By TIOL News Service

MUMBAI, JULY 11, 2016: THE appellant filed two shipping bills for export of 54500 WMT and 54200 WMT of ‘iron ore fines' of grade 50% Fe and 52% Fe respectively to China.

The shipping bills were provisionally assessed upon request but subject to submission of final test report/bank reconciliation certificate and final draught survey for finalising of shipping bills. On receipt of the test report from the Customs Laboratory and on submission of the documents by the appellant, the assessment was finalised.

The lower appellate authority held that the final assessment of shipping bills in both the cases are just and proper.

Before the CESTAT, the appellant submitted that they had contracted for supply of iron ore content of 54% and 52% with the foreign parties; that based upon the certificate of analysis given by the private laboratories they filed shipping bills which were indicating Fe content as 54% and 52%. However, when the consignments reached the destination, the samples were analysed and it was noticed that the Fe contents were not as per the requirements or as per the analysis of the load port and it was 46% and 50%; that the party declined to accept the consignment due to which they located another party and sold the goods to the second party; that the customs duty on the export of iron ore needs to be recalculated as the appellant had received less amount than the contracted value due to the dispute of less Fe content; that duty on export of goods was payable on the price at discharge port at the value as evidenced from BRC and assessment was to be finalized accordingly. Following case laws were cited in support VGM Exports - 2013-TIOL-314-CESTAT-MUM & Eicher Tractors Ltd - 2002-TIOL-06-SC-CUS.

The AR submitted that the provisional assessment was conducted based upon the Fe contents declared at 52% and 54% & the Dy. Chief Chemist report for the consignments also indicated that the Fe contents were same as was declared. It is further stated that subsequently if lower Fe contents were noticed at the port of destination, that cannot be the reason for accepting the value which was received by the appellant for the said consignments and finalised for the levy of export duty;that revised contract with another buyer based upon the Fe contents as per the analysis done at port of destination has no relevance for finalisation of assessment as it goes against the provision of Section 14 of the Customs Act, 1962 which is based upon deemed value concept rather than BRC concept and it is at the time of export; that the appellant had not decided to challenge the Customs Lab report and it is binding on them. [ Reliance Cellulose Products Ltd. 2002-TIOL-854-SC-CX refers.]

The Bench extracted the provisions of section 14 of the Customs Act, 1962 and observed -

++ The provisions if read holistically would indicate that in any transaction, the terms of the agreement need to be given precedence and the value at the time and place of export as entered between two parties has to be considered for the discharge of duty liability.

++ In the case in hand, the goods were presented for export and the taxable event is the point when the export goods are cleared for placing on board at the port of loading. It is also to be seen that the provisions of Section 14 specifically mandate for value paid or payable at the time of export. In the case in hand, the appellant had entered into contracts with purchasers in China and Singapore for the export of the goods of specified Fe content as per specifications agreed by them. Subsequently, purchasers did not accept the consignments as the private analytical report as provided by the appellant were supposedly forged in view of which the appellant sold the goods to some other purchasers. ++ The negotiations entered into by the appellant with the second purchaser was after the goods landed in China and the said purchase agreements were not the documents which was produced before the authorities at the time of exportation. ++ It is also to be noted that in the case in hand we find that the Dy. Chief Chemist had drawn the samples of the iron ore fines in respect of shipping bill No. 55/11-12 and recorded that the Fe content is 52%. It is settled law that analysis of departmental laboratory, unless challenged, has to be accepted as true and correct. Since the value/price of the iron ore fines is based upon the Fe content of the consignment, the value was, in our opinion, correctly worked out by the lower authorities.

++ Looking at the entire issue from another angle it has to be noted that once the ship sails from the port after the Let Export Order, and the cargo does not arrive at the destination, the assessment entered by the adjudicating authority at the time of Let Export Order remains and does not undergo any change even for the reason that the goods are lost at sea. The exporter does not have a claim for refund. This was conceded... If this principle is applied, which is the correct principle for valuation as per Section 14 of the Customs Act, 1962, the consignment having been declared to be unaccepted by the purchaser cannot be a reason for reduction in the value of the consignment as cleared from India.

Holding that the impugned order is correct, the appeals were rejected.

(See 2016-TIOL-1692-CESTAT-MUM)