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TMI Blog2023 (12) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... governance of the country and that in interpretation of the fundamental rights, and in constitutional interpretation in any area, the Directive Principles become an aid to play their role, however, for noncompliance of any of the Directives in Part IV, a citizen cannot seek remedy through courts. The Court also cannot compel the State to implement the Directives. Looking to the language of Article 24 juxtaposed with the aspects of the present dispute and the controversy about the contents of RVC in the Country of Origin Certificate, it is debatable and doubtful whether the provisions of Article 24 would apply. What the Article contemplates is that a dispute concerning origin determination, classification of products or other related matters, the Government authorities of the exporting and importing parties may consult each other. In the present case, the origin of goods to be of Malaysia is not in dispute - Nor the dispute relates to classification of products or other related matters. However, the contention of the petitioner that Article 24 mechanism should have been resorted to by the respondents may be dealt with irrespective of and independent of the above aspect and consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and override. This Court is exercising jurisdiction under Article 226 of the Constitution. In that view, the finding of facts stands binding. Even otherwise, having regard to the cogent nature of the findings, they do not warrant any interference by the Court. The action initiated and the impugned order passed needs to be upheld. The Order-in-Original dated 29.05.2020 challenged in Special Civil Application No. 14028 of 2020 and in Special Civil Application No. 13365 of 2020, as also Order-in-Original dated 24.06.2020 impugned in Special Civil Application No. 14937 of 2020 passed by Additional Commissioner, Customs House, Kandla and by Assistant Commissioner, Customs House, Mundra, respectively could not be said to be without jurisdiction - application dismissed. - HONOURABLE MR. JUSTICE N.V. ANJARIA AND HONOURABLE MR. JUSTICE BHARGAV D. KARIA Appearance: For the Petitioner(S) No. 1 : Mr Mihir Joshi, Sr. Advocate With Mr Hardik P Modh (5344) For the Respondent(S) No. 1 : Mr Devang Vyas(2794) For the Respondent(S) No. 2,3 : Mr Priyank Lodha With Mr Utkarsh R Sharma (6157) CAV JUDGMENT (PER : HONOURABLE MR. JUSTICE N.V. ANJARIA) All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sked to pay the differential customs duty of Rs. 8,52,700/- under Section 28(4) of the Customs Act. The goods valued at Rs. 1,40,31,590/- were held liable to be confiscated. Penalty of equivalent amount of duty under section 114A was imposed. Basic Facts 3. The petitioner of the first captioned petition Trafigura India Pvt. Ltd. having its office at village Mithi Rohar, Gandhidham-Kutch, is engaged in the business of trading in non-ferrous metals. The goods-Tin Ingots were imported by this petitioner filing two warehouse Bills of Entry No. 2144316 dated 05.08.2015 and No. 2499949 dated 07.09.2015. The goods were imported from overseas supplier M/s. Trafigura PTE Ltd, Singapore, Malaysia. The goods were manufactured by M/s. Malaysia Smelting Corporation. It was declared in the Bills of Entry that the Country of Origin of the goods was Malaysia. The Country Origin Certificate was produced and under Notification No. 46/2011, Concessional Basic Customs Duty (0%) was claimed. 3.1 In both the Bills of Entry, this petitioner of first petition claimed concessional duty and paid total Rs. 90,10,875/-. As stated in the impugned order, it was based on the duty structure of Basic C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng them to show cause as to why the duty and penalty etc., should not be recovered from the petitioners as the exemption was wrongly availed. The Trafigura was the importer whereas M/s. Lykos India and other noticees were the the ex-bond holders who purchased the goods-Tin Ingots imported by M/s. Trafigura when they were kept in the warehouse, availing the duty exemption. In other two cases, show-cause notices dated 21.05.2019 and 29.05.2019 were issued. All the notices culminated into the impugned orders. 3.1.6 The goods-Tin Ingots were purchased by the petitioners from Malaysia, which were manufactured by M/s. Malaysia Smelting Corporation (MSC). In respect of the goods in question, which were of Malaysian origin, the Country of Origin Certificate (COO) was required to be produced. The duty exemption was availed by the petitioners by producing the COO wherein the Regional Value Content (RVC) was misstated and misrepresented. The RVC of the goods was prescribed to be above 35% as per the condition, however, in actuality the RVC was much less than 35%, and found to have been calculated in fraudulent and misrepresented basis to project the goods accordingly. 3.2 The proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the exporting country to support the claim that the product or goods in question shall be accepted as eligible for the preferential treatment. 3.3.3 In all present four cases, the respective petitioners had imported the Tin Ingots (CTH 8001 1090) or had purchased from the importer, while in warehouse or in high sea sale basis, as the case may be, from foreign supplier Trafigura Pte Ltd., Singapore. The goods were manufactured by the Malaysia Smelting Corporation ('MSC' as abbreviated). By presenting Bills of Entry for warehousing in the case of first petitioner and the ex-bond Bill of Entries in rest of the cases, the petitioners produced the Origin Certificate to obtain the customs duty benefit under Notification No. 46/2011 projecting that the goods satisfied the condition of Malaysian origin requirement of RVC content. 