Certificate of origin verification under preferential customs rules must follow treaty procedure before exemption is denied.

Preferential customs exemption based on a foreign certificate of origin cannot be rejected by importing authorities on the basis of unilateral local inquiry alone. Where the claim is supported by a certificate issued by the designated authority under the Interim Rules of Origin, the proper course is to invoke the treaty-prescribed verification mechanism, including retroactive verification through the issuing authority if there is reasonable doubt or a random check is required. Because the customs authorities relied on recorded statements and third-party material without following that procedure, the denial of exemption, and the resulting demand and penalties, were unsustainable.

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Issues: Whether the customs authorities could deny the preferential exemption on the basis of their own investigation into the value addition shown in the certificates of origin, without following the verification procedure prescribed under the Interim Rules of Origin.

Analysis: The exemption claim was founded on certificates of origin issued by the designated authority in Thailand under the notified Interim Rules of Origin. Rule 14 required the claim for preferential treatment to be supported by such a certificate, and Rule 15 of Annexure B provided the exclusive mechanism for retroactive verification when there was reasonable doubt or a need for random check. The proper course, if the importing authorities doubted the accuracy of the certificates, was to seek verification from the issuing authority in Thailand. The impugned action proceeded instead on statements recorded locally and third-party material, without using the prescribed verification route.

Conclusion: The denial of exemption and the consequent demand and penalties were unsustainable because the prescribed procedure for doubting and rejecting the certificates of origin was not followed.

Ratio Decidendi: Where preferential customs treatment depends on a certificate of origin issued by the designated foreign authority, the importing customs authorities must use the treaty-prescribed verification mechanism and cannot disregard the certificate on the basis of unilateral inquiry alone.

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