Orissa High Court Ruled on Applicability of WMT vs DMT Basis for Iron Ore Export Duty Assessment

ALO Law Office- IDT Tax I Arbitration I Litigation

Date: 23.02.2026

Orissa High Court Ruled on Applicability of WMT vs DMT Basis for Iron Ore Export Duty Assessment

On January 15, 2026, the Orissa High Court delivered a significant judgment in the case of OTAPL No. ​ 50 of 2025, which revolved around the assessment of customs duty on exported iron ore fines. This case highlights the complexities of customs law, the importance of adhering to established legal principles, and the role of substantial questions of law in appellate proceedings. ​ Below, we delve into the details of the case, the arguments presented, and the court’s reasoning behind its decision.

Background of the Case

The case originated from an appeal filed by the Commissioner of Customs (Preventive), Bhubaneswar, under Section 130 of the Customs Act, 1962. ​ The appeal challenged the Final Order No. 77815/2024, dated December 4, 2024, passed by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata. ​ The dispute centered around the determination of customs duty on iron ore fines exported by M/s. ​ Essel Mining and Industries Ltd. under two shipping bills dated March 3, 2021, and March 6, 2021. ​

The primary issue was whether the iron content (Fe content) of the exported iron ore fines should be calculated on a Wet Metric Tonne (WMT) basis or a Dry Metric Tonne (DMT) basis for customs duty assessment. ​ The case also involved the validity of test reports from two different laboratories: the Central Revenues Control Laboratory (CRCL), Kolkata, and M/s. Mitra S.K. ​ Private Ltd. (SKM), an NABL-accredited private testing agency. ​

Key Questions of Law

The Revenue raised several questions of law for adjudication, including:

1. Whether the CESTAT was correct in dismissing the appeal filed by the Department against the Order-in-Appeal dated June 9, 2023, passed by the Commissioner (Appeals), Bhubaneswar. ​
2. Whether the test report from the NABL-accredited private testing agency (SKM) could be accepted for customs duty assessment, given that the samples were drawn solely by the exporter without the presence of Customs officials. ​
3. Whether the CESTAT was justified in discarding the CRCL test report, which was based on representative samples drawn in the presence of Customs officials, in favor of the SKM test report. ​
4. Whether the CESTAT was correct in determining the Fe content of the iron ore fines on a WMT basis, as opposed to a DMT basis. ​

Arguments Presented

For the Appellant (Revenue): ​

• The CRCL test report, based on samples drawn in the presence of Customs officials, should have been given precedence over the SKM report. ​
• The SKM report was based on samples drawn solely by the exporter, which lacked credibility and violated CBIC Circular No. ​ 12/2014-Cus, dated November 17, 2014. ​
• The CRCL test report, which calculated Fe content on a DMT basis, was more accurate and should have been used for customs duty assessment.

For the Respondent (M/s. Essel Mining and Industries Ltd.): ​

• The SKM test report was based on samples drawn at the time of export and reflected the condition of the goods at the time of export, as required by law. ​
• The CRCL test report was based on samples tested after a significant delay, leading to evaporation of moisture and a higher Fe content on a DMT basis. ​
• The contract between the exporter and the foreign buyer specified that the Fe content of the iron ore fines should be less than 58% on a WMT basis, and payments were made accordingly.

Court’s Analysis and Judgment ​

The Orissa High Court meticulously analyzed the arguments and evidence presented by both parties. The court’s judgment focused on the following key points:

1. Determination of Fe Content: ​
   • The court upheld the principle that the Fe content of exported goods should be calculated based on their condition at the time of export, which includes moisture and other impurities. ​ This aligns with the legal position established in previous judgments, including Union of India v. Gangadhar Narsingdas Agrawal. ​
2. Validity of Test Reports:
   • The court found no reason to discard the SKM test report, as it was based on samples drawn at the time of export and reflected the condition of the goods in their natural form. ​ The CRCL test report, on the other hand, was based on samples tested after a significant delay, which could have affected the accuracy of the results. ​
3. Transaction Value: ​
   • The court emphasized that the valuation of exported goods should be based on the transaction value, as per Section 14 of the Customs Act. ​ In this case, the transaction value was determined based on the SKM test report, which was consistent with the terms of the contract between the exporter and the foreign buyer. ​
4. Substantial Question of Law:
   • The court concluded that the questions raised by the Revenue were primarily based on factual findings and did not constitute “substantial questions of law” as required under Section 130 of the Customs Act. ​ The court cited several precedents to support its decision, including Santosh Hazari v. Purushottam Tiwari and Hero Vinoth v. Seshammal. ​

Conclusion

The Orissa High Court dismissed the appeal filed by the Revenue, affirming the concurrent findings of fact by the Appellate Authority and the CESTAT. ​ The court held that the Fe content of the iron ore fines exported should be calculated on a WMT basis, as per the legal position prevailing at the time of export. ​ The judgment underscores the importance of adhering to established legal principles and the limited scope of appellate jurisdiction under Section 130 of the Customs Act.

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Source: Orissa High Court

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