ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 27.10.2025
CESTAT Kolkata Dismissed DRIβs Allegations of Fe Content Manipulation
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379.
In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Eastern Zonal Bench, Kolkata, has rejected the appeal filed by the Revenue against M/s Kashvi Power and Steel Pvt. Limited (KPSPL) in Customs Appeal No. 75043 of 2022. β The case revolved around allegations of export duty evasion by mis-declaring the iron content (‘Fe’) in iron ore fines exported by KPSPL through Paradip Port, Odisha. β
Background of the Case
M/s KPSPL, engaged in trading iron ore in domestic and international markets, was accused of evading export duty by misrepresenting the iron content in their shipments. β According to the Directorate of Revenue Intelligence (DRI), KPSPL allegedly manipulated test reports to declare lower iron content (‘Fe’) in their shipments, thereby claiming a nil export duty rate for iron ore fines with less than 58% Fe content. β The investigation revealed that KPSPL had exported iron ore fines through multiple shipping bills between 2016 and 2018, allegedly splitting consignments to avoid paying the higher export duty of 30% applicable to iron ore fines with Fe content above 58%. β
A Show Cause Notice (SCN) was issued to KPSPL, demanding differential export duty of βΉ17.59 crore, along with interest and penalties. β However, the Principal Commissioner of Customs (Preventive), Bhubaneswar, dropped the proceedings, citing unsustainable evidence. β Aggrieved by this decision, the Revenue filed an appeal with the CESTAT.
Key Issues in the Appeal
The Revenue raised several points in its appeal, including:
- The Adjudicating Authority (AA) relied solely on test reports from the Central Revenue Control Laboratories (CRCL), Kolkata, and disregarded test reports from private testing agencies. β
- The AA allegedly ignored the analysis of Fe content conducted at the discharge port in China by the China Entry-Exit Inspection and Quarantine Bureau (CIQ). β
- The AA failed to consider the alleged manipulation of test reports and splitting of consignments by KPSPL. β
Tribunal’s Observations and Ruling β
After hearing both sides and reviewing the evidence, the Tribunal upheld the findings of the Adjudicating Authority and rejected the Revenue’s appeal. The key observations and conclusions were:
- Reliability of Test Reports: The Tribunal emphasized that the CRCL test reports, based on samples drawn by Customs authorities in the presence of KPSPL representatives, were more credible than private lab reports. β It cited the Supreme Court’s decision in Steer Overseas Pvt. β Ltd. v. Commissioner [2022 (381) E.L.T. β A34 (S.C.)], which held that private lab reports based on samples drawn without Customs oversight cannot override CRCL reports. β
- Valuation of Goods: The Tribunal found no evidence of suppression or misdeclaration of Fe content by KPSPL. β The declared values in the shipping bills matched the final invoices and bank realization certificates (BRCs), indicating no undervaluation. β
- Discharge Port Analysis: The Tribunal ruled that the CIQ test reports from the discharge port in China were irrelevant for customs duty assessment, as the contracts between KPSPL and its overseas buyers were based on load port test results. β
- Alleged Manipulation of Consignments: The Tribunal found no substantial evidence to support the Revenue’s claim that KPSPL had manipulated test reports or artificially split consignments to evade export duty.
Refund of Deposited Amount β
During the investigation, KPSPL had deposited βΉ2.5 crore towards potential duty liability. β With the Tribunal ruling in favor of KPSPL, it ordered the refund of the deposited amount along with applicable interest. β
Conclusion
This ruling highlights the importance of adhering to established procedures for sample collection and testing in customs cases. β The Tribunal’s decision underscores the credibility of CRCL test reports over private lab analyses and reinforces the principle that adjudication must be based on substantial evidence rather than mere allegations. β The case serves as a reminder to exporters about the importance of accurate self-assessment under the Customs Act, 1962, while also emphasizing the need for the Revenue to follow due process and present credible evidence in cases of alleged duty evasion.
Source: CESTAT Kolkata
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