2024 (6) TMI 914 - AT - Customs

Applicability of export duty - determination of Fe content - whether the Fe content is to be determined on Wet Metric Ton basis or Dry Metric Ton basis? - HELD THAT - The adjudicating authority has given a clear finding on this issue. He has relied upon the Board Circular No. 04/2012-Cus dated 17th February, 2012 states that for the purposes of charging export duty, the Fe (Iron) content in the Iron Ore Fines has to be determined on Wet Metric Ton basis and not Dry Metric Ton basis. Fe content on Dry Metric Ton basis certified by CRCL Report cannot be relied upon for levy of export duty. We agree with the submission of the Respondent. The Board Circular clearly specifies that the Fe content is to be determined on WMT basis. On applying the standard industry formula for determining Fe content on Wet Metric Ton ( WMT ) basis, after considering Fe Content on Dry Metric Ton ( DMT ) basis and Moisture content determined by CRCL, the Fe content works out to be below 58%, and therefore, in the impugned order he held that export duty is not applicable on the goods exported by the Respondent. The department has not adduced any reason why the Board Circular should not be applied to determine the Fe content in this case. The adjudicating authority has correctly applied the Formula and determined the Fe content on WMT basis. Thus, there are no infirmity in the determination of Fe content by the adjudicating authority. Circular No. 04/2012-Cus dated 17.02.2012 was issued by the Central Board of Excise and Customs (as it was known then), wherein it was specifically provided that the net Fe content for the purpose of charging export duty is to be determined on Wet Metric Ton basis. Hon ble Supreme Court in UNION OF INDIA VERSUS GANGADHAR NARSINGDAS AGGARWAL 1995 (8) TMI 73 - SUPREME COURT ,wherein the judgment of the Hon ble Bombay High Court in the case of UNION OF INDIA AND OTHERS VERSUS GANGADHAR NARSINGDAS AGRAWAL AND ANOTHER 1986 (4) TMI 71 - HIGH COURT OF BOMBAY was upheld, 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, Fe content is to be determined on Wet Metric Ton basis. The adjudicating authority has rightly followed the decision of the Hon'ble Supreme Court and the Circular issued by Board on this issue and dropped the proceedings. Accordingly, there are no infirmity in the impugned order passed by the adjudicating authority dropping the proceedings. The impugned order upheld - appeal filed by the Appellant (Department) dismissed.

Summary

Issues Involved:
1. Assessment of Iron Ore Fines (IOF) under Tariff Item 2601 11 43.
2. Enhancement of the value of exported goods based on test reports.
3. Recovery of Customs duty.
4. Appropriation of deposited Customs duty.
5. Confiscation of exported IOF.
6. Imposition of penalties u/s 114A and 114AA of the Customs Act, 1962.

Summary:

The department challenged the Order-in-Original dated 23.03.2023, wherein the Commissioner of Customs (Prev), Bhubaneswar, dropped the proceedings against the Respondent initiated via show cause notice dated 25.12.2021. The Respondent had exported 34,500 MT of Iron Ore Fines (IOF) with an iron content certified at 56.87% by TCRC. The Preventive Officer's sample tested by IMMT reported 66.05% Fe content, leading to the seizure of the IOF u/s 110 of the Customs Act, 1962. Subsequent retesting by CRCL showed 58.89% Fe content on a Dry Metric Ton (DMT) basis.

The Respondent sought provisional release of the seized goods, which was granted upon payment of Customs duty under protest. The Respondent's independent tests, including those by TCRC and the Inspection Agency of China, consistently reported Fe content below 58%.

Issue 1: Assessment of IOF under Tariff Item 2601 11 43
The adjudicating authority held that Circular No. 04/2012-Cus mandates Fe content determination on Wet Metric Ton (WMT) basis, not DMT basis. Applying this standard, the Fe content was below 58%, making the goods duty-free. The department argued that the adjudicating authority ignored the CSIR-IIMT report and misapplied the formula for Fe content determination.

Issue 2: Enhancement of Value Based on Test Reports
The adjudicating authority found that Fe content on DMT basis certified by CRCL cannot be relied upon for levy of export duty, as per Circular No. 04/2012-Cus. The Respondent's independent tests corroborated Fe content below 58%.

Issue 3: Recovery of Customs Duty
The Respondent argued that IOF with Fe content below 58% is exempt from export duty under Notification No. 27/2011-Customs. The adjudicating authority agreed, finding no basis for the department's demand for Rs. 8,47,21,032/-.

Issue 4: Appropriation of Deposited Customs Duty
The adjudicating authority's decision to drop proceedings meant no appropriation of the Rs. 7,82,98,618/- deposited by the Respondent.

Issue 5: Confiscation of Exported IOF
The adjudicating authority found no grounds for confiscation as the Fe content was below 58% on WMT basis.

Issue 6: Imposition of Penalties u/s 114A and 114AA
The adjudicating authority did not impose penalties, as the proceedings were dropped based on the determination of Fe content on WMT basis.

The Tribunal upheld the adjudicating authority's order, emphasizing the application of Circular No. 04/2012-Cus and the Supreme Court's judgment in Union of India v. Gangadhar Narsingdas Aggarwal, affirming that Fe content for export duty purposes must be determined on WMT basis. The department's appeal was rejected, and the impugned order was upheld.