Importer wins appeal against duty demand as revenue fails to prove Chinese origin allegations with inadmissible statements under Section 138B

CESTAT Ahmedabad allowed the appeal and set aside the demand order. Revenue alleged wrongful availment of preferential duty under Indo-ASEAN FTA notification, claiming goods imported from Malaysia were actually of Chinese origin routed through Malaysia. The tribunal found all import documents including bill of entry, commercial invoice, mill inspection certificate, bill of lading, and certificate of origin clearly established Malaysian origin. Revenue's case relied on statements of two persons who were not examined during adjudication proceedings, making their statements inadmissible under Section 138B of Customs Act. The tribunal held documentary evidence takes precedence over oral evidence, and revenue failed to provide cogent material to substantiate serious allegations against the appellant.

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Issues Involved:
1. Wrongful availing of preferential rate of duty under Notification No. 46/2011-Cus.
2. Authenticity of the Certificate of Origin.
3. Denial of cross-examination of key witnesses.
4. Violation of principles of natural justice.
5. Reliability of documentary versus oral evidence.

Detailed Analysis:

1. Wrongful Availing of Preferential Rate of Duty:
The case revolves around the allegation that the appellant wrongfully availed the benefit of the preferential rate of duty under Notification No. 46/2011-Cus. The Department of Revenue Intelligence (DRI) received information that the appellant, in connivance with a supplier, was importing Cold Rolled Stainless Steel Coils from China but declaring them as originating from Malaysia to avail the preferential duty benefits. The goods were routed through Malaysia, and the appellant submitted documents such as packing lists, commercial invoices, and Certificates of Origin to support their claim.

2. Authenticity of the Certificate of Origin:
The investigation revealed that the Certificates of Origin submitted by the appellant were not genuine. The DRI's investigation included searches and recorded statements from involved parties, which suggested that the goods were of Chinese origin. However, the appellant provided comprehensive documentation, including Mill Inspection Certificates, Bills of Lading, and Fumigation Certificates, to prove the Malaysian origin of the goods. The Tribunal noted that the Customs department had initially accepted these documents during the import process without objection.

3. Denial of Cross-Examination of Key Witnesses:
The appellant argued that the statements of key witnesses, including Mr. Sanjay Jain, were crucial to the case but were not subjected to cross-examination. The appellant's request for cross-examination was denied by the adjudicating authority. The Tribunal emphasized that under Section 138B of the Customs Act, statements made during an inquiry must be admissible only if the witness is examined and cross-examined. The denial of cross-examination was seen as a violation of the principles of natural justice.

4. Violation of Principles of Natural Justice:
The Tribunal found that the rejection of the appellant's request for cross-examination amounted to a violation of the principles of natural justice. The Tribunal cited the case of Veetrag Enterprises v. Commissioner of Customs, which underscores the importance of cross-examination in ensuring a fair trial. The Tribunal held that not providing an opportunity for cross-examination violates the rules of natural justice.

5. Reliability of Documentary versus Oral Evidence:
The Tribunal observed that the documentary evidence provided by the appellant, such as Commercial Invoices, Mill Inspection Certificates, and Certificates of Origin, should be given precedence over the oral statements of witnesses. The Tribunal referred to established legal principles that in cases of contradiction between documentary and oral evidence, the former should prevail. The Tribunal cited several judgments, including Philip Fernandes v. Commissioner and R.P. Industries v. Collector, supporting this view.

Conclusion:
The Tribunal concluded that the demands confirmed against the appellant were not sustainable. The Tribunal set aside the impugned order and allowed the appeal, granting consequential reliefs to the appellant. The judgment emphasized the importance of adhering to the principles of natural justice and the reliability of documentary evidence over oral statements in adjudicating such cases.

(Pronounced in the open court on 12.07.2024)

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