This is the department's appeal against the above captioned impugned order dt. 31.5.1996 of the Collector (Appeals) Ahmedabad praying for setting aside the same.
1. The facts of the case are the respondents imported 10.450 M.T. of Metallurgical Coke per M.V. AN-XIN-JIANG at port of Navlakhi Port and cleared the same under Bill of Entry Nos. F-12 to F-21 dt. 19.6.1991, valued at Rs. 23,87,912.82 CIF and the assessable value of Rs. 24,95,602/-. Under the each bill of entry 1045 M.T. were cleared. The "Coke with phosphorus content" of 0.035% or below, when imported into India for manufacture of Pig-iron was exempted of the Customs duty as in excess of 25% ad valorem, vide Notification No. 35/90-Customs dated 20.3.1990 as amended. The whole of Auxiliary duty of Customs was exempted on Sr. No. 17, Chapter No. 27. Coke with Phosphorus content of 0.035% or below for manufacture of Pig-iron, vide Notification dated 14.3.1991 under No. 23/91-Customs, as amended. The whole of additional duty of customs was also exempted on 27.04 Coke, vide Notification No.36/90-Customs dated 20.3.1990. The importers paid customs import duty at the rate of 40% ad valorem for Rs. 9,98,241/-, without availing the partial exemption, but availed full exemption of Auxiliary duty and Additional duty of Customs. The Bills of Entry referred above were assessed provisionally on 23.6.1991, for Chemical test result of the samples drawn. The National Test House, Alipore, Calcutta, under Test Certificate No. CO(c) 91/9 dt. 16.3.1992 reported Phosphorus content by Mass=0.041 per cent, which exceeded the permissible limit of below 0.035% for granting exemption from the whole of Auxiliary duty of Customs by mass. The Central fuel Research Institute Dhanbad, Bihar under Analysis report No. TU/AR/221/91 dated 27.9.1991, reported Phosphorus (on Coke) 0.023%. Therefore, auxiliary duty of Customs was leviable and the goods was not eligible to the exemption. On the final assessment of the bills of entry dt. 19.6.1991 the importers were liable to pay the said duty. The Inspector of Customs Navlakhi issued demand show cause notice dt. 31.3.1992 demanding auxiliary duty at 50% ad valorem for Rs. 12,47,801/- on each of the 10 bills of entry and the total amount of duty for Rs. 1,24,78,010/-. A corrigendum was issued on 10.4.1992 to the original demand show cause notice incorporating the chemical test result and the circumstances under which the auxiliary duty was demanded. The copy of the test report of National Test House, Alipore, Calcutta was also supplied with the corrigendum to the show cause notice to the importers. The respondents replied the same on 25.5.1992. The personal hearing was held on 22.1.1993 and the respondents along with the Counsel Shri Paresh V. Sheth appeared and cross examined the witnesses and made their final submissions on 26.2.1994. After perusing the same and hearing arguments the Assistant Collector Jamnagar has confirmed the demand under the show cause notice under Section 28(2) of the Customs Act. Aggrieved by this order the Respondents preferred an appeal to -the Collector of Customs Ahmedabad, which was allowed on 14.9.1994. Hence this appeal.
2. In support to the appeal, the Ld. DR has contended that the Commissioner (Appeals) has entertained the additional evidences, the Chartered Accountant's certificate, without giving reasonable opportunity to examine the same or to cross examine the witness under Rule 5(3)(a) of the Custom appeal Rules. The balance of convenience is also not properly appreciated. It is a well-settled principle of assessment that the test report on the representative samples drawn by the proper officer of Customs from the Import consignment tested through recognised laboratory can be considered valid for the purpose of assessment. Out of the said five test reports, only two reports relate to the test on the representative samples drawn by the proper officer of Customs under Section 144 of the Customs Act. The test reports based on the samples drawn behind the back of the proper officer cannot be relied upon. The first test report result from Central Fuel Research Institute, Dhanbad was not conclusive and without evidentiary value in judicial proceedings even if, the phosphorus content indicated therein were reported to be more than the limit prescribed in the exemption notification. The reliance of the test report of National Test House Alipore, Calcutta by the Assistant Commissioner is proper. The test result on the samples drawn by the respondent association tested through the same laboratory also indicates the same remarks as in "red cloth packet". The test result of Dhanbad Laboratory in respect of samples drawn by the Respondent is also duly affixed with the same stamp and remarks as available on the test result of the samples drawn by the department. Thus, samples drawn by the Respondents are not having any evidentiary value and the test report in that regard cannot be accepted, as a valid one. Notification should be interpreted on the basis of the language used therein and not on the basis of the intendment or by supplying words or ignoring them, for which there is no scope for any addition to its language or for taking away anything which is specifically provided in such notification. The words "air dried basis" are not available in the exemption notification No. 23/91-Cus. dt. 14.3.1991. The cumulative reading of the wordings of the exemption notification reveals that the mass of coke imported into India should consist of phosphorus content of 0.035% or below. The percentage of phosphorus content