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TMI Blog2018 (8) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Registrar of Companies, Tamil Nadu. 2. Heard Ld. A.R. In view of Certificate of Incorporation issued by the Registrar of Companies, Tamil Nadu, the Registry is directed to change the name of the importer as Suguna Foods Private Ltd. in all future proceedings. MA (CT) is allowed. 3. Suguna Foods private Ltd. imported Poultry Dry Mix with full exemption from Customs duties under Indo-Sri Lankan Free Trade Agreement (ISFTA) with Sri Lanka. The subject goods were imported from M/s. Ocean Feeds Pvt. Ltd., Sri Lanka, which is alleged to be a wholly owned subsidiary of the importer. Two such consignments were detained on the issue of discrepancy concerning date of issue of Certificate of Origin (hereinafter referred to as COO). During further investigation, it was observed that there was discrepancy in the quantity and description of raw materials between the Cost Statement submitted by the importer to Sri Lankan authorities in support of the claim for exemption under ISFTA and the actual Formulation and Consumption details of Ocean Feeds Pvt. Ltd. which was submitted to D.R.I by the importer. Based on the apparent evidences gathered during investigation, references were made to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1962. Importer is aggrieved with this Order and has filed Appeal C/41075/2013. Revenue is aggrieved with non-imposition of equal penalty under Section 114A of the Customs Act and non-imposition of penalty under Section 114AA ibid by the adjudicating authority and have filed Appeal C/41122/2013. 4. When the matter came up for hearing, on behalf of the importer, Ld. Advocates Shri Vipin Jain and Shri G. Krishnamoorthy made oral and written submissions which can be broadly summarized as under : i) At the time of import, importer had placed on record with the Customs authorities COOs signed by the competent authority in Sri Lanka. Each of the 25 COOs which are the subject matter of these appeals certify the percentage value of raw material originating from non-contracting parties to be less than 65% of the FOB value of the export goods, thus implying satisfaction of the minimum value addition condition specified in Rule 7 of Notification No.19/2000-Cus (NT). ii) DRI Chennai, based on a reference from Chennai Customs, commenced investigations sometime in November, 2006 and scrutinized all the documents pertaining to consignments imported from the beginning. On examination, DRI foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verlooks the condition which mandates in clear terms that insofar as the question of origin of goods is concerned, the provisions of Notification No.19/2000-Cus (NT), which prescribed COOs as conclusive evidence of the origin of goods, had to be followed unhesitatingly. Since in the present case, the COOs for the 25 Bills of Entry had been issued by the competent authority in the Government of Sri Lanka and since their validity and genuineness had been confirmed and reaffirmed by the Sri Lankan Authorities by specifically dealing with all the objections and allegations made by the DRI, the learned Commissioner was not justified in ignoring the said COOs and in recording findings contrary to such subsisting and valid COOs. vi) The goods imported in Container No.TAHU 2339356 were not covered by COO No.6523 dated 1.8.2006 as assumed by the Commissioner in para 32. This container was actually covered by the other COO 6661, which had 2 different formulations (Annexure AG and AH). In respect of Annexure AG, which specifically covered the goods in the Container No.TAHU 2339356, the DRI did not find any discrepancy. The discrepancy was noticed only in the second formulation (Annexure AH) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as many as 5 different raw materials used by "Ocean Feeds Pvt.Ltd." were being sourced from India. The said report appears at page 287 of the appeal and the relevant part of the finding can be found in para 4 on page 288 which in turn refers to Annexure 1 t the said report which can be seen at page 290 to 291. In view of the specific report issued by the Sri Lankan Customs Authorities on this very point, there was no justification for the learned Commissioner to record contrary findings merely on the basis of letters and statements of the importer's employees who were not directly concerned with the procurement and production of "Poultry Feed Premix" in Sri Lanka. ix) The Commissioner has failed to appreciate that all the allegations and charges levelled by the DRI against the importer were communicated to the Sri Lankan Authorities through various letters and reminders which are part of the appeal memorandum from page 279 onwards till page 308. The Sri Lankan Authorities conducted their own verification, in the manner