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2018 (8) TMI 432 - AT - CustomsMis-declaration of imported goods - import of Poultry Dry Mix with full exemption from Customs duties under Indo-Sri Lankan Free Trade Agreement (ISFTA) with Sri Lanka - violation of Rule 7 of the Customs Tariff (Determination of Origin of Goods under the Free Trade Agreement between the Democratic Socialistic Republic of Sri Lanka and Republic of India) Rules, 2000 - Department took the view that 25 consignments imported and cleared by producing the other COOs appear to have been obtained by suppression of facts and collusion between the importer and M/s.Ocean Feeds Pvt. Ltd. Sri Lanka, imported in violation of condition laid down under Rule 7 of the ISFTA Rules - Confiscation - penalty. Held that - From the exchange of correspondence between the DRI and Sri Lankan Customs, it is but evident that the former harboured a view that total value of materials etc. originating from third countries had exceeded 65% of the FOB value of the products - Rule 13 of these Customs Tariff Rules lays down identical provisions for cooperation between the contracting parties including the manner of addressing the problems arising from circumvention including facilitation of joint plant visits and contacts by representatives of both contracting parties upon request and on a case-by-case basis - N/N. 26/2000-Cus.dt. 1.3.2000 lists out the goods exempted and the quantum of corresponding exemption from customs duty, provided the importer is able to prove that the goods in respect of which exemption is claimed are of the origin of Sri Lanka as per the conditionalities contained in N/N. 19/2000-Cus. (NT). Thus, there is no lack of clarity in respect of meaning of goods not wholly produced or obtained from the contracting parties , as per the provisions of the ISFTA and the related Customs notifications. In particular, the total value of the materials, parts etc. originating from countries other than the contracting parties (India and Sri Lanka) or of undetermined origin, cannot exceed 65%. This is what primarily certified in the Certificates of Origin issued by the competent Sri Lankan authorities. All the very issues and allegations that have been raised in the impugned SCN were also flagged to the Sri Lankan authorities, in particular, the Sri Lankan Customs and the Department of Commerce (Sri Lanka). Both these authorities from Sri Lanka have unequivocally clarified and reiterated in all their letters that except for the two COOs (6523 and 6661), the product complied with the Rules of Origin criteria set out in the ISFTA in respect of the remaining COOs and a categorical emphasis has been made that there is no necessity to cancel the other COOs. It is also relevant to note that at the initial stage, the two COOs (6523 and 6661) had been withdrawn by Suguna Poultry which was apparently deemed as sufficient action in the matter by the Sri Lankan Customs. Only after insistence by the DRI were these two COOs were cancelled by the Sri Lankan authorities - the Ld. Advocate is correct in his assertion that the discrepancies in respect of the two COOs (6523 and 6661) were only related to the addition of ingredient Mycosorb (Containers IALU 2245133 and IALU 2249967 - related COO 6523) and ingredient L-Threonine (Container JPLU 8223708 - related COO 6661). Since all the remaining COOs have been recertified and found as being in order by the Sri Lankan authorities, the impugned order rejecting the impugned COOs, denying the benefit of exemption under N/N. 26/2000-Cus. in respect of the impugned goods, demanding differential duty with interest and imposing penalty under Section 112 (a) of the Customs Act, 1962, cannot sustain and therefore will have to be set aside. Imposition of penalty under Section 114 and 114AA of the Act is found to be without merit and is therefore dismissed. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Change of name of the importer in legal proceedings. 2. Discrepancy in the Certificates of Origin (COO) under the Indo-Sri Lankan Free Trade Agreement (ISFTA). 3. Denial of customs duty exemption under Notification No. 26/2000-Cus. 4. Demand for differential duty and imposition of penalties. Detailed Analysis: 1. Change of Name of the Importer: The Appellant, initially named M/s. Suguna Foods Ltd., requested a change of name in the cause title to Suguna Foods Private Ltd. due to a subsequent name change. The Tribunal allowed this request based on the Certificate of Incorporation issued by the Registrar of Companies, Tamil Nadu. 2. Discrepancy in the Certificates of Origin (COO): Suguna Foods Private Ltd. imported Poultry Dry Mix under the ISFTA, claiming full exemption from customs duties. The Department of Revenue Intelligence (DRI) found discrepancies between the Cost Statement submitted to Sri Lankan authorities and the actual Formulation and Consumption details. Specifically, in two COOs, the value of imported materials from non-contracting parties exceeded 65%, violating Rule 7 of the ISFTA Rules. The Sri Lankan authorities confirmed these discrepancies and canceled the two COOs, but refused to cancel the remaining 25 COOs after verification. 3. Denial of Customs Duty Exemption: The department issued a show cause notice proposing the denial of the exemption under Notification No. 26/2000-Cus for 25 consignments, demanding a duty of ?2,26,50,335/- with interest, and imposing penalties. The adjudicating authority upheld the denial of exemption, finding that the third country components in all 25 consignments exceeded the stipulated 65%, thus violating Rule 7 of the ISFTA Rules. 4. Demand for Differential Duty and Imposition of Penalties: The importer contested the findings, arguing that the COOs were issued by the competent Sri Lankan authority and were confirmed as valid except for the two canceled COOs. They also highlighted that the discrepancies in the two COOs were specific to certain ingredients and did not affect other consignments. The Tribunal noted that Free Trade Agreements are based on trust and cooperation, and the Sri Lankan authorities had confirmed the validity of the remaining COOs after thorough verification. The Tribunal concluded that the department should have accepted the outcome of the bilateral consultations and extended the benefit of ISFTA to the imports. Judgment: The Tribunal set aside the impugned order rejecting the COOs, denying the exemption, demanding differential duty, and imposing penalties. The appeal by Suguna Foods Private Ltd. was allowed with consequential benefits, and the revenue's appeal for additional penalties was dismissed. The Tribunal emphasized the importance of adhering to the provisions of Free Trade Agreements and the conclusions of bilateral consultations between contracting countries.
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