Custom, Excise & Service Tax Tribunal
M/S. Kanpur Edibles Pvt. Ltd. vs Kolkata-Prev on 9 May, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.1
Customs Appeal No.75534 of 2024
(Arising out of Order-in-Original No.20/Cus/CC(P)/WB/2023-24 dated 28.03.2024
passed by Commissioner of Customs (Preventive), Kolkata.)
M/s. Kanpur Edibles Private Limited
(103, Gagan Complex, 15/260, A-1, Civil Lines, Kanpur, Uttar Pradesh-208001 OR
Shri Ashish Batra, Advocate, Level 2, The India Mall, No.1 Community Center, New
Friends Colony, New Delhi-110025.)
...Appellant
VERSUS
Commissioner of Customs (Preventive), Kolkata
.....Respondent
(15/1, Strand Road, Custom House, Kolkata-700001.) WITH
(i) Customs Appeal No.75535 of 2024 (Shri Ankit Gupta, Director, M/s. Kanpur Edibles Private Limited vs. Commissioner of Customs (Preventive), Kolkata); (ii) Customs Appeal No.75536 of 2024 (Shri Sunil Kumar Gupta, Director, M/s. Kanpur Edibles Private Limited vs. Commissioner of Customs (Preventive), Kolkata); (iii) Customs Appeal No.75537 of 2024 (Shri Manoj Kumar Gupta, Director, M/s. Kanpur Edibles Private Limited vs. Commissioner of Customs (Preventive), Kolkata);
(Arising out of Order-in-Original No.20/Cus/CC(P)/WB/2023-24 dated 28.03.2024 passed by Commissioner of Customs (Preventive), Kolkata.) APPEARANCE Shri Asish Batra, Advocate for the Appellant (s) Shri S.Debnath, Authorized Representative for the Revenue CORAM: HON'BLE SHRI ASHOK JINDAL, MEMBER(JUDICIAL) HON'BLE SHRI K. ANPAZHAKAN, MEMBER(TECHNICAL) FINAL ORDER NO. 75884-75887/2024 DATE OF HEARING : 03.05.2024 DATE OF DECISION : 09.05.2024 2 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 Per : ASHOK JINDAL :
The appellants are challenging the impugned order wherein the benefit of Notification No.99/2011-CUS dated 09.11.2011 has been denied to them. Consequently, the duty has been demanded, the goods were held liable for confiscation and penalty has been imposed on all the appellants.
2. The facts of the case are that an intelligence was gathered by DRI to the effect that a syndicate of rouge importing firm including the appellant in connivance with some Bangladeshi suppliers as well as some traders and brokers based in Singapore were engaged in importing edible oils, such as Refined Palm Olein, Palm oil and Soyabean oil from non-SAFTA countries by routing it through Bangladesh, and importing such goods in India through different Land Customs Stations (LCS), namely Ghojadanga LCS, Mahadipur LCS and Petrapole LCS, all in the state of West Bengal, by mis-using the provisions of SAFTA (South Asian Free Trade Agreemnt) with an intent to illegitimately claim Customs duty exemption.
3. It was further found that the actual originating countries of these imports were mainly Malaysia and Indonesia, both countries being major producer-suppliers of different Palm oil products. These edible oils, after being imported into Bangladesh, were then supplied to India as such, or with minimal processing in Bangladesh, which is not sufficient to claim originating status under the SAFTA Agreement. Almost all such imports were undertaken after increase in Customs duty on these items in 2018. As per intelligence inputs, the price of Refined Palm Olein/RBD Palm Olein supplied from Bangladesh was intentionally inflated by the Bangladeshi supplier, in connivance with the Indian importers, in order to fraudulently show the prescribed minimum domestic value addition that is supposed to be done in the exporting state Bangladesh, as per SAFTA Rules of Origin.
4. Contemporaneous imports of the same product, imported directly into India from Malyasia and Indonesia by different Indian importers, including the present appellant showed contemporaneous import prices 3 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 less by around 300 USD to 500 USD per MT. The prices of these direct imports (into India) were also in sync with prevailing international prices, as well as the Tariff Value notified by the Government of India. The corroborated intelligence inputs that the prices were being artificially inflated in respect of imports routed through Bangladesh, in order to claim inadmissible Customs duty exemption under SAFTA Agreement.
5. On the basis of the said intelligence, the premises of the appellant were searched and certain documents were seized and recovered and voluntary statements of the appellant were recorded.
6. On the basis of the investigation, it was alleged that the appellants were engaged in the activity of importing Refined Palm Olein, Palm oil and Soyabean oil and enrouteing through Bangladeshi supplier to claim the benefit of Notification No.99/2011-Cus dated 09.11.2011. Therefore, the proceedings were initiated by the respondent by issuance of show cause notice to the appellants to deny the benefit of the said Notification and to confiscate the goods in question and to impose penalty on the appellants.
7. The matter was adjudicated, the benefit of exemption Notification was denied and consequently, differential duty was demanded and the goods were held liable for confiscation and allowed to be redeemed on payment of redemption fine and imposition of penalties on all the appellants. Aggrieved from the said order, the appellants are before us.
