Tribunal Raps Customs for Skipping Verification, Restores AIFTA Duty Relief to Thai Imports
Introduction
The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that the benefit of exemption under the ASEAN-India Free Trade Agreement (AIFTA) cannot be denied without proper verification of the certificate of origin issued by the competent authority. The bench comprising Ajay Sharma (Judicial Member) and C. J. Mathew (Technical Member) observed that there was no finding or allegation of inauthenticity of the certificates corresponding to the consignments imported from Thailand, nor any reasoning to support the conclusion that the goods did not conform to the documentation.
Factual Background
The appellant, Marvel Silver, imported ten consignments from Thailand between February 2018 and July 2018, claiming concessional duty under the AIFTA in terms of Notification No. 46/2011-Cus. dated 1st June 2011 (as amended). The benefit was based on certificates of origin issued by Thai authorities confirming that the goods were produced in Thailand.
The customs authorities issued a show cause notice alleging discrepancies in the certification of one “live consignment” and extended the same template of discrepancy to all consignments, denying the AIFTA benefit and demanding duty.
Procedural Background
The adjudicating authority confirmed the denial of exemption and raised a demand under Section 28 of the Customs Act, 1962, along with confiscation of the goods. On appeal, the Commissioner (Appeals) upheld the denial. The assessee approached the Tribunal, contending that the denial was made without following the verification process prescribed under the relevant rules governing origin certificates.
Issues
- Whether the benefit of AIFTA exemption can be denied solely based on alleged discrepancies without verifying the authenticity of the certificate of origin?
- Whether the adjudicating authority exceeded its jurisdiction during de novo proceedings by introducing new grounds not part of the original adjudication?
Contentions of the Parties
Appellant’s Submissions: The customs authorities failed to follow the prescribed procedure for verification of the certificate of origin. There was no finding or evidence suggesting that the certificates were fake or invalid. Denial of exemption without verifying the certificates is contrary to the notification and the law. The adjudicating authority exceeded its jurisdiction in de novo proceedings by imposing new detriments.
Revenue’s Submissions: The irregularity detected in one live consignment indicated a similar pattern across earlier imports. Under self-assessment, the importer bears the responsibility to substantiate claims for exemption. The withdrawal of the claim during clearance under protest supports the inference of irregularity.
Reasoning and Analysis
The Tribunal held that AIFTA exemption is conditional upon proof that the goods originate in an ASEAN member country, as evidenced by a valid certificate of origin. In the present case, there was no verification or finding that the certificates were invalid or that the goods were not of Thai origin. The bench criticised the adjudicating authority for applying assumptions based on a single consignment to all imports and held that denial of exemption on such presumptive grounds violates due process. It observed that if there was any doubt about the certificate’s authenticity, the customs authorities were required to refer the matter to the issuing authority for verification, as per the AIFTA Rules. The Tribunal also noted that expanding the scope of de novo adjudication to impose fresh liabilities was beyond jurisdiction.
Implications
The decision reinforces the principle that customs exemptions under international trade agreements cannot be denied on conjecture. It underscores that verification of certificates of origin is a mandatory procedural safeguard before withdrawing concessional benefits under trade treaties. The judgment ensures predictability and procedural fairness in implementing the AIFTA framework.
In this case the appellant was represented by Shri Sujay Kantawala and Ms. Aishwarya Kantawala, Advocates. Meanwhile the respondent was represented by Shri Krishna Murari Azad, Assistant Commissioner.