2017 (10) TMI 715 - AT - Customs

Penalty u/s 114 of CA, 1962 - mis-declaration - export of iron ore having Fe content above 64% - the exporter has declared the Fe content of the goods covered under the shipping bill is less than 64% - Held that - in the present case, when shipping bills were filed, the Fe content, as per the Certificate of Quality issued by accredited laboratory, was less than 64% in the consignment and when the same was tested by the Chemical Examiner of the Customs Laboratory, it was above 64% and therefore the Revenue has come to a conclusion that it is in violation of the Policy - the report of the Chemical Examiner is based only on dry basis without showing the moisture content and without applying the correction factor for moisture content. The sample was drawn on 10/05/2005 and was tested on 22/08/2005 which is beyond the period of one month and with the lapse of time, Fe content does not remain constant due to evaporation. Reliance placed in the case of UNION OF INDIA Versus GANGADHAR NARSINGDAS AGGARWAL 1995 (8) TMI 73 - SUPREME COURT OF INDIA , where it was held that if the percentage of iron content is determined after ignoring the moisture the percentage would not be relatable to the lumpy iron ore weighed at the relevant point of time for the purposes of charging duty. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Imposition of penalty under Section 114 of the Customs Act, 1962 based on discrepancy in iron ore content declared for export.

Analysis:
The appeal was against an order imposing a penalty of ?8 lakhs on the appellant for declaring the iron ore content below 64% for export, which was later found to be 65.15%. The appellant argued that the order was passed without considering material facts and binding judicial precedents. They contended that the iron content should be tested in the condition in which the goods were exported, as per various court judgments cited. The appellant also highlighted that the delay in testing the sample could lead to adverse results due to changes in moisture content, supported by relevant case laws. The appellant further argued that the Chemical Examiner's report did not consider the moisture content and correction factor, which was crucial in determining the iron content accurately.

The appellant relied on previous tribunal decisions, such as in the case of Alphine International, where the order of the Commissioner was set aside due to similar issues regarding testing procedures and the acceptance of test results from reputed laboratories. The appellant emphasized that the test results from accredited laboratories should not be ignored, especially when there are discrepancies in the iron content due to delays in testing. The appellant's arguments were supported by legal precedents and decisions to strengthen their case against the penalty imposed.

After considering the submissions from both parties and reviewing the material on record, the judicial member found that the iron content discrepancy arose due to differences in testing procedures and the lack of consideration for moisture content. Referring to legal judgments, including the case of UOI Vs. Gangadhar Narsinghdas Agrawal, the member emphasized the importance of determining iron content accurately based on total weight and moisture content. The member also cited the Division Bench's decision in the case of Bagadiya Brothers Pvt. Ltd., which highlighted the impact of delays in testing on the consistency of iron content in exported goods. Consequently, the penalty imposed on the appellant was deemed unsustainable in law, and the appeal was allowed with consequential reliefs, if any.

In conclusion, the judgment focused on the procedural discrepancies in testing the iron ore content for export and the significance of considering moisture content and correction factors in determining the accurate iron content. The decision to set aside the penalty was based on legal principles and precedents emphasizing the importance of fair procedures and accurate testing methods in customs matters.