2019 (7) TMI 728 - AT - Customs

Demand of differential Customs duty based on the Fe content of iron ore fine - Export of Iron Ore Fines - reliability on test reports - Benefit of N/N. 62/2007-Cus dated 03.05.2007 - appellant declared the iron content in their Iron ore fines as below 62% however the test report declared the Fe content in the iron ore as 62.91% - CBEC Circular No. 4/2012-Cus datd 17.02.2012 - HELD THAT - This is an unusual case in which there are three test reports indicating different levels of iron content. None of the three test reports are perfect. The test reports produced by the appellant are detailed and elaborate and indicate Fe content of below 62%. However the samples were collected behind the back of the Customs Officers. Therefore there is always a doubt as to how the samples were drawn. The test reports are as good as samples drawn. One cannot be termed a diabetic or HIV positive based on a blood test unless it is certain that it was his blood which was tested and not the blood of anybody else - Similarly the test reports cannot be relied upon unless the samples were drawn authentically from the export goods. In this respect the only authentic sample which was drawn was sent to the Chemical Examiner because it was drawn in the presence of Customs Officers and Exporter and signed by both the parties. Further the test report of the Chemical Examiner or the Chief Chemist cannot be brushed aside in favour of reports of private persons. None of the three test reports can be relied upon. Usually any declaration made in the import/export documents are accepted unless there is evidence to the contrary. The department could not sufficiently establish that the declaration made by the appellant in the shipping bill that the Fe content of iron ore fine was below 62% was incorrect - the confirmation of differential duty demand by the Asst. Commissioner and its affirmation by the impugned order are not sustainable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of exemption notification for export duty on Iron Ore Fines with Fe content below 62%
- Reliability of test reports determining Fe content for export duty calculation
- Adherence to principles of natural justice in providing test report copies and cross-examination opportunities

Interpretation of Exemption Notification:
The case involved exporters of Iron Ore Fines declaring Fe content below 62% for export duty calculation. The exemption notification allowed for duty exemption if Fe content was 62% or below, with a specific rate mentioned. The dispute arose when a test report by the Chemical Examiner showed Fe content above 62%, leading to differential duty demand. The appellant argued that CBEC Circular mandated considering Fe content on wet MT basis, highlighting discrepancies in the test reports and lack of clarity in the Chemical Examiner's report.

Reliability of Test Reports:
The appellant presented two detailed test reports from reputable laboratories showing Fe content below 62%, while the Chemical Examiner's report indicated otherwise. The appellant contended that the Chemical Examiner's report lacked clarity on methodology, moisture percentage, and basis of Fe content calculation. The respondent argued that the Chemical Examiner's report, based on an authentic sample drawn in the presence of Customs Officers and the exporter, should be considered reliable over private testing agency reports.

Adherence to Principles of Natural Justice:
The appellant raised concerns regarding the denial of the Chemical Examiner's test report copy during adjudication and the lack of cross-examination opportunity. They argued that principles of natural justice were violated as they were not allowed to clarify doubts or re-test samples. The Tribunal emphasized the importance of authentic sample collection and the need for clarity in test reports, ultimately concluding that none of the test reports could be fully relied upon.

In the judgment delivered by the Appellate Tribunal CESTAT Hyderabad, the differential duty demand was found unsustainable due to the lack of sufficient evidence to refute the appellant's declaration of Fe content below 62%. The Tribunal set aside the confirmation of the duty demand, allowing the appeal with consequential benefits. The decision highlighted the importance of authentic sample collection, clarity in test reports, and adherence to principles of natural justice in customs proceedings.