2025 (11) TMI 707 - AT - Customs

Concessional duty granted under N/N.10/2008-Cus after valid origin verification under N/N.59/2005-Cus; summary denial overturned for procedural lapse

CESTAT allowed the appeal and set aside the impugned order that denied concessional duty under N/N.10/2008-Cus. Tribunal held the Rules of Origin under ... Benefit of concessional duty provided under N/N. 10/2008- Cus dated 15.01.2008 - denial of benefit on the ground that the imported goods are not correlatable with the Certificate of Origin accompanying them - HELD THAT:- The N/N.10/2008-Cus ibid which provides for exemption of duty of customs, for the goods of the origin of Republic of Singapore, stipulates that in order to secure the benefit of concessional rate of duty, the importer has to prove that the goods in respect of which the benefit of this exemption is claimed are of the origin of Republic of Singapore, in accordance with the provisions of the Rules of Origin that have been notified under the N/N. 59/2005-Cus (N.T.). Thus indisputably, the Rules of Origin govern the determination that the goods are from the Republic of Singapore. Coming to the operational procedures on the issuance and verification of the Certificate of Origin and other related administrative matters, Annexure A of the aforesaid N/N. 59/2005-Cus (N.T) ibid, under Rule 6 lays down the pre-export examination details that are required to be ensured as fulfilled, by the authority issuing the certificate of origin. The issuing authority is required to ensure that the application and the Certificate of Origin are duly completed and signed by the authorized signatory; that the origin of the product is in conformity with the Rules of Origin; that the description, quantity and weight of goods, marks and number of packages, number and kinds of packages, as specified, conform to the consignment to be exported; and that other statements of the Certificate of Origin correspond to supporting documentary evidence submitted. In short, the authority issuing the certificate of origin is ensuring it is correct and accurate in all respects to the satisfaction of the issuing authority. In the instant case, the Appellate Authority has laboured under the misapprehension that Certificate of Origin is deficient as no marks and numbers are mentioned on the packages, a finding premised on a misconception about the requirement of Sl.No.5 of the overleaf note. Admittedly, the Certificate of Origin has been issued the under the certification by the certifying authority that on the basis of control carried out the declaration by the exporter is correct. It follows that the issuing authority is acting as per the mandate cast on it under Rule 6 of Annexure A aforementioned to conduct the verification necessary to ensure that the Description, quantity and weight of goods, marks and number of packages, number and kinds of packages, as specified, conform to the consignment that was being exported. The rejection of the Certificate of Origin adduced by the appellant by the appellate authority in the impugned order has been made without following any of the procedure as given in the relevant notification No.59/2005-Cus NT and Annexure A thereto, to contest the same. Such a summary rejection, militates against the very spirit of such agreements entered into and violates the ethos of the Rule 18 of the Rules of Origin read with Rules 15 and 21 of Annexure A to the said notification. It is also pertinent that there is no finding that the Certificate of Origin has been obtained by fraudulent means nor is there any finding that they are forged. Therefore, the impugned Order in Original cannot be sustained and is liable to be set aside. The impugned order in appeal is unsustainable and hereby set it aside - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Customs authorities were justified in denying preferential concessional duty under the relevant notification on the ground that the imported packages bore no marks and numbers and thus could not be correlated with the Certificate of Origin accompanying the consignment. 2. Whether, when a Certificate of Origin issued by the competent authority of the exporting State is produced and not recalled or shown to be forged, the assessing authority may summarily reject the certificate on the basis of absence of marks on packages without invoking the verification and denial procedures prescribed in the Rules of Origin and operational procedures. 3. Whether minor discrepancies between the Certificate of Origin and import documents or packaging ipso facto invalidate the certificate, or whether procedural safeguards (requests for clarification, provisional admission, retroactive checks, cooperation between issuing and importing authorities) must be followed before denial of preferential treatment. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Legality of denial of preferential duty for lack of marks correlating goods with Certificate of Origin Legal framework: The concessional duty notification grants benefit subject to proof that goods are of the origin of the exporting State in accordance with Rules of Origin as notified under the implementing notification. The Rules of Origin and Annexure A (Operational Certification Procedures) prescribe: (a) authority issuing the Certificate of Origin must be satisfied of origin and conformity (Rule 9, Rule 16); (b) the issuing authority must, inter alia, ensure the description, quantity, weight, marks and number/kind of packages conform to the consignment (Rule 6, Annexure A); (c) export consignments accompanied by an authentic Certificate of Origin shall not be detained and, if reasonable doubt arises, the importing authority must seek clarification from the certifying authority with time-bound responses and allow provisional entry on bond (Rule 18; Rules 14-15 of Annexure A); and (d) procedures exist for retroactive checks, cooperation, and action on suspected fraud (Rules 15, 20-21). Precedent treatment: The Court noted prior decisions relied on by the appellant that restrict assessing authorities from discarding valid Certificates of Origin without proper cause and procedure; the Court found its view to be in line with those authorities. Interpretation and reasoning: The Rules of Origin scheme affords primacy and credibility to a Certificate of Origin issued by the designated certifying authority. The issuing authority's certification that declarations and particulars were checked (including that packing was in plain bags) is evidence that the certifying authority conducted the Rule 6 verifications. Rule 14 tolerates minor discrepancies and does not ipso