Import of alkalised cocoa powder from Malaysia gets FTA benefits under Notification 46/2011-Cus without proper verification

The CESTAT Ahmedabad allowed an appeal regarding import of alkalised cocoa powder from Malaysia where customs denied FTA benefits under Notification No. 46/2011-Cus. The department alleged non-fulfillment of 35% value addition condition based on intelligence but conducted no verification to support this claim. Following precedents from Shriazee Traders and BDB Exports cases with identical facts, the tribunal held that without proper verification, the denial of FTA benefits was unsustainable and set aside the impugned orders.

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Issues Involved:

1. Denial of FTA benefit u/s Notification No. 46/2011-Cus dated 01.06.2011.
2. Allegation of non-compliance with the 35% value addition condition.
3. Validity of the certificate of origin and lack of independent verification.
4. Invocation of extended period of limitation u/s 28(4) of the Customs Act, 1962.

Summary:

1. Denial of FTA Benefit:

The appellant imported Alkalised Cocoa Powder from Malaysia and claimed the benefit of Notification No. 46/2011-Cus dated 01.06.2011. The customs authority denied this benefit on the ground that the 35% value addition condition was not met. The adjudicating authority confirmed a differential duty of Rs. 8,55,792/- and imposed an equal penalty, which was upheld by the Commissioner (Appeals).

2. Allegation of Non-Compliance with 35% Value Addition Condition:

The department's denial was based on intelligence suggesting non-compliance with the 35% value addition requirement. However, no verification was carried out to support this allegation. The appellant argued that the certificate of origin was not independently verified, and similar cases were decided in favor of the assessee, citing judgments such as Shirazee Traders and Global Exim.

3. Validity of Certificate of Origin and Lack of Independent Verification:

The tribunal noted that the denial of the FTA benefit was solely based on presumptions and assumptions without any verification of the certificate of origin. It emphasized that the customs authority must follow the verification process outlined in Annexure-III of the Customs Tariff (determination of Origin of Goods under the Preferential Trade Agreement between India and Malaysia) Rules, 2011. The tribunal found no evidence of such verification in the present case, rendering the denial of the benefit unsustainable.

4. Invocation of Extended Period of Limitation:

In the case of Global Exim, the tribunal addressed the issue of limitation, noting that the show cause notice was issued beyond the normal period of limitation. The tribunal held that the demand was time-barred, as the appellant had no control over the issuance of the certificate of origin by the Malaysian authority and had complied with all documentary requirements at the time of filing the Bill of Entry.

Conclusion:

The tribunal concluded that the impugned orders were not sustainable due to the lack of verification of the certificate of origin and the time-barred nature of the demand. The appeal was allowed with consequential relief, setting aside the orders of the lower authorities.

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