2025 (9) TMI 765 - AT - Customs

Confiscation, redemption fine and penalties set aside where Certificate of Origin not properly verified under Rule 6

CESTAT allowed the appeal, setting aside confiscation, redemption fine and penalties imposed under the Customs Act. The tribunal found no credible ... Rejection of country of origin as UAE - re-determination of country of origin as Pakistan for the purpose of levy of duty - mis-declaration of description of the goods in respect of country of origin and for violation of Food Safety, and Standards (Packing and Labelling) Regulation, 2011 - confiscation - redemption fine - penalty - HELD THAT:- The case has been made out against the appellants is with regards to concocted Certificate of Origin, certifying that the impugned goods sought to cleared on the Bill of Entry No 5036474 dated 24.09.2019 at ICD Dadri. It is observed that no enquiries were made with the authority issuing the said certificate of origin, though the enquiry that we can contemplate could have been made only with the certificate of origin issuing authority UAE as per Rule 6 of the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020. If any such enquiry made the outcome of the said enquiry should have been part of the impugned order, for the reason that the only case is in respect of the validity and correctness said Certificate of Country of Origin. The Adjudicating authorities straightway rejected the Country of Origin without even taking note of the evidences in available on the record in form of Phyto Sanitary Certificate and Fumigation Certificate. If the certificate was to be rejected the same should have been done in consultation with the Certificate issuing authority. Thus, the Custom Authorities under Custom Act, 1962, have no jurisdiction to challenge the documents issued by the Government Authorities of the other Country - there are no merits in the reliance placed by the adjudicating examination report given by M/s Atul Rajasthan Date Palms Limited, as the same is based on the experience of the person signing the said report without stating any reasons. Determining Country of origin of any goods is a complex matter and it cannot be decided by way of visual inspection of goods only. In the case of Krishna Das [2014 (5) TMI 201 - CESTAT NEW DELHI] it is observed that 'The Revenue in the present case apart from relying upon so called expert opinion as regards the foreign origin of the goods have not produced any evidence to establish the smuggled nature of the goods. It is not the case of the Revenue that betel nuts of foreign origin are not legally imported into India and the same are not available in the open market. As such, in the absence of any evidence to show that betel nuts in question were actually smuggled, the confiscation of the same cannot be upheld.' The impugned goods were of Pakistan origin certain export declarations filed at Dubai customs which were obtained from the Shipping Lines have also been relied. Appellants have questioned the validity and reliance on these documents as evidence which have been obtained from third party and not from the person making the declaration or the Government Authority to whom such declaration was made. There are nothing on records to show that even a effort was made by the revenue authorities to obtain the copy of said declarations from the Customs Authority at Dubai, to whom the same was made - there are no position to uphold the order in relation to the liability to confiscation under Section 111 (m) of Customs Act, 1962, and the penalties imposed under Section 112 (a) and (b) ibid. There is no credible evidence produced to show that the “Certificate of Origin” issue by the designated authorities in UAE was manipulated, in fact no enquiries have been made in this regard from the authorities in UAE. We also note that nothing has been placed on record to show that he has by his act of omission and commission contravened any provision of Customs Act, 1962. He has supplied the goods – dry dates, for being imported into India by the said importers in normal course of business. Even if it is assumed and admitted that he has manipulated the documents to declare country of origin as UAE, then also the offence which has been committed in UAE, action would lie against him under the law of that country. In the present case penalty has been on the Appellant 1, 4, 5 & 6 under Section 114AA, without establishing the fraud in respect of the said concocted Certificate of Origin by way of proper enquiries with the certificate issuing authorities as have been provided by Rule 6 of Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 - there are no merits in the imposition of such penalties. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the country of origin of imported chopped (dry) dates was correctly determined as Pakistan or as UAE for purposes of customs duty assessment and confiscation. 2. Whether documentary and testimonial material relied upon by the adjudicating authority - specifically: (a) an expert opinion based on physical examination; (b) export (FZ Transit Out) declarations obtained from a shipping line; and (c) statements recorded under Section 108 - suffice to rebut a produced foreign Certificate of Origin and sustain confiscation under Section 111(m) and consequential penalties. 3. Whether the proper procedure under rules governing verification of foreign Certificates of Origin (Rules of Origin / verification requests) was followed before rejecting or treating the foreign Certificate of Origin as concocted. 4. Whether alleged non-compliance with Food Safety and Standards (Packing & Labeling) Regulations, 2011 (loose/ detachable slips on bags) justified confiscation and penalties. 5. Whether penalties under Section 112(a) and/or 112(b) and under Section 114AA can be sustained against various persons (importer, proprietor, caretaker, CHA personnel, supplier/export intermediary), having regard to required mens rea, evidence of knowledge, and alleged acts/omissions. 