2023 (9) TMI 935 - AT - Customs

Dispute over export duty levy on Iron Ore, procedural irregularities noted, appeal allowed with necessary document provision

The case involved a dispute regarding the enhancement of transaction value for export duty levy on Iron Ore. The Adjudicating Authority did not follow ... Valuation of Export duty on Iron ore - enhanced rate taken up by the Customs for levy of export duty - reliance placed on the contemporaneous prices noticed during that period - process of Adjudication and appeal proceedings before the Commissioner (Appeals) have been carried out in careless manner - HELD THAT:- From the findings of the Commissioner (Appeals), it is observed that he admits that proper procedure was not followed by the Adjudicating Authority while enhancing the transaction value. It is also seen from the Table 10 of the Order-in-Original that the Adjudicating Authority has not mentioned quantity involved in each of such exports, country to which such exports are made and quantity of such exports. Unless, all these parameters are taken up together and compared, the Department cannot directly arrive at the contemporaneous value. The entire process of Adjudication and appeal proceedings before the Commissioner (Appeals) have been carried out in a very casual and careless manner. The Commissioner (Appeals) after holding that the Adjudicating Authority was in error in going with enhancement still has rejected the appeal. He has directed the Assistant Commissioner to produce the documentary evidence to the appellant now, which has no meaning after the entire process has been completed. Impugned order set aside - appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED Whether the Adjudicating Authority lawfully rejected the declared transaction value of exported iron ore and enhanced the unit price without following the procedure prescribed under Rule 8 of the Export Valuation Rules (EVR), 2007 and the Principles of Natural Justice. Whether the Adjudicating Authority applied the EVR sequentially (Rules 4-7 prior to Rule 8) and considered all relevant parameters (quantity, destination, comparable contemporaneous contracts and Bank Realisation Certificates) before resorting to loading with contemporaneous prices. Whether the Commissioner (Appeals) correctly dismissed the appeal despite finding procedural infirmities in the Adjudicating Authority's assessment and whether remand or other corrective relief was appropriate. Whether failure to provide the documents/evidence relied upon by the Department (shipping bills, invoices, contracts, BRCs) to the exporter before finalizing assessment constituted legal error warranting interference. 2. ISSUE-WISE DETAILED ANALYSIS Issue A - Procedural requirements under Rule 8 EVR, 2007 and Principles of Natural Justice Legal framework: Rule 8(1) & (2) of EVR, 2007 prescribes conditions and procedure where the declared transaction value is doubted, including issuing a query, specifying reasons in writing, seeking further information and granting personal hearing before rejecting declared value. Principles of Natural Justice require notice of case and disclosure of material relied upon for adverse conclusions. Precedent Treatment: No earlier authorities were invoked in the judgment; the Court relies on statutory procedure and principles of natural justice as guiding legal standards. Interpretation and reasoning: The Commissioner (Appeals) found that the Adjudicating Authority doubted the declared unit price but did not comply with Rule 8's procedural safeguards (no query memo, no specific reasons in writing, no opportunity for hearing to challenge contemporaneous evidence). The Tribunal reiterates that rejection of declared price without following the prescribed procedure leaves the assessment legally untenable. Ratio vs. Obiter: Ratio - adherence to Rule 8's procedural steps is mandatory before rejecting declared transaction value; failure to follow them renders enhancement invalid. Observational reasoning - provision of relied documents is characterized as a legal requirement essential to fair adjudication. Conclusion: The Adjudicating Authority's rejection of the declared unit price without following Rule 8 and without providing relied-upon evidence violated procedural mandates and Principles of Natural Justice; such rejection cannot stand. Issue B - Sequential application of EVR (Rules 4-7 prior to Rule 8) and use of contemporaneous prices Legal framework: EVR contemplates a sequential application of valuation rules - Rules 4 through 7 should be applied to arrive at transaction value; Rule 8 (use of contemporaneous values or other bases) is a residual measure only after preceding rules fail to yield value. Precedent Treatment: The judgment does not cite authority distinguishing or