2026 (1) TMI 1495 - AT - Customs

Certificate of origin entitlement to nil basic customs duty under ASEAN preferential trade rules upheld after verification obligations not performed

Entitlement to nil basic customs duty under the ASEAN preferential notifications turns on compliance with the certification and verification procedure for ... Entitlement for the benefit of ‘Nil’ basic customs duty in terms of Notification No. 46/2011-Cus. read with customs Notification No. 189/2009-Cus. - Operational certification and verification procedure for certificate of origin under Annexure III and Rule 13 of the 2009 Rules - Verification obligation of importing Customs and duty to refer doubts to issuing authority in exporting country - Invokation of Section 17(3) - HELD THAT:- No inquiry as mandated by the Notification was conducted with respect to the said Country of origin Certificate which otherwise has been issued by the Competent Authority of one of ASEAN country as mentioned under Appendix I of the Notification No. 46/2011 dated 01.06.2011. In the given circumstances, it was highly unreasonable that the Certificate should not have been accepted. Once all documents as required under Notification No. 046/2011-Cus dated 01.06.2011 have been provided by the importer and their authenticity has not been challenged by the verifying Customs officers nor got verified from the issuing authority, there is no reason for the said Customs officer to hold that said certificate is not genuine. Demand of duty based upon reassessment ordered is actually not sustainable The impugned Notification is a kind of preferential trade arrangement between States of Association of Southeast Asian Nations (ASEAN) and the Republic of India in order to facilitate free movement of trade. If the exemption sought under the applicable rules is denied on one or the other pretext that too based merely on assumptions and presumptions, it will hamper the free movement of trade between agreeing nations. Same is highly uncalled for and would rather render the entire exemption Notification otiose more so when on the face of the record, the Certificate of Origin is otherwise not disputed. Above all, the substantial benefit as that of exemption from payment of duty shall not be denied merely based on procedural lapse. Apparently and admittedly, the respondent-department which is competent authority, has failed to conduct the said verification. In the given circumstances, considering the negative response as not response by the department and denying the benefit of nil rate of duty which were otherwise available to the appellant under free trade agreement among ASEAN countries is held to have been wrongly denied; the provisions as that of Rule 16(b) of 2009, Rules and Section 17 (3) of Customs Act, 1962 are therefore held to have been wrongly invoked. There is, otherwise, no iota of evidence on record to disprove the authenticity of the certification of origin produced by the appellant before the customs authorities. In the totality of entire above discussion, appellant is held entitled for the benefit of ‘Nil’ BCD. The issue framed above therefore stands decided in favour of the appellant. Resultantly, the order of Commissioner (Appeals) which is order under challenge confirming demand of customs duty is hereby set aside. Consequently, both the appeals are hereby allowed. Issues: (i) Whether the importer is entitled to nil basic customs duty under Entry No. 966(I) of Notification No. 46/2011-Cus dated 01.06.2011 read with Notification No. 189/2009-Cus dated 31.12.2009; (ii) Whether invocation of Section 17(3) of the Customs Act, 1962 and Rule 16(b) of Annexure III to Notification No. 189/2009-Cus to deny the preferential duty benefit was proper.Issue (i): Entitlement to nil basic customs duty under Entry No. 966(I) of Notification No. 46/2011-Cus read with Notification No. 189/2009-Cus.Analysis: The claim rested on an AIFTA Certificate of Origin issued by the competent authority of an eligible exporting country and on accompanying import documents. The Operational Certification Procedures in Annexure III and Rule 13 require issuance of the Certificate of Origin by the exporting party's designated authority and mandate verification steps where the importing authority has reasonable doubt. The record shows the original Certificate of Origin was produced and no evidence disputes its authenticity. The prescribed verification steps under Annexure III, including returning an unacceptable certificate to the issuing authority and seeking clarification, were not followed before denying preferential treatment.Conclusion: Entitlement to nil basic customs duty is established in favour of the importer.Issue (ii): Validity of invoking Section 17(3) of the Customs Act, 1962 and Rule 16(b) of Annexure III to deny the benefit.Analysis: Rule 16(b) permits requesting information or documents where there is reasonable doubt, but Annexure III and Rule 7 require specific verification procedures with the issuing authority before denial. The importer provided answers to the questionnaire, with some responses stating lack of knowledge of upstream supplier/refinery details which the importer was not obliged to possess. The importing authority did not return the certificate to the issuing authority nor seek the required clarification; instead it treated incomplete upstream details as sufficient ground to deny the benefit. No evidence was recorded to disprove the certificate's authenticity.Conclusion: Invocation of Section 17(3) and Rule 16(b) to deny the preferential duty benefit was improper and not justified on the record; the denial is held to be incorrect and in favour of the importer.Final Conclusion: The entitlement to preferential nil customs duty is upheld and the orders confirming demand of customs duty are set aside; the appeals are allowed.Ratio Decidendi: Where a valid Certificate of Origin issued by the competent authority of an eligible exporting country is produced and its authenticity is not disproved, and where the importing authority has not followed the Annexure III verification procedure (including returning the certificate to the issuing authority and obtaining clarification), preferential tariff treatment cannot be denied merely because the importer lacks upstream supplier or refinery details.