Iron Ore Exports and Refund: Assessing 'Fe' Content on WMT Basis for Duty Calculation

Deciphering Legal Judgments: A Comprehensive Analysis of Judgment of Tribunal on "Determining 'Fe' Content for Export Duty on Iron Ore"

Reported as:

2024 (7) TMI 1080 - CESTAT KOLKATA

INTRODUCTION

This article analyzes a recent decision by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) regarding the determination of iron ('Fe') content in iron ore exports for the purpose of calculating applicable customs duty. The core legal question presented revolves around whether the 'Fe' content should be calculated on a Dry Metric Ton (DMT) or Wet Metric Ton (WMT) basis, which significantly impacts the duty liability.

ARGUMENTS PRESENTED

The appellant, an iron ore exporter, argued that the 'Fe' content should be determined on a WMT basis, as per the Supreme Court's decision in Union of India v. Gangadhar Narsingdas Aggarwal [1995 (8) TMI 73 - SUPREME COURT] and the subsequent CBEC Circular No. 04/2012-Cus. This method considers the iron ore in its exported condition, including impurities like moisture. The legal basis for this position stems from the principle that goods should be assessed in the form and manner in which they are presented for assessment.

The Revenue contended that since the contractual agreement was on a DMT basis, and the load port analysis report showed 'Fe' content of 63.22% on a DMT basis, the export duty was correctly charged at Rs. 300/- per MT.

COURT DISCUSSIONS AND FINDINGS

The CESTAT observed that the Deputy Commissioner had finalized the provisional assessments on a DMT basis, contrary to the Supreme Court's decision in Gangadhar Narsingdas and the CBEC Circular. The Tribunal extensively analyzed precedents from various High Courts and its own decisions, which consistently held that 'Fe' content should be determined on a WMT basis for charging export duty.

The Tribunal also referred to Notification No. 62/2007-Customs, which stipulated that when 'Fe' content is below 62%, the customs duty payable is Rs. 50/- per MT. Applying this notification, the CESTAT found that the appellant's 'Fe' content of 58.61% on a WMT basis fell below the 62% threshold, attracting the lower duty rate.

ANALYSIS AND DECISION

The CESTAT concluded that the Deputy Commissioner's order finalizing the assessments on a DMT basis was legally unsustainable. It held that the 'Fe' content should be determined on a WMT basis by deducting the moisture content from the total weight, as per the universally recognized formula:

Iron content (on as received basis) = Fe x (100-M) / 100

Where Fe is the percentage of iron content on a dry basis, and M is the moisture content in the sample.

Applying this formula, the CESTAT found that the appellant was liable to pay customs duty at Rs. 50/- per MT instead of Rs. 300/- per MT. Consequently, the appellant was entitled to a refund of the excess duty paid during the export.

DOCTRINAL ANALYSIS

The CESTAT's decision reinforces the well-established legal principle that goods should be assessed for duty in the form and condition in which they are presented for assessment. This principle has been consistently upheld by the Supreme Court and various High Courts in the context of iron ore exports.

The decision also highlights the importance of adhering to statutory notifications and circulars issued by the Central Board of Excise and Customs (CBEC) in determining the applicable duty rates. The CESTAT's reliance on Notification No. 62/2007-Customs and CBEC Circular No. 04/2012-Cus. underscores the significance of these regulatory instruments in ensuring uniform application of customs laws.

Furthermore, the CESTAT's adoption of the universally recognized formula for calculating 'Fe' content on a WMT basis provides clarity and consistency in the assessment process, aligning with international practices in the mining industry.

Overall, this decision reinforces the doctrine of assessing goods in their presented condition and adhering to relevant statutory provisions and circulars, while also promoting uniformity and certainty in the application of customs laws related to iron ore exports.

Full Text:

2024 (7) TMI 1080 - CESTAT KOLKATA