Legal principle

The extended period under Section 28(4) of the Customs Act cannot be invoked, and a beneficial exemption cannot be denied, where the department's delayed, partial and unauthenticated foreign verification of Certificates of Origin fails to establish fraud and no culpatory statement implicates the importer.

Court decision

The Tribunal allowed both appeals with consequential benefits. It held that the evidence failed to establish fraud — at most arousing suspicion — that no culpatory statement indicated mis-declaration by the appellant, and that the extended period under Section 28(4) could not be invoked nor the beneficial exemption denied; the demand, interest and penalties were therefore not invokable, the appeal succeeding on limitation and non-application of Section 28(4).

Facts

Imperial Fibres Pvt. Ltd., an importer and trader of Polyester Knitted Fabrics (CTH 60053200) from China and Malaysia, was alleged by DRI to have mis-declared the country of origin as 'Malaysia' when the goods were actually from China, to wrongly avail preferential duty benefit under Notification No. 46/2011-Cus dated 01.06.2011. DRI had the Bill of Entry dated 16.03.2015 examined under Panchnama, drew samples, and sought verification of the Certificates of Origin through CBEC from MITI, Malaysia, which replied only on 14.10.2016 — well beyond the prescribed three months — that 15 of the referred COO certificates were not authentic and belonged to some other company. Statements of Director Varun Goyal were recorded, in which he said the certificates came from the supplier and he had no reason to doubt them. A show cause notice dated 15.01.2018 followed, and the Commissioner of Customs (Mundra) confirmed duty with interest and penalty, leading to these appeals before the CESTAT Ahmedabad.

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 108, Customs Act, 1962 — Power to summon persons to give evidence and produce documents
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Rule 6, Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 — Verification request
• Section 139(ii), Customs Act, 1962 — Presumption as to documents in certain cases
• Section 2(f), Customs Act, 1962 — Definitions
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 46(4), Customs Act, 1962 — Entry of goods on importation
• Section 111(m), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 28AA, Customs Act, 1962 — Interest on delayed payment of duty