TaxTMI 
TaxTMI 
2024 (9) TMI 716
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....ioners are aggrieved by the detention of a consignment of goods comprising of platinum alloy sheets and the release thereof being made subject to the submission of a PD Bond equivalent to 100% of the assessable value along with a Bank Guarantee of differential duty @ 10.712% thereof pending verification of the Country-Of-Origin [COO] certificate accompanying those goods. 2. The petitioners contend that the action of the respondents is wholly arbitrary since no reasons have been assigned in the impugned orders which may be viewed as being even suggestive of the formation of a reasonable belief or opinion that the COO certificate or the imported articles were non-compliant with the statutory prescriptions which apply. The petitioners refer to the detailed statutory mechanism prescribed by Section 28DA of the Customs Act, 1962 [Act] read along with the Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between India and the United Arab Emirates) Rules, 2022 [CEPA Rules] together with the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 [CAROTAR] and which compendiously create a minimum threshold whic....
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....llowing additional background facts. 6. By virtue of Finance Act, 2020, Section 28DA came to be inserted in the Act providing for a detailed procedure in respect of imports made under Trade Agreements and the claims of importers for a preferential rate of duty being applied. It is pursuant to the aforesaid provision coming to be inserted in the statute that CAROTAR came to be framed. 7. Section 28DA reads as follows: - "SECTION 28DA. Procedure regarding claim of preferential rate of duty. - (1) An importer making claim for preferential rate of duty, in terms of any trade agreement, shall, - (i) make a declaration that goods qualify as originating goods for preferential rate of duty under such agreement; (ii) possess sufficient information as regards the manner in which country of origin criteria, including the regional value content and product specific criteria, specified in the rules of origin in the trade agreement, are satisfied; (iii) furnish such information in such manner as may be provided by rules; (iv) exercise reasonable care as to the accuracy and truthfulness of the information furnished. (2) The fact that the....
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....y be, does not furnish information within the specified time or the information furnished by him is not found satisfactory, the proper officer shall disallow the preferential tariff treatment for reasons to be recorded in writing : Provided that in case of receipt of incomplete or non-specific information, the proper officer may send another request to the Issuing Authority stating specifically the shortcoming in the information furnished by such authority, in such circumstances and in such manner as may be provided by rules. (9) Unless otherwise specified in the trade agreement, any request for verification shall be sent within a period of five years from the date of claim of preferential rate of duty by an importer. (10) Notwithstanding anything contained in this section, the preferential tariff treatment may be refused without verification in the following circumstances, namely :- (i) the tariff item is not eligible for preferential tariff treatment; (ii) complete description of goods is not contained in the certificate of origin; (iii) any alteration in the certificate of origin is not authenticated by the Issuing Authority;....
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....the duty provisionally assessed under section 18 and the preferential duty claimed. In terms of Section 28DA, the suspension may, as a result of due enquiry or a failure to furnish information, culminate in the preferential rate of duty being disallowed. 9. The process of verification as contemplated under Section 28DA thereafter stands amplified and spelt out in greater detail under the CAROTAR. Rule 3 of the CAROTAR while dealing with preferential tariff claims makes the following provisions:- "RULE 3. Preferential tariff claim. - (1) To claim preferential rate of duty under a trade agreement, the importer or his agent shall, at the time of filing bill of entry, - (a) make a declaration in the bill of entry that the goods qualify as originating goods for preferential rate of duty under that agreement; (b) indicate in the bill of entry the respective tariff notification against each item on which preferential rate of duty is claimed; (c) produce certificate of origin covering each item on which preferential rate of duty is claimed; and (d) enter details of certificate of origin in the bill of entry, namely : (i) certificate ....
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....the origin criteria prescribed has not been met. The said Rule reads as follows:- "RULE 5. Requisition of information from the importer. - (1) Where, during the course of customs clearance or thereafter, the proper officer has reason to believe that origin criteria prescribed in the respective Rules of Origin have not been met, he may seek information and supporting documents, as may be deemed necessary, from the importer in terms of rule 4 to ascertain correctness of the claim. (2) Where the importer is asked to furnish information or documents, he shall provide the same to the proper officer within ten working days from the date of such information or documents being sought. (3) Where, on the basis of information and documents received, the proper officer is satisfied that the origin criteria prescribed in the respective Rules of Origin have been met, he shall accept the claim and inform the importer in writing within fifteen working days from the date of receipt of said information and documents. (4) Where the importer fails to provide requisite information and documents by the prescribed due date or where the information and documents receive....
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....n provided by importer is found to be insufficient. Such a request shall seek specific information from the Verification Authority as may be necessary to determine the origin of goods. (2) Where information received in terms of sub-rule (1) is incomplete or non-specific, request for additional information or verification visit may be made to the Verification Authority, in such manner as provided in the Rules of Origin of the specific trade agreement, under which the importer has sought preferential tariff treatment. (3) When a verification request is made in terms of this rule, the following timeline for furnishing the response shall be brought to the notice of the Verification Authority while sending the request : (a) timeline as prescribed in the respective trade agreement; or (b) in absence of such timeline in the agreement, sixty days from the request having been communicated. (4) Where verification in terms of clause (4) or (b) of sub-rule (1) is initiated during the course of customs clearance of imported goods (a) the preferential tariff treatment of such goods may be suspended till conclusion of the verification; ....
