2024 (1) TMI 988 - AT - Customs

Concessional rate of Customs Duty - benefit of N/N. 46/2011-CUS dated 01.06.2011 read with N/N. 53/2011 - CUS dated 01.07.2011 - Import of Natural Cocoa Powder (CTH - 18050000) from Malaysia - Certificates of Origin - Onus to prove (shifting burden) - whole case has been made on assumption and presumptions without any evidence against the appellant that their imported Cocoa Powder did not fulfill the condition of 35% RVC - HELD THAT - The certificate of origin in the present instance was issued by the designated authority i.e Ministry of International Trade and Industry (MITI) Malaysia which is competent authority to issue such certificate under ASEAN FTA (AIFTA) mentioning the Regional Value content (RVC) to be much higher than stipulated 35% i.e. 47%. The Free Trade Agreement stands incorporated in the Customs Tariff vide Notification No. 46/2011-Cust., dated 01.06.2011 available to impugned product i.e. Natural Cocoa Power originating from Malaysia. The differential duty of Rs. 6,44,233/- was demanded by the department, denying benefit on the ground that in another investigation taken up by DRI in respect of certificate of origin pertaining to another party in the year 2014, Cocoa Beans were suspected to be derived from Ghana and not Malaysia by that importer. The company did not provide cost data due to data privacy and since the Board was of the opinion that under AIFTA cost data cannot be denied, therefore, in the present case in the Year-2018, since impugned goods have been supplied by M/s. Guan Chong Cocoa as manufacturer, the proceedings for denial of exemption despite claim of 47% value addition have been initiated even without attempting to verify the documentary evidence by way of the Certificate of Origin by the designated authority issued under the agreement. It is found that this is nothing but attempt to make case on the basis of assumptions and presumptions even without as much as verification having been attempted to be made by the authorities. The same is therefore, not maintainable. Department has been provided a documentary evidence by way of a stipulated certificate from the designated authority under the agreement. On production of such agreement which is in the nature of the documentary evidence, the onus to prove fakeness of its content or otherwise clearly shifts on the department. Unlike, the course of action adopted in respect of other importers who made imports in the Year-2014, the department has not even attempted to do verification with Government of Malaysia and has proceeded in the instant case, on the basis of following assumptions and presumptions without rebuttal of the documentary evidence procured and produced by the appellant. In the present case in the face of certificate of origin having been produced and no verification process having been conducted before issuance of show cause notice, the demand of duty cannot be sustained - in absence of burden having been discharged or even having been attempted till such belated stage, the show cause notice cannot be sustained. The appeal is allowed with consequential relief as far as duty, penalty and interest are concerned.

Summary

Issues Involved:
1. Validity of the Certificate of Origin.
2. Compliance with the Regional Value Content (RVC) requirement.
3. Justification for the denial of concessional customs duty benefits.
4. Procedural adherence by the customs authorities.

Summary:

1. Validity of the Certificate of Origin:
The appellant imported Natural Cocoa Powder from Malaysia under Bill of Entry No. 5152802 dated 12.02.2018, availing concessional customs duty benefits as per Notification No. 46/2011-CUS dated 01.06.2011 and Notification No. 53/2011-CUS dated 01.07.2011. The Certificate of Origin was issued by the Ministry of International Trade and Industry (MITI) Malaysia, certifying a Regional Value Content (RVC) of 47%, which is higher than the required 35%.

2. Compliance with the Regional Value Content (RVC) Requirement:
A Show Cause Notice dated 30.05.2019 challenged the Certificate of Origin, alleging that the goods were derived from Cocoa Beans of Ghana origin with an RVC of only 13-17%, based on a 2014 investigation by DRI. However, no specific verification was conducted for the appellant's import in 2018. The appellant provided a letter dated 02.05.2016 from the foreign supplier certifying an RVC of 47%, verified by MITI Malaysia.

3. Justification for the Denial of Concessional Customs Duty Benefits:
The customs authorities denied the concessional duty benefits based on assumptions from a previous investigation in 2014 involving another party. The appellant argued that no retroactive check was requested for their import, and the Certificate of Origin was never referred to the issuing authority for verification. The appellant's import occurred much later, and the previous intra-department references were irrelevant.

4. Procedural Adherence by the Customs Authorities:
The customs authorities did not conduct any verification for the appellant's import and relied on assumptions from the 2014 investigation. The department failed to prove the fakeness of the Certificate of Origin or conduct any verification with the Government of Malaysia. The case laws cited by the department were distinguishable as they involved different circumstances.

Conclusion:
The Tribunal concluded that the denial of concessional duty benefits was based on assumptions and without any verification. The onus to prove the fakeness of the Certificate of Origin was on the department, which it failed to discharge. The appeal was allowed with consequential relief regarding duty, penalty, and interest. The decision emphasized the need for proper verification and adherence to procedural requirements before denying benefits under the ASEAN-India Free Trade Agreement (AIFTA).