2024 (4) TMI 122 - AT - Customs

Extended period of limitation - authenticity of the country of origin certificate - concessional rate of duty under N/N. 46/2011-Cus dated 01.06.2011 as amended and N/N. 53/2011-Cus. dated 01.07.2011 read with N/N. 189/2009-Cus (N.T.) dated 31.12.2009 - misrepresentation of the Regional value content (RVC) to be above 35% whereas the actual RVC was much less than 35% - valuation of CR SS Flat products - HELD THAT - In the present disputed matter appellant has claimed the goods to be originating in Malaysia as provided under Rule 5 of the AIFTA Rules i.e. not wholly obtained or produced. In respect of all the subject consignments the appellant produced certificate of origin in Form A-1 issued by the Ministry of Internal Trade and Industry (MITI) of Government of Malaysia showing the Regional Value content of the subject goods as more than 35% CTSH . However case of the department is that intelligence gathered by the DRI officers suggested that the said RVC was misstated as the overseas supplier M/s. Bahru did not have integrated stainless steel factory and had only facility to manufacture CR SS products with annealing and pickling lines sendzimir skin-pass and finishing line during the material time and mainly used hot-rolled coils supplied by other factories belonging to the group from Non-AIFTA countries. The Revenue without getting confirmation from the Malaysia Government about their doubt of authenticity of the country of origin certificate and activity of M/s Bahru proceed to deny the benefit in respect of COOs issued by M/s Bharu is not genuine and consequently denied Exemption Notification No. 46/2011 dated 1-6-2011 and consequential demand was confirmed. We find that as per the documents submitted by the appellant it appears that there is no doubt on the authenticity of the country of origin certificate issued and import of the goods by Appellant on the basis of said COOs. However to clear any doubt it is the burden on the department to get the verification from the Malaysia Government regarding authenticity of Certificate of origin which has not been discharged by the department. Therefore in the interest of justice one chance is given to the department to get the verification from concerned authorities about the genuineness of the certificate of origin issued by M/s Bahru and their manufacturing activity thereafter to pass a fresh order. The impugned order is set aside - Appeals are allowed by way of remand to adjudicating authority for passing a fresh order.

Summary

Issues Involved:
The issues involved in the judgment are misrepresentation of regional value content (RVC) for availing concessional rate of duty, misuse of Free Trade Agreement (FTA) resulting in evasion of custom duty, denial of benefit of Exemption Notification on disputed goods, imposition of penalties, fulfillment of conditions under the Country of Origin Rules, validity of Country of Origin Certificate, sufficiency of evidence for value addition, and limitation period for demanding custom duty.

Misrepresentation of Regional Value Content (RVC) and Misuse of FTA:
The appellant and other parties were importing CR SS Flat products by misrepresenting the RVC to be above 35% while the actual RVC was much less, indicating a misuse of the FTA and evasion of custom duty. The investigation revealed that the raw material imported from Non-AIFTA countries constituted a major part of the value of goods, leading to doubts about the value addition qualifying for the minimum requirement. The show cause notice was issued proposing to deny the benefit of the Exemption Notification and demand custom duty, which was confirmed by the Ld. Commissioner in the impugned order.

Denial of Benefit and Imposition of Penalties:
The appellants challenged the denial of benefit under the Notification and imposition of penalties, arguing that they had correctly availed the exemption as per the Country of Origin Rules. They contended that the conditions of change in tariff sub-heading and 35% value addition were satisfied, supported by the Country of Origin issued by the exporting country. They also argued that the evidence did not conclusively prove the lack of required value addition and that the entire demand was beyond the normal limitation period.

Validity of Country of Origin Certificate and Evidence for Value Addition:
The appellant emphasized the validity of the Country of Origin Certificate as evidence of regional value addition in the imported goods. They argued that the COO had not been canceled by the issuing authority, and reliance was placed on various judgments supporting this stance. It was asserted that the evidence/data provided by the DRI did not definitively show the failure to achieve the necessary value addition, and the demand was considered time-barred.

Fulfillment of Conditions under Country of Origin Rules:
The Tribunal analyzed the provisions of the AIFTA Rules regarding the origin criteria and value addition requirements. It was noted that the appellant claimed the goods to be originating in Malaysia under Rule 5 of the AIFTA Rules. The appellant produced a certificate of origin showing the RVC of the goods as more than 35%, but the department raised concerns about the misstatement of RVC by the overseas supplier. The department's verification visit to the supplier's unit and subsequent denial of preferential benefits were discussed.

Decision and Remand:
After considering the arguments and evidence, the Tribunal set aside the impugned order and allowed the appeals by way of remand to the adjudicating authority. The department was given one chance to verify the authenticity of the Certificate of Origin issued by the supplier and their manufacturing activity before passing a fresh order within six months.