8. The Ld.Counsel for the appellant submits that the issue involved in this case that whether the appellant is entitled to avail benefit of exemption under SAFTA in respect of RBD Palm Oil imported from SG Oils, Bangladesh. The appellant has imported 136 consignments of RBD Palm Oil from M/s. S.G. Oil Refineries Ltd. EPZ, Mongla, Bangladesh in the month of February 2018 and started regular imports of RBD Palm Olein from May 2018 onwards. It is the contention that M/s. SG Oils in turn imported crude palm olein from Malaysia, carried on the process on converting it to RBD Palm Olein, and thereafter exporting the same to the appellants. For these imports the appellants have claimed 4 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 exemption as per SAFTA on issuance of the country of origin certificate by the supplier. It is his contention that the DRI has alleged that the SAFTA certificate issued by the EPB, Bangladesh is without following the procedure prescribed under the Rules of Determination of Origin of Goods under the agreement on SAFTA hence exemption ought not to have been granted.
9. Further, it is alleged that the appellant is in connivance with the supplier namely M/s. SG Oils. This allegation was made on the basis of the recovery of certain e-mails wherein purportedly the appellant has agreed to sign a Letter of Indemnity on behalf of the said SG Oils. Secondly, the appellant has also agreed to open a letter of credit on behalf of SG Oils. It was also alleged by the DRI that the appellant has exported the machine to the exporter M/s. SG Oil and it is also alleged that against the tariff value of RFD Palm Oil fixed by the Indian Government between USD 597 to USD 709, in respect to the subject imports made by the appellant from SG Oils, the value declared was ranging between USD 925 to USD 1125.
10. It is his contention that in terms of SAFTA Rules of Origin, the supplier of the goods/exporter has to issue certificate of country of origin that they have processed the goods and have done value addition in terms of SAFTA Rules and exported the same. It is his submission that there is no dispute with regard to country of origin certificate has been issued by the exporter and the same has been verified by the Revenue from the exporting contracting state Bangladesh, who after verification issued the verification report and found that the exporter has manufactured and exported the goods in terms of SAFTA Rules. Therefore, it is his contention that the benefit of exemption Notification cannot be denied to the appellant.
11. On the other hand, the Ld.AR for the department supported the impugned order and submitted that the same goods if imported from Malyasia and Indonesia directly are having much lower value. Moreover, the value addition shown by the appellant in the certificate of 5 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 country of origin is less than the norms prescribed under SAFTA Rules. Therefore, the said certificates are not admissible.
12. Heard the parties, considered the submissions.
13. We find that in this case the sole issue arises is that whether the appellant is entitled for benefit of exemption Notification No.99/2011- CUS dated 09.11.2011 for importation of the goods from Bangladesh, who is the part of SAFTA.
14. We find that the initial allegation is made against the appellant is that there were certain correspondence between the appellant and the exporter in Bangladesh and certain documents were recovered from the possession of the appellant, therefore, it was alleged that the appellant is having connivance with the exporter suppliers.
15. We further find that the appellant is an importer and having certain correspondence with the exporter for import of the said goods and nothing incriminating has been mentioned in these e-mails that the supplier shall inflate the value of the imported goods and there is no allegation against the appellant that they have received any kickback in other kinds from the supplier for inflating the value.
16. We further take note of the fact that it has been alleged that the appellant has exported the machine to the supplier for manufacturing of the goods in question for processing of the goods in question. We find that there is no bar in SAFTA that the appellant cannot export such machinery to a manufacturer located in Bangladesh for manufacturing of the goods in question. Therefore, on the basis of that it cannot be alleged that the appellant has violated any provisions of SAFTA under the Customs Act, 1962.
17. We further take note of the fact that the value of the goods imported from Malayasia or Indonesia directly is much lower than the value shown by the supplier/exporter from Bangladesh of the goods in question.
18. We find that the it is a fact on record that the exporter has imported crude palm oil from Malayasia/Indonesia and processed the same and after processing the same has been converted to RBD Palm 6 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 Oline and cleared to the appellant. Definitely, the price after processing has been higher than crude oil imported by the exporter from Malayasia or Indonesia. It is not the case of the Revenue that the exporter in Bangladesh have not processed the goods and cleared as such to the appellant. It is a fact on record that the supplier in Bangladesh has imported crude oil form Malayasia/Indonesia and processed the same and exported to the appellant RBD Refined Palm Olein, therefore, it cannot be alleged that the supplier/exporter has not processed the goods.
19. Further, the supplier has issued certificate of country of origin and the same has been verified by the Revenue from Deputy Director, EPB, Bangladesh, who has verified and certified that the certificate issued by the exporter in Bangladesh are genuine and correct.
20. For better appreciation, the certificate issued by Deputy Director, EPB, Bangladesh is extracted below:-
7Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024
21. We further take note of the fact that it is not the case of the Revenue that the certificate issued by the exporter is not genuine or correct and the verification report given by Deputy Director, EPB, Bangladesh is not correct. The certificate of country of origin and the verification report cannot be doubted unless and until, the same is proved fake by the Revenue. No such allegation in the show cause notice that the certificate of country of origin provided by the exporter and the verification report are fake, in that circumstances, the benefit of exemption Notification cannot be denied to the appellant.
