Vedanta Ltd. Vs Commissioner of Customs (Preventive) (CESTAT Kolkata)
The Appellants have exported Iron Ore Fines declaring the Fe content therein to be less than 64%. Under seven Shipping Bills exports were completed for different overseas importers during the period 2010-2011. Before the shipment, samples were drawn by Customs officials in the presence of the representative of the exporter, which was sent to the Deputy Chief Chemist Chemical Laboratory Customs House, Kolkata-700001 (CRCL for short) for testing. Based on the Test Report, received from the CRCL, the Department issued the Show Cause Notice on the ground that in all the seven cases, the „Fe‟ content was more than 64% whereas the Appellant was claiming that in all these cases, the Fe content was between 63 to 63.97, hence less than Fe content of 64%. As per the Department, if the Fe content was more than 64%, no export can be taken up by the parties directly and the same had to be exported through Channelizing Agency MMTC Ltd. Only. Therefore, taking the view that the consignment exported were illegally exported by resorting to gross mis-declaration about the ‘Fe’ content, the Show Cause Notice was issued to the Appellant. In the due course, the Adjudicating Authority held that 161625 MT of Iron Ore Fines having Fe content of more than 64%, valued at Rs.368,21,722/- are liable to be confiscated. He ordered for confiscation of these goods. He gave the option to pay Redemption Fine of Rs. 1 crore. He also imposed penalty of Rs.50,00,000/-. Being aggrieved, the Appellant is before the Tribunal.
2. The Learned Chartered Accountant appearing on behalf of the Appellant submits that at the time of exports, the Appellant could not directly arrive at the ‘Fe’ content of Dry Metric Ton (DMT for short). Therefore, they had shown in the Shipping Bill, the DMT value of Fe at 63 for all the seven consignments. In case of all the seven consignments, the ‘Fe’ content on Wet Metric Ton (WMT for short) basis was between 55.44 to 57.33. When the Department has drawn samples and sent it to the Government Laboratory for testing the same, even the Appellant also has taken the samples and sent the same to reputed Government recognized Private laboratories. The samples drawn by the Appellant from these seven export consignments were sent to three different reputed Government Recognized laboratories. These laboratories have tested the material and have given the report that the Fe content on DMT basis is between 63.33 to 63.80. As per the Test Reports of these laboratories, the Fe content on WMT basis is between 57.31 to 58.71. The Learned Chartered Accountant submits that after drawing the samples, the Department failed to provide the Test Reports of CRCL to the Appellant for the next six years. As a matter of fact, these Test Reports were given to the Appellant along with the Show Cause Notice issued by the Department in 2016. The Show Cause Notice was issued on 18/08/2016 for the consignments which were exported in 2010-11. Between the period 2010-12 to 2016, the Appellant has made several representations before the officials for finalization of provisionally assessed Shipping Bills. For completing the finalization of assessment, the Appellant has provided all the documentary evidence including the copies of the Test Reports issued by the Private laboratories. He submits that inspite of various representations and regular follow up, no action was taken by the Department to complete the finalization of the provisionally assessed Bills of Exports. Finally, the Department issued the Show Cause Notice on 18/08/2016 along with the Test Reports of the CRCL (Government Laboratory) which was provided to the Appellant for the very first time. He submits that on going through the Test Reports of the CRCL, it is seen that in all the cases, the Tests were completed between 105 days to 138 days after the samples was drawn at the Port. He submits that when the samples were drawn, the Iron Ores were in wet condition. There is a specific formula to arrive at the Fe values on DMT. From the Test Reports provided by the Department, it is not clear as to what procedure or formula they had adopted to arrive at the Fe value of the Iron Ore on DMT condition. He submits that CRCL has taken more than 100 to 138 days to submit their Test Reports whereas in case of the Private Parties engaged by the Appellant all the Test Reports were made available to the Department within 7 to 9 days time, which makes the Test Reports of Private Lab more reliable. He further submits that the moisture content alone is not sufficient to arrive at Dry Matric Tone Fe value basis. The other impurities also have to be considered to arrive at the DMT Fe content. From the Test Report of the Government Lab, it is not clear whether they have considered such impurities while computing the „Fe‟ value of DMT.
3. He further submits that in all the seven cases, the Appellant has realized the amount from the overseas importer based on the Fe content on DMT basis based on the Test Reports given by the Private Laboratories recognized by the Government of India. The Appellant had indicated in their earlier Shipping Bills that the „Fe‟ content of DMT was 63 and the same turned out to be between 63.33 to 63.92 in most of the consignments as per the Test Reports of the Private Labs. The overseas importer has paid higher amounts to the Appellant in such cases. On higher amounts realized by them, the Appellant has calculated the amount of Export duty involved and paid the same. The Export realizations which are based on the Fe value arrived at by the Private Labs, have been duly certified by the Chartered Accountant and they have been enclosed along with the Appeal Paper Book. He submits that at no point of time, the Department has questioned the BRCs submitted by the Appellant towards the realization of export proceeds. The Learned Chartered Accountant produces the Table containing the sequence of event right from 2010 onwards for finalizing the provisionally assessed Shipping Bills. He draws attention to the grievance filed in CPGRMCBOEC by them on 19/11/2014 and on 03/04/2015. He submits that inspite of having all the documentary evidence with them, the Customs Department never tried to complete the finalization of the seven Shipping Bills of Export. He submits that as per Para 12.1 of Iron Ore Sampling and Sampling Preparation Manual method, BIS1405S2010 issued by Bureau of Indian Standards prescribes “that to avoid any change in the moisture content the moisture determination shall be done as quickly as possible after the sample is taken.” He also draws attention to Para 56 of Manual of Revenue Laboratory under CBEC which provides that “expeditions testing is the vital requirement of laboratory and all samples should be tested and reported as quickly as possible.”