3.3.4 The requisite RVC has to be above 35%, whereas the goods imported by the petitioners and for which the duty benefit was availed and earned, had the RVC less than 35% in each cases. As per respondents' case, it was by wrong, fraudulent and misrepresented presentation of RVC, the petitioners showed higher RVC contents. For instance, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to observe that the issue raised by the appellant(s) regarding the efficacy of Article 24 of the Appendix D to the Treaty cannot be adjudicated by the competent authority. That issue needs to be addressed by the High Court in the Writ Petition (s) filed by the concerned appellant (s). 8. In this view of the matter, we set aside the impugned judgment and order and relegate the parties before the High Court by restoring the concerned writ petition (s) to their original number(s), to be decided on their own merits in accordance with the law. All questions are left open. 9. The appeal (s) and pending application (s) are accordingly disposed of. No costs. 3.4.4 In light of the observations of the Supreme Court as above, the issue regarding competence of the Customs authorities to proceed under the Customs Act in light of Article 24 of the Appendix D to the Treaty AIFTA dated 30.08.2009 is required to be examined. The Article 24 is reproduced hereinafter. AIFTA Determination of Origin Rules, 2009 3.5 The AIFTA Agreement aims at fostering and promoting economic cooperation between the member countries and has the object also of establishing the ASEAN-India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 25 of the Customs Act is about power to grant exemption from duty. It is provided that if the Central Government is satisfied that it is necessary in public interest so to do, it may by Notification in the official gazette, exempt generally either absolutely or subject to such conditions to be fulfilled before or after clearance as may be specified, the goods of any specified description, from the whole or any part of the duty or customs leviable thereon. The further provisions in sub-sections deal with the form and method in relation to rate and duty, continuation of exemption etc. Eye-view of AIFTA Provisions 3.7 Generally stated, the preferential tariff treatment agreed to be given by India in view of the AIFTA is subject to these conditions-firstly, the goods must fall within a description of goods eligible for the concession in the country of import destination. Secondly, the goods must comply with the consignment condition in accordance with relevant Rule of Rules of Origin. And thirdly, the goods must comply with the origin criteria as prescribed. 3.7.1 Surveying the relevant provisions and procedural contemplation of AIFTA, its preamble states inter alia that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 Accessories, Spare Parts, tools and instructional or other information material 10 10 Indirect materials 11 11 Identical and interchangeable materials 12 12 Certificate of Origin 13 13 Review and Modification 14 -- 3.7.4 Similarly, the Annexure-III Operational Procedure of AIFTA and the procedure envisaged under 2009 Rules is as per following tabular detail, Titles of the Rules Number under operational certification procedure for the Rules of Origin under AIFTA Number under operational certification procedure prescribed under DOGPTA Rules Authorities 1 1 Applications 4 4 Pre-exportation examination 6 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (b) products not wholly produced or obtained in the exporting party provided that the said products are eligible under rule 5 or 6. 3.8.1 Rule 4 is about Wholly produced or obtained products. Rule 5, which is again relevant, deals with Not wholly produced or obtained products, Rule 5. Not wholly produced or obtained products.- (1) For the purpose of clause (b) of rule 3, a product shall be deemed to be originating, if - (i) the AIFTA content is not less than 35 percent. of the FOB value; and (ii) the non-originating materials have under gone at least a change in tariff subheading (CTSH) level i.e. at six digit of the Harmonized System: Provided that the final process of the manufacture is performed within the territory of the exporting party. (2) For the purpose of clause (i) of sub-rule (1), the formula for calculating the 35 per cent. AIFTA content is as follows: (i) Direct Method AIFTA Material Cost + Direct Labour Cost + Direct Overhead Cost + Other Cost + Profit _____________________________________________________ x 100 % 35% 35% FOB Price (ii) Indirect Method Value of Imported Non-AIFTA Value of Und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificate of Origin are duly completed and signed by the authorised signatory; (ii) the origin of the product is inconformity with the Rules. (iii) other statements of the AIFTA Certificate of Origin correspond to supporting documentary evidence submitted; and (iv) description, quantity and weight of goods, marks and numbers on packages, and number and type of packages, as specified, conform to the products to be exported. (b) Multiple items declared on a single invoice and single AIFTA Certificate of Origin shall be allowed, provided that each item qualifies separately in its own right. 