prescribed by Notification No.19/2000-Cus (NT) and the ISFTA and responded to the DRI that only the only COOs that needed to be cancelled were Certificate No.6523 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een found only in respect of raw materials "L-Threonine" and "Mycosorb". It was also specifically clarified by Sri Lankan Customs that there was no discrepancy concerning the commodity "L-Lysine". xiii) Ld. Advocate also drew our attention in page 76 of the Convenience Compilation, to the letter dt. 28.3.2006 of Sri Lankan authorities clarifying that verifications carried out by them on the structure of cost relating to the COOs under reference have confirmed that the product complied with the Rules of Origin criteria set out in the ISFTA except the above mentioned two COOs (6523 and 6661); therefore the necessity to cancel the other COOs would not arise. It was clarified that there is no significant difference between the "actual formulation and consumption details and the Cost Statement furnished to us except substitution of raw material (e.g. wheat bran to rice bran and Chloride to Sulphate)"; and that these substitutions have not resulted in altering the cost structure substantially causing the product not being eligible for tariff concessions available under ISFTA. xiv) Ld. Advocate drew our attention to para-35 of the impugned order, where the adjudicating authority has pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds Ltd., Sri Lanka is a wholly owned and 100% subsidiary of the importer. By collusion between the importer and their Sri Lankan subsidiary, wrong Cost Sheets were submitted to the Sri Lankan authorities by suppressing the vital information, to obtain the COOs. From the details of the Formulation Statement obtained from the importers during the investigation, it has come to light that there are differences between the information contained therein and in the Cost Statement submitted to the Sri Lankan authorities. v) Hence the Ld. Adjudicating authority is correct in concluding that once the COO 6661 was found not to satisfy the prescribed ratio of inputs of third country of origin as laid down in the Free Trade Agreement, it would naturally follow that in respect of the other imports of the said importer where the same formulation or composition of Poultry Feed Mix was followed, the related COOs should be treated as not complying to the ISFTA Rules and are required to be withdrawn. vi) Ld. AR drew our attention to the decision of Tribunal in Surya Light Vs CC Bangalore - 2008 (226) ELT 74 (Tri.-Bang.) where it has been held that as the certificate of origin was issued by Sri La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of damaged parts, and like operations) 2. Simple operations consisting of removal of dust, sifting or screening, sorting, classifying, matching (including the making-up of sets of articles), washing, painting, cutting up; 3. (i) changes of packing and breaking up and assembly of consignments. (ii) simple slicing, cutting and repacking or placing in bottles, flasks, bags, boxes, fixing on cards or boards, etc., and all other simple packing operations. 4. the affixing of marks, labels or other like distinguishing signs on products or their packaging; 5. Simple mixing of products, whether or not of different kinds, where on or more components of the mixture do not meet the conditions laid down in these Rules to enable them to be considered as originating products; 6. simple assembly of parts of products to constitute a complete product; 7. A combination of two or more operations specified in 9 (a) to (f); 8. slaughter of animals; The value of the non-originating materials, parts or produce shall be : i. The c.i.f value at the time of importation of the materials, parts or produce where this can be proven; or ii. The earliest ascertainable price paid for the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic of Sri Lanka and the Republic of India) Rules, 2000 issued vide Customs Notification No.19/2000-Cus. (NT) dt. 06.03.2000. 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 mirror and reiterates the exact language of the Rule 7 of the Rules of Origin of ISFTA agreement reproduced above. Thus, 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. Rule 13 (4) ibid further provides as under : "13. Co-operation between contracting parties :- ... ... .... (4) If either Party believes that the rules of origin are being circumvented, it may request consultation to address the matter or matters concerned with a view to seeking a mutually satisfactory solution. Each party will hold such consultations promptly." 