FOB Value Cannot be Treated as CUM Duty Price for Export Duty: CESTAT Dismisses Essel Mining's Appeal [Read Order]

In a recent ruling, the Customs, Excise and Service Tax AppellateTribunal (CESTAT) dismissed Essel Mining's appeal, holding that the FOB (Free on Board) value of exported goods cannot be treated as a "CUM duty price" for the calculation of export duty.

The appellant, M/s Essel Mining and Industries Ltd., is engaged in exporting iron ore. They argued that for the purpose of assessing export duty, the FOB value should be considered as a "CUM duty price," meaning the export duty amount should be deducted from the FOB value before computing the final tax liability. They contended that not doing so amounted to charging "duty on duty" and relied on a Board's Circular to support their interpretation.

The Revenue, however, assessed the export duty on the entire FOB value without any deduction, leading to a demand for additional duty. The respondent (Customs) argued that this issue was no longer res integra and that different Benches, including the present one, had clearly held under the provisions of the Export Valuation Rules that the FOB value cannot be treated as a "CUM duty price."

A two member bench of A.K. Jyotishi (Technical) and Angad Prasad (Judicial), after perusing the records and relying on precedents including the case of Sesa Goa Ltd., observed that the FOB price is the price actually paid or payable for the exported goods. The assessable value cannot be reduced by extending the benefit of a "CUM duty price." The Tribunal found no legal infirmity in the order passed by the Commissioner (Appeals), which had upheld the department's stance.

Consequently, the CESTAT held that the export duty must be calculated on the full FOB value. In dismissing the appeals filed by Essel Mining, the Tribunal upheld the department's demand, confirming that treating the FOB value as a "CUM duty price" to lower the assessable value was not legally permissible.

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