22. Similar issue came up before this Tribunal in the case of BDB Exports Pvt.Ltd. vs. Commissioner of Customs (Prev.), Kolkata [2017 (347) E.L.T. 662 (Tri.-Kolkata)], wherein this Tribunal has observed as under:-
"4. Heard both sides and perused the records of the case. The issue involved in the present appeal is whether the main appellant is eligible to avail partial exemption under Notification No. 105/99-Cus., dated 10-8-1999 when read with SAPTA Rules. As per the first proviso to this Notification, the Assistant Commissioner/Deputy Commissioner/Joint Commissioner has to be satisfied that imported goods are in accordance with the Customs Tariff (Determination of Origin of Goods under the Agreement on SAARC Preferential Trading Arrangement) Rules, 1955 (SAPTA Rules). As per Rule 4 of the SAPTA Rules read with its Schedule even products processed in the member countries are eligible for concessions under SAPTA Rules when the base goods are not produced/manufactured in the contracting countries. The only requirement under these Rules is that a certification of origin has to be produced for availing concessions as issued by the designated authority of Govt. of exporting contracting State and notified to the other contracting States in accordance with the certification procedures mentioned in the form annexed to SAPTA Rules. Required certificates of origin with respect to imported goods were furnished by the appellant where percentage of value addition as per SAPTA Rules was also indicated. Adjudicating authority has not accepted the value addition indicated in the certificate of origin but has gone with the investigation indigenously to allege that value addition cannot be to 8 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 the extent claimed by the Appellant and also that activities undertaken by the supplier of cloves does not amount to 'processing' of cloves. It is observed from various provisions of SAPTA Rules and Notification No. 105/99-Cus., dated 10-8-1999 that there is no discretion or power with the Customs authorities to reject the certificate of origin given by the concerned contracting State. Para 9 of the same Schedule does give power to the contracting States to review/modify the said Rules.
4.1 It is also observed that Hon'ble Apex Court in the case of Zuari Industries Ltd. v. CCE & Cus. (supra) held as follows :-
"9. Firstly, on the facts we find that the assessee had given to the Sponsoring Ministry its entire Project Report. In that report they had indicated that for the expansion of the fertilizer project they needed an extra item of capital goods, namely, 6MW Captive Power Plant. In their application, the assessee had made it clear that the fertilizer project was dependant on continuous flow of electricity, which could be provided by such Captive Power Plant. Therefore, it was not open to the Revenue to reject the assessee's case for nil rate of duty on the said item, particularly when the certificate says so. In the judgment of this Court in the case of Tullow India Operations Ltd. (supra), this Court held that essentiality certificate must be treated as a proof of fulfilment of the eligibility conditions by the importer for obtaining the benefit of the exemption notification. We may add that, the essentiality certificate is also a proof that an item like Captive Power Plant in a given case could be treated as a capital goods for the fertilizer project. It would depend upon the facts of each case. If a project is to be installed in an area where there is shortage of electricity supply and if the project needs continuous flow of electricity and if that project is approved by the Sponsoring Ministry saying that such supply is needed then the Revenue cannot go behind such certificate and deny the benefit of exemption from payment of duty or deny nil rate of duty. To the said effect is the judgment of the Calcutta High Court in the case of Asiatic Oxygen Ltd. (supra) in which it was held that the object behind the specific Heading 98.01 in Customs Tariff Act, 1975 was to promote industrialization and, therefore, the heading was required to be interpreted liberally. It was further held that, once an essentiality certificate was issued by the Sponsoring authority, it was mandatory for the Revenue to register the contract."9
Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 4.2 Karnataka High Court in the case of Yellamma Dasappa v. Commissioner of Customs, Bangalore (supra) also observed as follows:-
"9. A valid certificate has been issued and the said certificate, even as on date, has not been withdrawn or cancelled for any alleged violation of the condition by the appellant. Unless the said certificate is cancelled, the Customs Authorities cannot impose customs duty. The seizure of the equipment is only a consequential act that would follow the cancellation of the certificate issued in favour of the appellant. So long as the certificate is not cancelled, the respondents could not, in our opinion, have initiated seizure proceedings in the case on hand. Petitioner-appellant was sent only a questionnaire and the said questionnaire has been answered by the appellant herein. No further action has been taken by the respondents. The Director General of Health Services has also not issued any cancellation of certificate as on date. In these circumstances, we are clearly of the view that without withdrawing or cancelling the certificate already issued, the present seizure cannot stand. Therefore we hold that the seizure effected by the respondents is not in accordance with law. The impugned order of the learned Single Judge, in these circumstances, requires to be set aside and accordingly the same is set aside."