3.8.7 Similarly, paragraph 7 deals with issuance of AIFTA Certificate of Origin, which is also reproduced, 7. Issuance Of AIFTA Certificate Of Origin (a) The AIFTA Certificate of Origin shall bein International Organisation for Standardisation (ISO) A4 size, and white paper in conformity with the specimen as in the Attachment to these Operational Certification Procedures. It shall be made in English. The AIFTA Certificate of Origin shall comprise one (1) original and three (3) copies. Each AIFTA Certificate of Origin shall bear a reference number as given separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable doubt as to the authenticity of the document or as to the accuracy of the information regarding the true origin of the good in question or of certain parts thereof. The Issuing Authority shall conduct a retroactive check on the producer/exporter s cost statement based on the current cost and prices within a six-months time frame prior to the date of exportation subject to the following procedures: (i) the request for a retroactive check shall be accompanied by the AIFTA Certificate of Origin concerned and specify the reasons and any additional information suggesting that the particulars given in the said AIFTA Certificate of Origin may be inaccurate, unless the retroactive check is requested on a random basis; (ii) the Issuing Authority shall respond to the request promptly and reply within three months after receipt of the request for retroactive check; (iii) In case of reasonable doubt as to the authenticity or accuracy of the document, the Customs Authority of the importing party may suspend provision of preferential tariff treatment while awaiting the result of verification. However, it may release the goods to the importer subject to any administrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial tariff treatment to the goods referred to in the said AIFTA Certificate of Origin that would have been subject to the verification visit; and (v) the Issuing Authority receiving the notification may postpone the proposed verification visit and notify the importing party of such intention within fifteen days from the date of receipt of the notification. Notwithstanding any postponement, any verification visit shall be carried out within sixty days from the date of such receipt, or for such longer period as the parties may agree. (b) The importing party conducting the verification visit shall provide the producer/exporter whose goods are subject to the verification and the relevant Issuing Authority with a written determination of whether that goods qualify as originating goods. (c) The determination of whether the goods qualify as originating goods shall be notified to the producer/exporter, and the relevant Issuing Authority. Any suspended preferential tariff treatment shall be reinstated upon a determination that the goods qualify as originating goods. (d) If the goods are determined to be non-originating, the producer/exporter shall be given thirty days fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine the value addition and in order to ascertain the originating criteria for Tin Ingots exported. This exercise was undertaken in terms of paragraph 17 of Annexure III of the Rules of Origin read with paragraph 10 of Annexure III of the India Malaysia Preferential Trade Agreement Rules. 3.9.2 It was revealed pursuant to the DRI investigation that for calculating the Free on Board (FoB) and the RVC, period of three months of year 2013 was taken as a base and on the basis of such cost sheet, the RVC was indicated for the goods which was never accurate, much less satisfied the requisite criteria under the Rules of Origin. It was found by the authorities that the Malaysian Smelting Corporation had adopted this method as usual practice since long. On the basis of such methodology, it was observed in the show-cause notice, the RVC for qualifying the origin criteria in Form AI (COO) was claimed in the range above 70%, which was extraordinarily higher. 3.9.3 It was also observed that there was another model of operation wherein the Tin Ingots were exported by the Malaysian Smelting Corporation to the Indian importers after getting the goods manufactured on job work or works contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed the benefit on the basis of Origin Certificate, which was fraudulent and that the petitioners were guilty of suppression of material fact to be liable to be subjected to the proceedings under section 28 (4) of the Customs Act. As per the impugned order, as stated, the competent authority confirmed the duty demand and also proceeded to impose the penalty. 3.9.7 The following two issues were addressed by the adjudicating customs authority, while passing the impugned orders, (a) Whether the Importer and Ex-bonders have wrongly availed the benefit of exemption Notification No. 46/2011-Cus dated 01.06.2011 on the basis of fraudulently obtained Country of Origin certificate by the supplier namely MSC, Malaysia by submitting incorrect declaration while presenting the bills of entry under Section 46(4) of the Customs Act, 1962, if so, whether differential duty is to be recovered with appropriate interest under Section 28(4) and 28AA ibid and the subject goods are liable to confiscation under Section 111(0) ibid and they have rendered themselves liable to penal action under Section 112(a), 114A and 114AA of the Customs Act, 1962. (b) Whether non-observance of provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OB of the exported Tin ingots as per the originating criteria mandated under the Rules of Origin of AIFTA. 