8.6 Notification No.26/2000-Cus.dt. 1.3.2000 lists o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have not been shown in the Cost Statements. In letters dt. 12/14.02/2007, 7.4.2007, 12.04.2007 and 30.04.2007, another doubt has been raised by DRI that "other overheads" mentioned in the cost statements are inflated figures in as much as the administrative functions have been performed in Coimbatore, India by, and at the cost of M/s.Suguna Poultry Farm Limited, Coimbatore. 8.9 The issues raised in all the above letters from DRI have been replied by Sri Lankan Customs in a communication dt. 24.05.2007 wherein it has been inter alia clarified that factory inspection of M/s.Ocean Feeds, Sri Lanka has been carried out by the Department of Commerce with a panel of officials from other relevant authorities and that the panel had been satisfied that the production process of the company performs the substantial operation which fulfils the rules of Origin regulations stipulated under ISFTA. 8.10 Regarding on the doubt raised by DRI on the item "L-Lysine", the Sri Lankan authorities clarified that the said commodity has been imported from different companies in different trade names, but it was declared under the common name as L-Lysine" in the Cost Statement which has been approved. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant two Certificates of Origin, bearing Nos.Co/ISFTA/06/6523 dated 10th August 2006 and CO/ISFTA/06/6661 dated 11th August 2006 (Copies of COOs are attached. We will also notify our decision to the respective Indian Customs accordingly. The verifications carried out by us on the structure of cost pertaining to the COOs under reference confirmed that the product complies with the Rules of Origin criteria set out in the ISFTA except the above mentioned two Certificates. Therefore, the necessity to cancel the other COOs mentioned in your letter would not arise." (emphasis added) After setting to rest issues flagged by DRI relating to imports from China, Germany, South Korea, France and Indonesia, the letter has finally concluded as under : "There is no significant difference between the actual formulation & consumption details and the Cost Statement furnished to us except substitution of raw material (e.g. wheat bran to rice bran and Chloride to Sulphate). These substitutions have not resulted in altering the cost structure substantially causing the product not being eligible for tariff concessions available under ISFTA."(emphasis supplied) 9.1 The combined takeaway from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the disputed COOs have actually been cancelled. There is no allegation that the ingredients which make up the goods of container TAHU 2333935 include "L-Threonine" or "Mycosorb". Even the doubt raised by DRI on the issue of "L-Lysine" which is an ingredient in the TAHU 2333935 consignment has been adequately looked into by the Sri Lankan authorities, and no discrepancy found with the same. 9.4 Free Trade Agreements are articles of faith between the Contracting Countries. The provisions and conditionalities governing such free trade agreements are clearly laid down therein. The basic philosophy underlining such trade agreements is trust and cooperation between the contracting countries, in an attempt to remove the trade barriers and strengthen harmonious trade of goods and services with each other. All such Free Trade Agreements including the ISFTA between India and Sri Lanka, have provisions for consultation in case when there is any doubt that Rules of Origin may have been circumvented. 9.5 Surely, there has been more than enough consultations between DRI and the Sri Lankan authorities in this case. Each of the doubts and allegations emanating from trade circumventions have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri Lankan Customs at the time of import of non-originating goods from China cannot be put to question here in India, proceeded to consider certain reports given by Sri Lankan Customs with reference to classification of one of the non-originating inputs. The classification of such input is not in the domain of the assessing officer in India. No opinion or conclusion can be formed based on the assessment, if any, carried out by Sri Lankan Customs. Denial of concession even when valid certificates of origin were submitted (and reiterated) is not legally tenable." 9.8 We also note that the case law of Surya Light Vs CC Bangalore (supra) relied upon by Ld. A.R concerned facts wherein the original invoice was replaced with fake invoice which was fabricated to show that origin of goods was Sri Lanka. Quite obviously, the said case law will be of no use to Revenue. 10. In the result, we hold that since all the remaining COOs have been recertified and found as being in order by the Sri Lankan authorities and also in view of the discussions herein above, the impugned order rejecting the impugned COOs, denying the benefit of exemption under Notification No.26/2000-Cus. in respect of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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