4.3 CESTAT, Delhi in the case of Dhar Cement Ltd. v. CCE Indore (supra) after relying upon case laws of Supreme Court and Karnataka High Court, held as follows :-
"7. We have heard both sides and examined the appeal records. This is the third round of litigation in the present case. The issue involved is the installed capacity of the appellant vis-à-vis their eligibility to Notification Nos. 24/91 and 5/93-C.E. The concession of notification is available when the installed capacity is not exceeding 1,98,000 T.P.A. It is admitted fact that the Director of Industries, Madhya Pradesh, who is designated as a competent authority in the Notification itself has more than once certified the installed capacity of the appellant to be 1,98,000 T.P.A. As observed by the Hon'ble Supreme Court in normal circumstances such a certificate is to be acted upon. The Hon'ble Supreme Court directed this Tribunal to examine the various material relied on by the Revenue to contest the appellant's claim for exemption. We perused of the impugned order which was passed after 10 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 the specific direction of this Tribunal to approach the competent authority for re-examining all the facts, material, evidence, furnished by both the sides to certify the installed capacity. As per the direction of this Tribunal the Director of Industries was addressed by the Adjudicating Authority on 5-9-2002 along with copies of 11 documents (Para 12 of the impugned order) which are relied upon by the Revenue to contest the correctness of certificate issued by the competent authority. In response, the Commissioner of Industries vide his letter dated 17-6-2003 categorically stated that the installed capacity of the appellant unit is 1,98,000 T.P.A. during the impugned period. He also observed that with reference to the various evidences submitted by the Revenue his office is in agreement with the clarification given by the appellant that their annual installed capacity was 1,98,000 M.T. and they were capable to produce 25% extra, which comes to 2,47,500 T.P.A., for which there was no restriction from the Government end. We have noted that all the evidences available with the Department have been submitted to the Commissioner of Industries who reiterated the certificate already issued. In spite of such confirmation by Commissioner of Industries, Madhya Pradesh, the original authority examined the issue of appellants' eligibility and held that the appellants have deliberately misdeclared the installed capacity to the Central Excise Department to avail the concessional rate of duty under Notification No. 24/91. The Original Authority observed that the very basis of installed capacity certificate is not correct especially when the capacity of individual machinery/equipment and the various other documents of the appellants themselves suggest that installed capacity of their plant was much more than 1,98,000 T.P.A. Accordingly, he held the appellant is not eligible for the concession. We find that while coming to such conclusion he has acted apparently, as appellate authority with reference to certificate issued by the competent authority in terms of the notification. We find the original authority has no such legal powers to sit on judgment on the certificate issued by the competent authority designated by the Government. In case the certificate was obtained by misrepresentation or not presenting full facts the only option left to the Department is to approach the competent authority with all the evidences to modify/cancel the certificate issued already. The Department did approach not only the Director of Industries but also Commissioner of Industries with all the evidences which were examined and the certificate was reiterated by 11 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 the competent authority. As already noted, no other evidence was left to be considered."
4.4 In view of the above observations and the ratios laid down by the Courts certificates of origin produced by the Appellant cannot be discounted. There is no evidence on record that designated authority of Bangladesh under SAPTA Rules was maliciously involved with the supplier of cloves and the Appellant.
5. Adjudicating authority has relied upon some indigenous sources to conclude that neither the imported goods are 'processed cloves' nor the value addition to extent claimed is justified. Appellant asked for the cross-examination of Shri Sunil Doletram Chhabria, Shri C.J. Jose, Dr. J. Chakraborty and Shri Pratab Chakroborty as per Para 18 of Appellants' reply dated 5-12-2005 to the show cause notice dated 26- 8-2005. These facts have been duly reflected in the submissions of the main appellant in the Order-in-Original dated 28-2-2007 but the request of cross-examination of the witnesses has been conveniently avoided by the Adjudicating Authority and no observations are given as to why request of the appellant for cross-examination is not acceptable. In the absence of cross-examination the evidentiary value of the relied upon witnesses is lost. Secondly, Shri Doletram T. Chhabria is also an exporter and importer of spices whose business is threatened by concessional rate on cloves under SAPTA Rules. Being an interested party his statement otherwise also cannot be relied upon and used against the Appellants. It is observed from the SAPTA Rules that the concessions to member countries are as a result of commitments amongst the SAARC countries for enhancing, inter alia, the trade between the members contracting countries. Great trust is imposed under SAPTA Rules upon the designated authority of Govt. of the Exporting Contracting State as per Para 7 of the Schedule to SAPTA Rules. To fulfil the commitments to SAARC nations a certificate of origin given by exporting contracting State cannot be scuttled by the department by conducting some local investigation creating confusion in extending the exemption benefits. As already observed a certificate of origin issued by the designated authority cannot be dishonoured unless cancelled by the same authority.
12Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 5.1 On the issue of processing of cloves it is the case of the department that minor activities done by the supplier will not make the goods as processed cloves and that such processed cloves come into existence only when oil is extracted from natural cloves. It is correctly argued by the Senior Advocate arguing on behalf of the Appellants that 'exhausted cloves' or 'spent cloves', from which clove oil has been extracted, will be cheaper than the natural cloves. If the argument of the department on this account is accepted then there cannot be value addition in the making of processed cloves and Notification No. 105-99-Cus., dated 10-8-1999 will become redundant, so far as concession/exemption to imported cloves from SAPTA countries is concerned.
