CESTAT Hyderabad Remands Iron Ore Export Valuation Dispute, Orders Fresh Assessment Considering Contract Addendum

The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside the order of the Commissioner (Appeals) and remanded a dispute relating to export valuation of iron ore fines, holding that contractual modifications and supporting documents must be duly considered while finalizing assessments and refund claims.

The appeal was filed by M/s Kalinga Commercial Corporation Ltd. against the order dated 13 March 2013 passed by the Commissioner (Appeals), Visakhapatnam, which had upheld the reassessment carried out by the original authority.

The appellant had entered into an agreement dated 2 August 2010 with a Chinese buyer for supply of iron ore fines with 62.50% Fe content at a price of USD 136 PDMT on FOB basis. Since key parameters such as Fe content and moisture were provisional, the shipping bills were initially assessed provisionally. Upon submission of final documents, including commercial invoice, Bank Realization Certificate (BRC), Bill of Lading and load port certificate, the assessments were finalized and a refund of ₹2,95,549 was granted.

However, during reassessment, the adjudicating authority relied on the originally declared FOB value and Fe content, despite laboratory findings showing variation in Fe content (62.78%) and moisture levels. It also noted that 7.48% of the consignment comprised lumps and, after allowing a 5% tolerance, levied higher duty at 15% ad valorem on 2.48% of the consignment by treating it as iron ore lumps.

The Commissioner (Appeals) upheld this reassessment, observing that the appellant had failed to substantiate amendments to the contract and that the reduced price of USD 111 PDMT was based only on a buyer’s letter without adequate supporting evidence. The authority also rejected the argument that higher duty could not be imposed on a portion of the consignment by classifying it as lumps.

Before the Tribunal, the appellant argued that the original contract had been modified through an addendum due to variation in Fe content, leading to renegotiation of the unit price. It was contended that the assessing authority failed to consider these revised contractual terms and supporting documents.

The Tribunal, comprising Technical Member A.K. Jyotishi and Judicial Member Angad Prasad, observed that while the export was initially governed by the original contract, its terms were subsequently amended in light of lower Fe content, which would naturally result in renegotiation of price. It held that the assessing officer failed to appreciate these contractual modifications and did not consider the revised unit price based on actual parameters such as moisture and Fe content.

The Bench further clarified that where a consignment contains a certain proportion of lumps within permissible limits, the entire consignment should be treated as fines. It also relied on its earlier decisions in similar matters, including Vibhutigudda Mines v. Commissioner of Customs and related cases, which addressed identical issues.

In view of these findings, the Tribunal held that the impugned order could not be sustained. Accordingly, it set aside the order of the Commissioner (Appeals) and remanded the matter to the original authority for fresh assessment, directing consideration of the original contract, addendum, supporting documents and applicable precedents, and thereafter grant of refund, if any, in accordance with law.

Case Details:
Case Title: M/s Kalinga Commercial Corporation Ltd. v. Commissioner of Customs, Visakhapatnam
Case No.: Customs Appeal No. 26820 of 2013
Coram: A.K. Jyotishi (Technical Member) and Angad Prasad (Judicial Member)