4. The Learned Council relies on the following case law:
(i) Alpine International vs Commissioner of Customs, Mangalore – 2008 (224) ELT 331 (Tri-Bangalore)
(ii) Bagadiya Brothers Pvt. Ltd. Vs. CC & C. Ex., Visakhapatnam-IV (2010 (249) ELT 387 (Tri.-Bang.)
(iii) Mineral Enterprises Ltd vs Commissioner of Customs, Mangalore-2010 (253) ELT 241 (Tri Bangalore)
(iv) Steer Overseas Private Lifted vs Commr. of Customs, Central Excise, Vishakhapatnam-2010 (250) ELT 308 (Tri.-Banglore)
5. He submits that in these cases, it has been held that the testing of the Iron ore has to be done as soon as possible once the samples are drawn. It is also held in these cases that when the Test Report of the Department is countered by way of a proper Test Report by the appellant procured from Government approved Private Laboratories, the same also is required to be taken into consideration. It has also been held that the details of the payments received by the exporter from the overseas importer based on the Fe content of the iron ore will also be a factor to be considered while deciding as to which is the correct Fe value. In these cases, it has been held that not only the moisture content but also the other impurities on account of different minerals also have to be taken into account before arriving at the Fe value of the iron ore. Therefore, relying on these case laws, the consultant submits that in the present case, the Department has not taken into account the Test Certificates filed by the appellant from various reputed testing agencies. He submits that the BRC details submitted to the Department, wherein they have shown that the Overseas Importer has made the payment based on the „Fe’ content at the . Therefore, he submits that the ratio laid down in this case law are squarely applicable case also. He also relies on the decision of the Hon’ble High Court of Mumbai at Goa in their own case wherein the Hon’ble High Court vide Order dated 23rd September 2022 in respect of Writ Petition No. 216 of 2022 has held as under:-
46. We, therefore, find much substance in the contention as urged on behalf of the petitioners that the Fe (iron) content of the iron ore was required to be determined at the second stage as noted above, to be undertaken on the basis the iron ore as it naturally stood at the time of export, namely, on the Wet method as in such condition the iron ore would contain moisture and other impurities.
[emphasis supplied]
6. He submits that from the Test Reports generated by Government Laboratory (CRCL), it is seen that they have only considered the moisture content and then arrived at the Dry Weight Fe content of the iron ore. They have not considered the details of other impurities to arrive at the correct Fe content. He further submits that in case of each of the Shipping Bill, the appellant has submitted the details of Commercial Invoice, Bill of leading, BRC, Test Report, copy of the contract, differential duty payment challan etc. and they have been regularly requesting the Department to finalize assessment of the Shipping Bills. Though all these particulars were available with the Department by June 2013 itself, no further action was taken up to finalize the assessments. The Appellant has made several complaints and filed several representations to the higher officials to ensure that the assessment is completed. Though all the Test Reports of Private Lab were available with the Department right from June 2013, the Department had not rebutted that these Test Reports are not correct. The Department provided the CRCL Test Reports only along with the Show Cause Notice which was served in 2018. Therefore, there was no scope for the Appellant to even ask for retesting. Hence, he submits that the Test Reports given by various reputed private organizations have to be taken into account along with the fact that the overseas importer has accepted the Fe content of these private test reports and made the payments accordingly. Based on all the above submissions, the Learned Consultant prays that the present appeal may be allowed.
7. Learned AR reiterates the detailed findings given by the Adjudicating Authority. He further submits that in this particular case, the entire issue is as to what was the „Fe‟ content in case of the iron ore exported on Dry Weight basis. Therefore, he says that the Department was correct in getting the test analysis done based on the Dry Weight basis only. He submits that the Chemical Examiner’s report clearly shows that in all the seven cases as per the Test Reports given by the Chemical Examiner, the Fe content was more than 64%. If the Fe content is more than 64%, the Appellants are required to export the iron ore only through the channelizing agency of MMTC which was not done in this case. He submits that if the appellant was aggrieved by the Test Reports issued by the Chemical Examiner (CRCL), it was open for the Appellant to challenge the same before the higher authority of CRCL. This was not done by the Appellant. Therefore, they cannot take a stand that ignoring the Test Reports issued by CRCL, the Test Reports of the private Laboratories should be accepted. He relies on the case law of Vishal Lubetech Corpn. vs. Additional Commissioner of Customs Coimbatore-2016 (342) ELT 201, (Madras), wherein it has been held that if the party is aggrieved by the Test Report of the Chemical Examiner, they cannot call for cross-examination of this person since this chemical examiner is one of the Government officials and he is not a witness to the proceedings and no statements have been recorded by the Department from him. Only when such condition exists, the cross-examination can be granted. He submits that since in all the seven cases, the „Fe‟ content on Dry Weight basis was more than 64%. Hence, the Appellant was required to take up the exports only through MMTC. Therefore, he justifies the confirmed demands under the OIO. Accordingly, he prays that the present appeal may be rejected.
8. Heard both sides and perused the documents.
9. Admittedly the factual matrix without any dispute from both sides in this case is as under:-
