Country-of-origin requirements under free trade rules supported exemption, defeating duty demand and penalties.

Imported goods were found to satisfy the Indo-Sri Lanka Free Trade Agreement origin requirements for exemption under Notification No. 26/2000-Cus. The test report, export documents and Sri Lankan customs opinion supported that the goods were an edible palmolein mixture and that a four-digit tariff shift had occurred in Sri Lanka, while the country of origin certificate and permissible non-originating material content further supported compliance. On that basis, the contrary view on classification and origin was unsustainable, and the exemption could not be denied. The duty demand and penalties were therefore not maintainable.

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Issues: Whether the imported goods satisfied the origin requirements under the Indo-Sri Lanka Free Trade Agreement so as to qualify for exemption under Notification No. 26/2000-Cus., and whether the demand of duty and penalties could be sustained.

Analysis: The test report showed that the goods conformed to the standards of RBD palmolein, indicating an edible product. The export documentation and the Sri Lankan customs opinion showed that the goods were declared as a mixture of imported palmolein and coconut oil and were classified in Sri Lanka under heading 15.17, while the materials imported into Sri Lanka were classifiable under heading 15.11. This supported the view that a change in classification at the four-digit level had taken place in Sri Lanka. The adjudicating authority had also accepted the country of origin certificate and the value of non-originating material being within the permissible limit. On that basis, the conditions under the origin rules were found to have been met, and the contrary finding on classification and origin was held to be unsustainable.

Conclusion: The appellant was entitled to the benefit of Notification No. 26/2000-Cus., and the duty demand and penalties were not maintainable.

Ratio Decidendi: Where the prescribed country-of-origin conditions are satisfied, including the requisite tariff shift and supporting origin certification, preferential exemption cannot be denied merely on a contrary view of classification.

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