into imported consignment should be tested on as received basis. There is no proper appreciation of the cross examination of the Inspector N.C. Bilandani, C.H. Navlakhi and Shri B.N. Ghosh, Chemist of National Test House Alipore Calcutta. The appreciation of the Commissioner (Appeals) regarding the procedure of drawing samples from their evidence is not correct. Samples testing of method of drawing samples not to be held defective without any evidence. Shri B.N. Ghosh has specifically stated in the cross examination that the samples were tested as per ISI specification 1350 part 5 19079, whereas the Commissioner (Appeals) has upheld the contention of the appellant that it is not so. The evidence of Shri Ghosh regarding the condition in which the samples were received is also not properly appreciated, as there is no admission by him that the laboratory received the samples in unsealed condition. In the Judgement in the case of Madhu Wool Spinning Mills v. Union of India in 1989 ECR 531 of Bombay High Court, the samples were drawn from bale No. 12 and 34, out of 37 bales imported/ which was woollen hosiery. The test result in both the cases were found the wool content more than 50% as provided under relevant exemption Notification. The third sample was drawn from bale No. 19 by the department based on the tariff advise, and its test result on core-drilling test was found below 50% of the wool. The first 2 test result of the samples drawn by the department was conclusive, and the third test was un-warranted. So this judgement was on different footing, which is not applicable to the instant case. The first test result received from Central Fuel Research Institute, Dhanbad was not indicating proximate analysis, the same was affixed with certain remarks that "this is not a certificate and not valid to be produced in a Court of Law". So it cannot be relied upon.
When the first test result has no evidentiary value, the test from another standard and recognised laboratory was essential, and so the department got tested the samples from the National Test House, Alipore Calcutta whose report was in detail indicating the proximate analysis as well as other various details. The levy of Customs and exemption from Customs duty is applicable on the goods imported into India. The SGS certificate from Australia was based on the sample which was not drawn by the proper officer of Customs and were also not duly sealed by Indian Customs. The test report from a foreign country cannot be relied upon. The impugned order relying on such report is not proper and correct. The exemption notification is not interpreted in true spirit and the evidence is not properly appreciated, and the impugned order hamper the well settled principles of assessment as framed by law from time to time, and is based on assumption and presumption and deserves to be set aside.
3. The Ld. Sr. Counsel appearing for the respondent has strongly supported the impugned order, and has analysed the whole case in the light of the material available in the case. The respondent is an association incorporated since 1972, and have tried to solve the problems of the members with the different Government authorities, and it deals with the import of the raw material from the concerned companies at the competitive rates, and distributes to the members at a landing cost + overseas expenses. The motive is not to make any profit out of the material supplied to the member. The said association cannot be said to have any motive of getting any illegal benefit. The very fact that they entered into contract with mines sent S.A. Australia to get Metallurgical Coke with the Phosphorus content less than 0.35% is supported by the suppliers test report, from a well known laboratory, universally accepted as reliable one, of the samples obtained by the supplier out of the goods imported, showing the result of the phosphorus content less than 0.035%, supports the aim of the association. It is only after satisfying, the association has imported 1045 M.T. of Metallurgical coke from mines sent S.A. Australia. The Inspector of Customs has drawn the samples on 26.6.1991, from the imported goods during the course of unloading process only which commenced on 16.6.1991 and completed on 5.7.1991. The Inspector of Customs had drawn 4 samples totally weighing approximately 2 kgs., out of which one sample was sent to National Test House Alipore Calcutta, and another to Central Fuel Research Institute Dhanbad, for determination of the Phosphorus content in the metallurgical coke. The authorised representative of the respondent had also drawn the sample, and sent to the same laboratories and institute. The test result of the samples drawn by the respondents dt. 11.10.1991 and 24.7.1991 of National Test House Calcutta, and Central Fuel Research Institute, Dhanbad respectively showed the phosphorus content in the sample is less than 0.035%, according to which the respondents can claim the benefit of notification No. 23/91 dt. 14.3.1991, so far as the payment of auxiliary duty of customs is concerned. The show cause notice based on the test report dt. 16.3.1992 of the National Test House Alipore, Calcutta shows the abnormal delay of testing the samples received in July 1991, the said report was received by the concerned Inspector in September, 1991, but have not finalised assessment, and demand if any was liable to be raised within 6 months from the date of the receipt of the said results. The test result from Dhanbad, CFRI received by the Inspector was brushed aside without immediately acting upon it as he