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....f Rules 14 and 15 of the CEPA Rules which make the following provisions:- "14. Proof of Origin. - (1) For products originating in a Party and fulfilling the requirements of these rules, the proof of origin of an exported product shall be provided through any of the following means, namely :- (a) a paper Certificate of Origin in electronic or hard copy format issued by a competent authority referred to in rule 15; (b) a fully digitised Certificate of Origin issued by a competent authority and exchanged by a mutually developed electronic system under rule 33; (c) an origin declaration made out by an approved exporter referred to in rule 34. (2) A Certificate of Origin shall be valid for twelve months from the date of issue in the exporting Party. (3) The Certificate of Origin shall be submitted to the Customs Administration of the importing Party in accordance with the procedures applicable in that Party 15. Certificate of Origin and Certification Procedures. - (1) The Certificate of Origin shall be in the format as specified in Annexure-E and shall include the HS Code, description and quantity of the products, name of co....
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....n five working days from the date of shipment due to involuntary errors or omissions, or any other valid reasons, the Certificate of Origin may be issued retrospectively, bearing the words "ISSUED RETROSPECTIVELY" in box 9 of the Certificate of Origin, with the issuing authority also recording the reasons in writing on the exceptional circumstances due to which the certificate was issued retrospectively. The Certificate of Origin can be issued retrospectively but no longer than twelve months from the date of shipment. (12) In the event of theft, loss or destruction of a Certificate of Origin, the manufacturer, producer, exporter or their authorized representative may apply in writing to the issuing authority for a certified true copy of the original made on the basis of the export documents in their possession bearing the endorsement of the words "CERTIFIED TRUE COPY" (in lieu of the original certificate) and the date of issuance of the original Certificate of Origin. The certified true copy of a Certificate of Origin shall be issued within the validity period of the original Certificate of Origin. The exporter shall immediately notify the loss and undertake not to use the....
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.... under rule 3; (b) shall provide the competent authority of the other Party with,- (i) the reasons why such assistance is sought; (ii) the Certificate of Origin, or a copy thereof; and (iii) any information and documents as may be necessary for the purpose of providing such assistance. (3) Insofar as possible, the competent authority of the importing Party conducting a verification shall seek necessary information or documents relating to the origin of imported product from the importer, in accordance with its laws and regulations, before making any request to the competent authority of the exporting Party for verification. (4) In cases where the competent authority of the importing Party deems necessary to seek verification from the competent authority of the exporting Party, it shall specify whether the verification is on a random basis or the veracity of the information is in doubt In case the determination of origin is in doubt, the competent authority shall provide detailed grounds for the doubt concerning the veracity of the Certificate of Origin. (5) The proceedings of verification of origin as provided in these ....
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....ting Party shall communicate the fact to the competent authority of the exporting Party. The term for the execution of such new actions, or for the presentation of additional information, shall be not more than ninety days from the date of the receipt of the request for the additional information. (7) If, upon receiving the results of the verification pursuant to sub-rules (4) and (5), the competent authority of the importing Party deems it necessary, it may deliver a written request to the competent authority of the exporting Party to facilitate a visit to the premises of the exporter or producer or manufacturer, with a view to examining the records, production processes, as well as the equipment and tools utilized in the manufacture of the product under verification. (8) The request for a verification visit shall be made no later than thirty days of the receipt of the verification report referred to in sub-rules (4) and (5). The requested Party shall promptly inform the dates of the visit, but no later than forty-five days of the receipt of request and give a notice of at least twenty-one days to the requesting Party and exporter or producer or manufacturer so a....
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....ing access to the records, documentation or visit for verification; (c) the exporter or producer or manufacturer of the product fails to provide sufficient information and documents, including breakup of costs relating to material, labour, other overheads, and any other relevant elements such as profits and related components that the importing Party requested to determine that the product is an originating product; (d) the exporter or producer or manufacturer denies access to the relevant records or production facilities during a verification visit; (e) the competent authority of the exporting Party fails to provide sufficient information, including breakup of costs relating to material, labour, other overheads and any other relevant elements such as profits and related components in pursuance to a written request for verification or fails or refuses to respond to a request for verification within stipulated timelines under rule 23; (f) the information provided by the competent authority of the exporting Party or exporter or producer or manufacturer is not sufficient to prove that the product qualifies as an originating product as defined under ....
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....gla, learned counsel representing the Customs authorities, we find that the detention of the imported articles, for reasons which we assign hereinafter, is clearly rendered unsustainable on the following counts. 22. It becomes pertinent to note at the very outset that the detention of the goods is not prefaced by the recordal of any reasons by the proper officer of circumstances on the basis of which it came to the form the opinion or had reason to believe that the goods sought to be imported did not conform to the COO criteria. It is also not alleged by the proper officer that the genuineness of the COO certificate itself was doubted. 23. We note that under the CAROTAR, the proper officer would be justified in holding back a clearance of goods provided it has reason to believe that the origin criteria has not been met. If that be the ground for detention, Rule 5 enables that officer to call for further information from the importer. In the facts of our case, it is not disputed that the information which was sought from the writ petitioners was duly provided. 24. The detention would also not sustain when tested on the anvil of the CEPA Rules. Before us, it was not disputed....
