2016 (9) TMI 930 - AT - Customs

Enhancement of assessable value of export - Fe percentage content in the ore - Fe content as per invoice - Fe content as per Customs Laboratory Report - rule 6 of CVR - CBEC Board issued Circular no. 12/2014 Cus-dated 17.11.2014 in respect of valuation of Iron Ore - Held that - the test reports of Custom House laboratory have been issued around a month after filing of the shipping bills. It is been consistently held that time factor is important in testing such samples, since there would result increase in Iron content due to evaporation of moisture. The decision in the case Steer Overseas Pvt. Ltd Vs Commissioner Cus & CE, Vizag 2009 (4) TMI 369 - CESTAT, BANGALORE have been followed. It is also noted that the declared contractual values of such Iron Ore exports are accepted in other ports like Kolkatta, Paradeep etc., as per the documents submitted by the appellant. The variations in Fe content were very minor, within tolerance limits, did not impinge upon the declared values since the invoice amount in each case was realized as per the BRCs - the loading of assessable value found to be arbitrary and without any basis. Appeal allowed - decided in favor of appellant.

Issues Involved:

1. Determination of the correct transaction value of iron ore fines for export.
2. Acceptance of Fe content values from different sources (Customs Laboratory vs. Appellant's final invoice).
3. Application of Customs Valuation Rules in the context of iron ore exports.
4. Compliance with CBEC Circular No. 12/2014-Cus.
5. Adherence to principles of natural justice in the adjudication process.

Issue-wise Detailed Analysis:

1. Determination of the Correct Transaction Value of Iron Ore Fines for Export:

The appellant filed shipping bills for the export of iron ore fines, declaring specific Fe content and unit prices. However, the Customs authorities provisionally assessed these bills based on their laboratory reports, which often showed higher Fe content than declared, leading to an enhanced value. The authorities rejected the declared transaction values under Section 14 of the Customs Act, 1962, and re-determined the values per the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 (CVR). The Tribunal found that the declared values should be accepted as the transaction values since the final invoices and Bank Realization Certificates (BRCs) matched, and there was no evidence of additional consideration received by the appellant.

2. Acceptance of Fe Content Values from Different Sources:

In multiple appeals, the Fe content as per the appellant's final invoices differed from the Customs Laboratory reports. For instance, in Appeal No. C/3499/2012, the appellant declared 57.12% Fe content, but the Customs Laboratory reported 58.8%. The Tribunal noted that variations in Fe content were within acceptable tolerance limits and did not impinge upon the declared price, as evidenced by the BRCs. The Tribunal emphasized that minor differences in Fe content due to factors like moisture evaporation over time should not lead to rejection of the declared values.

3. Application of Customs Valuation Rules in the Context of Iron Ore Exports:

The Customs authorities discarded Rules 4 and 5 of CVR, ultimately determining the values under Rule 6, considering the higher Fe content reported by the Customs Laboratory. The Tribunal observed that the authorities did not provide sufficient evidence to justify rejecting the declared transaction values. The Tribunal reiterated that under Section 14 of the Customs Act and Rule 3 of CVR, the transaction value should be accepted unless there is significant evidence to doubt its accuracy.

4. Compliance with CBEC Circular No. 12/2014-Cus:

The Tribunal referred to CBEC Circular No. 12/2014-Cus, which provides guidelines for valuing iron ore exports, emphasizing uniformity and transparency. The Circular advises that variations in Fe content within tolerance limits should not affect the declared price. The Tribunal found that the Customs authorities did not adhere to these guidelines, as they failed to finalize provisional assessments based on the declared values, despite the variations being within acceptable limits.

5. Adherence to Principles of Natural Justice in the Adjudication Process:

The Tribunal noted that the Customs authorities did not provide the appellant with the relied-upon evidence, such as comparable shipping bills and contract prices, thus violating principles of natural justice. The appellate authority acknowledged this lapse but proceeded to decide the case on merits due to the lack of remand power. The Tribunal emphasized the importance of following natural justice principles, which were ignored in these cases, leading to arbitrary value enhancements.

Conclusion:

The Tribunal concluded that the variations in Fe content were minor and within tolerance limits, and did not impinge upon the declared values. The declared values should be accepted as the transaction values, as they matched the final invoices and BRCs. The Tribunal found the loading of assessable value by the Customs authorities to be arbitrary and without basis, allowing the appeals with consequential reliefs.

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