was duty bound. There was no reason as to why the test result of CFRI Dhanbad on the samples supplied by the department was not acceptable to the department. No evidence is produced to show that the test was defective. In the absence of it, not taking action immediately on the said report goes against the department. The time limit for issue of show cause notice starts from the date of test result is finalised. The show cause notice now issued without any allegation of suppression of facts etc. is clearly barred by time. When there are two contrary reports on the same samples the report which is favourable to the party should be accepted, and not the other way, that is favourable to the department. So on this count the demand made under the show cause cannot be upheld. The respondents cannot be denied the benefit of notification No. 23/91 dt. 14.3.1991 when the test report on the samples drawn by the Inspector of Customs shows that phosphorus content less than 0.035%. The test report given by the National Test House and CFRI, Dhanbad on the samples supplied by the respondents and the test result given by the CFRI, Dhanbad and the samples supplied by the department are only the reliable result. The 16.3.1992 test report of the Nation1 Test House Alipore Calcutta does not pertain to the samples drawn by the Inspector of Customs out of imported coke, in view of the inconsistent evidence of the Inspector and Chemical Examiner, Shri B.N.Ghosh in the cross examination regarding the seal of the samples and its condition when tested. The Inspector has admitted the samples were sent in the sealed condition but the Chemical examiner Shri Ghosh has admitted that it was not sealed. So the samples are not identified by them as one taken out of the imported coke. The Inspector of Customs who has taken the samples, has admitted that there is no prescribed procedure for drawing sample in the cross examination, which clearly shows his ignorance of the prescribed procedure in ISI 436 Pt-II 1965, which is not followed by him. Shri B.N. Ghosh who has tested the samples and the National Test House, Alipore Calcutta has avoided to answer important questions as evident from his cross examination. He has no comments to offer to the quantity of samples as per the ISI specification. He has not explained the standard procedure for testing the hygroscopic substances. He has relied on the Indian standard specification prescribed in ISI 1350 Part-5 1979 to conduct the test.
4. According to it for the purpose of preparation of samples for test, the method of sampling prescribed is IS-436 Part-II 1965 is to be followed. In para 3.2.1 it is prescribed that the samples so taken shall be received in sealed containers, and shall consist of analysis of the sample of about 300 gms. of air dried coal or coke and special moisture samples of 1 kg. of coal or 2.5 kg. of coke. So from the above it is clear no test can be done unless the samples are as prescribed above. The samples should be received in sealed containers only, and for determining moisture contents in the coke, the minimum requirement is of 2.5 kg. in duplicate. The chemical examiner has not cared to look into the quantity of samples sent. In the instant case the Inspector of Customs has clearly stated that the samples were sent in cloth bag only, and approximately 500 gms. to 1 kg. quantity were sent. In view of this position on the test report of Mr. B.N. Ghosh cannot be relied upon to prove the phosphorus content. While taking the sampling Inspector has not followed the procedure as prescribed in IS 436 (part-II) 1965. He has sent his samples for laboratory testing on 26.6.1991 that is before completion of unloading process which were over on 5.7.1991. So the sample sent cannot be representative sample of entire cargo weighing 10450 M.T. Result and such sample cannot be relied upon. The test report obtained during the 1991 has to be considered in this case as the respondent has imported the metallurgical coke only in that year, and not either prior to or subsequent to it. The affidavit of the Secretary of the association of the respondent filed, clarifying the test certificates of National Test House, Calcutta, Central Fuel Research Institute Dhanbad are based on the samples drawn by the respondents, and also the test report and the certificate supplied by the supplier from Australia, supports the case of the respondent that the metallurgical coke imported by it has the phosphorus contents, less than 0.035%. Even the test result based on the samples given by the department supports it. As against the solitary test report of National Test House Alipore, Calcutta on which show cause notice is issued, there are 4 test reports supporting the case of the respondents.
5. Further the test report given by Shri B.N. Ghosh challenged by confronting him in the cross examination with the certificate of Prototype Development and Training Centre, a Govt. of India undertaking at Rajkot, according to which the test report issued by him with the total percentage of Volatile matter, Ash and fix carbon is less than 100%, for which Shri B.N. Ghosh has replied that he has no comments to offer, and thereby he has accepted the certificate. He has not denied the same or clarified it. This shows that the test report is not correct and unreliable. The Chemical Examiner has accepted the fact that to analyse the sample containing moisture content it should be dried and then only it can be tested. So the report issued by him without drying the sample is not correct. So the test result is defective and unreliable.
