2026 (2) TMI 46 - AT - Customs

Invalidation of certificate of origin under AIFTA found unlawful; revocation not a substitute for Article 16 verification, relief granted

Invalidation of a certificate of origin under AIFTA was treated as revocation rather than a verification under the Operational Certification Procedures, ... Invalidation of certificate of origin under AIFTA - Cumulative rule of origin - Revocation versus verification under Operational Certification Procedures (Article 16) - Denial of preferential tariff benefit - Procedural notice and enquiry u/s 28DA - Recovery of duty u/s 28(4) - Penalties and confiscation regime under sections 114A, 114AA, 111(o), 111(q) and 125 - HELD THAT:- There is no doubt that one certificate of origin had been revoked, but, from the correspondence, there are no appearances of either lack of authenticity or non-conformity with leeway afforded by rule 2(b) of the Rules of Origin for the ASEAN-India Free Trade Agreement (AIFTA). It appears that, upon inquiry being instituted, a request was made for revocation. Indeed, the said Rules of Origin as well as the Operational Certification Procedures have no provision for revocation by any government authority. To read such revocation as tantamount to a report of verification contemplated in Article 16 of the Operational Certification Procedures is contrary to Agreement that has force of law and is egregious exercise of extra-legal authority. By venturing upon the extraordinary sweep of rule 7 of Customs (Administration of Rules of Origin under Trade Agreement) Rules, 2020 but, instead of following due process enshrined therein, proceeded to recover duty foregone, the saddling of consequences is tainted by breach of proper notice prescribed in section 28DA of Customs Act, 1962 even if the report on the single other ‘certificate of origin’, i.e. certificate of origin no. AI2019-0037008 dated 13th August 2019 corresponding to bill of entry no. 4567038 dated 20th August 2019, was considered as unfavourable. This is particularly so as the movement of ‘antimony oxide’ from Myanmar was against D Form and in accordance with the bilateral agreement between Thailand and that country. That such transfer did not occur against A Form does not alter the principle of cumulative origin. Nevertheless, we see that, other than the impugned certificate of origin, the imports have been effected against certificate of origin that had been issued by the competent authorities that were not subjected to the scrutiny prescribed in the respective rules. It would be inappropriate to deprive the benefit of exemption notification to imports where the connected certificate of origin had not been scrutinised and without following the process of placing the importer on notice, not for recovery of duty, for invalidation of eligibility. Thus, we find that the detriment fastened on the appellant cannot sustain. Accordingly, the impugned order is set aside and appeal is allowed. Issues: Whether revocation/report concerning one certificate of origin and consequent administrative action could invalidate entitlement to exemption under Notification No. 46/2011-Cus for other consignments without following the verification and notice process prescribed under the Rules of Origin, Operational Certification Procedures and section 28DA of the Customs Act, 1962.Analysis: The Tribunal examined whether the revocation of one certificate of origin amounted to a lawful verification report under the Operational Certification Procedures or otherwise authenticated in a manner that would defeat the certificates issued for other consignments. The Tribunal assessed the scope of the Rules of Origin for the AIFTA, the Operational Certification Procedures (including Articles 16 and 23), and the procedural requirements under section 28DA and the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020. It considered that the Operational Certification Procedures contain no provision for unilateral revocation by a government authority constituting a verification report, that the adjudicating authority did not follow Article 23 or the procedural safeguards, and that the recovery under section 28(4) proceeded without the notice and determination process mandated by section 28DA and related rules. The Tribunal also addressed the principle of cumulative origin where intermediate inputs moved under a different form (D Form) do not necessarily negate origin under the agreement, and noted absence of findings that certificates were inauthentic or that imported goods did not conform to the certificates.Conclusion: The detriment imposed on the importer by treating the other certificates as invalid and recovering duty without following the prescribed verification and notice process cannot be sustained; the impugned order is set aside and the appeal is allowed in favour of the appellant.Ratio Decidendi: A unilateral revocation or communication concerning one certificate of origin does not, without proper verification and adherence to the verification and notice procedures under the applicable Rules of Origin, Operational Certification Procedures and section 28DA, justify denial of preferential exemption or recovery of duty in respect of other consignments covered by certificates issued by competent authorities.