Legal principle

Preferential tariff treatment under a trade agreement cannot be denied merely because the overseas supplier failed to cooperate in an origin verification, where the Certificates of Origin covering the importer's own consignments are not shown to be forged, cancelled or invalid, and the extended period under Section 28(4) cannot be invoked mechanically without cogent proof of the importer's wilful suppression.

Court decision

The Tribunal allowed the appeal and set aside the Order-in-Original dated 30.04.2025 in full, holding the appellant entitled to the preferential rate of Basic Customs Duty under Sl. No. 967(I) of Notification No. 46/2011-Customs in respect of all six Bills of Entry. The differential duty demand with interest, confiscation with redemption fine, and penalties under Sections 114A and 114AA were all set aside, the court holding the appellant had succeeded both on merits and on limitation.

Facts

The appellant, an importer with a valid IEC, imported Cold Rolled Stainless Steel Coil manufactured by M/s. Bahru Stainless SDN. BHD., Malaysia, under six Bills of Entry dated between 21.10.2022 and 15.03.2023, claiming concessional duty under Sl. No. 967(I) of Notification No. 46/2011-Customs under the AIFTA on the strength of Certificates of Origin (Form-AI) issued by Malaysian authorities. During a DRI investigation into alleged misuse of AIFTA benefits, an on-site verification visit was made to the supplier's premises under Para 17 of Annexure-III of the Rules of Origin, but the supplier declined to furnish documents citing confidentiality after consulting its parent entity, Acerinox Group, Spain. Treating this non-cooperation as rendering the COOs unverifiable and not acceptable as genuine, the Board initiated proceedings for denial of preferential tariff treatment and Malaysian authorities were asked not to issue further COOs to the supplier. On a Show Cause Notice dated 13.11.2024, the Principal Commissioner of Customs (Port), Kolkata denied the exemption, confirmed differential duty of Rs.1,43,72,465 with interest under Sections 28(4)/28AA, confiscated the goods under Sections 111(m) and 111(o) with a Rs.3,00,00,000 redemption fine under Section 125, and imposed penalties of duty-equal amount under Section 114A and Rs.3,00,00,000 under Section 114AA.

Key provisions

• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 47, Customs Act, 1962 — Clearance of goods for home consumption
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty
• Section 28DA, Customs Act, 1962 — Procedure regarding claim of preferential rate of duty
• Rule 8, Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 — Miscellaneous