Coal Classification - Matter goes to Larger Bench
WHEN the then Hon'ble Finance Minister in his budget speech for 2012-13 said "Domestic producers of thermal power have been under stress because of high prices of coal. I propose to ease the situation by providing full exemption from basic customs duty and a concessional CVD of 1 per cent to Steam coal for a period of two years till March 31, 2014. Full exemption from basic duty is also being provided to the following fuels for power generation", he perhaps might not have realized that he is actually triggering the stress for the Industry in the next few months and "easing the situation" is never going to be a reality.
The premier investigating agencies started to believe that the thermal power producers of this country, both in public and private sector have been evading crores of Rupees of customs duty by irregularly taking benefit of the exemption announced by the Finance Minister by mis-classifying their coal as Steam coal while it merits classification as Bituminous coal. They started protecting the revenue for the Government.
When the matter reached Tribunal, the Bangalore Bench in Coastal Energy Pvt Ltd & Others Vs CCE 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 Vs CCE - , the Tribunal ordered pre-deposit of duty and interest.
The Ahmedabad Bench of the Tribunal had also ordered pre-deposit - and even an appeal by one of the parties to the High Court was not successful. - 2014-TIOL-2207-HC-AHM-CUS.
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 - and Maheswari Brothers and placed the matter before the President for constitution of Larger Bench.
Now that Chennai Bench has referred the matter to the Larger Bench, will other appellants in the queue get waiver of pre-deposit?
Whatever may be the decision of the Larger Bench, the aggrieved party will go in for an appeal. All this because somebody could not draft a Notification properly to give effect to the intention of the Finance Minister. When the intention was to help thermal power industry, the exemption could have been given to any type of coal used by a thermal power plant for generation of electricity.
It seems the classification by the department largely depends on rate of duty more than anything else. The classification of disputed coal was accepted as Steam Coal by the department when duty rates were initially same for both types of coal. Disputes started after the 2012-13 budget (17th March 2012) when exemption was granted to Steam Coal. When parity is restored for both types of coal from 01.03.2013, it seems the classification, as Steam Coal is not disputed by the department for the imports made after 01.03.2013. So, beware, your classification is not dependent on the actual product, but solely on the rate of duty.
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