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....They are in fact totally silent with respect to the requisite formation of opinion and which is a sine qua non for the detention of goods or imports under the CAROTAR and CEPA Rules. 29. On a conjoint consideration of Section 28DA of the Act read along with the CEPA Rules and CAROTAR, the following scheme of verification emerges. In terms of Section 28DA(3), where a proper officer has reasons to believe that the COO criteria has not been met, it may require the importer to furnish further information "consistent with the trade agreement" and in such manner "as may be provided by Rules". Sub-section (10) enables the proper officer to refuse an extension of preferential tariff treatment in the circumstances enumerated therein. This includes cases where it is found that a tariff item is ineligible for preferential tariff treatment, the COO certificate fails to embody a complete description of goods, an alteration in the COO certificate remains unauthenticated by the Issuing Authority or the COO certificate bearing a date which has already expired. 30. This takes us to the CEPA Rules and which by virtue of Rule 22 prescribes the procedure for determination of authenticity and cor....
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....hension that may weigh in the mind of the proper officer, the record itself must reflect the material on the basis of which that formation of opinion rests. In our considered opinion, the foundation of the requisite opinion must be demonstrably apparent from the reasons that the proper officer chooses to record and the order that it may frame. The formation of the requisite opinion cannot be left to surmise and conjecture. The order which the proper officer chooses to frame must itself be reflective of the reasons which weighed upon that authority to block or pause the importation. 35. We bear in mind the indubitable fact that the Act read along with the CEPA Rules and CAROTAR constructs a well-defined criteria which must inform an importation being interrupted. It was, therefore, incumbent upon the respondents to specify the nature of the infraction alleged, the statutory prescription which stood violated and the reasons which informed the tentative denial of preferential duty treatment. Even if the formation of that opinion, be tentative or prima facie, the law would require the reasons underlying that decision being duly recorded. 36. What we seek to emphasise is that sinc....
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....on of the writ petitioners that such a verification exercise can, in fact, be initiated and completed by way of an online verification process and in real-time. If those certificates were to be loosely brushed aside, it would shake the very edifice of a Trade Agreement and be contrary to the reciprocal arrangement agreed upon by respective States. 41. The submission of Mr. Singla based on space constraints on the portal also fails to convince us to change the view expressed above bearing in mind the legal imperative of the order itself being reflective of the proper officer having duly applied its mind to issues that the statute ordains to be germane for the purposes of detention of goods. We have no hesitation in holding that it was incumbent upon the concerned officer while framing an order to ensure that the same reflected and embodied reasons, howsoever briefly or succinctly noted, and which formed the basis for the formation of its opinion. The perceived constraints of space would not absolve the proper officer from recording a gist of the reasons which convinced it to take the impugned action. 42. Insofar as the condition of requiring a Bank Guarantee or differential du....
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....) in the case of goods cleared for home consumption or exportation, the amount paid shall be adjusted against the duty [finally assessed or re-assessed, as the case may be] and if the amount so paid falls short of, or is in excess of, [the duty [finally assessed or re-assessed, as the case may be]], the importer or the exporter of the goods shall pay the deficiency or be entitled to a refund, as the case may be; (b) in the case of warehoused goods, the proper officer may, where the duty [finally assessed or re-assessed, as the case may be] is in the excess of the duty provisionally assessed, require the importer to execute a bond, binding himself in a sum equal to twice the amount of the excess duty. [(3) The importer or exporter shall be liable to pay interest, on any amount payable to the Central Government, consequent to the final assessment order [or re-assessment order] under sub-section (2), at the rate fixed by the Central Government under section [28AA] from the first day of the month in which the duty is provisionally assessed till the date of payment thereof. (4) Subject to sub-section (5), if any refundable amount referred to in clause (a) of s....
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....igned. The respondent has also abjectly failed to bear in consideration clause 5(b) of Paragraph 3 of the Guidelines and which stipulates that where cases are selected on a random basis for verification of origin, there would be no justification for a Bank Guarantee or cash deposit being obtained as security. As we read the orders impugned, it becomes apparent that the condition relating to the submission of a Bank Guarantee has been mechanically imposed with no justification having been proffered. 46. This we note notwithstanding the consistent position taken by this Court that the prescription of onerous conditions for provisional release based on guidelines framed by the CBEC would not be sustainable in law. In fact, and as the Division Bench had observed in Bullion and Jewellers Association (Regd.) vs. Union of India 2016 SCC OnLine Del 2437, such a guideline or prescription may, in fact, be violative of Section 151A of the Act itself. In Bullion and Jewellers Association, the Court had observed as follows:- "54. Examined in light of the legal position explained in the above decisions, it is plain that the impugned circulars dated October 6, 2015 and January 20, 201....