TaxTMI 
TaxTMI 
2026 (7) TMI 1564
X X X X Extracts X X X X
X X X X Extracts X X X X
....(o) of the Customs Act, 1962, giving an option to the importer to redeem the same on payment of redemption fine of Rs.3,00,00,000/- under Section 125 of the Act, confirmation of demand of differential customs duty amounting to Rs.1,43,72,465/- together with applicable interest, besides imposition of a penalty equal to the differential duty amount under Section 114A of the Customs Act, 1962 and a further penalty of Rs.3,00,00,000/- under Section 114AA of the Act. 2. The facts, in brief, are that the appellant, an importer holding a valid Importer Exporter Code (IEC: 0209023601), imported various consignments of "Cold Rolled Stainless Steel Coil" of various dimensions manufactured and supplied by M/s. Bahru Stainless SDN. BHD., Malaysia, under six (06) Bills of Entry bearing Nos. 3006408 dated 22.10.2022, 2995989 dated 21.10.2022, 3233632 dated 09.11.2022, 3799724 dated 19.12.2022, 5049699 dated 15.03.2023 and 5049769 dated 15.03.2023. The imports were accompanied by Certificates of Origin (Form-AI) issued by the competent authorities of the Government of Malaysia and, on the strength thereof, the appellant claimed the benefit of concessional rate of duty under Sl. No. 967(I) of N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ea. The matter was thereafter placed before the Central Board of Indirect Taxes and Customs, which, based upon the verification report, informed that proceedings had been initiated for denial of preferential tariff treatment in respect of Certificates of Origin pertaining to M/s. Bahru Stainless SDN. BHD., and the Malaysian authorities were also requested not to issue further Certificates of Origin to the said supplier until its willingness to cooperate in origin verification was communicated. 6. On the basis of the aforesaid investigation and subsequent communications exchanged between the Department, the Board and the Malaysian authorities, the Revenue entertained the view that the Certificates of Origin (COOs) issued in respect of the goods supplied by M/s. Bahru Stainless SDN. BHD. could not be accepted as genuine for the purpose of extending the preferential tariff benefit as per the existing Notifications for the time being in force. Consequently, it was alleged that the appellant had wrongly claimed exemption under Notification No. 46/2011-Customs and that the Certificates of Origin were liable to be rejected under Rule 8 of the Customs (Administration of Rules of Origin ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lity payable by them. It is his stand that as the said assessments have not been challenged by the Department, the assessments attained finality. Thus, the contention of the appellant is that they have rightly paid the applicable duty payable on the goods imported by them and hence the question of re-determining the duty liability does not arise. The Appellant assailed the ground on which the impugned order has rejected the eligibility of exemption claimed by the under the Notification No. 46/2011-Customs. In this regard, the appellant, while reiterating the grounds urged in the appeal, advanced, inter alia, the following submissions in support of their contentions:- (i) That the present case is neither one of short levy nor of breach of any condition of the exemption notification. It was submitted that the appellant had imported the goods against valid Certificates of Origin (COOs) duly issued by the competent designated authority of the Government of Malaysia, which were accepted by the Customs authorities at the time of assessment and clearance of the imported goods. According to the appellant, there is no allegation that the Certificates of Origin were forged, fabricat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xtending the exemption benefit under Notification No. 46/2011-Cus. It was therefore submitted that the completed assessments cannot subsequently be reopened solely on the basis of subsequent departmental correspondence. (vii) That the Show Cause Notice proceeds entirely on assumptions arising from internal correspondence exchanged between departmental authorities and recommendations made by the DRI, none of which possess statutory force nor establish that the Certificates of Origin issued by the Malaysian authorities had ever been suspended, cancelled or declared invalid by any competent authority. (viii) That significantly, the imports in question were effected during the year 2022, whereas much of the departmental correspondence relied upon in the Show Cause Notice pertains to recommendations made subsequently during the year 2023. It was therefore submitted that subsequent internal communications cannot retrospectively invalidate benefits which had already accrued and stood lawfully extended at the time of import. (ix) That even otherwise, there exists no material on record demonstrating that either the Government of India or the Government of Malaysia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion, confirmed the consequential differential duty along with interest, ordered confiscation of the imported goods and imposed penalties in accordance with law. The Ld. Departmental Representative, therefore, prayed that the impugned order be upheld in its entirety and the appeal be dismissed. 