5.1.1 On this issue of processing Gauhati High Court vide Order dated 30-8-1978, in the case of Chandeswar Singh v. State of Assam [1978 (42) STC 424 (Gau.)], held that when leaves and roots are removed from the onions then such onions become processed onions. Following observations were made by Hon'ble Gauhati High Court :-
"To put the argument of the learned counsel in nutshell, his contention is that a person who sells onion produced in Assam is not a dealer inasmuch as onion is neither manufactured nor made nor processed. On this assumption, contends the learned counsel, that levy of sales tax on onion imported from outside the State of Assam is hit by article 301 of the Constitution which deals with freedom of trade, commerce and intercourse throughout the territory of India. It is argued that article 304(a) cannot come to the rescue of the State for justifying this levy inasmuch as article 304(a) provides that the legislature of a State may by law impose on goods imported from other States any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced. In support of this contention, the learned counsel has relied on State of Madhya Pradesh v. Bhailal Bhai, Firm A.T.B. Mehtab Majid and Company v. State of Madras and State of Rajasthan v. Ghasiram Mangilal. On the other hand, Mr. Goswami, learned counsel for the State of Assam, contends that there is no discrimination between onion imported from outside and onion grown in the State of Assam inasmuch as both are subjected to levy of sales tax. The argument in this connection has 13 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 centred round the definition of the word "processed". It is urged by the learned counsel for the petitioner that onion cannot be processed inasmuch as it is not subjected to any mechanical process after it has been removed from the earth.
The word "process' used as transitive word means according to Webster's New International Dictionary "to prepare by or subject to treatment or process". In Nilgri Ceylon Tea Co. v. State of Bombay, Shah, J. as he then was, observed as follows :
"The expression 'process' has not been defined in the Act. According to Webster's Dictionary 'process' means 'to subject to some special process or treatment, to subject (especially raw material) to a process of manufacture, development or preparation for the market, etc., to convert into marketable form, as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurising, fruits and vegetables by sorting and repacking."
(1) [1964] 15 S.T.C. 450 (S.C.); A.I.R. 1964 S.C. 1006.
(2) [1963] 14 S.T.C. 355 (S.C.); A.I.R. 1963 S.C. 928.
(3) [1969] 2. S.C.C. 710 (4) [1959] 10 S.T.C. 500.
According to Chambers's Twentieth Century Dictionary, "process", inter alia, means to prepare, (e.g., agricultural product) for marketing. In the Oxford English Dictionary, Vol. VIII, "process" has been defined to mean besides other things, "to preserve fruit, vegetable, etc. by some process". In Webster's New International Dictionary, Vol. II, besides other things, process has been defined to mean "a course of procedure, something that occurs in the series of actions".
Now, it is common knowledge that the onion has its roots under the earth with coats of bulbs also and its leaves sprout on the surface of the earth. It is removed along with the root, the leaves are dried up, and the main part which may be called bulb is exposed in the sunshine and after the leaves have dried up and have been removed from the bulb, the bulb, i.e., the edible round article is taken to the market for sale. From this it will be clear that the commodity is subjected to a treatment or process. It does not remain in the same condition in 14 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 which it was when embedded to the earth or as initially harvested. Looked at from this angle, we are inclined to hold that onion is processed and that is why the onion grown in the State of Assam has been rightly subjected to a levy of sales tax by the Government."
5.2 In view of the above case law of Gauhati High Court department cannot sit as on Adjudicator over the certificate of origin given by the designated authority under SAPTA Rules. Only an appropriate authority of Bangladesh could have certified as to what could be the value addition, after satisfying about the nature of processing activities done by the supplier and the extent of expenses incurred by such supplier in carrying out the activities of cleaning, handling, storage, sorting, packing, etc.
6. In view of the above observations and the settled proposition of law certificates of origin issued by the designated authority under SAPTA cannot be rejected which is the only requirement for the satisfaction of the Customs department under Notification No. 105/99- Cus., dated 10-8-1999. Once on merit the case goes in favour of the main appellant, there is no question of confiscation of imported goods and imposition of penalties upon the appellants.
7. Appeals filed by the Appellants are allowed with consequential relief, if any."
23. Further, the said decision of the Tribunal was followed by this Tribunal in the case of Romil Jewelry & Ors. vs. Commissioner of Customs, Air Cargo Complex, Mumbai vide Final Order No.A/86251- 86265/2023 dated 29.08.2023, wherein this Tribunal has observed as under:-
"9. In this context and sans any allegation of collusive arrangement of buyer and seller, statements and other documentation are not really evidentiary reference points for ascertainment of origin particularly in the absence of investigation carried out at supplier end. Furthermore, any perceived lack of rigor in the reporting system at the time of import probably has more to do with negotiation stance which tax administration need not necessarily be privy to or even inclined to appreciate. At the appellate level, it can clearly be asserted that the 15 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 contents of the scheme as laid out in notification no. 85/2004-Cus dated 31st August 2004 and in notification no. 101/2004-Cus (NT) dated 31st August 2004 alone must determine the outcome of the appeal.
10. The first of these is unequivocal in prescribing that '....the importer proves to the satisfaction of the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, that the goods in respect of which the exemption under this notification is claimed are of the origin of Thailand, in accordance with the provisions of Interim Rules of Origin, published with the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 101/2004-Customs (NT), dated the 31st August 2004...' be eligibility to avail the benefit. There is, thus, no discretion beyond the mechanism institutionalized in the second notification.
11. Rule 3 of the Interim Rules of Origin is, again, categorical that origin is to be determined only according to compliance with conditions in the Rules and to the satisfaction of 'respective Government Authorities designated to issue the Certificate of Origin.' It is the case of the appellants that, with furnishing of that certificate, compliance with conditions on the part of the exporter is natural assumption to be contradicted only in accordance with the mechanism of the Rules. The case of Revenue is that the Department of Foreign Trade, Government of Thailand has not authenticated most of the certificates and the few that were, are also as unacceptable.
