While hearing out a public interest litigation (PIL), the Supreme Court has observed that evasion of duty in regard to iron ore and pellet exports to China from 2015 onwards is a “serious issue” that needs to be introspected at the earliest.
Duty evasion
The apex court has directed the Centre to file a response to the PIL, filed in personal capacity by advocate M.L. Sharma, arguing that certain companies be prosecuted for alleged evasion of export duty by declaring wrong tariff code to ship out iron ore and pellets under the Foreign Trade (Development and Regulation) Act, 1992. The bench was told that iron ore “smuggling to China” was taking place, as these companies have been exporting without paying the 30% export duty.
It has been alleged in the PIL that the ministries of commerce and finance control and regulate the export policies and decide under which harmonised system (HS) codes each good will be exported. The government had set up KIOCL to use low-grade iron ore for palletisation and exports under the “duty free Tariff HS code 26011210 which is exclusively prescribed for KIOCL”.
HS CODE flip-flop
The PIL observes that under Foreign Trade (Development and Regulation) Act, 1992, “tariff HS CODE NO. 26011100 was prescribed to export” all other kinds of iron ore subject to payment of export duty at the rate of 30%. The firms were wrongly allowed to export iron ore/pellets using the tariff code being used by KIOCL.
The PIL states that ministries of commerce and finance, customs department and 61 companies have been “hand-in-glove” in exporting millions of tonnes of iron ore and pellets to China” in violation of various laws by using Tariff HS Code 26011210 instead of 26011100 and evading 30% export duty. The PIL seeks that a penalty of over 7 lakh crore be slapped on the defaulters.
The apex court has also issued notices to JSPL, BRPL, and JSW Steel among other leading iron ore pellet exporters, SteelMint learnt from latest reports.
Indian pellet export shipments were recorded at 13.85 mn t in FY’21, as per data maintained with SteelMint. The exports picked up by 9% y-o-y as against 12.67 mn t in FY’20. China was the largest importer of Indian pellets in FY21 at 11.04 mn t, up 7% as against 10.35 mn t in FY’20. Malaysia stood second-largest exporter at 0.80 mn t followed by Oman at 0.66 mn t.
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