6. (a) 1985 (sic) (25) ECR 531 of Bombay High Court in the case of Madhu Woollen Spinning Mills v. Union of India is relied upon in support of the contention that merely because different analysis show different conclusion, it is not permissible to select that conclusion which suits authority to levy duty.
(b) in the case of Prasad Spinners Pvt. Ltd. v. Union of India of the Bombay High Court is cited in support of the contention that the department cannot take into consideration only the favourable report because one of the several result is not in favour of the assessee. When there are 5 test reports on the imported coke about the percentage of phosphorus content therein, 4 reports cannot be ignored to issue the show cause notice. As per the settled law the test in favour of the respondents has to prevail and when there are two possible views then the view in favour of the party shall be accepted as per the decision in the case of Vegetable Products Ltd. reported in 1988 LTR 196 (SC), which is binding. The affidavit filed by the secretary of the respondent is not challenged in the cross examination by the department, and the contents therein has to be accepted that the test result given by the National Test House Alipore Calcutta and CFRI Dhanbad to the respondent on the samples drawn from the imported Metallurgical Coke only. The above case laws are considered in the below paras.
7. The point for consideration is whether the impugned order is required to be set aside? We answer it in the....
8. Perused the Show Cause Notice dt. 31.3.1992 and its corrigendum and the Reply of the Respondent and the test certificates of SGS Australia (P) Ltd. dt. 6.6.1991, CFRI Dhanbad dt. 24.7.1991 in favour of the respondents, and its certificate dt. 25.7.1991 issued to the Inspector Customs, and the test certificates of National Test House, Alipore Calcutta the bills of entry of metallurgical coke 10 in number dt.
15.6.1991, and the contract with minement USA dt. 7.3.1991, and the cross examination of the witnesses, and the written submissions, and the orders of the lower authorities, and the appeal memorandum and the copy of the Notification No. 23/91 dt. 14.3.1991 and No. 267/92-Cus dt.
3.9.1992. Also perused Section 144 of the Customs Act and relevant pages of IS 1350 (Part 5, 1979 and of IS: 436 Part II) 1965 regarding the method for sampling of coal and coke revised, regarding sampling of coke of 1976 and 79, and also the affidavit dt. 26.2.1994 of Ashwin Mehta an Honorary Secretary of the Respondents. The effect of phosphorus content on the composition of coke is a material factor to the case as per the finding given by the Collector in the impugned order, for the availment of the benefit of concessional notification for auxiliary duty in the imported metallurgical coke. Section 144 of the Customs Act deals with the power to take samples. According to it, the proper officer, that is the officer of the Customs, who is assigned with the function by the Board or the Commissioner of Customs Act, may on the entry or clearance of any goods or at any time while such goods are being based to (sic) the customs area, take samples of such goods in the presence of the owner or his representative thereof, for examination or testing or for certain (sic), the value thereof or for any other purposes of the Act. Under para 2.1 of IS 436 (Part-II) of 1965 regarding the manner of taking sample of the coke it is observed that "2.1 General-samples collected from the surface of the coke in piles, bins or wagons are in general, unreliable, because of size segregation. Coke shall be sampled, whenever, possible, in motion, while it is being loaded into or unloaded from barges or trucks or when it is being discharged from supply bings.
9. The show cause notice dt. 31.3.1992 issued in this case in para 4 demands duty on the grounds that the test result of the metallurgical coke of the National Test House Alipore, Calcutta dt. 16.3.1992 shows the phosphorus contents at 0.041% among the percentage of the contents, and the metallurgical coke in the bill of entry No. F. 12 to F. 21 dt.
