2024 (2) TMI 740 - AT - Customs

Import of foods of Malaysian origin - Benefit of Notification No.46/2011-Cus and 53/2011-Cus - failure to prove the condition of qualifying value content of the goods should not be less than 35% of the FOB value - cost structure on the basis of data privacy was not provided - onus of prove shifts to Department (shifting burden) - HELD THAT - In the instant case, the certificate was duly got verified through the Government to Government process and Malaysian authorities have not doubted the issuance of genuine certificate of origin nor its contents. However, the department in the absence of cost data has placed the whole burden of proof on the appellants, despite documentary evidence coming to the fore by way of certificate of origin and same getting verified from Malaysian authorities - Failure of Indian authorities to get more detailed verification or underlying cost data from the Malaysian Government authorities cannot be held against the appellant, who discharged their burden to claim benefit by producing the relevant prescribed document under the agreement and the Customs notification. On production of such evidence, it was for the department to discharge the burden as shifted on it. Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the denial of benefit under Exemption Notification and imposition of penalty, rejection of certificate of origin, burden of proof on the appellant to provide cost data, and the justification of the order by the learned Commissioner (Appeals).

Denial of Benefit under Exemption Notification and Imposition of Penalty:
The case involved M/s Kaira Ingredients Inc. filing appeals against an order issued by the Additional Commissioner of Customs. The appellant imported goods declared as Cocoa Powder from Malaysia, availing concessional rate of Customs Duty benefit under Notification No.46/2011-Cus. The issue arose when it was found that the goods were derived from Cocoa beans of Ghana origin, not meeting the qualifying value content requirement of 35% of the FOB value as per Customs Tariff Rules. Despite verification by the High Commission of Malaysia, the cost structure data was not provided due to data privacy concerns. A show cause notice was issued, leading to the denial of the benefit of the Exemption Notification and imposition of penalties under relevant sections. The Commissioner (Appeals) upheld this decision, emphasizing the appellant's obligation to provide cost data to prove the claimed value addition.

Rejection of Certificate of Origin:
The appellant's certificate of origin from Malaysia was rejected by the authorities due to the lack of cost structure data from the suppliers. The appellant's reliance on verification by the Malaysian authority and the genuineness of the certificate was challenged by the department based on the absence of detailed cost data. The rejection of the certificate led to the dispute over the country of origin being wrongly mentioned, impacting the eligibility for Customs Duty benefits under the preferential trade agreement.

Burden of Proof on the Appellant to Provide Cost Data:
The judgment highlighted the burden of proof placed on the appellant to provide cost data to support the claimed value addition for the goods imported. Despite the certificate of origin being verified by Malaysian authorities, the department insisted on the appellant furnishing cost data, which was not provided due to data privacy concerns. The appellant argued that the responsibility to obtain detailed cost data from the Malaysian Government should not fall on them, as the certificate of origin was duly verified through official channels.

Justification of the Order by the Learned Commissioner (Appeals):
The Learned Commissioner (Appeals) upheld the denial of benefits and penalties imposed on the appellant, emphasizing the appellant's obligation to provide cost data to substantiate the value addition claim. The appellant's appeal against this decision was based on the argument that the burden of proof should not solely rest on them, especially when the certificate of origin had been verified by the Malaysian authorities. The judgment ultimately favored the appellant, acknowledging the verification process and the lack of detailed cost data as a matter between governments, not to be held against the appellant.

Separate Judgment:
The judgment was pronounced by HON'BLE MEMBER (JUDICIAL) Mr. Somesh Arora on 14.02.2024, allowing the appeal and providing consequential relief to the appellant.