2023 (12) TMI 963 - AT - Customs

Iron ore export duty valuation based on Fe content requires proper sampling under Section 144 with exporter knowledge

CESTAT Kolkata allowed the appeal regarding valuation of iron ore fines based on Fe content for export duty purposes. The tribunal held that the CRCL test ... Valuation of iron ore fines - ‘Fe’ content - Value of iron ore fines was to be determined on the basis of Certificate of Inspection and Quality (CIQ) analysis - ‘Fe’ content in iron ore fines exported - consequent determination of value for purposes of levy of export duty - whether the CRCL report can be accepted and the assessment of the export goods carried out based thereon? - HELD THAT:- In the present case, it nowhere comes on record that the sample of Customs House Laboratory were drawn in strict adherence to the BIS Standards, as also contained in the Board’s Circular. Moreover, the sample is alleged to be drawn by the Customs Officer at the back of the appellant and without the knowledge of the exporter, which is against the statutory mandates provided under Section 144 of the Customs Act, 1962 - Since the report of the Customs Lab is cryptic and incomplete without showing the BIS Standard and protocol and method of testing, it is noticed that the appellant sought to cross examine the Customs Officer who had drawn the sample and the Chemical Examiner who had tested the sample. It is thus evident that the CRCL test report is not only cryptic, but it is also not clear whether the same was in accordance with the prescribed standards. The fact that the sample was tested nearly two months after its drawal and had not been stored in accordance with the prescribed conditions, the reliability of the test result, therefore is not only doubtful but also unreliable - It is also noted that the Board’s Circular- 12/2014-Cus clearly states that the sample is to be drawn in accordance with the BIS standards. The coordinate bench of the Tribunal in M/s. Vedanta Ltd. Vs. Commissioner of Customs (Preventive) Bhubeneshwar [2023 (8) TMI 947 - CESTAT KOLKATA] had held in that case that the samples were required to be tested as early as possible and had held the inordinate delay of over a hundred days as unforgivable. There are no legal substance in the order of the learned Commissioner (Appeals), and are of the view that the learned Commissioner was in error of law in passing the impugned judgement - appeal allowed. Issues Involved:1. Determination of Iron Content for Export Duty2. Admissibility of CRCL Test Report3. Adherence to BIS Standards for Sample Testing4. Valuation of Iron Ore Fines on Wet Metric Ton (WMT) BasisSummary:1. Determination of Iron Content for Export DutyThe dispute revolves around the 'Fe' content in iron ore fines exported by the appellant and the consequent determination of value for export duty. The appellant contended that the iron content was below 58%, classifying the product under heading 26011142, attracting NIL rate of duty as per Notification No. 15/2016-Cus. The proper officer, however, based the assessment on the CRCL report, which indicated an iron content of 62.4%, thereby attracting a 30% export duty.2. Admissibility of CRCL Test ReportThe appellant challenged the CRCL report on two grounds: a) The report was not supplied to them during the first round of litigation, depriving them of a fair opportunity to contest it.b) The samples were not drawn and tested according to the procedure set out in BS1405-2010. The tribunal noted that the CRCL report was not disclosed until the second round of litigation, making it unreliable.3. Adherence to BIS Standards for Sample TestingThe appellant argued that the CRCL samples were not drawn in accordance with BIS standards, which require specific procedures for sample preparation and moisture determination. The tribunal noted discrepancies in the CRCL's adherence to these standards, including improper storage of samples and delayed testing, which compromised the reliability of the results.4. Valuation of Iron Ore Fines on Wet Metric Ton (WMT) BasisThe tribunal referred to the apex court's decision in Union of India Vs. Gangadhar Narsinghdas Agarwal, which held that the assessment of iron ore fines should be on a WMT basis. The tribunal found that the load port and discharge port test reports, which adhered to BIS standards, indicated iron content below 58%. Therefore, the CRCL report, which assessed iron content on a dry basis, was deemed invalid for determining export duty.Conclusion:The tribunal set aside the order of the learned Commissioner (Appeals) and allowed the appeal, emphasizing the need for adherence to BIS standards and the WMT basis for determining iron content in iron ore fines for export duty purposes.