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2025 (5) TMI 171 - AT - CustomsValuation of export goods - Rejection of declared value under Rule 8 of the Customs Valuation (Determination of the Value of Export Goods) Rules 2007 - Department has relied on the chemical examiner s report dt.29.11.2010 given by the Customs House Kakinada which reported Fe content at 63.2% in place of report dt.16.01.2010 given by Inspectorate Griffith India Pvt Ltd Bellary Karnataka which reported the Fe content at 61.02% on dry basis - HELD THAT - The report given by Customs House Kakinada as sought by the Department did not contain any moisture content and nowhere it is mentioned that it is tested on WMT or DMT basis which is in contravention of norms as laid down by Hon ble Supreme Court in UOI Vs Gangadhar Narsingdas Aggarwal 1986 (4) TMI 71 - HIGH COURT OF BOMBAY as also in the circular issued by CBIC. Whereas the report given by Inspectorate Griffith India Pvt Ltd which is authorized agency for inspection under section 7(1) of Export (Quality Control Inspection) Act 1963 under Export Inspection Council of India under Ministry of Commerce Industry (GOI) has specifically mentioned moisture content while testing the sample on DMT (dry basis). Therefore the reliance placed by Commissioner (Appeals) on the test report given by Customs House Kakinada is misplaced as it has not tested the sample as required by law. Hence the findings given by Commissioner (Appeals) on basis of report dt.29.01.2010 given by Customs House Kakinada is not tenable. The Commissioner (Appeals) has also not referred to any material evidence for substantiating any additional consideration received by the exporter over and above the Invoice Price for rejection of the transaction value. Whereas the Assistant Commissioner has correctly finalized the assessment in terms of Final Invoice dt.23.12.2009 based on Fe content of 61.02% as per the Test Report at the load port and realization of the price confirmed by the BRC in terms section 14 ibid as per the terms of the sale contract. The Order of the Commissioner (Appeals) is based on the Test Report dt.29.01.2010 which is not according to the CBIC circular and the decision of Hon ble Supreme Court in the case of Gangadhar Narsingdas Aggarwal. The impugned order of the Commissioner (Appeals) is not proper legal and correct in the facts of the case and therefore liable to be set aside. Conclusion - The finalization of assessment based on the authorized agency s test report specifying moisture content and Fe content on DMT basis corroborated by the final invoice and BRC is correct and must be upheld. Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were: - Whether the transaction value declared by the appellant for export of Iron Ore Fines was correctly accepted under Section 14 of the Customs Act, 1962, or whether it should be rejected under Rule 8 of the Customs Valuation (Determination of the Value of Export Goods) Rules, 2007, as held by the Commissioner (Appeals). - Whether the test report relied upon by the Commissioner (Appeals), issued by the Customs House, Kakinada, which indicated a higher Fe content without specifying moisture content or the basis (wet or dry metric ton), was admissible and in conformity with the legal standards laid down by the Hon'ble Supreme Court and CBIC Circular No. 04/2012-Cus. - Whether the final invoice price, corroborated by the sale/purchase contract and Bank Realization Certificate (BRC), could be rejected without substantive evidence of mis-declaration or excess realization beyond the invoice price. - The proper legal interpretation and application of Section 14 of the Customs Act, 1962 and the Customs Valuation Rules, 2007, in determining the export duty liability on Iron Ore Fines. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of the transaction value declared by the appellant under Section 14 of the Customs Act, 1962 Relevant legal framework and precedents: Section 14(1) of the Customs Act, 1962 prescribes that the value of export goods shall be the transaction value, i.e., the price actually paid or payable for the goods when sold for export, provided buyer and seller are unrelated and price is the sole consideration. Customs Valuation Rules, 2007, particularly Rule 3(1) and Rule 4(1), mandate acceptance of transaction value unless exceptions under Rule 4(2) apply. The burden lies on the Department to establish reasons for rejection of declared transaction value. Precedents relied upon by the appellant include:
Court's interpretation and reasoning: The Tribunal noted that the Assistant Commissioner had accepted the final invoice dated 18.01.2010, which detailed quantity, Fe content, moisture content, chemical composition, and price (US $1,164,475.35 for 16,018 WMT). The price was corroborated by the BRC dated 22.03.2010. There was no evidence of mis-declaration or excess realization beyond the invoice price. The Department did not contest that the buyer and seller were unrelated or that the price was not sole consideration. The Tribunal held that in absence of substantive evidence to the contrary, the transaction value declared by the appellant must be accepted as per Section 14 and Customs Valuation Rules. Application of law to facts and treatment of competing arguments: The Department's reliance on provisional invoice and Chemical Examiner's report was found insufficient to rebut the conclusive evidence of final invoice and BRC. The Department failed to demonstrate any additional consideration or related party transaction that would justify rejection of declared value. Conclusion: The declared transaction value was valid and should have been accepted for export duty assessment. Issue 2: Admissibility and correctness of the Chemical Examiner's report dated 29.01.2010 issued by Customs House, Kakinada Relevant legal framework and precedents: The Hon'ble Bombay