10. Heard both sides and perused the documentary evidence presented before us. 11. The principal issue that arises for consideration is whether the preferential tariff benefit claimed by the appellant under Sl. No. 967(I) of Notification No. 46/2011-Cus. dated 01.06.2011, pursuant to the ASEAN-India Free Trade Area (AIFTA), could have been denied merely on the basis of the investigation undertaken by the Directorate of Revenue Intelligence, Mumbai Zonal Unit (DRI, MZU) in respect of the overseas supplier, namely, M/s. Bahru Stainless SDN BHD, Malaysia, and the consequential communications issued by the Board, or not, in the facts and circumstances as obtaining in this case. 11.1. At the outset, it would be apposite to notice the genesis of the dispute. The entire edifice of the Revenue's case traces its origin to an investigation initiated by the Directorate of Revenue Intelligen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the legality of the impugned action can be analysed. For better appreciation of the facts, the said communications dated 26.03.2018 and 14.03.2023 are scanned and reproduced hereinbelow: - ▪ Communication dated 26.03.2018 issued by DRI, MZU: ▪ Communication dated 14.03.2023 issued by CBIC, FTA Cell: 11.4. Upon a careful reading of the aforesaid communications and the statutory framework governing the Rules of Origin under the ASEAN-India Free Trade Area (AIFTA), we are unable to accept the manner in which the Revenue has proceeded. The Rules undoubtedly provide a mechanism for seeking verification of Certificates of Origin wherever doubt arises regarding the origin criteria. Equally, the Rules contemplate a structured procedure to be followed while examining such doubts. However, what is conspicuously absent is any statutory provision which authorizes the Customs authorities to mechanically deny the benefit of every Certificate of Origin issued by a particular overseas supplier merely because such supplier did not cooperate during a verification exercise. Non-cooperation by itself cannot automatically translate into wholesale invalidation of every....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd spirit of the India-Malaysia Preferential Trade Agreement or the Rules of Origin framed thereunder. 11.6. Every Certificate of Origin represents an independent statutory document issued in relation to a distinct import transaction and carries with it a separate legal presumption until lawfully displaced in accordance with the prescribed procedure. Consequently, the validity or otherwise of one Certificate cannot be mechanically determined on the basis of a generalized administrative recommendation issued in respect of an exporter. The Revenue's attempt to reject, through one omnibus communication, all Certificates of Origin issued by a particular overseas supplier, irrespective of the importer, the consignment, the issuing authority or the attendant facts, is legally untenable. Such a blanket approach is wholly alien to the statutory scheme governing preferential trade agreements, which envisages examination of each Certificate of Origin on its own facts and in accordance with the prescribed verification mechanism. Such an approach cannot therefore merit judicial acceptance. 11.7. Furthermore, after examination of the records, we find that the observation recorded at P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 47 of the Customs Act, 1962. Significantly, neither the Show Cause Notice nor the impugned order records any finding that the Certificates of Origin produced by the appellant were forged, fabricated, cancelled or otherwise declared invalid by the competent issuing authority. Even as on the date of hearing of the present appeals, no material has been placed before us by the Revenue to demonstrate that the Certificates of Origin covering the six Bills of Entry have either been cancelled or held to be non-genuine in accordance with law. In the absence of any such determination, the denial of the preferential benefit solely on the basis of subsequent departmental correspondence cannot be sustained. 12.1. We also find considerable force in the submission advanced on behalf of the appellant that the imports in question were effected during the year 2022, whereas the principal communication of the FTA Cell, CBIC recommending denial of preferential tariff treatment is dated 14.03.2023. At the time when the appellant imported the goods, presented the Bills of Entry and produced the Certificates of Origin, the same were accepted without reservation by the Customs authorities and the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inter-governmental dispute is not determinative of the present appeals. Nevertheless, the absence of any such material further reinforces the conclusion that the impugned proceedings have proceeded solely on the basis of internal departmental communications without there being any corresponding determination under the treaty framework itself. 