2026-VIL-436-CESTAT-CHE-CU
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CUSTOMS CESTAT Cases

Customs - Scope of Show Cause Notice, Substitution of ground in SCN - Denial of benefit of exemption under Notification No. 21/2002-Cus dated 01.03.2002 as amended by Notification No. 12/2012-Cus dated 17.03.2012 in respect of import of coal - Show Cause Notice (SCN) proposing to deny the benefit on the grounds that Mean Reflectance had not been ascertained by a departmental laboratory and that the load port survey reports were unreliable based on certain geological texts - Whether the adjudicating authority traveled beyond the scope of the Show Cause Notice by confirming a demand based on evidentiary material not disclosed in the original notice – HELD - The impugned order is legally unsustainable as it exceeded the jurisdiction defined by the Show Cause Notice. It is a settled proposition of law that the SCN constitutes the foundation of the proceedings and circumscribes the permissible scope of adjudication. The jurisdictional validity of any order must be tested strictly against the allegations and grounds contained in the notice - In this case, the decisive evidentiary foundation, the research institute's report, did not form part of the SCN and the notice did not allege that subsequent scientific testing demonstrated non-fulfillment of the notification's conditions. The adjudicating authority cannot retrospectively expand or substitute the foundation of the SCN with new grounds during adjudication - By substituting the original grounds in the SCN with reliance upon CIMFR reports, the adjudicating authority has travelled beyond the scope of the notice. The reliance on CIMFR test reports not referred to in the SCN renders the impugned order legally unsustainable - the impugned order is set aside to the extent it denies exemption and confirms demand in respect of the relevant Bill of Entry, along with the interest demand – The appeal is allowed - Customs Exemption - Coking Coal - Contemporaneous Evidence vs. Belated Testing - The importer claimed exemption for coal supported by load port certificates and a Customs House Chemical Examiner’s report showing both Mean Reflectance (MR) and Crucible Swelling Number (CSN) values above the required thresholds of 0.60 and 1 respectively - Department sought to deny the exemption based on a re-test of remnant samples conducted more than two years later which reported a CSN value below the threshold - Whether the imported coal satisfied the conditions of the exemption notification and whether a belated test report can override contemporaneous evidence of the goods' condition at the time of import – HELD - The imported coal satisfied the conditions for exemption as the contemporaneous evidence established compliance with the prescribed parameters. It is well-settled that the classification and assessment of goods must be determined based on their condition at the time of import. Technical literature and judicial precedents confirm that coal is a hygroscopic material subject to oxidation and weathering, which causes the deterioration of caking properties like CSN over time. A test conducted more than two years after the samples were drawn, without evidence of preservation in specialized conditions to prevent oxidation, cannot displace contemporaneous reports. Since the Chemical Examiner’s initial report and the load port certificates were not rejected on any cogent or scientific grounds, they remain valid evidence of the goods' state at import. The department's preference for a belated test report over contemporaneous evidence is arbitrary. As the duty demand is set aside, the consequential interest demand also cannot survive.
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