S.K. Sarawagi & Co. Pvt Ltd Vs Commissioner of Customs (CESTAT Hyderabad)
The appeal concerned the valuation of iron ore fines exported by the appellant through two shipping bills in October 2010 under a contract with a buyer in Hong Kong, China. The goods consisted of 10,500 WMT of iron ore fines with 61% Fe content and a declared unit price of USD 115 PDMT FOB. The declared value was provisionally assessed pending test results and final documentation. During finalization of assessment, the adjudicating authority held that the declared price varied from contemporaneous export prices and adopted a higher price of USD 128 PDMT FOB based on the export price of another exporter. The authority also examined the tolerance for iron ore lumps and concluded that since lumps were found to be 8.4%, exceeding the permitted tolerance of 5%, duty was payable on the excess 3.4% at the rate of 15% ad valorem under Notification No.56/2010-Cus. Accordingly, a demand of Rs.2,97,081 along with interest was ordered. The Commissioner (Appeals) upheld this order, after which the appellant approached the Tribunal.
The appellant argued that the adjudicating authority had not raised any valid doubt about the declared transaction value or the Bank Realization Certificate (BRC) but had nevertheless rejected the declared value by comparing it with prices of other exporters and selecting the highest price among contemporaneous values. It was further argued that the Export Valuation Rules required the proper officer to make reasonable adjustments when comparing prices of other exports, including differences in export dates, commercial levels, quantity, quality, and freight, but no such adjustments were made. The Tribunal noted that the dispute related only to acceptance of the unit price and not to the Fe content or moisture content. It observed that although the table of contemporaneous prices contained both higher and lower prices than the declared value, the adjudicating authority adopted the highest price without providing reasons for rejecting the declared value. The Tribunal also noted that the required procedure under the Export Valuation Rules—such as issuing a query memo, seeking additional information, and recording reasons for doubting the declared value—had not been followed.
