2026 (1) TMI 1024 - HC - Customs

Iron ore fines Fe content calculation on WMT versus DMT affirmed as factual basis; appeal dismissed by court

Dispute concerns whether Fe content of exported iron ore fines must be calculated on wet metric tonne (WMT) or dry metric tonne (DMT) and whether this ... Involvement of substantial questions of law or not - Requirement to consider test report of CRCL specifying Fe content of subject goods based on DMT, in deference to the report of SKM which specified the “Fe content” of the Iron Ore Fines exported contained less than 58% on the WMT basis. Involvement of Substantial questions of law or not - HELD THAT:- On analysis of evidence on record, the view of the Appellate Authority found favour with the CESTAT, being fortified by consistent view expressed by it in very many cases. The percentage of Fe content of the Iron Ore Fines exported was as per report of SKM, which examined the sample on WMT basis. For addressing the aforesaid issue(s) relevant cases decided have been followed by the CESTAT. It observed that prior to the amendment of the Customs Tariff Act, 1975, by virtue of the Finance Act, 2022 with effect from 01.05.2022, the goods exported were to be assessed on the basis of WMT. Such an opinion is supported by the principles laid down in the case of Union of India Vrs. Gangadhar Narsingdas Agrawal [1986 (4) TMI 71 - HIGH COURT OF BOMBAY], where it was held that 'Merely because in respect of moist iron ore the iron content cannot be determined directly by physical analysis this cannot lead to the result that the iron ore content cannot be determined at all or that the petitioners should be deprived of their just claim on that footing which is totally unwarranted by law.' Thus, determination of iron content of the goods exported as reflected in the Shipping Bills is to be governed by the legal position as emanating from Gangadhar Narsingdas Agrawal whereby it can be deduced that whenever any samples are tested, it has to be in the condition to which the goods are exported, i.e., in gross weight which included the moisture and other impurities. The learned Tribunal having drawn conclusion on the basis of consistent approach maintained by different Benches of the CESTAT supported by the view expressed by the High Court and the Supreme Court, there is hardly any scope for any substantial question of law to arise out of the Order of the CESTAT. Whether the learned CESTAT was justified in affirming the adaptation of the principle of calculation of Fe content in the Iron Ore Fines exported on WMT basis? - HELD THAT:- The learned Tribunal has returned the finding of fact that the Fe content of the goods described in Shipping Bill No. 9152539, dated 06.03.2021 was below 58%. Such determination was made on the basis of WMT, which attracted export duty at “NIL” rate in view of Notification No.58/2022-Cus, dated 18.11.2022 “with the classification of Iron Ore Fines under Customs Tariff Heading: 26011141”. The sample sent for testing in CRCL, Kolkata was done after a lapse of considerable number of days from collection of samples, and the moisture is subject to evaporation by efflux of time. Time elapsed between date of drawing samples and date of testing. It is further observed on analysis of Shipping Bill No.9089712, dated 03.03.2021 that there was a substantial delay of 39 days in testing the samples from the date of collection of the samples. The Fe content as per the CRCL test report was calculated after removing moisture and other impurities, i.e., on the basis of DMT. The learned Tribunal observed that the Fe content calculated on WMT basis in respect of goods described in aforesaid Shipping Bill dated 03.03.2021 was 51.97%. Therefore, it accepted the certificate issued by SKM. This Court is persuaded to believe that the question of law posed in this appeal by the Revenue for adjudication is essentially based on finding of fact and supported by well established principles as was in vogue at the relevant point of time, i.e., position prior to the Finance Act, 2022 came into force. Therefore, there arises no substantial question of law from the order of the CESTAT on the facts and in the circumstances of the case - an appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal qua the determination of any question having a relation to the rate of duty of customs or to the value of goods for the purposes of assessment, if the Court is satisfied that “the case involves a substantial question of law”. This Court does not perceive the questions of law posed by the Revenue fall within the connotation of expression “the case involves a substantial question of law”. The questions of law which are posed by the Revenue are basically based on the factual details. The determination of customs duty liability in respect of export of Iron Ore Fines, percentage of Fe content of which was calculated based on WMT as certified by SKM, does not call for determination of the question as “substantial” on the facts and in the circumstances of the case. The finding of the fact returned by the Appellate Authority is affirmed by the learned CESTAT and such finding of fact is based on appreciation of evidence on record and adaptation of consistent approach of the learned CESTAT rendered earlier in different cases. Hence, this Court desists from re-appreciating the evidence, which in its considered opinion is impermissible - This Court does not find any perversity in the concurrent finding of fact rendered by the learned CESTAT affirming the view expressed by the Appellate Authority. This Court finds no question of law much less any substantial question of law that arises for consideration. Ergo, the appeal preferred by the Revenue under Section 130 of the Customs Act, 1962, being devoid of merit, is liable to be dismissed - Appeal dismissed. Issues: (i) Whether the appeal involves a substantial question of law under Section 130 of the Customs Act, 1962 challenging the CESTAT's order; (ii) Whether the CESTAT was correct in affirming that Fe content for determination of export duty prior to 01.05.2022 is to be calculated on Wet Metric Tonne (WMT) basis and in accepting load-port/NABL private laboratory reports (SKM) and transaction value over the CRCL (DMT) test report.Issue (i): Whether the appeal involves a substantial question of law under Section 130 of the Customs Act, 1962.Analysis: The questions advanced by the Revenue principally challenge concurrent factual findings about sampling, basis of Fe calculation and acceptance of transaction value supported by invoices and bank realisation certificates. The points relied upon were either governed by settled precedent of coordinate Benches and higher courts or raised factual disputes. The statutory test for admission under Section 130 requires a debatable question of law not settled by binding precedent and with material bearing on rights of parties.Conclusion: No substantial question of law is involved; the appeal does not satisfy the threshold for admission under Section 130 in favour of the appellant.Issue (ii): Whether Fe content for determination of export duty (for shipments prior to 01.05.2022) is to be determined on WMT basis and whether load-port/NABL private lab reports and the contract-based transaction value prevail over CRCL DMT reports for levy of export duty.Analysis: Authorities and prior decisions establish that assessment of exported iron ore must reflect the condition at export (including moisture) and, for the relevant period, Fe percentage was to be calculated on WMT. The commercial contract, final invoices and bank realisation certificates showing payment based on load-port test reports formed the transaction value under Section 14. The CESTAT and Appellate Authority applied these principles, considered sampling timing and representativeness, and relied on coordinated tribunal and court decisions and CBIC circulars directing comparison of load-port/discharge reports and deference to transaction value where contract terms so provide.Conclusion: The CESTAT correctly affirmed determination of Fe on WMT basis and acceptance of the load-port/NABL private testing reports and transaction value over the CRCL DMT report for the shipments in question; this conclusion is in favour of the respondent (assessee).Final Conclusion: The appeal is dismissed for lack of any substantial question of law and on the merits the concurrent findings affirming WMT-based determination and reliance on contractually agreed load-port test reports are upheld.Ratio Decidendi: For export consignments prior to 01.05.2022, Fe content for levy of export duty is to be determined on Wet Metric Tonne (WMT) basis and, where the transaction value/price actually paid or payable is determined by contract and supported by load-port/discharge test reports and bank realisation, those reports and the transaction value govern assessment under Section 14 of the Customs Act, 1962.