3.9.10 The findings recorded as above are the findings of fact. As stated, the Directorate of Revenue Intelligence investigated and having regard to the material collected, the factual conclusions were drawn. Case and Submissions of the Petitioners 4. It is the case and the contention of the petitioners in alia that the proceedings initiated by the respondent customs authorities and the orders consequently passed are without jurisdiction. The petitioners have stated that the only premise on which the proceedings were sought to be initiated was that the exporter provided incorrect information in respect of the Certificate of Origin. The dispute with regard to the determination of origin of product, RVC determination, etc., were required to be resolved in the manner provided under Article 24 of the AIFTA, which was a dispute settlement resolution mechanism in the said international agreement. It is the case that once the said procedure is not followed, the entire proceedings stand bad in law. 4.1 It is the further case that while the Government of India has quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all or cancel preferential tariff concession once it is granted. The customs authority may at the best suspend the provision for preferential tariff in terms of Article 16(a)(iii) of the Rules of Origin, 2009. (ii) Paragraph 16(a)(iii) would apply when the process of verification is undertaken. (iii) The certificate of Country of Origin given by the exporting State or issuing authority could not have been rejected by the Customs authority. The Certificate is not cancelled by the issuing authority. (iv) The preferential tariff treatment granted to the importer cannot therefore be unilaterally withdrawn by the importing authority or customs authority. (v) The COOs are valid and subsisting even today. The respondents cannot question the correctness thereof unless the issuing authority confirms the determination of the importing party and consequentially withdraws the COOs. (vi) Process of retroactive check provided under Article 16 cannot be treated as retrospective invalidation of the preferential treatment granted to the importer. (vii) Rules of Origin merely empowers customs authorities of the importing party to perform a retroactive check to ascertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEAN-India DSM Agreement. On this score, the following submissions were advanced, (a) AIFTA is a complete code in itself and in case of any dispute with regard to origin determination, classification or other related matters, Appendix D - Article 24 of the AIFTA provides that the governmental authorities in the importing and exporting parties shall consult each other for resolving the dispute and in case no solution is reached through consultations, the parties to AIFTA may invoke Dispute Settlement procedures under the ASEAN India DSM Agreement. (b) AIFTA does not give a primacy to the finding or conclusion of either nation, that is, exporting party or importing party and instead provides for a procedure for mutual consultation and arbitration under Article 24. AIFTA also doesn't give primacy of the decision taken either by the exporting party or importing party about the validity of the certificate. (c) AIFTA does not stipulate that in case of conflict, whose view or determination will prevail, rather, prescribes a specific procedure of mutual consultation and arbitration under Article 24 of the agreement read with DSM Agreement. (d) The customs department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achieved by the international treaty is a uniform international code of law which is to be applied by the courts of all the signatory nations in a manner that leads to the same result in all the signatory nations. (para 24) 4.2.4 Next relied on was decision also of the Apex Court in Entertainment Network (India) Limited and Anr. vs. Super Cassettee Industries Ltd. and Ors. [(2008) 13 SCC 30]. The Supreme Court while dealing with the application of international conventions in India, observed that while interpreting the municipal laws, conventions and norms can be relied for the following purposes, In interpreting the domestic/municipal laws, this Court has extensively made use of International law inter alia for the following purposes: (i) As a means of interpretation; (ii) Justification or fortification of a stance taken; (iii) To fulfill spirit of international obligation which India has entered into, when they are not in conflict with the existing domestic law; (iv) To reflect international changes and reflect the wider civilization; (v) To provide a relief contained in a covenant, but not in a national law; (vi) To fill gap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was played by the petitioner-importers in issuance of the COO by MITI to allege any foul play against the petitioners. Stand of Respondents 4.3 On behalf of the respondents, detailed affidavit-in-reply was filed to contest the petition, oppose the prayers and answer the various contentions raised. It was stated that the show-cause notice was issued for denial of exemption benefit under Notification No. 46/2011 after necessary verification and investigation done by the Directorate of Revenue Intelligence regarding authenticity of Certificate of Origin, which was done as per the procedure provided under Rules of Origin. It was stated that in the instant cases, the petitioners failed to provide correct Country of Origin Certificate(COO) issued on the basis correct and authentic information and supporting documents by the supplier-exporter as per the provisions under the Rules of Origin. It was contended that the goods could not have been availed the benefit of exemption under the said notification to earn the concessional basic customs duty. 4.3.1 It was contended that as revealed, the importer had imported the goods