12. In terms of rule 4 of Interim Rules of Origin and, on the common ground of neither gold nor diamonds being mined in Thailand, reference to '(b) products not wholly produced or obtained in the territory of the exporting Party provided the said products are eligible under Rule 6 or Rule 7, and Rule 8.' therein circumscribes the deeming of Thailand as origin of the impugned goods. Insofar as rule 8 of Interim Rules of Origin is concerned, there is no allegation of non-compliance and the eligibility arises from certification that has been issued as adhering to rule 6 or rule 7 of Interim Rules of Origin. There is also no allegation that the stipulation of 'final process' in rule 6(b) of Interim Rules of Origin have 16 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 not been complied with. Likewise, there is no allegation pertaining to change in tariff classification. The issue is, thus, all about 'local value added content' which is prescribed as 20% or more.
13. The formula in rule 6(d) is verifiable only upon availability of value of 'non-originating materials' which is markedly absent in the investigation as narrated in the show cause notices and impugned orders. Ascertainment through domestic agencies or purported admissions in statements recorded by investigation agencies cannot substitute for this essential foundation. Rule 14 of Interim Rules of Origin is again clear on the validity and sanctity of 'certificate of origin' issued by designated Government Authority for determination of eligibility at the importer end.
14. The Operational Certification Procedure is not only elaborate but also sets out details that can lead to rejection of certificate for nonconformity. It is not the case of Revenue that these are a remote possibility. Rule 15 of Interim Rules of Origin is unambiguous about the procedure for retroactive check of the certificates and the circumstances prompting the same. We, therefore, turn to the response of the Department of Foreign Trade, Thailand dated 31st July 2014 that has been referred to in the arguments of Learned Authorized Representative. This is categorical in stating that 'Having conducted a cross-examination, we confirm the authenticity of these Forms FTA Thai-India. They were truly issued by the Department of Foreign Trade.' while qualifying such certification, relating to 59 of those, thus 'Nevertheless, it was determined that the exporter failed to prove within a stipulate time frame, that the authorized consignments of goods were originating in Thailand according to the consent of preferential duty treatment. As a result, we are not in position to recognize that the goods covered by 59 of Forms FTA Thai-India are qualifying for the origin claim as of the entitlement.' It appears that a different construction has been placed on the report supra by First Secretary (Economic & Commerce) in communication of Embassy of India, Bangkok dated 13th August 2014 restricting the authentication to 59 of the certificates while a plain reading of the parent report appears to authenticate all the certificates while advising on apparent ineligibility of these 59 certificates for some 17 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 noncompliance. This misinterpretation by the overseas mission appears to have informed the proceedings culminating in the impugned order. That, however, does not suffice to negate the entirety of the certificates or even the 59 in the absence of details for computation of the 'local value added content' in rule 6 of Interim Rules of Origin.
15. In re RS Industries (Rolling Mills) Ltd, it has been held that '6. In any case, para 38.3 of the impugned order refers to non- fulfilment of condition under Rule 7(a) of Origin Rules. Reliance was placed on reports given by Sri Lankan customs dated 31-12-2004, 8- 2-2005 and 5-4-2005 to conclude that the domestic value addition is not fulfilled. We have perused all the three reports which are on record. We note that none of these reports by Sri Lankan customs give any indication about the value addition not being fulfilled by the Sri Lankan supplier. To this extent, there is no factual support for the observation made in the impugned order. Further, we note that the valuation of Zinc Ingots as ascertained by the impugned order has no relevance to question the certificate issued by the Competent Authority of Sri Lankan Government. As such, we find the non- fulfilment of condition under Rule 7(a) could not be invoked by the Original Authority, in the facts of this case. Further, it is also recorded by the Original Authority that the Director of the importing Indian company in the statements gave details which supported the allegation of incorrect data submitted by the Sri Lankan supplier. We note that there is no such admission by the Director in his statements. Even otherwise, we note that certificate of origin and the data submitted to get such certificates cannot be questioned based on statements of the importers. We find no record to the effect that the country of origin certificates issued by the Sri Lankan Government has been questioned by the Indian Authorities and follow up after import was done in order to cancel or recall the same. We note that the issue regarding country of origin certificate and questions of bonafideness was discussed in the bilateral meeting of working group between the two countries on 5-6- 2002 it was agreed that no detention or hold up of cargo is to be ordered on the question of bonafideness of certificates. Verification, if any, can be done post-facto with the concerned local nodal focal points at the respective headquarters. This much has been recorded in the letter dated 5-10-2004 of Department of Commerce, Government of Sri Lanka addressed to Commissioner of Customs (Imports), JNPT.18
Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024
7. In view of the above discussion and analysis, we find that in the presence of valid certificates of origin issued by Competent Authority, the assessing authorities in India are not right in denying the benefit of exemption notification. Accordingly, we set aside the impugned order and allow the appeals.' and in re Minakshi Exports that '7. We note that the impugned goods were imported from Sri Lanka. Certificates of Origin issued by the competent Designated Authority in Sri Lanka have been filed for claiming preferential treatment for customs duty. The genuineness of the certificates is not in dispute. The certificates are valid and reiterated by the issuing authority even after specific queries were made by the Customs authorities in India. We also note that the similar consignments have been cleared by the Customs authorities extending the preferential rate of duty in similar set of facts. We have perused the impugned order. We note that there is a basic contradiction in the findings recorded. After careful examination of the available details, the Original Authority categorically held that the goods were not of Chinese origin and as such, anti-dumping duty cannot be levied on them, which is otherwise leviable if the goods are of Chinese origin. Having recorded thus, the Original Authority proceeded to hold that the appellant is not eligible for preferential rate though admittedly, the goods have originated from Sri Lanka. In other words, the goods were held to be of not Chinese origin and also not of Sri Lankan origin. In other words, we note that it is clear that the question of country of origin of the present goods is left hanging without a finding by the Original Authority. The goods were neither of Chinese origin nor of Sri Lankan origin. We note that the same is not a tenable position.
