Iron ore Fe content for export duty must be calculated on WMT basis, including moisture.

M/s Rungta Mines Ltd. exported iron ore fines through Gangavaram Port under three shipping bills.

The assessments were initially provisional pending test reports and final documents.

Upon finalisation, the jurisdictional Assistant Commissioner determined the iron content on a Dry Metric Ton (“DMT”) basis.

Since the Fe content exceeded 58%, the consignments were subjected to the corresponding higher export-duty rate.

The appellant contended before the Commissioner (Appeals) that Fe content had to be calculated on a Wet Metric Ton (“WMT”) basis, including moisture in the total mass of the iron ore as presented for export.

The Commissioner (Appeals) rejected the appeals without examining the contention on merits, holding that the appellant had accepted the proposed finalisation, waived personal hearing, and sought to raise an additional ground/evidence contrary to Rule 5 of the Customs (Appeals) Rules, 1982.

The appellant therefore approached the CESTAT.

Whether the Commissioner (Appeals) was justified in rejecting the appeals without examining the appellant’s legal contention that Fe content had to be determined on a WMT basis rather than a DMT basis?

Whether Rule 5 of the Customs (Appeals) Rules, 1982 applied where the appellant relied on existing test reports and raised a legal ground without seeking to introduce additional factual evidence?

Whether the appellant’s acceptance of the proposed finalisation and waiver of personal hearing barred it from challenging the final assessment in statutory appeal?

Whether, for determining the applicable export-duty rate, Fe content in iron ore had to be calculated with reference to the total weight inclusive of moisture, i.e., on a WMT basis?

Rule 5 of the Customs (Appeals) Rules, 1982 governs the production of additional evidence before the Commissioner (Appeals) and does not bar the raising of a pure legal ground based on material already on record.

Section 128A(2) of the Customs Act, 1962 permits the Commissioner (Appeals) to allow a ground not specified in the memorandum of appeal where its omission was not wilful or unreasonable.

The principles in Jute Corporation of India Ltd. v. CIT, 1991 (54) E.L.T. 176 (S.C.), and National Thermal Power Co. Ltd. v. CIT, 1998 (229) ITR 3 (S.C.), recognise that a pure question of law may be raised at the appellate stage where it can be decided on facts already on record.

Under Union of India v. Gangadhar Narsingdas Aggarwal, 1997 (89) E.L.T. 19 (S.C.), Fe percentage in iron ore is to be determined with reference to the total weight of the ore, including moisture, so that it reflects the goods in the condition presented for export.

CBEC Circular No. 4/2012-Cus. dated 17 February 2012 likewise directs that Fe content for export-duty purposes be assessed on a WMT basis and not a DMT basis.

The acceptance of an assessment or waiver of hearing does not create an estoppel against challenging the legality of the assessment through the statutory appellate remedy; ITC Ltd. v. Commissioner of Central Excise, Kolkata-IV, 2019 (368) E.L.T. 216 (S.C.), was relied upon regarding the need to challenge an assessment through the prescribed appellate mechanism.

The Tribunal held that the appellant had not sought to introduce any new test report or factual material; it merely argued that the Fe percentage shown in the existing reports should be evaluated on a WMT basis.

The objection under Rule 5 was therefore misconceived, and the Commissioner (Appeals) was required to examine the legal ground under Section 128A(2).

The appellant’s earlier acceptance of the proposed finalisation and waiver of personal hearing did not prevent it from invoking the statutory appeal remedy, since there can be no estoppel against the correct application of statutory provisions.

On merits, the Tribunal applied the Supreme Court’s ruling in Gangadhar Narsingdas Aggarwal and CBEC Circular No. 4/2012-Cus., holding that exclusion of moisture from the denominator would not represent the goods as presented for export.

However, the precise WMT Fe percentage, tariff entry, applicable duty, and consequential valuation required verification from the individual test reports, moisture data, and assessment records.

As these matters had not been examined by the lower authorities, a fresh determination was necessary.

The impugned appellate order dated 31 July 2019 and the corresponding final assessment orders were set aside, and all three matters were remanded to the jurisdictional adjudicating authority.

The authority was directed to determine Fe content on a WMT basis, considering moisture and the condition of the iron ore fines as presented for export; examine the existing test reports and permit production of connected contractual and assessment documents; and separately determine classification, export-duty rate, and transaction value in accordance with law.

All consequential valuation and duty issues were left open, and the appeals were allowed by way of remand, subject to the outcome of the fresh proceedings.