6. Whether cross-examination of the expert and co-noticees was required as a matter of natural justice in the circumstances. 7. Whether confiscation can be ordered (and redemption fine imposed) where the goods have already been auctioned and are not available for physical confiscation. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Determination of country of origin Legal framework: Determination of origin for customs purposes is governed by documentary evidence (invoice, Certificate of Origin, phytosanitary/fumigation certificates), export declarations filed with exporting country customs, and applicable Rules of Origin/verification procedures. Confiscation under Section 111(m) may follow mis-declaration of value or other particulars (including country of origin). Precedent treatment: Authorities and tribunals have held that a Certificate of Origin issued by the competent designated authority of the exporting country merits weight and cannot be discarded without verification from the issuing authority; visual/expert inspection alone is inadequate to determine origin. Interpretation and reasoning: The adjudicating authority relied primarily on (i) an expert visual opinion (stating 'Indian subcontinent' origin), (ii) an export FZ Transit Out declaration obtained from a shipping line indicating 'PK' (Pakistan), and (iii) recorded statements admitting Pakistan origin. The Tribunal found deficiencies in those materials: (a) the expert opinion was merely visual, lacked explanation of methods and credentials sufficient to be treated as conclusive, and was of limited probative value for country-of-origin determination; (b) the export declaration was obtained from a shipping line (not directly from Dubai Customs) contained inconsistencies, and could not supplant the formal Certificate of Origin without direct verification; (c) statements, some retracted or hearsay, cannot alone displace documentary evidence. Crucially, no verification request was made to the foreign authority issuing the Certificate of Origin as contemplated by the rules governing verification of origin. Ratio vs. Obiter: Ratio - A foreign Certificate of Origin issued by competent authorities deserves due weight and cannot be discarded solely on the basis of visual expert opinion, third-party export declarations obtained from shipping lines, or uncorroborated statements; the revenue must seek verification from issuing authorities under the applicable verification procedure before rejecting such certificate. Obiter - observations on the specifics of FZ Transit Out practice and interpretations of ISO country codes as corroborative evidence. Conclusions: The Tribunal held that the adjudicating authority erred in rejecting the foreign Certificate of Origin and in declaring the goods Pakistan origin without attempting or producing verification from the issuing authority; therefore the finding of mis-declaration of origin (and consequent confiscation on that ground) is unsustainable as to the appellants. Issue 2 - Admissibility and weight of expert opinion and third-party export declarations Legal framework: Opinions under Section 45 of the Evidence Act and established jurisprudence require that expert evidence be reasoned, disclose methodology and credentials, and be based on accepted scientific/technical processes to be admissible for technical determinations; third-party documents must be authenticated, and photocopies/unattested extracts may have limited evidentiary value. Precedent treatment: Prior decisions cited by the Tribunal hold that visual inspection-only opinions, non-accredited laboratory reports, and unauthenticated third-party documents are of limited evidentiary weight for origin determination. Interpretation and reasoning: The ARDPL opinion was based on visual examination; credentials and methodology were not sufficiently disclosed; comparable authorities have rejected such reports for country-of-origin proof. The export declaration from the shipping line had internal inconsistencies and was not obtained from the Dubai Customs itself; reliance upon such a document without direct verification was unsafe. Ratio vs. Obiter: Ratio - Visual expert reports and unauthenticated third-party export declarations cannot, without corroboration and formal verification, displace a Certificate of Origin issued by a competent foreign authority. Obiter - detailed critique of specific lab accreditation lists and comparisons with other cases. Conclusions: The expert report and shipping-line export declaration lacked sufficient reliability to support the adjudicating authority's conclusion; they did not discharge the revenue's burden to rebut the foreign Certificate of Origin. Issue 3 - Duty to verify foreign Certificates of Origin and proper procedure Legal framework: Rules of Origin and domestic rules provide for verification requests to the exporting country's verification authority when genuineness/authenticity is doubtful; such verification is the proper channel before denying origin claims and preferential/declared origin benefits. Precedent treatment: Multiple decisions hold that absent verification from the issuing foreign authority, the domestic authority cannot lightly discard a Certificate of Origin and deny benefits or treat the certificate as forged. Interpretation and reasoning: The Tribunal emphasized Rule 6 (verification request) and related principles: the adjudicating authority did not initiate or produce evidence of a verification request to the issuing authority in the UAE; therefore the shift to treating the Certificate as concocted without following the prescribed verification steps was procedurally and legally improper. Ratio vs. Obiter: Ratio - Verification of foreign Certificates of Origin by the designated foreign authority is a precondition before treating such certificates as invalid for the purpose of confiscation/duty enhancement. Obiter - reference to timelines and procedural particulars of the Rules of Origin. Conclusions: Failure to seek/produce verification from the foreign issuing authority rendered rejection of the Certificate of Origin unsustainable. Issue 4 - Applicability of FSSAI packing & labeling non-compliance as ground for confiscation Legal framework: FSSAI (Packing & Labeling) Regulations apply to imported foodstuffs; FSSAI Authorized Officers are the proper authority to assess compliance and issue NOC or rejection; Customs guidance/Circulars require FSSAI clearance for release. Precedent treatment: Courts/tribunals have recognized that compliance with FSSAI is a matter for FSSAI authorities and their clearances carry weight. Interpretation and reasoning: The adjudicating authority found slips on bags were removable, suggesting non-compliance. However, records showed that FSSAI had inspected, drawn samples, and issued a No Objection Certificate indicating compliance; examining customs officers had not recorded discrepancies at physical examination. The Tribunal held that noncompliance was not established against appellants where the competent FSSAI authority had certified compliance. Ratio vs. Obiter: Ratio - Alleged labeling non-compliance cannot sustain confiscation where the designated FSSAI authority has inspected and certified compliance; Customs cannot supplant FSSAI's assessment. Obiter - commentary on examining officer responsibilities. Conclusions: Confiscation on the ground of FSSAI non-compliance was not sustainable as to the appellants where FSSAI had issued NOC and customs examiners had not recorded defects. Issue 5 - Imposition and sustainment of penalties under Sections 112(a)/(b) and 114AA Legal framework: Section 112(a) imposes penalty for acts rendering goods liable to confiscation (strict liability/no mens rea required); Section 112(b) requires knowledge/reason to believe goods are liable (mens rea); Section 114AA penalizes knowingly/ intentionally using false or incorrect material (requires intent/knowledge). Precedent treatment: Jurisprudence distinguishes strict liability (112(a)) from knowledge-based liability (112(b), 114AA); penalty under 114AA requires clear proof of intentional use of false material. Interpretation and reasoning: The adjudicating authority imposed multiple penalties based on its mis-declaration/confiscation findings. The Tribunal held that where confiscation findings are unsustainable (see Issues 1-4), penalties predicated upon them (especially those requiring mens rea) cannot be sustained. Further, imposition of 114AA against appellants without having verified the alleged falsity of foreign certificates or established intentional creation/use of false documents was improper. For CHA/employees who filed BEs on the basis of documents provided, only token penalties (if any) may be appropriate where no evidence of knowledge or intent exists. Ratio vs. Obiter: Ratio - Penalties under knowledge/intent provisions cannot be imposed without evidence of knowledge/intent; where confiscation is not justified, related penalties fall. Obiter - comparative discussion of quantum and interplay between Sections 112 and 114AA. Conclusions: Penalties under Sections 112(b) and 114AA (and some impositions under 112(a) linking to confiscation) were not sustainable against the appellants in the absence of adequate proof of origin manipulation, verification from issuing authority, and proof of knowledge/intent. Issue 6 - Right to cross-examine expert and co-noticees Legal framework: Principles of natural justice permit cross-examination where necessary to test evidence; however, courts have held that cross-examination of persons whose statements are voluntarily made or where statements are corroborative may not be a matter of right in administrative adjudication. Interpretation and reasoning: The adjudicating authority refused cross-examination requests on the ground that the expert was an identifiable entity with suitable credentials and that co-noticees' statements were largely corroborative and involved persons integral to the transaction; prior decisions permit denial of cross-examination in similar circumstances. The Tribunal accepted that refusal to allow cross-examination was not necessarily violative where cross-examination would be futile and statements were corroborative; but this fact did not cure the primary evidentiary infirmities noted elsewhere. Conclusions: Denial of cross-examination was not per se fatal in the circumstances, but the absence of proper verification and reliance on weak evidence were decisive. Issue 7 - Confiscation / redemption fine where goods not physically available Legal framework: Section 125 permits redemption fine in lieu of confiscation; authorities and courts have held that liability to confiscate can exist even if goods are not physically available and redemption fine may be imposed. Interpretation and reasoning: The adjudicating authority auctioned the goods prior to adjudication; the Tribunal recognized precedent allowing imposition of redemption fine when goods are unavailable and found imposition of a token redemption fine legally tenable where confiscation cannot be effectuated physically. Conclusions: Redemption fine in lieu of physical confiscation is legally permissible where goods are not available; however, since primary confiscation finding (based on origin mis-declaration and FSSAI non-compliance) was not sustainable as to the appellants, related monetary consequences could not be upheld against them. Final disposition (as to appellants): The Tribunal concluded that the adjudicating findings on origin, FSSAI non-compliance and resulting confiscation/penalties were not sustainable vis-à-vis the appellants because the revenue failed to follow prescribed verification procedures and relied on insufficient/uncorroborated evidence; accordingly the appeals were allowed in favour of the appellants on the grounds discussed above.