SC to decide if coke breeze imports qualify for duty exemption for steelmakers

NEW DELHI/MUMBAI: The Supreme Court on Wednesday took up a long-running tax dispute over a key steelmaking input, with steelmakers such as Jindal Steel (formerly Jindal Steel & Power Ltd) challenging the customs department on whether coke breeze qualifies for a duty exemption available to metallurgical coke.

A bench of Justices P.S. Narasimha and Alok Aradhe agreed to hear the case and settle the core question, a ruling that will determine how such materials are treated for tax purposes and could have cost implications for steelmakers.

“Appeal admitted; hearing expedited,” the court remarked.

The dispute

The case stems from conflicting rulings by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in 2025, leaving the tax treatment of coke breeze unsettled.

Coke is a carbon-rich fuel made from coal and is essential for steel production. Metallurgical coke is the larger, strong form used directly in blast furnaces to produce iron, acting as both fuel and a reducing agent. Coke breeze consists of smaller particles formed during processing. It cannot be used directly in furnaces, but is used in the sintering process to prepare iron ore, where it also acts as a fuel and supports efficient steelmaking.

The dispute turns on classification. Metallurgical coke is fully exempt from customs duty under Notification No. 12/2012-Cus, while coke breeze is not clearly mentioned and typically attracts a basic customs duty of around 5%, leading tax authorities to treat it as a separate taxable product.

In February 2025, the Bangalore bench of CESTAT ruled against companies including Mukand Ltd, Kalyani Steels Ltd, Kirloskar Ferrous Industries Ltd, and SLR Metaliks Ltd, holding that coke breeze and metallurgical coke are distinct products and denying the exemption. It upheld a customs duty demand of over ₹6.7 crore, taking a strict view that the benefit applies only to metallurgical coke.

According to lawyers, if the ruling goes against steelmakers, it could have significant ramifications, especially for past transactions, potentially exposing companies to fresh tax demands and scrutiny.

“The ruling could trigger a fresh wave of assessments and litigation across the industry, with tax authorities likely to reopen or scrutinise past transactions within statutory limits. This may lead to show cause notices, reassessment proceedings, and disputes over classification, valuation and penalties.” said Tushar Kumar, Advocate, Supreme Court of India.

However, in November 2025, the Hyderabad bench of CESTAT, in a case involving Jindal Steel & Power Ltd, reached the opposite conclusion. It held that coke breeze, though smaller in size, is used in the steelmaking process and should qualify for the exemption based on its use. The bench noted that coke breeze is used in sintering, a step in steelmaking, where it acts as both a fuel and a reducing agent, and said the exemption should depend on how the material is used since the law does not clearly define metallurgical coke.

Before the matter reached the Supreme Court, the government in January 2026 eased import rules for low-ash metallurgical coke, including coke breeze, shifting these imports from restricted to free under a 3 January notification, allowing easier imports and lowering costs for steelmakers.

At the same time, it imposed a provisional anti-dumping duty ranging from $60.87 to $130.66 per tonne on low-ash metallurgical coke imports for six months to support the domestic industry and protect local producers from cheaper imports.

Low-ash metallurgical coke is a key input in steelmaking and accounts for about 35 to 40% of production costs, making its pricing and availability critical for the industry.