through the manufacturer Malaysian Smepting corporation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed advocate Mr. Utkarsh Sharma for the respective respondents submitted, (i) There is no conflict between the Articles of AIFTA and the Rules of Origin and Customs Tariff (DOGPTA between ASEAN India) Rules, 2009. (ii) The Articles of Agreement and provisions stand in harmony with other. The Articles of Agreement AIFTA speak about operation and implementation of provisions of Customs Act, 1962. (iii) The Customs authority is referred in several articles. The powers of the Customs authorities are accepted in the treaty provisions. (iv) None of the Articles or clauses of the Agreement or Rules of Origin have been breached. The Malaysian authorities have endorsed to the non-compliance of Rule 4 of Rules of Origin in respect of the requirement of requirement of 35% AIFTA contain calculation by the exporters. (v) The minimum requirement of 35% Regional Value Content was a pre-condition for availing the benefit of differential tariff under the Agreement. The said pre-condition was not satisfied therefore importers were not entitled to differential tariff treatment on such import. (vi)The Malaysian authorities did not cooperate at the stage when the Customs a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect over procedural aspect of Rules of Origin. International versus State Laws 5. In order to appreciate the dimensions of the above questions and so as to address them resolution bound, it is quite necessary to examine the legal principles in respect of applying and implementing the international law within the State or particular country. It is pertinent to discuss for the purpose, the interrelationship between the international law provisions and municipal laws-more appropriately described as State laws. 5.1 International laws may find their exposition in form of customary international law, international Conventions or the international treaty provisions. International treaties are the pacts entered into by two or more nations out of politically inclined union or to develop and foster international political relations. 5.2 In the present controversy, the issue is about applicability of international treaty provision visa-vis the State law, although it could be safely said that whether it is customary international law, convention or treaty, the principles regarding their applicability and efficacy vis-a-vis the State law would be parallel and same. 5.3 In U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of International Justice, be altered by the express or implied terms of the treaty, in which case its provisions become self-executory. Otherwise, if treaties contain provisions with regard to rights and duties of the subjects of the contracting States, their Courts, officials, and the like, these States must take steps as are necessary according to their Municipal Law, to make these provisions binding upon their subjects, Courts, officials, and the like. 5.6 In order to implement the stipulations in any treaty, enactment of municipal or State law is necessary. International treaty provisions find their implementative efficacy in the member State or country through the laws enacted by the Sovereign legislature of such State. Theories on Relationship 6. A brief discourse on the theories governing the relationship of international law and municipal law, would provide a preface. This relationship is always a complex question, more particularly when the question arises for implementing the international law in particular state or country to regulate the rights and obligations of the citizens of the State. 6.1 One is the monistic theory, pronounced by German Scholar Mose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relationship between the two States. In terms of principle also, the two theories differ as the State law has legal sanctity whereas the international law obligations are guided by international political relations and co-operative bond between the member countries. 6.7 The monistic theory preaches and follows the principle of incorporation. It treats the international law principles to have been incorporated as State laws to operate effective within the State. The dualistic theory embraces the doctrine of transformation. In order to apply any or all international laws within the State, they must be transformed and converted into State laws enacted by the sovereign law making body. Transformation Into State Laws 7. The two theories also explain the difference between the doctrine of incorporation and the doctrine of transformation in the context of the implementation of the international law provisions and rules. The difference is that the process of incorporation is to adopt the international law principles into the municipal law just because it is international law. The international law in other words becomes automatically applicable within the sphere of municipa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... octrine of transformation known to dualistic approach. Constitutional Framework 8. In India, though the general principle is accepted that the implementation of the international law provisions shall be harmonised through transformation into the State laws, the final mechanism defining Indian law relationship with international law provisions, in the present case the treaty provisions, is the Constitutional framework envisaged under the Constitution. 