Pre-2022 Iron Ore Exports Cannot Be Reassessed On DMT Basis; WMT Applies: Orissa High Court

The Orissa High Court has held that iron ore exports made before the 2022 change in law must be assessed on Wet Metric Tonne (WMT) basis prevailing at the time, and cannot later be reassessed on Dry Metric Tonne (DMT) basis.

The court held,

“It is trite that under all taxing statutes to consider levy of tax/duty it is to be determined when exactly did the taxable event occur? It is with reference to that point of time, that the chargeability or leviability of the tax or duty, as the case may be, has to be determined. That is the crucial date.”

A Bench of Chief Justice Harish Tandon and Justice Murahari Sri Raman was dealing with a dispute over how to calculate iron content in exported iron ore fines, which determines whether export duty is payable.

The issue before the Court was whether customs authorities could reassess export transactions by computing iron content on Dry Metric Tonne basis instead of Wet Metric Tonne basis, thereby increasing the iron content beyond 58% and changing the classification of the goods.

The court held that since the exports took place before the law was amended in 2022, the earlier method had to be applied.

It observed:

“Since both the counsel appearing for the respective parties are at consensus ad idem that the shipping bills, subject matter of assessment in the present case are of prior to amendment of the Customs Tariff Act, 1975 by virtue of the Finance Act, 2022. Therefore, in the considered view of this Court as the taxable event with respect to exported goods in question occurred prior to amendment by virtue of the Finance Act, 2022 changing the modality of computation of weight of iron ore fines from WMT to DMT, the adjudication suffered set back inasmuch as the calculation of Fe content of iron ore fines as exported should have been made on the basis of WMT.”

The court explained that customs duty involves chargeability, valuation and quantification, all of which are tied to the taxable event, namely the export of goods.

It clarified,“It would be clear that Section 14 by itself does not lay down when or what goods are chargeable to customs duty. It only deals with valuation of the goods exported which are chargeable to customs duty. If they are chargeable to duty and are chargeable by reference to their value, then the value has to be determined as laid down in Section 14.”

The case arose from a show cause notice issued to OCL Iron and Steels Limited alleging misdeclaration of iron content in exports made between 2018 and 2022 and proposing reassessment on Dry Metric Tonne basis, leading to a demand of about Rs.256.95 crore along with interest and penalty.

The company argued that Wet Metric Tonne was the accepted and uniformly applied method under a 2012 circular and that adopting Dry Metric Tonne would artificially increase iron content and deny exemption.

The authorities alleged that the company had suppressed the true iron content and that contracts and export proceeds were based on dry weight, justifying reassessment.

Rejecting this, the court held that the authorities could not change the basis of assessment for past exports by applying a different method.

It relied on settled precedent to reiterate that goods must be assessed in the condition in which they are exported, allowing the plea.

For Petitioner: Senior Advocate V. Sridharan, assisted by Advocates Saswat Kumar Acharya, Abhisek Agarwal, Sahil Pargh and Abhijeet Agarwal.

For Respondents: Central Government Counsel Satyanarayan Pattanaik; Senior Standing Counsel Sujan Kumar Roy Choudhury.