8. The Original Authority has apparently exceeded the jurisdiction in going into the aspects of possible classification of inputs used by the supplier in the manufacture of impugned goods in Sri Lanka. Holding that one of the input and the final product fall under the same four digit classification, it was concluded that the provisions of the Rule 7 have not been fulfilled. More specifically, reference was made by the Original Authority to conditions (b) and (d) of the Rule 7. This is based on the certain reports received from Sri Lankan Customs. The Original Authority while conceding the point that the assessment made by Sri Lankan Customs at the time of import of non-originating goods from China cannot be put to question here in India, proceeded to consider certain reports given by Sri Lankan Customs with reference to 19 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 classification of one of the non-originating inputs. The classification of such input is not in the domain of the assessing officer in India. No opinion or conclusion can be formed based on the assessment, if any, carried out by Sri Lankan Customs. Denial of concession even when valid certificates of origin were submitted (and reiterated) is not legally tenable.'
16. In re BDB Exports Pvt Ltd, it has been held that '4. Heard both sides and perused the records of the case. The issue involved in the present appeal is whether the main appellant is eligible to avail partial exemption under Notification No. 105/99-Cus., dated 10-8-1999 when read with SAPTA Rules. As per the first proviso to this Notification, the Assistant Commissioner/Deputy Commissioner/Joint Commissioner has to be satisfied that imported goods are in accordance with the Customs Tariff (Determination of Origin of Goods under the Agreement on SAARC Preferential Trading Arrangement) Rules, 1955 (SAPTA Rules). As per Rule 4 of the SAPTA Rules read with its Schedule even products processed in the member countries are eligible for concessions under SAPTA Rules when the base goods are not produced/manufactured in the contracting countries. The only requirement under these Rules is that a certification of origin has to be produced for availing concessions as issued by the designated authority of Govt. of exporting contracting State and notified to the other contracting States in accordance with the certification procedures mentioned in the form annexed to SAPTA Rules. Required certificates of origin with respect to imported goods were furnished by the appellant where percentage of value addition as per SAPTA Rules was also indicated. Adjudicating authority has not accepted the value addition indicated in the certificate of origin but has gone with the investigation indigenously to allege that value addition cannot be to the extent claimed by the Appellant and also that activities undertaken by the supplier of cloves does not amount to 'processing' of cloves. It is observed from various provisions of SAPTA Rules and Notification No. 105/99-Cus., dated 10-8-1999 that there is no discretion or power with the Customs authorities to reject the certificate of origin given by the concerned contracting State. Para 9 of the same Schedule does give power to the contracting States to review/modify the said Rules. 4.1 It is also observed that Hon'ble Apex Court in the case of Zuari Industries Ltd. v. CCE & Cus. (supra) held as follows :-
"9. Firstly, on the facts we find that the assessee had given to the Sponsoring Ministry its entire Project Report. In that report 20 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 they had indicated that for the expansion of the fertilizer project they needed an extra item of capital goods, namely, 6MW Captive Power Plant. In their application, the assessee had made it clear that the fertilizer project was dependant on continuous flow of electricity, which could be provided by such Captive Power Plant. Therefore, it was not open to the Revenue to reject the assessee's case for nil rate of duty on the said item, particularly when the certificate says so. In the judgment of this Court in the case of Tullow India Operations Ltd. (supra), this Court held that essentiality certificate must be treated as a proof of fulfilment of the eligibility conditions by the importer for obtaining the benefit of the exemption notification. We may add that, the essentiality certificate is also a proof that an item like Captive Power Plant in a given case could be treated as a capital goods for the fertilizer project. It would depend upon the facts of each case. If a project is to be installed in an area where there is shortage of electricity supply and if the project needs continuous flow of electricity and if that project is approved by the Sponsoring Ministry saying that such supply is needed then the Revenue cannot go behind such certificate and deny the benefit of exemption from payment of duty or deny nil rate of duty. To the said effect is the judgment of the Calcutta High Court in the case of Asiatic Oxygen Ltd. (supra) in which it was held that the object behind the specific Heading 98.01 in Customs Tariff Act, 1975 was to promote industrialization and, therefore, the heading was required to be interpreted liberally. It was further held that, once an essentiality certificate was issued by the Sponsoring authority, it was mandatory for the Revenue to register the contract."
