sampling, and exemption benefits for imported coal. This article provides a detailed overview of the case, the legal arguments, and the implications for importers and customs authorities.

Background of the Case

JSW Steel Ltd. imported coal and classified it under Customs Tariff Heading (CTH) 2701 1910, claiming exemption benefits under Notification No. 21/2002-CUS and Notification No. 20/2006-CUS. The customs authorities denied these benefits, confirming a duty demand of Rs. 6,24,76,922. JSW Steel appealed, and the Commissioner (Appeals) ruled in their favor, referencing the Supreme Court’s decision in Tata Chemicals Ltd. vs. CC (Preventive), Jamnagar. The Revenue then appealed this decision to the CESTAT.

Core Legal Issues

1. Sampling Procedure Dispute
- Customs Argument: The Revenue argued that the coal samples were drawn in the presence of JSW Steel’s Custom House Agent and that the sampling procedure had not been objected to until after the test report was received. They also noted that the Central Institute of Mining and Fuel Research (CIMFR), a government institute, conducted the testing, and that the exemption notifications did not specify a particular testing procedure.
- JSW Steel’s Argument: JSW Steel contended that the sampling was not conducted as per IS Standard 436, which is critical for accurate technical assessment. They also highlighted that their request for retesting was ignored and that the test results from the load port and CIMFR did not match.
2. Legal Precedent: Tata Chemicals Ltd.

The Commissioner (Appeals) and the Tribunal relied heavily on the Supreme Court’s ruling in Tata Chemicals Ltd., which established that if no specific testing method is prescribed, the Indian Standard (IS 436) must be followed. The Supreme Court held that samples not drawn according to IS 436 are invalid for legal and technical assessment.

Tribunal’s Findings
1. Sampling Must Follow IS 436:
  - The Tribunal confirmed that IS 436 is the applicable standard for sampling coal imports when no other method is specified.
  - Samples not drawn as per IS 436 cannot be relied upon for customs assessment or denial of exemption benefits.
2. No Estoppel Against Law:
  - The Tribunal rejected the argument that JSW Steel’s acceptance of previous sampling methods or the presence of their agent could validate an improper procedure. Legal requirements must be strictly followed, and there can be no estoppel against the law.
3. Retesting Requests Are Justified:
  - The Tribunal found that JSW Steel’s request for retesting was reasonable, especially since the test report was communicated after eight months and there was a discrepancy between the load port and CIMFR results.
4. Revenue’s Appeal Dismissed:
  - The Tribunal upheld the Commissioner (Appeals)’s order, dismissing the Revenue’s appeal and confirming JSW Steel’s entitlement to the exemption benefits.
Implications for Importers and Customs Authorities
- Strict Adherence to Sampling Standards: Importers and customs officials must ensure that sampling procedures strictly follow IS 436 or any other prescribed standard to avoid disputes and ensure fair assessment.
- Importance of Timely Communication: Delays in communicating test results can undermine the credibility of the assessment and justify requests for retesting.
- Legal Precedents Matter: The Tata Chemicals Ltd. decision remains a cornerstone for similar disputes, reinforcing the need for procedural compliance.
Conclusion

The CESTAT Bangalore’s order in favor of JSW Steel Ltd. underscores the importance of following prescribed sampling procedures and respecting legal precedents in customs assessments. This case serves as a reminder that procedural lapses can invalidate technical findings and that both importers and authorities must prioritize compliance to ensure fair outcomes.

Connected Matter

Supreme Court Ruled on Legality of Sampling Procedures and Acceptance of Independent Certification in Coking Coal Imports

Source: CESTAT Bangalore

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June 12, 2026
CESTAT Chennai Sets Aside Customs Duty Demand on Imported Coal
ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 11.03.2026

CESTAT Chennai Sets Aside Customs Duty Demand on Imported Coal

Adv Ravi Shekhar Jha

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 id 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. JSW Steel Ltd. vs. Commissioner of Customs, Trichy Commissionerate (Customs Appeal No. 42447 of 2015). The case revolved around the denial of exemption under Notification No. 21/2002-Cus (as amended by Notification No. 12/2012-Cus) for coal imported by M/s. JSW Steel Ltd. under Bill of Entry No. 5919332 dated 06.02.2012. 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. The company declared the goods as “Coking Coal” under CTH 2701 19 10 and claimed exemption from Basic Customs Duty under Sl. No. 68 of Notification No. 21/2002-Cus. The goods were provisionally assessed under Section 18 of the Customs Act, 1962, pending test reports.

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. Based on the CSN values from the Customs Laboratory and MR values from the load port surveyor’s certificate, the Assistant Commissioner finalized the provisional assessments and extended the exemption.

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. The SCN alleged that MR had not been ascertained from the Customs laboratory and that CSN values from the load port reports were unreliable. 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. 5919332. Based on this report, the Commissioner denied exemption for this specific Bill of Entry while dropping proceedings for the remaining five.

Aggrieved by the order, M/s. JSW Steel Ltd. filed an appeal before the CESTAT.

Key Issues for Determination 

The Tribunal identified two primary issues for consideration:
1. Whether the impugned order traveled beyond the scope of the Show Cause Notice by relying upon CIMFR test reports not referred to therein. 
2. Whether the coal imported under Bill of Entry No. 5919332 satisfied the conditions of exemption under Notification No. 21/2002-Cus as amended. 
Tribunal’s Observations and Findings 

1. Scope of the Show Cause Notice 

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. Upon examining the SCN, the Tribunal noted that it did not reference the CIMFR reports, which were obtained after the issuance of the notice. The impugned order, however, relied heavily on these reports to deny the exemption.

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. 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.

2. Satisfaction of Exemption Conditions 

The exemption under Notification No. 21/2002-Cus required the coal to meet two conditions:
- Mean Reflectance (MR) above 0.60.
- Crucible Swelling Number (CSN) of 1 or above.
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.
- A Test Report from the Chemical Examiner, Customs House, Chennai, reporting CSN of 3.
Both reports confirmed that the imported coal met the exemption criteria. 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. The Tribunal acknowledged the appellant’s argument that coal properties deteriorate over time due to oxidation and weathering, which could affect the CSN values. 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.

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. Furthermore, the Tribunal highlighted that the burden of proof for claiming exemption lies with the importer, and M/s. JSW Steel Ltd. had successfully discharged this burden through valid contemporaneous test reports.

Based on these findings, the Tribunal held that the coal imported under Bill of Entry No. 5919332 satisfied the exemption conditions under Notification No. 21/2002-Cus as amended.

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. Additionally, the Tribunal found that the imported coal met the exemption conditions based on contemporaneous evidence. Consequently, the Tribunal set aside the Order-in-Original No. 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.

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
1. 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.
2. 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.
3. 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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March 11, 2026