following earlier cases; it applies statutory sequencing as a normative requirement. Interpretation and reasoning: The Adjudicating Authority applied contemporaneous contract/export prices (Rule 8 approach) without first demonstrating the inapplicability or failure of Rules 4-7. Further, the contemporaneous pricing table lacked material comparative parameters such as quantities, destination countries and BRCs, preventing meaningful parity analysis. The Tribunal notes that contemporaneous loading would have been supportable only if comparability (quantity, quality, destination, contract date) were established and disclosed to the exporter. Ratio vs. Obiter: Ratio - Rule 8 is applicable only after sequential application of Rules 4-7; contemporaneous value loading requires full comparability and disclosure. Obiter - specific deficiencies in the table (omitted quantities/destinations) are cited as factual shortcomings supporting the legal conclusion. Conclusion: The Adjudicating Authority erred in resorting to contemporaneous values under Rule 8 without first following Rules 4-7 and without establishing or disclosing required comparability parameters; the enhanced value is therefore unsustainable. Issue C - Failure to call for Bank Realisation Certificates (BRCs) and other exporter evidence Legal framework: Transaction value under section 14 (referenced in the proceedings) is the value realized as per the commercial invoice and actual realisation (BRC). Procedural fairness requires consideration of BRCs and giving the exporter opportunity to place such documents when the declared price is disputed. Precedent Treatment: No precedents cited; the determination rests on statutory concept of transaction value and procedural fairness. Interpretation and reasoning: The Adjudicating Authority did not call for BRCs to verify actual realisation; the exporter was not put on notice of grounds for enhancement, undermining the Department's ability to justify loading and the exporter's ability to rebut. The Commissioner (Appeals) observed that it was erroneous to expect the exporter to produce all evidence before being notified of the grounds for enhancement. Ratio vs. Obiter: Ratio - when declared value is questioned, authorities must seek and consider BRCs and relevant documentary evidence, and must put the exporter on notice to allow response. Obiter - the observation that after-the-fact disclosure (post finalization) is meaningless reinforces the necessity of contemporaneous disclosure. Conclusion: Failure to seek and consider BRCs and failure to notify specific grounds deprived the exporter of a fair opportunity and vitiated the enhancement. Issue D - Correctness of Commissioner (Appeals) action in dismissing appeal despite noting Adjudicating Authority's error Legal framework: Appellate authority must adjudicate merits consistent with law and remedy procedural or substantive errors; power to remand may be limited by statute but appellate determination must accord with law. Precedent Treatment: No remand precedents discussed; the Commissioner (Appeals) observed inability to remand but declined relief on merits; Tribunal examines propriety of that outcome. Interpretation and reasoning: Commissioner (Appeals) correctly identified procedural failures but dismissed the appeal on merits while directing that the Department provide the relied-upon documents to the exporter. The Tribunal finds the appeal dismissal inconsistent with the Commissioner's own findings that the Adjudicating Authority failed to follow Rule 8 and Principles of Natural Justice; given these failures, the appellate dismissal was not tenable. Remand was considered but Commissioner stated lack of power; the Tribunal therefore exercises appellate power to set aside the impugned order and allow reliefs. Ratio vs. Obiter: Ratio - an appellate authority cannot dismiss a challenge where the lower authority's assessment is procedurally defective; appropriate corrective relief is required. Obiter - direction to provide documents after finalization is of no remedial value. Conclusion: The Commissioner (Appeals) erred in dismissing the appeal despite recognizing fatal procedural defects; the Tribunal sets aside the appellate order and allows the appeals with consequential reliefs. Final Disposition (as concluded by The Tribunal) The enhancement of transaction value is set aside for failure to follow Rule 8 EVR, the sequential statutory valuation scheme (Rules 4-7 before Rule 8), failure to consider BRCs and failure to provide relied-upon material to the exporter. The impugned appellate order is set aside and the appeals are allowed with consequential reliefs as per law; the Department is directed to furnish the documents relied upon if further proceedings are required, subject to applicable legal limits.