Fe Content of Iron Ore to Be Determined on Wet Basis: CESTAT relies on Supreme Court Ruling to set aside Duty Demand [Read Order]

The Principal bench of Customs, Excise and Service Tax Appellate Tribunal CESTAT, New Delhi, has reaffirmed that Fe (iron) content in iron ore fines must be determined on a wet basis in line with the Supreme Court’s ruling in Gangadhar Narsingdas.

The appeals were filed by M/s Disha Realcon Pvt. Ltd. and M/s S.M. Ayat Niryat Pvt. Ltd., iron ore exporters, along with two individuals, against a common order passed by the Commissioner of Customs (Adjudication), New Delhi. The appellants exported iron ore fines through the ports of Haldia and Paradip. Exports of iron ore fines with Fe content below 58% were exempt from export duty under Notification No. 15/2016-Cus dated 1.3.2016.

The DRI issued a show-cause notice to M/s Disha Realcon Pvt. Ltd. and M/s S.M. Niryat Pvt. Ltd., alleging underpayment of export duty on iron ore fines exported through Haldia and Paradip ports. The exemption under Notification No. 15/2016-Cus was available to iron ore fines containing Fe content below 58%.

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The exporters argued that the Supreme Court ruling in Gangadhar Narsingdas settled the issue: Fe content must be computed on a wet basis, taking total weight inclusive of moisture, since export duty is linked to overall weight at shipment.

The CBEC Circular No. 04/2012-Cus, issued following that judgment, explicitly directed all field formations to assess Fe content on a wet basis. Ignoring both the precedent and the circular, the Commissioner violated the principle of judicial discipline.

They maintained that even if dry-basis tests were industry practice, legal interpretation prevails over technical convenience.

The Department defended the order, asserting that BIS Standard IS-1493-1959 prescribes Fe testing on a dry basis, and that the invoices themselves reflected dry-weight values. It argued that no recognised method in international trade assessed Fe on a wet basis.

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The CESTAT found that the facts of the present case were identical to those in Union of India v. Gangadhar Narsingdas Aggarwal (1997) where the Supreme Court rejected the very argument advanced by the Department - that Fe content should be calculated after removing moisture.

The Tribunal noted that the Commissioner had no discretion to disregard a binding Supreme Court decision. Also, administrative instructions or testing standards cannot override judicial pronouncements. The CBEC circular implementing the Supreme Court ruling had statutory force for departmental officers. Hence, assessing Fe content on a dry basis was contrary to both law and discipline.

The Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) set aside the duty demand, penalties, and confiscations against all appellants, allowing the appeals with consequential relief.

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