facto invalidate a certificate where it corresponds to the products. Rule 18 prescribes a specific procedure where reasonable doubt about authenticity arises: seek clarification from the certifying authority (30 days), permit provisional admission on bond, and thereafter finalize assessment; retroactive checks and possible visits are regulated by Rule 15. In the present facts, the authorities summarily rejected the Certificate of Origin because the physical packages bore no marks, construing this as a deficiency of the certificate. The Court held that (a) there was no statutory requirement in the notification that marks must be physically present on packages as a precondition separate from the certifying authority's verification; (b) the issuing authority had certified conformity (including that packing was in plain bags), fulfilling Rule 6 obligations; and (c) authorities did not follow Rule 18/Rule 15 procedures (no request for clarification, no provisional admission on bond procedure, no retroactive check request), nor was there any finding of forgery or fraud. Ratio vs. Obiter: Ratio - The certificate issued by the competent certifying authority, not being shown to be forged or recalled, must be accorded the credibility and procedural protections under the Rules of Origin; an assessing authority cannot summarily deny preferential treatment solely because packages lack marks without following the verification/clarification/retroactive-check procedures mandated by the Rules. Obiter - Observations regarding the constitutional and international law genesis of preferential agreements and their primacy when framed by sovereign states; these contextual remarks support the interpretation but are ancillary to the core holding. Conclusions: The summary rejection of the Certificate of Origin for lack of marks on plain packages, without invoking the prescribed verification and denial procedures (request to certifying authority, provisional admission, retroactive check, cooperation), was legally unsustainable. In absence of any finding of forgery or fraud and without following Rule 18/Rule 15 processes, the denial of the concessional duty benefit had to be set aside. Issue 2 - Extent to which minor discrepancies or packaging descriptions (e.g., 'plain bags') may affect validity of Certificate of Origin Legal framework: Annexure A Rule 14 provides that minor discrepancies between the Certificate of Origin and import documents shall not ipso facto invalidate the certificate if it corresponds to the products. Rule 6 obliges the issuing authority to verify description, marks, number and kinds of packages before issuance. Precedent treatment: The Court referenced prior authorities that prohibit questioning the certificate's validity by importing authorities without following procedural safeguards, indicating consistency with established tribunal practice that favors reliance on bona fide Certificates of Origin. Interpretation and reasoning: Where the certifying authority expressly records that packing is in plain bags and certifies conformity of particulars to the consignment, an absence of external markings does not necessarily create a fatal discrepancy. Rule 14 allows tolerance for minor inconsistencies. The proper course when doubt exists is prescribed procedures (seek clarification, provisional admission, retroactive checks); absent those steps, treating packaging description as a ground for refusal is disproportionate and procedurally defective. Ratio vs. Obiter: Ratio - A Certificate of Origin that indicates plain packaging and is certified by the issuing authority cannot be rejected merely because packages lack external marks; such an absence is a minor discrepancy to be handled under the Rules' verification and clarification processes. Obiter - Remarks on the operational competence of issuing authorities and their investigatory role prior to issuance. Conclusions: The packaging notation 'plain bags' in the Certificate of Origin, coupled with the issuing authority's certification, constituted sufficient documentary basis to require the importing authority to follow established verification procedures rather than summarily denying relief on that ground. Issue 3 - Mandatory procedural steps before disallowing preferential tariff treatment and the consequence of non-compliance Legal framework: Rules 14-18 and Annexure A (Rules 6, 15, 20-21) prescribe the mandatory sequence: presumed credibility of authentic certificates, duty to seek clarification from certifying authority on reasonable doubt, provisional admission on bond, retroactive checks, and international cooperation in fraud or dispute resolution. Precedent treatment: Prior tribunal decisions endorse adherence to the notified procedures and caution against unilateral rejections by importing authorities without invoking prescribed mechanisms. Interpretation and reasoning: The Court found no evidence that the Revenue sought clarification from the certifying authority or initiated retroactive checks; nor was there any finding of fraud, forgery, or cancellation of the certificate. The imported consignment was allowed entry after payment under protest, but the adjudicatory rejection proceeded without employing the procedural safeguards. Such failure to follow mandated procedures violates the rules' spirit and text and renders the denial of preferential treatment invalid. Ratio vs. Obiter: Ratio - Importing authorities must follow the explicit procedural steps in the Rules of Origin and Annexure A before denying preferential treatment; failure to do so invalidates subsequent denial. Obiter - Observations on the international cooperative framework and policy reasons for protecting bona fide certificates. Conclusions: Non-compliance with the verification and denial procedures (seeking clarification, provisional admission, retroactive checks, and cooperative dispute resolution) precludes lawful denial of concessionary tariffs; the adjudicating and appellate authorities' failure to follow those procedures necessitated setting aside their orders. Overall Disposition The Court held that the challenged denial of concessional duty was unsustainable because the Certificate of Origin issued by the designated authority was neither shown to be forged nor cancelled, the issuing authority had certified the particulars (including that packing was in plain bags), and the importing authorities failed to follow the prescribed clarification and retroactive-check procedures before rejecting the certificate. Consequently, the impugned order denying preferential treatment was set aside and the appeal allowed with consequential reliefs in law.