8.1 Since advent of our sovereign Constitution, Indian practice with regard to relationship of international law and Indian law is governed and guided by Constitutional provisions. Article 51 in Part IV of the Constitution, under the head Directive Principles of State Policy inter alia provides that the States shall endeavour to (a) promote international peace and security, (b) maintain just and honourable relations between nations; (c) foster respect for international law and treaty obligations in the dealings of organised people with one another and (d) encourage settlement of international disputes by arbitration. 8.2 It is well settled that the Directive Principle provisions of Part IV of the Constitution are not en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vested in the President and shall be exercised by him either directly or through officers subordinate to him in accordance with this Constitution. 8.7 Under Article 73 of the Constitution, the Executive power of the Union shall extend to the maters with respect to which the Parliament has powers to make laws. Thus, the Constitution contemplates enactment of law by the Parliament to regulate the executive power of entering into treaties and their implementation. As already noticed, treaty remains in the realm international political, and the implementation of provisions of treaty would be a legal exercise to be finally undertaken through domestic laws and rules enacted by the law making bodies of the country and then enforced by the Courts of law as arbiters of all laws. 8.8 In Agricas LLP (supra), the Supreme Court stated that law of India vis-a-vis implementation of treaty provisions and the international law are not very different from other Commonwealth countries. The constitutional scheme in this regard highlighted above was delineated by the Apex Court in following words, Article 73 of the Constitution delineates the extent of executive power of the Union which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that cessation of the territory could take place without Constitutional amendment. In that case, the decision of the Supreme Court was on the basis of noticing the distinction between the formation of treaty on one hand and performance of treaty obligations on the other hand. 9.2 The Supreme Court observed, The first is an executive act and the second a legal act if domestic law is required. Unless the Parliament assents to the treaty and accords its approval to the first executive act, the performance has no force of law though the treaties created by the executive action bind the contracting States and, therefore, means must be found for their implementation within law. Consequently, whenever a peace treaty involves municipal execution, statutes have to be passed. While accepting the contention that precedents of this Court are clear that no cession of Indian territory can take place without constitutional amendment, the Constitution Bench held that the settlement of a boundary dispute cannot be held to be cession of territory. Accordingly, the decision to implement the award by exchange of letters treating the award as an operating treaty by demarcating the correct bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted in terms of and in order to implement the treaty, private individual rights are not readily affected by virtue of existence of international treaty. The international treaties are of international character and its periphery is international-political relations between the party States. When the provisions of such treaty become law of the land of the member country concerned, then only they affect, regulate and govern the rights of the subjects, to find teeth for implementation and enforceability. 10.1 English decision in Maclaine Watson Co. Ltd. v. Department of Trade and Industry Anr. [(1989) 3 All ER 523], was narrated by the Supreme Court in Agricas LLP (supra), observing that making of treaty itself does not alter the law nor has any effect of changing or modulating rights of the individuals. ...as a matter of the constitutional law of the United Kingdom, the royal prerogative, whilst it embraces the making of treaties, does not extend to altering the law or conferring rights on individuals or depriving individuals of rights which they enjoy in domestic law without the intervention of Parliament. Treaties, as it is sometimes expressed, are not self-execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power of the Union extends to the matters with respect to which the Parliament has power to make laws. Our Constitution makes no provision making legislation a condition of the entry into an international treaty in times either of war or peace. The executive power of the Union is vested in the President and is exercisable in accordance with the Constitution. The Executive is qua the State competent to represent the State in all matters international and may by agreement, convention or treaties incur obligations which in international law are binding upon the State. But the obligations arising under the agreement or treaties are not by their own force binding upon Indian nationals. The power to legislate in respect of treaties lies with the Parliament under Entries 10 and 14 of List I of the Seventh Schedule. But making of law under that authority is necessary when the treaty or agreement operates to restrict the rights of citizens or others or modifies the laws of the State. If the rights of the citizens or others which are justiciable are not affected, no legislative measure is needed to give effect to the agreement or treaty. (para 80) Sovereign Will and Treaty Provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vis-a-vis State law is that when there is an omission of international law rule or treaty provision in the State law, it is provided in the State law only would prevail to become implementable. 