2025 (11) TMI 1458 - AT - Customs

Export iron ore value to follow Section 14 transaction value, not recomputed using moisture tests; refund reassessment allowed

CESTAT Hyderabad held that export value of iron ore must be determined under Section 14 of the Customs Act read with the Valuation Rules, based on ... Determination of export duty, taking into account the moisture content - Export of iron ore - Fe content and moisture - Rate of duty Per Dry Metric Tonne (PDMT) - gross violation of the provisions of Section 14 and the Export Valuation Rules - final price is to be determined based on the test report of CIQ and based on the terms and conditions of the contract which provides for determination of weight on DMT basis, the final quantity has been arrived - HELD THAT:- It is found that the export value has to be determined in terms of Section 14 of the Customs Act read with Customs Valuation Rules and wherever the transaction value is doubted, due process is to be undertaken for deciding as to what should be the value for the purpose the computing the customs duty. Admittedly, no grounds have been adduced for discarding the transaction value as reflected in terms of the final invoices submitted and supported by BRC nor there is any evidence for receiving any additional remittance towards the said consignment except for the moisture content, which was found on a higher side by CRCL than what has been declared. It is an admitted fact that in terms of contract various parameters were to be determined on the basis of CIQ report and thereafter only the final price was to be finalised and accordingly the invoices were issued and payment were received. Therefore, there was no ground for the Adjudicating Authority to discard the transaction value in the first place. Moreover, we find that the whole re-computation of the value is based on the variation in the moisture content and he has followed the moisture content as determined by CRCL at load port. This issue has been adequately and extensively discussed by this Bench in the case of Bonai Industries, Rungta Mines, Feegrade Vs CC [2024 (6) TMI 1016 - CESTAT HYDERABAD]and Vibhutigadda Mines Vs CC [2025 (5) TMI 171 - CESTAT HYDERABAD], wherein, under the identical situation, in so far as the issue of taking moisture content based on CRCL report was concerned, the Tribunal, has, interalia, held that the moisture content arrived at by CIQ has to be applied for arriving at the DMT quantity and for raising invoices. The order of the Commissioner (Appeals) is not sustainable and therefore set aside. However, in order to decide the exact quantum of refund, based on finalisation of the provisional assessment as per transaction value, the matter is remanded back to the Original Adjudication Authority, who shall accept the transaction value as evidenced by the final invoice and duly supported by BRC and thereafter re-workout the admissible refund. Appeal allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether the Adjudicating Authority was justified in re-computing export duty liability by recalculating Dry Metric Tonne (DMT) quantity using moisture content determined by CRCL at load port contrary to the transaction value evidenced by final invoices and Bank Realisation Certificate (BRC). 2. Whether transaction value as per Section 14 of the Customs Act read with Customs Valuation Rules and Export Valuation Rules can be discarded or reworked where invoices and BRCs reflect finalisation of price based on CIQ-determined parameters under contractual terms. 3. Whether, for the purpose of determining export duty (ad valorem), the value to be taken is the transaction value actually realised in invoices/BRC or a value recomputed on the basis of laboratory moisture determinations post-export. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of re-computation of DMT quantity using CRCL moisture report Legal framework: Section 14 of the Customs Act and the Customs Valuation Rules govern determination of export value; Export Valuation Rules and relevant circulars (notably Circular No. 12/2014 dated 17.11.2014, as invoked) set parameters for transaction value and its acceptance. Contractual terms provided for final price determination based on CIQ report and DMT basis. Precedent Treatment: The Adjudicating Authority applied CRCL report to re-compute moisture and thereby DMT. The Tribunal relied on its prior decisions (Bonai Industries, Rungta Mines, Feegrade and Vibhutigadda Mines) holding that CIQ-determined moisture must be applied for arriving at DMT and invoices. Appellant relied on Eicher Tractors v. Commissioner of Customs and Commissioner of Customs, Goa v. VGM Exports to support transaction value principle. Interpretation and reasoning: The Court emphasized that where contracts prescribe that quality/parameters (including moisture/Fe) and consequently price are to be determined by CIQ report and the export invoice and consideration are finally fixed and realised on that basis, the transaction value reflected in invoices and supported by BRC cannot be discarded without grounds. The Tribunal found no evidence of additional remittance or other consideration beyond the invoiced amount; the transaction value was not doubted in the Order-in-Original. The re-computation undertaken