19.6.1991 does not appear to be containing phosphorus not exceeding 0.035%, and the benefit of 50% Auxiliary duty under Notification No.23/91 Customs dt. 14.3.1991 is not available to the respondent. Notice is issued under Section 28 of the Customs Act calling upon to explain why it should not be recovered. In response to that, the respondents in the reply dt. 25.5.1992 has denied the contents of the said notice and asserted that the benefit of the Notification No. 23/91 dt. 14.3.1991 as amended has rightly been applied for availing of the concession provided thereunder. The certificate No. 002291 of National Test House Alipore Calcutta vide letter No. CO(c) 91/7 dt. 11.10.1991 shows the phosphorus content in the metallurgical coke involved in this case as 0.030% by mass. The report of analysis dt. 24.7.1991 of CFRI Dhanbad shows the same as 0.033%, and the certificate of quality and weight No.EP1106 dt. 6.6.1991 issued by SGS Australia Pvt. Ltd. after having analysed in accordance with International Standard Method shows the phosphorus content as 0.032%. On 16.3.1992 the Test Certificate of National Test House Alipore is issued after more than six months of the receipt of the sample on 30.7.1991, after the subsequent correspondence ending with letter dt. 3.2.1992 received from the Inspector, Customs, Navlakhi Port. The Coke is having volatile matter which plays a great role in the context of variation in the percentage contents in the items of contents present in coke if lying exposed for a long period in a varied weather condition. The two certificates issued by National Test House Alipore Calcutta with an interval of 5 months in this case, when compared, shows the variation in the percentage in the items of contents, due to the factor like human eyes reading and weather condition. Some degree of allowance has to be given. The percentage favourable to the respondents has to be applied. There are 5 test reports in this case out of which only one belatedly issued certificate shows the phosphorus content at 0.041% in the metallurgical coke, and it cannot be considered for levying auxiliary duty. Merely because of the different conclusion, it is not permissible to select the conclusion which suits the authority to levy the duty. So the demand has to be withdrawn. Section 28 of the Customs Act, applies only to the completed assessment and not to the provisional one as per clause (3)(b). On the receipt of the test report, and after giving reasonable opportunity to the party to submit its case on the result of the test report, the final assessment has to be made. So on this count also the notice is not tenable the demand is unjustified, and is liable to be withdrawn. In the alternative, the cross examination of concerned Director Chemical National Test House Alipore Calcutta and Inspector of Customs Navlakhi Port, is sought for and an opportunity to convince in support of the case is also requested.
10. Section 28 of the Customs Act deals with the issue of notice for payment of duties not levied, short levied etc. According to it, a proper officer may in the case of any import made by any individual for his personal use or by governmental, or by Educational or Charitable Institution or hospital within one year and any other case within six months, from the relevant date serve notice on the person chargeable with the duty requiring him to show cause why he should not pay amount specified in this notice. Under Clause (2) the proper officer after considering the presentation, if any of the person on whom the notice is served, shall determine the amount of duty from such person, and thereupon such person shall pay the amount. Under Clause (3) relevant date is explained under sub-clause (b) as in a case where duty is provisionally assessed under Section 18, the date of adjustment of duty after the final assessment thereof. Section 18 of the Customs Act, deals with provisional assessment of duty. Notwithstanding anything contained in this Act, but without prejudice to the provisions contained in Section 46, the proper officer, when the importer or exporter is unable to produce any document or furnish any information necessary for the assessment of duty on the imported goods or where the proper officer deems it necessary to subject any imported goods or export goods to any chemical test or other test for the assessment of duty thereon, or where the proper officer deems it necessary to make further inquiry for assessing the duty even after the importer or exporter has produced all the necessary document and furnished full information for the assessment of duty, he may direct that the duty leviable on such goods may pending completion of the test or inquiry or production of document or furnishing information, be assessed provisionally if the importer or exporter furnishes such security deemed fit for the payment of deficiency, if any, between the duty finally assessed and the duty provisionally assessed. Sub-clause (2)(a) deals with the adjustment of the amount paid in the case of goods cleared for home consumption or exportation against the duty finally assessed.
11. So the reading of the above provisions, clearly supports the contention of the respondents in this case it is complied. From the show cause notice it is clear that the respondent has paid the customs basic duty and claimed exemption under the Notification No. 23/91 dt.
14.3.1991 of the payment of auxiliary duty. So under such circumstance question of adjustment doesn't arise because, the duty paid, and duty claimed are different. An opportunity is given to the respondents and is heard. So the requirement of Section 18(3)(b) are complied in this case. The contention of the respondent contrary to it cannot be accepted and it is rejected. The respondent has challenged the demand on the grounds of time bar, as beyond six months from the date of receipt of the Test Report from Dhanbad. The department has relied on 16.3.1992 test Report of Calcutta National Test House, and for finalising the assessment by issue of show cause notice on 31.3.1992.