High Court in UOI Vs Gangadhar Narsingdas Aggarwal (1988) and the Hon'ble Supreme Court in the same case (1997) clarified that the Fe content for export duty assessment must be determined on Wet Metric Ton (WMT) basis, i.e., inclusive of moisture content, since duty is relatable to weight. The CBIC Circular No. 04/2012-Cus dated 17.02.2012 reiterated this legal position and directed uniform assessment based on Fe content on WMT basis. Court's interpretation and reasoning: The Tribunal observed that the Chemical Examiner's report dated 29.01.2010 issued by Customs House, Kakinada, which the Commissioner (Appeals) relied upon, did not mention moisture content nor specify whether Fe content was tested on dry or wet basis. This was contrary to the binding legal standards and CBIC circular. In contrast, the test report dated 16.01.2010 from Inspectorate Griffith India Pvt Ltd (an authorized agency under Export Inspection Council) explicitly mentioned moisture content and tested Fe content on dry metric ton (DMT) basis. The Tribunal held that the report relied upon by the Commissioner (Appeals) was not in conformity with the law and was inadmissible for assessment purposes. Application of law to facts and treatment of competing arguments: The Department's argument that the appellant never contested the Government Department's test report was rejected because the report itself was defective and non-compliant with legal requirements. The appellant's reliance on the authorized agency's test report was held proper and consistent with law. Conclusion: The Chemical Examiner's report dated 29.01.2010 was inadmissible for valuation; the assessment must be based on the authorized agency's report compliant with legal standards. Issue 3: Whether the Commissioner (Appeals) was justified in setting aside the Assistant Commissioner's finalization of assessment and rejecting the declared transaction value Relevant legal framework and precedents: The Customs Valuation Rules, 2007, particularly Rule 8, empower rejection of declared transaction value in certain circumstances, such as related party transactions or evidence of price manipulation. However, the Department must produce material evidence to justify such rejection. The reliance on Rule 4 read with Rule 6 for adopting transaction value of goods of like kind and quality is conditional on the failure of declared transaction value. Court's interpretation and reasoning: The Commissioner (Appeals) set aside the Assistant Commissioner's order relying on the Chemical Examiner's report indicating higher Fe content and rejecting the declared value. The Tribunal found that this reliance was misplaced due to the defective nature of the report and non-compliance with the Supreme Court's legal standards. The Commissioner (Appeals) did not produce any substantive evidence to prove that the exporter received an amount in excess of the declared invoice price or that the declared value was not genuine. Application of law to facts and treatment of competing arguments: The Tribunal emphasized that rejection of transaction value is an exception and cannot be based on mere suspicion or defective reports. The Department failed to discharge its burden to prove that the declared value was not the true transaction value. Conclusion: The Commissioner (Appeals) erred in rejecting the declared transaction value and setting aside the final assessment order. 3. SIGNIFICANT HOLDINGS - "Section 14(1) of the Customs Act, 1962 stipulates that for the purpose of the Customs Tariff Act, the value of the exported goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export from India for delivery at the time and place of exportation, where the buyer and seller of the goods are not related and price is the sole consideration for the sale." - "The law, thus, is clear. As per Sections 14(1) and 14(1-A), the value of any goods chargeable to ad valorem duty is deemed to be the price as referred to in that provision. ... The adjudicating authority is bound to accept price actually paid or payable for goods as the transaction value. Exceptions are, however, carved out and enumerated in Rule 4(2). ... It is incumbent upon the Assessing Officer to give reasons as to why the transaction value declared ... was being rejected; to establish that the price is not the sole consideration; and to give the reasons supported by material on the basis of which the Assessing Officer arrives at his own assessable value." - "It is immaterial what method one adopts for the purposes of separating the iron content from the lumpy iron ore but the percentage has to be determined from the total weight which was available at the given point of time after the iron content is determined. That is because the duty is relatable to weight and, therefore, once the iron content is determined keeping in mind the total weight the percentage can be determined separating the iron content from the rest of the impurities inclusive of moisture and thereafter ascertain in which category the lumpy iron ore would fall for the purposes of charging duty." - "For the purpose of charging of export duty the assessment of Iron ore for determination of Fe contents shall be made on Wet Metric Ton (WMT) basis which in other words mean deducting the weight of impurities (inclusive of moisture) out of the total weight/Gross Weight to arrive at Net Fe contents." (CBIC Circular No. 04/2012-Cus) - The finalization of assessment based on the authorized agency's test report specifying moisture content and Fe content on DMT basis, corroborated by the final invoice and BRC, is correct and must be upheld. - The impugned order of Commissioner (Appeals) relying on the defective Chemical Examiner's report and rejecting the transaction value is set aside. - The appeal filed by the appellant is allowed with consequential relief.
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