solely on the basis of a CRCL moisture report at load port, when the contract and CIQ report governed final price and invoices, was held to be impermissible. The Tribunal reasoned that for ad valorem export duty the value actually realised for the net DMT shown in invoices must be taken; altering the duty base by reworking DMT on CRCL moisture effectively disregards the transaction value agreed and realised between parties. Ratio vs. Obiter: Ratio - Where contractual terms provide final price determination based on CIQ-determined parameters and the exporter has issued invoices and realised payment accordingly (evidenced by BRC), the transaction value cannot be discarded or re-computed by relying on a different laboratory (CRCL) moisture determination absent cogent reasons to doubt the transaction value. Obiter - Observations on circulars and subsidiary procedural aspects not essential to the core holding. Conclusions: Re-computation of export duty by recalculating DMT using CRCL moisture content was not justified in the absence of any reason to doubt the transaction value reflected in invoices and supported by BRC and where the contract/CIQ basis governed finalisation of price. The Adjudicating Authority's action in reworking value solely on CRCL moisture was set aside. Issue 2 - Applicability and primacy of transaction value where invoices and BRC reflect CIQ-based finalisation Legal framework: Section 14 (transaction value) and Customs Valuation Rules require valuation based on transaction value unless exceptions apply. Export duty assessed on ad valorem basis depends on declared/exported value. Export Valuation Rules and authoritative circulars govern the manner of accepting transaction value. Precedent Treatment: The Tribunal applied its earlier decisions (Bonai Industries, Rungta Mines, Feegrade; Vibhutigadda Mines) which held that where invoices reduce quantity to DMT based on CIQ moisture and only that realised value is received, the transaction value requirement is met and must be accepted for export duty computation. Appellant cited Eicher Tractors and VGM Exports in support of transaction value principle; the Tribunal's approach is consistent with those authorities insofar as transaction value is to be respected where not doubted. Interpretation and reasoning: The Tribunal found that the appellants followed contractual method - CIQ-determined moisture used to reduce gross quantity to DMT, invoices prepared on that basis, and consideration realised accordingly. Since the transaction value was neither doubted nor shown to be supplemented by additional remittance, the legal framework mandates acceptance of that transaction value for duty assessment. The Tribunal stressed that export duty being ad valorem makes the actual value realised the determinative factor irrespective of alternative theoretical DMT quantities calculated from other laboratories' moisture reports. Ratio vs. Obiter: Ratio - Where transaction value is established by final invoices and supported by BRC, and no grounds for doubting the transaction value exist, that value governs export duty even if alternative laboratory analyses (e.g., CRCL) report different moisture; the value cannot be recomputed to reflect such alternative moisture findings. Obiter - Extended commentary on policy or administrative practice beyond the direct application. Conclusions: Transaction value as evidenced by final invoice and BRC - determined and crystallised pursuant to contractual CIQ parameters - must be accepted for computation of export duty. The impugned recalculation disregarding that transaction value cannot be sustained. Issue 3 - Remedy and procedural disposition where provisional assessment was finalised contrary to transaction value Legal framework: Principles of provisional assessment finalisation require acceptance of transaction value when properly evidenced; remedial powers permit remand for recalculation of refunds or duties consistent with law. Precedent Treatment: Tribunal relied on its earlier orders providing similar remand directions where original authorities misapplied moisture determinations contrary to transaction value and CIQ-based invoicing. Interpretation and reasoning: Having held that transaction value must be accepted, the Tribunal remanded the matter to the Original Adjudicating Authority to accept invoices and BRC as evidence of transaction value and to re-compute admissible refund consequential to finalisation of the provisional assessment in accordance with that value. The remand preserves administrative fact-finding and computation while correcting the legal error of substituting CRCL moisture for CIQ-based invoiced quantity. Ratio vs. Obiter: Ratio - Appropriate remedy for an erroneous re-computation based on an impermissible disregard of transaction value is remand to the original authority to rework refunds/duties accepting transaction value as evidenced. Obiter - Specific directions on timelines or computation formulas beyond accepting transaction value are ancillary. Conclusions: The Commissioner (Appeals) order upholding the re-computation was set aside; matter remanded to the Adjudicating Authority to accept transaction value evidenced by final invoice and BRC and to re-calculate admissible refund accordingly.