Section 28(1)(a) prescribed one year in the case of any import made by any individual for his personal use or by Government or by any educational research or charitable institution or hospital within one year (b) in any other case, six months from relevant date. Under Section 28(3)(b) of the Customs Act, relevant date in the case of provisional assessment under Section 18 is the date of adjustment of duty after the final assessment thereof, (c) in any other case, the date of payment of duty. Even, as per respondent, the department has received Test Report from Dhanbad in September 1991. The show cause notice is dated 31.3.1992. So the notice is issued in six months period. Even otherwise, respondent is an association, importing with no profit and (no) loss basis can be charitable institution to help its members for which one year is prescribed under Section 28(3)(a) of the Customs Act, Notice is issued on 31.3.1992, even if it is beyond six months on as contended by the respondent. Department's case is on 16.3.1992 Calcutta National Test House Report was received, and Notice is issued dated 31.3.1992. Respondents have paid, on provisional assessment, Customs import duty on 23.6.1991. The notice is issued on 31.3.1992. Even as per it is within one year as per Section 28(3)(a) of the Act. So on any count, demand is in time. The contention of the Respondent in this regard, cannot be upheld. It is rejected.
12. The appellant's claim regarding prejudice by allowing additional evidence viz. C.A. certificate about the financial position of respondent, in making pre-deposit to hear the appeal. The discussion in para 10 and 11 in the light of the submission made in paras 6 and 7 of the impugned order shows that there was a modification of earlier order under the discretionary power to grant stay order before hearing the appeal. So the question of cross examination of the another of C.A.Certificate, and causing prejudice does not arise. It appears from the record that there was any sort of objection from the department, in opposing the allowing of additional evidence, and it was ignored by the appellate authority. In the absence of it, the ground now urged in that regard does not hold good.
13. Now coming to the merits of the case, the entire case depends upon the result of the various test reports either to demand duty or to avail exemption benefit of the Notification No. 23/91-Customs dated 14.3.1991 regarding auxiliary duty of customs. As per the facts of the case, material available on record, and the observation in the order of the lower authority, only 16.3.1992 Test Report based on the sample sent by the Inspector of Customs in July 1991 shows phosphorus content of 0.041% in the metallurgical coke imported by the respondent Association, which deprives the respondent of the benefit of exemption under notification No. 23/91-Cus dated 14.3.1991, which is upheld in the order-in-original, as it complies all the requirement of procedure prescribed for taking samples, and testing under the literature available in this case. The impugned order has objected to it, on the question of sample sent when was not as prescribed, and long delay in testing it, and the correction of Test Result in the light of cross examination of sender of samples and testing authority and also failure of Assistant Collector in not getting clarification and additional information on the test report of Dhanbad on the sample sent by Inspector of Customs, and to act upon it, mislead of ignoring it.
Impugned order has also dealt with the other factors viz. respondent's bona fides in importing the tested goods, and putting a condition in the contract with specification regarding the nature of goods, and the service motive, with no profit and (no) loss basis, in importing for the benefit of members, and the favourable report of the respondent, and on these counts, balance of convenience weighs in the favour of respondent in the light of case laws. It has to be seen how far it is acceptable.
14. As per Section 144 of the Customs Act, proper officer may take sample of goods imported, while it passing through customs area, in the presence of owner of goods for testing. But there is no provision how the owner of goods should take sample of such goods for his testing apart from the power of proper officer. So in view of this provision respondent taking sample without the knowledge of proper officer, does not hold good. The test result of Dhanbad and Calcutta Laboratories, with respect to the imported goods in favour of Respondent on its sample cannot be considered to decide the issue involved. In the absence of test result of the above laboratories, on the sample of the proper officer, and SGS report Australia which is based on the sample drawn by customs officer are the only available matters to decide this case. Out of this, the test report of CFRI Dhanbad dated 25.7.1991, showing phosphorus, on coke as 0.023% on the sample of proper officer, suffers from the defect of below minimum requirement for a representative sample as prescribed in IS specification. The test report of Dhanbad to both the parties also bear an endorsement in rubber stamp that "This is not a certificate and not valid for the purpose of contracts and cannot be produced on a court of law". So in view of this, Dhanbad Test Report cannot be relied upon for both sides.
The question of getting clarification and additional information by customs Inspector to fulfill the requirement of IS procedure of taking samples and testing about proximate analysis as per the literature produced in the case, as observed in the impugned order does not arise.
Both reports of Dhanbad loses its value.
15. Now the report of SGS Australia Pvt. Ltd. in the form of certificates of quantity and weight of 6.6.1991, and the report of National Test House Alipore Calcutta dated 16.3.1992 on the sample of department are the remaining material. First priority is for 16.3.1992 report. As per 26.6.1991 letter of Inspector of Customs Navlakhi to Chemical examiner, NTH Alipore Calcutta shows the sample drawn "from mixed P.O." in answerto Batch No. of containers, it is loose, and quantity it is approximately 2 kgs. It is under NO. TM No. 12 dated 26.6.1991,16.3.1992 report, in reply to it, describes sample received on 30.7.1991 in a cloth bag described as metallurgical coke, without mentioning the quantity of sample received, and the (4) in the report nature of coke is non coking. The test is limited for carbon items only as .required by the department i.e.
