‘A party cannot be permitted to take inconsistent stand at different stages of Proceeding’: Orissa HC Upholds DMT method of Fe content in IOF [Read Order]

In a recent case, the Orissa High Court upheld the DMT method in determining Fe content in IOF and dismissed the appeal, stating that ‘A party cannot be permitted to take inconsistent stands at different stages of proceedings’.

The appellant has filed an appeal under Section 130 of the Customs Act, 1962 assailing the judgment and order dated 30th August 2024 passed by the Customs, Excise and Services Tax Appellate Tribunal, Eastern Zonal Bench, Kolkata whereby and whereunder, the demand raised by the appellant upon issuing the show cause notices alleging that there has been a conscious avoidance of the customs duty by splitting one consignment into different components, was rejected.

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In order to ascertain whether the points so urged come within the periphery of the “substantial question of law”, the genesis of the dispute is required to be adumbrated as discerned from the records. The respondent, Chamong Tee Exports Pvt. Ltd exported the iron ore fines (IOF) under the cover of 13 shipping bills to different overseas buyers depicting the value and quantity of the said iron ore fines.

The revenue authorities, on the basis of DRI investigation found that 5 consignments of high grade iron ore fines containing more than 58% of the iron (Fe) by splitting them into 7 shipping bills of high grade iron ores which attracts the customs duty @ 30% and discharged their obligations upon payment of the same, but 6 shipping bills of iron ore fines which contain less than 58% of Fe being exempted from the customs duty under law, no duty was paid and, therefore, they have undervalued such 5 consignments with an intend to evade the custom duty.

Show cause notices were issued demanding the differential custom duty on the basis of a test report of the independent testing agency inviting the respondent to file the reply thereto. The respondent took a defence that the said demand is unsustainable as the Fe content is required to be determined on the basis of Wet Metric Ton (WMT) and not on the basis of Dry Metric Ton (DMT). It was the specific stand of the respondent that it has been held by several High Courts that Fe content has to be evaluated on the basis of WMT and not DMT and, therefore, the stand of the revenue authority is not sustainable.

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The adjudicating authority dropped the demand of the revenue with categorical finding that the Fe content of the aggregate/consolidated consignment exported through a single vessel was less than 58% on WMT basis, but imposed certain penalties on the respondent company and its authorised person. Since the demand of differential amount of custom duty was rejected by the adjudicating authority, the department preferred an appeal before the Tribunal, wherein the respondent also filed the cross objection challenging imposition of the penalty.

A stand was taken by the appellant in the appeal filed before the Tribunal that the respondent intentionally split 5 consignments of high grade iron ore fines containing more than 58% Fe into several shipping bills, some of which contains more than 58% Fe, where the custom duty @ 30% was discharged, but did not pay the custom duty by undervaluing the consignment on the premise that it contains less than 58% of Fe, which does not attract the custom duty in law.

A further plea was taken by the appellant that the Fe content is to ascertained on the basis of DMT and not WMT and the test report would reveal that IOF contains more than 58% of Fe in aggregate which was rejected by the Tribunal with categorical finding that the Fe content is to be ascertained on the basis of WMT and not on the basis of DMT.

The challenge is made in the instant appeal reiterating the stand that the testing report reveals that the said consignment being the subject matter of the dispute, contains more than 58% of Fe on DMT basis and, therefore, the finding of the Tribunal that it has to be done on WMT basis is unsustainable.

The first appellate Court has, in a very cryptic manner, reversed the finding on the question of possession and dispossession as alleged by the plaintiff as also on the question of adverse possession as pleaded by the defendant. The appellate Court has jurisdiction to reverse or affirm the findings of the trial Court. First appeal is a valuable right of the parties and unless restricted by law, the whole case is therefore open for rehearing both on questions of fact and law.

The judgment of the appellate Court must, therefore, reflect its conscious application of mind, and record findings supported by reasons, on all the issues arising along with the contentions put forth, and pressed by the parties for decision of the appellate Court. The task of an appellate Court affirming the findings of the trial Court is an easier one.

The appellate Court agreeing with the view of the trial Court need not restate the effect of the evidence or reiterate the reasons given by the trial Court; expression of general agreement with reasons given by the Court, decision of which is under appeal, would ordinarily suffice (Girijanandini Devi & Ors. Vs. Bijendra Narain Choudhary, AIR 1967 SC 1124).

From the observations of the coordinate bench, it is exposit that the Fe content in IOF is to be determined on the basis of WMT and not DMT and in view of a decision having taken in this regard and in absence of any materials forthcoming before us to take a different view, the said point having settled cannot be said to be a debatable one nor it invites any different opinion to be arrived at.

The Chief Justice Harish Tandon and Justice Manash Ranjan Pathak observed that the contention of the appellant that Fe content in IOF is to be determined on the basis of DMT and not WMT is sustainable.

“A party cannot be permitted to take inconsistent stands at different stages of the proceeding. The plea taken before the Tribunal is sought to be varicated at the stage of the instant appeal, which in our opinion is not permissible“, the bench said.

In absence of substantial question of law under Section 130 of the Customs Act, 1962, the appeals are dismissed.

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