CESTAT Quashes Method Adopted for Refund Computation, Remands to Reassess Duty u/s 18(4) of Customs Act [Read Order]

The Hyderabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside the orders passed by the lower authorities and held that export duty must be computed strictly on the basis of the final commercial invoice and Bank Realisation Certificate (BRC).

The Tribunal rejected the reliance placed on the CRCL moisture report and remanded the matter for fresh computation of refund and interest.

M/s Rungta Mines Ltd and M/s Rungta Sons Pvt Ltd are exporters of iron ore. Their shipping bills were provisionally assessed based on the declared FOB value and quantity. The Original Authority accepted that the export proceeds were fully realised as per the contract and that there was no mis-declaration of value.

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However, despite this finding, the authority re-determined the FOB value by replacing the declared moisture content of 8% with the moisture level found in the CRCL test report. This was done even though the CIQ discharge-port report, which formed part of the contractual framework, reflected different values.

The Commissioner (Appeals) later directed that Fe (iron) content must be accepted as declared but upheld the department’s reliance on the CRCL moisture reading.

The appellants argued that once the transaction value is found to be genuine, there is no basis for altering it at the time of final assessment. They submitted that duty must be computed only on the basis of the final invoice and BRC, which reflect the mutually agreed contractual terms.

They contended that the bond executed during provisional assessment did not bind them to accept the CRCL results and simply required payment of any differential duty, if applicable.

They also pointed out that the procedure prescribed for final assessment had not been followed by the lower authorities. The CIQ report, which the contract recognised for determining Fe and moisture parameters, was ignored without justification.

The Tribunal, comprising Angad Prasad, (Judicial Member) and A.K. Jyotishi, (Technical Member), agreed with the appellants and held that the final invoice issued after the CIQ report forms the proper basis for determining export duty.

It observed that the bond could not be construed as an agreement to accept CRCL findings. The Bench noted that several earlier decisions, including Daksh Minerals, Atha Mines, Essel Mining, VGM Exports and Bonai Industries, have consistently held that refund must be sanctioned based on the value realised as per the final commercial invoice and BRC.

The Tribunal found that the Refund Sanctioning Authority had incorrectly re-determined the value for the purpose of calculating the refund. It reiterated that any excess duty paid at the time of provisional assessment must be refunded along with interest in terms of Section18(4) of the Customs Act, 1962.

In view of these findings, the Tribunal set aside the impugned orders and remanded the matter to the Original Refund Sanctioning Authority to recompute the refund and interest strictly as per its directions. It further directed that the matter be finalised within three months from receipt of the order.

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