The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the customs department cannot deny exemption benefits based on laboratory test reports generated from coal samples that were not drawn in accordance with the mandatory sampling procedure prescribed under Indian Standard IS-436.

The Bench of P.A. Augustian (Judicial Member) and R. Bhagya Devi (Technical Member) upheld the order of the Commissioner (Appeals), which had granted the benefit of concessional customs duty notifications to the importer and set aside a customs duty demand exceeding ₹6.24 crore.

The dispute arose after the importer brought coking coal into India and classified the goods under the relevant Customs Tariff Heading while claiming the benefit of exemption notifications that provided concessional customs duty rates.

Following import, customs authorities drew samples of the coal and sent them for testing to the Central Institute of Mining and Fuel Research (CIMFR), Dhanbad. Based on the test results, the department concluded that the imported coal did not satisfy the conditions prescribed under the exemption notifications and consequently denied the concession, resulting in a demand of ₹6.24 crore.

The importer challenged the demand before the Commissioner (Appeals), who ruled in its favour. Aggrieved by that decision, the Revenue approached the Tribunal.

The department argued that the sampling process had been conducted in the presence of the importer’s customs broker and that objections to the sampling procedure were raised only after the adverse test results were received.

It further contended that the exemption notifications did not prescribe any specific testing methodology and that the tests had been conducted by a reputed government laboratory. According to the Revenue, the importer had accepted similar testing procedures in earlier cases and therefore could not subsequently challenge the validity of the sampling process.

The department also opposed the importer’s request for retesting, arguing that the request was made several months after the original test report and lacked sufficient justification.

The importer maintained that the assessment had initially been provisional and that the samples were not collected in accordance with IS-436, the recognised Indian Standard governing coal sampling procedures.

It was also argued that the quality certificate issued at the load port by an independent testing agency differed from the findings recorded by CIMFR. Consequently, the importer had requested authorities to consider the load-port test results and permit independent retesting.

The importer relied heavily on the Supreme Court’s judgment in Tata Chemicals Ltd. v. Commissioner of Customs (Preventive), Jamnagar, which held that where samples are not drawn in accordance with prescribed standards, the resulting test reports cannot be relied upon for assessment purposes.

The Tribunal noted that the Commissioner (Appeals) had correctly relied upon the Supreme Court’s ruling in Tata Chemicals. The Supreme Court had categorically held that where statutory or recognised standards prescribe a particular method of sampling, authorities must strictly follow that procedure.

Referring to the apex court’s observations, the Tribunal reiterated that if the law requires a particular act to be performed in a specified manner, it must be performed in that manner alone. Any deviation renders the resulting exercise legally unsustainable.

The Tribunal found no merit in the Revenue’s argument that the importer’s representative was present during sampling or that earlier acceptance of similar procedures could validate an otherwise defective process. It observed that there can be no estoppel against law and procedural violations cannot be cured merely because a party did not object at the earliest opportunity.

The Tribunal also agreed with the Commissioner (Appeals) that the department ought to have considered the importer’s request for retesting, particularly because there were material differences between the load-port test report and the laboratory report relied upon by customs authorities.

Rejecting the Revenue’s contention that the retesting request was belated, the Bench observed that the test report itself had been communicated to the importer only after a substantial delay. Therefore, the request for retesting could not be dismissed merely on the ground of delay.

Concluding that the department had failed to dislodge the findings recorded by the Commissioner (Appeals), the Tribunal dismissed the appeal and upheld the grant of exemption benefits to the importer.

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