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2014 (6) TMI 193 - HC - CustomsPenalty u/s 114 - export Iron Ore Fines containing Fe 64-65% - Fe content of Iron Ore exported by the respondent-exporter was found to be more than 65% - Confiscation of goods ordered - Order on the basis of CIQ reports - Commissioner in the course of hearing of the case, seem to have made reference to the report of chemical examiner at the receiving port in China and so also to some other documents which admittedly were not referred to in the show cause notice. Based on that material, the Commissioner passed the order dated 31.08.2006 imposing penalty of ₹ 25 lakhs on the respondent-exporter under Section 114 of the Customs Act - Held that - Even if it is assumed that what learned counsel appearing for the appellant submitted is correct, still, in our opinion, the material on which the Commissioner relied upon cannot be the ground to hold that the Fe content of Iron Ore samples was more than 65%. The Commissioner held against the respondent-exporter placing reliance upon the two reports of the Laboratory at China dated 28.06.2004 and 07.07.2004 (CIQ report). It is not clear nor any attempt was made by the appellant to show that while conducting chemical analysis, what was the method adopted by the laboratory in China or what were the standards prescribed for collecting the samples and conducting chemical analysis there. The report of the chemical laboratory at China which has shown 0.27% more Fe content than what is prescribed. Admittedly, the show cause notice did not make any reference, direct or indirect to these reports. Therefore, in our opinion, the reports of laboratories in China are of no avail to the appellant to take their case any further. Even the other material which was relied upon by the Commissioner, was not disclosed/reflected in the show cause notice and in any case that would not help the appellants to contend that there was an admission on the part of the respondent-exporter that the Fe content of Iron Ore exported by them was more than 65%. As a matter of fact, respondent-exporter, right from inception has contended that the Fe content of Iron Ore exported by them was not more than 65%. - Decided against Revenue.
Issues Involved:
1. Legality of the CESTAT's conclusion that the Commissioner of Customs' order traveled beyond the scope of the show cause notice. 2. Legality of the CESTAT's conclusion that the Commissioner relied on fresh materials not cited in the show cause notice. Issue-wise Detailed Analysis: 1. Legality of the CESTAT's conclusion that the Commissioner of Customs' order traveled beyond the scope of the show cause notice: The High Court examined whether the Commissioner of Customs had exceeded the scope of the show cause notice in the original order. The respondent-exporter had declared the Fe content of Iron Ore as 65% for export, but chemical analyses at Cochin and New Delhi showed higher Fe content (68.4% and 67.3% respectively). The Export and Import Policy 2002-2007 restricted the export of Iron Ore containing Fe content above 65%. The Commissioner issued a show cause notice under Section 114 of the Customs Act for misdeclaration and potential confiscation under Sections 113(d) and 113(i). The CESTAT set aside the Commissioner's order, noting that the reports from Cochin and New Delhi were rejected due to procedural defects and non-compliance with the Bureau of Indian Standards. The Commissioner had also relied on additional materials not mentioned in the show cause notice, which was deemed a violation of Section 124 of the Act. The High Court upheld the CESTAT's findings, emphasizing that the grounds for confiscation or penalty must be clearly stated in the show cause notice. The Commissioner's reliance on undisclosed materials was found to be legally untenable and a breach of natural justice principles. 2. Legality of the CESTAT's conclusion that the Commissioner relied on fresh materials not cited in the show cause notice: The High Court scrutinized the Commissioner's reliance on new materials during the hearing, which were not cited in the original show cause notice. The Commissioner had referred to a chemical examiner's report from China and other documents not initially disclosed. The appellant argued that the Commissioner could consider new materials surfaced during the enquiry. However, the High Court rejected this argument, highlighting that Section 124 mandates full disclosure of grounds for confiscation or penalty in the show cause notice. The High Court noted that the reports from China were not mentioned in the show cause notice, and there was no clarity on the methods or standards used in the Chinese laboratory. The reliance on these reports was found to be inappropriate as they were not part of the initial notice, thereby violating the respondent-exporter's right to a fair hearing. The High Court concluded that the CESTAT rightly set aside the Commissioner's order, as the reliance on undisclosed materials was unjustified. Conclusion: The High Court dismissed the appeal, affirming the CESTAT's decision to set aside the Commissioner's order. Both substantial questions of law were answered against the appellant, reinforcing the necessity for clear and complete disclosure in show cause notices under Section 124 of the Customs Act. The judgment emphasized adherence to procedural fairness and the principles of natural justice in customs adjudications.
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