13. Having considered the totality of the facts and circumstances of the case on hand, therefore, we are of the considered view that the impugned Show Cause Notice proceeds on assumptions which are fundamentally disconnected from the appellant's own imports and the Certificates of Origin produced by it. In the absence of any finding that the Certificates of Origin covering the six Bills of Entry were themselves invalid, cancelled, fraudulently obtained or otherwise legally unenforceable, the consequential denial of the benefit under Notification No. 46/2011-Cus. merely on account of the alleged conduct of the overseas supplier during a verification exercise cannot be sustained either on facts or in law. The reasoning adopted by the authorities below, therefore, fails to withstand judicial scrutiny. In view of the foregoing, we hold that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Bills of Entry before the proper officer. The Certificates of Origin were accepted during assessment, the benefit was extended after due scrutiny and the goods were permitted clearance under Section 47 of the Customs Act, 1962. As already observed hereinbefore, neither the Certificates of Origin have been shown to be forged or fabricated nor have they been cancelled or declared invalid by the competent authority. The entire dispute has arisen subsequently on account of the alleged non-cooperation of the overseas supplier during a verification exercise undertaken by the Department. Such subsequent developments, wholly beyond the control of the appellant, cannot retrospectively be construed as evidence of suppression or wilful misstatement attributable to the importer. 14.2. In this connection, we further find that the Revenue has not brought on record any evidence whatsoever to demonstrate that the appellant was privy to, or had participated in, any alleged irregularity concerning the overseas supplier or the issuance of the Certificates of Origin. In fact, the entire case of the Department rests upon internal communications exchanged between the DRI and the Board and the alleged....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent 1 230 DIRECTORATE OF REVENUE INTELLIGENCE MUMBAI ZONAL UNIT 13, SIR VITHALDAS THACKERSEY MARG, OPP. S.N.D.T COLLEGE, NEW MARINE LINES, MUMBAI-400020 Tel: 022-22050191-94(PBX)/22010327 Fax: 022-22010323/116 F.No .: DRI/MZU/F/INT-05/2010 2483-10 2485 my 2502+02512 March' 2018. To, The All Principal Chief/Chief Commissioner of Customs, Customs Zones, Sir, Subject: Verification visit to Malaysia under India-ASEAN FTA - denial of exemption In respect of imports of Cold Rolled Stainless Steel flat products from M/s Bahru Stainless SDN BHD, Malaysia -Reg., Your kind attention is invited to this office letter of even no, dated 07.03.2016 wherein this office has informed about the investigation initiated by DRI, MZU Mumbai in respect of misuse -- of the benefits of concessional duty of FTA imports of Cold Rolled Stainless Steel flat products from M/s Bahru Stainless SDN BHD, Malaysia under notification nos. 46/2011-Cus. dated 01.06.2011 and 53/2011-Cus. dated 01.07.2011 read with notification nos. 189/-Cus. (NT) dated 31.12.2009 and 43/2011 Cus. (NT) dated 01.07.2011 (copy of the letter attached herewith). 2. In the said case, as regards the retroactive che....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the concerned Commissionerates for taking necessary actions including issue of Show cause notices for the goods imported by the importers under your jurisdiction originating from M/s Bahru by submitting the Country of origin certificates for availing the benefits of the notification nos. 46/2011-Cus. dated 01.06.2011 and 53/2011-Cus. dated 01.07.2011 in respect of finally assessed goods. Assessment of goods provisionally assessed may be finalised on above lines and Bank Guarantees may be encashed. 7. It is also requested to not allow preferential benefits in respect of COOs issued in the name of M/s Bahru Stainless SDN BHD, Malaysia. 8. All the SCNs issued in the case along with recovery, if made may also be forwarded to DRI, MZU, Mumbai. BABY2x I pan @ 28/3/18 Yours sincerely SUO 18 Encl. As above o/c (Shrawan Kumar) Additional Director General Copy submitted to: 1. The Director (ICD), CBEC, North Block, New Delhi - 110 001. 2484 2. The Commissioner (Customs & EP), CBEC, North Block, New Delhi - 110 001. / 2485 3. The Director General, DRI, 7th Floor, D- Block, IP Bhavan, IP Estate, New Delhi 110 002. /2502 2 Document 2 - F. No. 45....