(a) Moisture Content per cent by Mass : 2.9 (b) Ash content per cent by mass : 11.4 (c) Volatile matter content, per cent by mass : 3.5 (d) Mixed Carbon content (by difference) : 82.2 (2) Calorific Value (a) Calories Per Gram : 6690 (b) B.TH.U Per Pound : 12.042 (3) Colour of Ash : Grey (4) Sulphur Total per cent by mass : 0.74 (5) Phosphorus percent by mass : 0.041 From the above, it is clear that the test report of Calcutta does not contain the quantity of sample received by Customs Inspector. Now what is the supporting and evidence is available on facts, is required to be seen. Cross Examination of Customs Inspector who has drawn the samples of imported metallurgical coke discloses that each sample drawn was from 500 gms to 1 kg. by mixing up the lot from different heaps and was different size and weight. It was packed in a cloth bag and sealed.
Regarding the specific system in drawing the sample of metallurgical coke, when it is unloaded from the heaps, he has replied that as per his knowledge goes to bulk cargo the samples are taken as above. So from the above, it is clear that regarding the quantity of sample drawn he is not definite. It ranges from 500 gms to 1 kg. As already observed above Dhanbad CFRI has endorsed that 500 gms. (1 /2 kg.), quantity of sample is below the minimum requirement for testing the representative sample as prescribed in I.S. specification. So B.N. Ghosh Scientist, SC (Chem) Madras, the then Assistant Director in NTH Alipore Calcutta in his cross examination has stated that due to delay he cannot say the exact quantity of sample he tested. But, unless it is more than 500 gms. sample will not be tested. From this it can be referred quantity of sample was above 500 gms. and below 1 kg.
16. From the Indian Standard Method of Coal and Coke IS:436 (Part II) 1965 under clause 2 sampling of coke in 2:1 is dealt with. According to it samples collected from the source of coke in piles, bins or wagons are in general unreliable, because of size segregation. Coke shall be sampled, wherever possible in motion while it is being loaded into or unloaded from wagon, barges, trucks, which is being discharged from supply bins. Under 2.2 quantity represented-A separate gross sample shall be taken for each 250 tonnes or fraction thereof or, in case of larger tonnages, for such quantities as may be agreed upon. Each lot of coke arising from a different source or known to be different quantity or size shall be sampled separately under clause 2.3 read with 2.4.1 under Table IMinimum weight of gross sample for coke is prescribed. As per the clause 2.3 the minimum weight of increments shall be 1 kg. (the actual increment has often to be considerably greater and the increment shall be of equal weight. It is essential that the sample should be taken by not less than the stated number of increments regularly and systematically collected, so that the entire quantity of coke sampled is represented proportionately in the gross samples. Table under clause is as follows: Size Grade of Coke Normal Minimum Number Minimum Weight Size MM of Increments of Gross Sample Hard Coke-large 150 to 38 50 240 Hard Coke rubble 38 to 25 50 120 Hard Coke Smothy 35 to 12.5 50 120 Under IS 1350 (Part V)-1979 Indian Standard Method of Test for coal and coke under Clause 3.1 Method shall be as prescribed in IS : 436 (Part I/Sec D-1964 for coal and IS (Part II)-1965 for coke. 3.2 - sampling.
3.2.0 General: Shall be followed in the preparation of samples sent to the laboratory. Besides the laboratory samples to be used for the analysis of ecal and coke, special samples are recommended for moisture.
3.2.1: The sample prepared in accordance with the above shall be received in sealed containers and shall consist of the following: (a) Analysis sample of about 300 gms. of air dried coal or coke, ground to pass 212 micron IS Sieve; and (b) Special moisture sample of 1 kg. of same coal or 2.5 kg. of coke, crushed to pass the square mesh screen conforming to designation 12.5 mm (C) of IS 460-1962 to be sent in duplicate.
3.2.2.: Where air-drying has been adopted in the preparation of the samples the percentage loss of moisture in this operation shall be recorded on the label together with the method of sampling used.
3.2.3: Sample received in the laboratory if already, ground to pass 212 micron IS Sieve shall be re-sieved to verify that all the material passes through this sieve and then air dried for 24 hours and mixed and bottled as above. Should a sample of coal or coke to be transported to any distance between the point of preparation and the laboratory under conditions in which it may be shaken down and may cause segregation to any degree, the entire contents of the bottle shall be re-mixed before analytical work is started. The use of mechanical devices is recommended.
