2021 (6) TMI 643 - HC - Customs

Rejection of claim for Preferential Duty - Areca nuts - certificate of origin (COO) - benefit of N/N. 26 of 2000 - remission of duty assessed under section 17 of the Customs Act, 1962 - HELD THAT - In the present case, the claim for preferential duty has been rejected unilaterally and without assigning any reasons whatsoever by the Deputy Commissioner of Customs, an authority not competent to have rejected the claim as per the proviso to Section 28-DA(4). Though the consignment has been imported in February 2021, there has been no initiation of enquiry by the proper officer under sub-Section (3) for further enquiry into the COO or any other aspect of the matter that he deems relevant. The impugned order rejecting the claim for exemption has come to be passed by the 2nd respondent, the Deputy Commissioner of Customs, who is not the competent authority to have rejected the claim of exemption, since such rejection could only have been by the Principal Commissioner or Commissioner and that too, for reasons to be recorded. This is a flaw that goes to the root of the matter, the procedure adopted in the impugned proceedings. The timeline for response by the Verification Authority is set out in regulation 63b, which is sixty days from date of request. In the present case, this request has not been initiated and the Department has been sitting pretty on the consignment despite requests for release, the petitioner repeatedly drawing attention to the fact that the consignment comprises perishable goods - The certificate of origin in this case as well as the clarification obtained by the petitioner have been obtained from the Assistant Director acting for the Director General of Commerce in the Department of Commerce, Colombo. The designated Authority under the IFSTA is the Director General of Commerce, Department of Commerce, also the authority which has issued the COO and subsequent clarification. The objection of the respondents in regard to the COO as well as their contention that the clarification dated 19.03.2021 ought to have been received through proper channel is thus, hypertechnical, to say the least. The petitioner has satisfied the requirement of production of a valid COO in this case - petition allowed.

Summary

Issues Involved:
1. Validity of the Certificate of Origin (COO)
2. Retrospective issuance of COO
3. Authority and procedure for verification under Section 28-DA of the Customs Act, 1962
4. Requirement of 100% security for differential duty
5. Consistency in customs authorities' decisions

Detailed Analysis:

1. Validity of the Certificate of Origin (COO):
The petitioner, an importer of Areca Nuts, filed a writ petition concerning a consignment imported through Chennai port. The petitioner sought customs duty exemption under Notification No.26 of 2000, supported by a COO issued by the Department of Commerce, Colombo, Sri Lanka. The Assessing Authority raised queries and assessed the consignment under the Faceless Assessment procedure. The COO's date was disputed, but a clarification from the issuing authority confirmed the correct date and the authorized signatory. Despite this, the respondents questioned the COO's authenticity.

2. Retrospective Issuance of COO:
The respondents objected to a stamp on the COO that read "issued retrospectively," arguing that the Indian Sri Lankan Free Trade Agreement (ISFTA) does not allow retrospective issuance of COO. The petitioner countered that other trade agreements permit retrospective issuance, but the ISFTA's silence on this matter led to further verification demands by the respondents. The court noted that the respondents' explanations were not part of the impugned order and were raised only in the counter.

3. Authority and Procedure for Verification under Section 28-DA of the Customs Act, 1962:
The court examined Section 28-DA, which outlines the procedure for claiming preferential duty rates. The section mandates that the importer must provide sufficient information and exercise reasonable care regarding the COO. If the proper officer doubts the COO's authenticity, they can request further information or initiate verification. The court found that the Deputy Commissioner of Customs, who rejected the exemption claim, was not competent to do so under Section 28-DA(4). The rejection should have been by the Principal Commissioner or Commissioner with recorded reasons.

4. Requirement of 100% Security for Differential Duty:
The respondents argued that the petitioner must provide 100% security for the differential duty to initiate verification. The court rejected this argument, stating that Section 28-DA(5) requires security only for the release of goods, not for initiating verification. The court deemed Circular No. 42 of 2020, which demanded 100% security for verification initiation, as exceeding statutory authority and thus invalid.

5. Consistency in Customs Authorities' Decisions:
The court highlighted that the petitioner had successfully used the same documentation, including the COO, at other Indian ports, including Thoothukudi, without issues. The court criticized the respondents' inconsistent stance, emphasizing that authorities under a central enactment should adopt consistent views on similar transactions. The court found the respondents' objections to the COO and the clarification as hypertechnical and unsupported by the statutory scheme.

Conclusion:
The court concluded that the petitioner had met the requirements for a valid COO and that the respondents' objections were unfounded. The court quashed the impugned order and issued a mandamus for the immediate release of the goods within one week. The court underscored the need for consistent decision-making by customs authorities across different ports. The writ petition was allowed, and connected miscellaneous petitions were closed without costs.