4.2 Karnataka High Court in the case of Yellamma Dasappa v. Commissioner of Customs, Bangalore (supra) also observed as follows:-
"9. A valid certificate has been issued and the said certificate, even as on date, has not been withdrawn or cancelled for any alleged violation of the condition by the appellant. Unless the said certificate is cancelled, the Customs Authorities cannot impose customs duty. The seizure of the equipment is only a consequential act that would follow the cancellation of the certificate issued in favour of the appellant. So long as the certificate is not cancelled, the respondents could not, in our 21 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 opinion, have initiated seizure proceedings in the case on hand. Petitioner-appellant was sent only a questionnaire and the said questionnaire has been answered by the appellant herein. No further action has been taken by the respondents. The Director General of Health Services has also not issued any cancellation of certificate as on date. In these circumstances, we are clearly of the view that without withdrawing or cancelling the certificate already issued, the present seizure cannot stand. Therefore we hold that the seizure effected by the respondents is not in accordance with law. The impugned order of the learned Single Judge, in these circumstances, requires to be set aside and accordingly the same is set aside."
4.3 CESTAT, Delhi in the case of Dhar Cement Ltd. v. CCE Indore (supra) after relying upon case laws of Supreme Court and Karnataka High Court, held as follows :-
"7. We have heard both sides and examined the appeal records. This is the third round of litigation in the present case. The issue involved is the installed capacity of the appellant vis- à-vis their eligibility to Notification Nos. 24/91 and 5/93-C.E. The concession of notification is available when the installed capacity is not exceeding 1,98,000 T.P.A. It is admitted fact that the Director of Industries, Madhya Pradesh, who is designated as a competent authority in the Notification itself has more than once certified the installed capacity of the appellant to be 1,98,000 T.P.A. As observed by the Hon'ble Supreme Court in normal circumstances such a certificate is to be acted upon. The Hon'ble Supreme Court directed this Tribunal to examine the various material relied on by the Revenue to contest the appellant's claim for exemption. We perused of the impugned order which was passed after the specific direction of this Tribunal to approach the competent authority for re-examining all the facts, material, evidence, furnished by both the sides to certify the installed capacity. As per the direction of this Tribunal the Director of Industries was addressed by the Adjudicating Authority on 5-9-2002 along with copies of 11 documents (Para 12 of the impugned order) which are relied upon by the Revenue to contest the correctness of certificate issued by the competent authority. In response, the Commissioner of Industries vide his letter dated 17-6-2003 categorically stated that the installed capacity of the 22 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 appellant unit is 1,98,000 T.P.A. during the impugned period. He also observed that with reference to the various evidences submitted by the Revenue his office is in agreement with the clarification given by the appellant that their annual installed capacity was 1,98,000 M.T. and they were capable to produce 25% extra, which comes to 2,47,500 T.P.A., for which there was no restriction from the Government end. We have noted that all the evidences available with the Department have been submitted to the Commissioner of Industries who reiterated the certificate already issued. In spite of such confirmation by Commissioner of Industries, Madhya Pradesh, the original authority examined the issue of appellants' eligibility and held that the appellants have deliberately misdeclared the installed capacity to the Central Excise Department to avail the concessional rate of duty under Notification No. 24/91. The Original Authority observed that the very basis of installed capacity certificate is not correct especially when the capacity of individual machinery/equipment and the various other documents of the appellants themselves suggest that installed capacity of their plant was much more than 1,98,000 T.P.A. Accordingly, he held the appellant is not eligible for the concession. We find that while coming to such conclusion he has acted apparently, as appellate authority with reference to certificate issued by the competent authority in terms of the notification. We find the original authority has no such legal powers to sit on judgment on the certificate issued by the competent authority designated by the Government. In case the certificate was obtained by misrepresentation or not presenting full facts the only option left to the Department is to approach the competent authority with all the evidences to modify/cancel the certificate issued already. The Department did approach not only the Director of Industries but also Commissioner of Industries with all the evidences which were examined and the certificate was reiterated by the competent authority. As already noted, no other evidence was left to be considered."
4.4 In view of the above observations and the ratios laid down by the Courts certificates of origin produced by the Appellant cannot be discounted. There is no evidence on record that designated authority of Bangladesh under SAPTA Rules was 23 Customs Appeal Nos.75534, 75535, 75536 & 75537 of 2024 maliciously involved with the supplier of cloves and the Appellant.
17. In the light of the factual matrix discussed supra and law settled in the judicial decisions supra, we find no justification for discarding of the 'certificates of origin' by the adjudicating authority. Accordingly, we set aside the impugned orders and allow the appeals."
24. In view of the above cited decisions and the observations made by us as the certificate of country of origin issued by the exporter and verification report filed by Deputy Director, EPB, Bangladesh are accepted by the Revenue, therefore, benefit of Notification No.99/2011-CUS Dated 09.11.2011 cannot be denied to the appellant.
25. Therefore, we hold that the appellant is entitled for the benefit of exemption Notification No.99/2011-CUS dated 09.11.2011, consequently, the impugned proceedings are not sustainable against the appellant. Accordingly, the same are set aside.
26. In the facts and circumstances of the case, no penalty is imposable on the appellants.
27. Accordingly, we set aside the impugned order and allow all the appeals filed by the appellants with consequential relief.
(Order pronounced in the open Court on 09.05.2024.) Sd/ (ASHOK JINDAL) MEMBER (JUDICIAL) Sd/ (K. ANPAZHAKAN) MEMBER (TECHNICAL) sm