17. Cross examination of Shri B.N. Ghosh, the then Assistant Director of NTH, Alipore Calcutta discloses that he tested on receive basis as per 1979 IS 1350 Part V. Result will be same, if it is tested even on air dry basis. Procedure for testing phosphorus content in metallurgical coke is as per IS 1350 Part V 1979 and it was adopted packing material cloth bag affects moisture content. For chemical analysis of moisture IS 436 Part II (1965) 1350 Part 1979) is adopted.
Both samples of customs and party were tested by same procedure. But sample of Customs was on received basis, and of party on dry basis.
Hence there was difference certificate dated 10.8.1992 issued by the director of Prototype Development and Training Centre. National Industries Corporation Ltd. Government of India undertaking shows that the test result 16.3.1992 of Shri B.N. Ghosh of NTH, Alipore Calcutta is not as per the specific standard, since the sum total of percentage of volatile metal ash and fix carbon is not 100%, when it was confronted in cross examination, Shri B.N. Ghosh has replied no comments to officer.
18. So from the above material on record, it is amply clear that 16.3.82 Test Result of National Test House Alipore, Calcutta suffers from various infirmities as can be gathered from paras 4, 5 and 6 and it cannot be safely accepted, in this case. As observed in the impugned order, there is an abnormal delay in testing the sample sent by Inspector of Customs in June, 1991 in March, 1992 for nearly 9 months, which is not properly explained delay for correspondence by the department is not satisfactory ground. As held in the impugned order even the drawal of sample by the Customs Inspector of the quantity of 500 gms. to 1 kg. out of 10450 metric ton of imported metallurgical coke is not in accordance with the specified procedure as narrated in detail in para 5 and 6. There is a lot of variation. Without replying by the National Test House, Alipore Calcutta to the Customs Inspector, about this lacunae, the test is conducted, limiting to carbon items only as required by the department. For Testing moisture content and volatile content, the quantity of sample in different increments, was required more for 10450 Metric Ton of metallurgical coke. The certificate of director of National Small Industries Corporation Ltd. a Government of India undertaking has opined that the report is not as per specified standard on the ground that since the sum total of percentage of volatile metal, ash and fix carbon is not 100% and it is accepted by Shri B.N. Ghosh Assistant Director, who conducted the test.
Even sending of sample is also not proper as cloth bag absorbs water content in the sample.- There is variation of results by Calcutta Laboratory even though same procedure was adopted for testing the sample of both sides. So, as contended by respondent, some margin has got to be given in test result. The 16.3.82 Test report which has indicated 0.041% of Phosphorus content in the metallurgical coke imported by respondent is not correct and acceptable, as held by the appellate authority in the impugned order for the reasons discussed above.
19. The sale contract of the Respondent with Minsment SA dt. 17.3.1991 describing commodity, and specification in clause 1 and 2, and satisfaction of meeting the above requirement of quantity, and weight, as per clause 7.2 and 10, on the sample drawn by SGS Honkong Inspector of Customs there which was analysed in accordance with international standard method, giving the analysis of total moisture on received basis, and rest dry basis, with the result of 0.030% of phosphorus present in coke, coupled with the affidavit of the secretary of Respondent, which stood unrebutted and the keen interest in getting the sample tested in India, and the efforts of the respondent association with no profit and (no) loss benefit, as observed in the impugned order, showing their bona fides in the transaction speaks of the charitable nature and genuine concern. As observed by both the lower authorities there are four test results of the imported coke, but none of them are shown to have been conducted as per the specified procedure of withdrawing sample and testing. So, as held by the appellate authority, Four results are in favour of respondent, with one belated result on the sample not properly drawn, as specified in the literature by the Customs Inspector Navalkhi, in favour of the department, the balance of convenience must really so in favour of the Respondent.
20. Regarding the case laws, even if the contention of appellant is upheld, only the case of Mis. Madhu Woollen Spinning Mills v. Union of India 1985 (sic) (25) ECR 531 cannot be applied as it differs on facts as contended. But, decision of Gujarat High Court in the case of Standard Dychem in 1980 E.L.T. 181 helps in this case, regarding SGS reports, which is brushed aside in the order-in-original arbitrarily as held in the impugned order. The contention of appellant that such a view may become precedent in future cannot be upheld, as each case depends upon the facts and circumstances prevailing there. So the appeal grounds are not convincing to set under the impugned order for the reasons discussed above. Point raised is answered in the negative.
Hence we pass the following order.
For the reasons discussed above, the appeal cannot be allowed, and it is rejected.