2022 (9) TMI 545 - AT - Customs

Recovery of Differential duty - export of iron ore fines which are subject to export duty at Rs.300 per MT - Fe content of the iron ore fines less than 62% - mis-declaration to invoke the proviso to section 28(1) of Customs Act - confiscation - redemption fine - penalty - HELD THAT - It is not in dispute that the appellant was exporting Iron ore fines which are chargeable to export duty at Rs.300 per MT if the Fe content is more than 62%. The first question which must be answered is whether this testing has to be done on dry basis or on wet basis. There will be a difference between the two. If 100 gm of sample (wet weight) has 60 gm of Fe and 10 gm of moisture and 30 gm of other substances, the Fe content will be 60% of the total weight on wet weight. If on the other hand, only dry weight is considered, the Fe content will be 60 gm of Fe in 90 gm of dry weight or 66.6%. Since the entire demand is based on test report on dry MT basis, which is contrary to the judgment of the Supreme Court in the case of Gangadhar Narsingdas Aggarwal 1995 (8) TMI 73 - SUPREME COURT and also contrary to the CBEC Circular No.04/2012 dated 17.02.2012, we find the entire basis of demand is not sustainable. Levy of redemption fine - HELD THAT - In view of the provisions, if the person does not opt for redemption within a period of 150 days, such option becomes void as per sub-section 3 of section 125 unless an appeal is pending against such order. In other words, the confiscation becomes absolute. In this case, where the goods have already left the country, the person has no reason to opt to pay redemption fine. Redemption cannot be forced on the person. There is another reason why only goods which are attempted to be exported can be confiscated under section 113 and not goods which are already exported. As per Section 126, on confiscation, unless the goods are redeemed on payment of redemption fine, the property vests with the Central Government and it is the responsibility of the officer, adjudging the confiscation, to take and hold possession of the confiscated goods. In a case where the goods have already been exported, it is impossible for the adjudicating authority to take possession of the confiscated goods. In other words, the officer cannot discharge his responsibility under section 126(2) of the Act. Even for this reason, the confiscation under section 113 and the consequential penalty under section 114 cannot be sustained in this case. Levy of penalty u/s 114A - HELD THAT - Section 114A provides for imposing a penalty for short levy or non levy of duty by reason of collusion or any wilful misstatement or suppression of facts by the person who is liable to pay the duty or interest. In this case, we do not find any collusion or wilful misstatement or suppression of facts or even any duty liability because the entire demand has been made only by applying the test reports which are on dry MT basis instead of test reports on wet MT basis in violation of the law. The impugned order is set aside - Appeal allowed.

Summary

Issues Involved:
1. Misdeclaration of Fe content in iron ore fines.
2. Basis for determining Fe content (wet basis vs. dry basis).
3. Validity of confiscation of already exported goods.
4. Imposition of penalties under Sections 114(ii), 114A, and 114AA of the Customs Act, 1962.
5. Recovery of differential duty and interest.

Issue-wise Detailed Analysis:

1. Misdeclaration of Fe Content in Iron Ore Fines:
The appellants were accused of misdeclaring the Fe content in the iron ore fines exported, which allegedly led to evasion of export duty. The initial shipping bill claimed the Fe content to be less than 62%, supported by a test report from a private laboratory. However, subsequent tests, including those conducted at the discharge port, indicated higher Fe content. The Directorate of Revenue Intelligence (DRI) initiated an investigation based on intelligence reports and issued a show cause notice for reassessment and recovery of differential duty.

2. Basis for Determining Fe Content (Wet Basis vs. Dry Basis):
The core issue was whether the Fe content should be determined on a wet basis or a dry basis. The appellants argued that the Fe content should be assessed on a wet basis, as per the CBEC Circular No. 04/2012 and the Supreme Court judgment in Union of India Vs Gangadhar Narsingdas Aggarwal. The tribunal found that the latter two test reports, which showed higher Fe content, were conducted on a dry basis. Since the law mandates assessment on a wet basis, the tribunal concluded that the entire basis for the demand of differential duty was faulty.

3. Validity of Confiscation of Already Exported Goods:
The tribunal examined whether goods that have already been exported could be confiscated under Section 113 of the Customs Act. It was clarified that Section 113 applies only to goods intended for export and not to goods that have already left the country. The tribunal noted that once goods are exported, Indian Customs has no control over them, making confiscation impractical and legally unsustainable. Consequently, penalties under Section 114, which are contingent on confiscation, were also deemed invalid.

4. Imposition of Penalties under Sections 114(ii), 114A, and 114AA of the Customs Act, 1962:
The tribunal scrutinized the penalties imposed under various sections. For Section 114A, which deals with penalties for short-levy or non-levy of duty due to collusion or wilful misstatement, the tribunal found no evidence of such collusion or suppression of facts by the appellants. The tribunal highlighted that the differential duty demand was based on an incorrect assessment method (dry basis), contrary to legal requirements. Therefore, the penalties under Sections 114(ii), 114A, and 114AA were found to be unsustainable.

5. Recovery of Differential Duty and Interest:
The tribunal concluded that the demand for differential duty and interest was based on an incorrect method of assessing Fe content. Since the correct method (wet basis) showed Fe content below 62%, the appellants were liable to pay export duty at Rs.50 per MT, not Rs.300 per MT. As a result, the tribunal set aside the demand for differential duty and interest.

Conclusion:
The tribunal allowed the appeals, setting aside the impugned order and providing consequential relief to the appellants. The judgment emphasized the importance of adhering to legally mandated assessment methods and clarified the limitations of Customs' authority regarding already exported goods.