12.1 The Supreme Court in Gramophone Company of India Ltd. vs. Birendra Bahadur Pandey [1982 (2) SCC 534] unequivocally observed that when the conflict between the international law and State law is inevitable, the international provision must submit to State law, There can be no question that nations must march with the international community and the Municipal law must respect rules of International law even as nations respect international opinion. The comity of Nations requires that Rules of International law may be accommodated in the Municipal Law even without express legislative sanction provided they do not run into conflict with Acts of Parliament. But when they do run into such conflict, the sovereignty and the integrity of the Republic and the supremacy of the constituted legislatures in making the laws may not be subjected to external rules except to the extent legitimately accepted by the constituted legislatures themselves. The doctrine of incorporation also recogn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of arrest and detention in civil prison of judgment debtor unable to satisfy the decree, which provision was found to be violative of the Article 11 of the International Covenant on civil and political rights which banned the imprisonment merely for not discharging the decree debt. 13.1 While dealing with the question of effect of said international provision and the enforcibility thereof at the instance of individuals within the State- this country, the Supreme Court stated, The positive commitment of the States parties ignites legislative action at home but does not automatically make the covenant an enforceable part of corpus juris of India. 13.2 The above proposition of law was enunciated bythe Supreme Court after quoting with approval, the observations of the Kerala High Court in Xavier Vs. Canara Bank Limited [(1969) KER LT 927], which dealt with the very Article 11, and stated in para 10, ...... The remedy for breaches of International law in general is not to be found in the law courts of the State because International Law per se or proprio vigore has not the force or authority of civil law, till under its inspirational impact actual legislation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Boycott and Cookwere amongst the sportsmen blacklisted by the United Nations on account of their participation in sports events in South Africa between 1.12.1980 and 31.3.1981. In view that the Government of India was one of the member countries of Gleaneagles Accord, it was under obligation not to allow to blacklisted English cricketers who had contact with South Africa. The Government of India allowed the English Cricket Team including those two players to come to the country and play the scheduled matches. The controversy arose as to whether the Government of India should allow the said cricket players despite their links with South Africa, in view of the obligation arising under the said international Gleaneagles Accord. 13.7 Referring to Article 51 Part IV of the Constitution, it was observed by the Karnataka High Court in paragraph 10 said that the same was not enforceable by the court of law, which was only Directive Principle, The provisions in Part-IV of the Constitution contain the directive principles of State policy. The provision in Article 51, occurring in that part, provides, inter alia, that the State shall endeavour to foster respect for inter-national l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligations under the Gleneagles Accord and obligations attached to its membership of United Nations, cannot be enforced at the instance of citizens of this country or associations of such citizens of this country or associations of such citizens, by courts in India, unless such obligations are made part of the law of this country by means of appropriate legislation. 13.8 Similar was held by the Division Bench of Rajasthan High Court in Birma Vs. State of Rajasthan [AIR 1951 Rajasthan 127], the question was whether a treaty with the British Government and the princly State of Dholapur which was not given effect to, by means of a legislative enactment, could be regarded as part of Municipal Law of the then Dholapur State. It was observed that, ....Treaties which are part of the international law do not form part of the law of the land unless expressly made so by the legislative authority. In the present case the treaty remained a treaty only and no action was taken to incorporate it into a law. That treaty cannot, therefore, be regarded as a apart of the Municipal law of the then Dholapur State Role of Courts 14. International law rules or treaty provisions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational law may and does act directly within the State, it is equally clear that as a rule that direct operation of international law is, within the State subject to the overriding authority of municipal law. Courts must apply statutes even if they conflict with international law. The supremacy of international law lasts, pro foro interno, only so long as the State does not expressly and unequivocally derogate from it. When it thus prescribes a departure from international law, conventional or customary, judges are confronted with a conflict of international law and municipal law and, being organs appointed by the State, they are compelled to apply the latter . 14.5 Decision of Calcutta High Court in Shri Krishna Sharma vs. The State of West Bengal Ors. [AIR 1954 Cal. 591] deserves to be referred to. The Division Bench of Calcutta High Court was concerned with applying the provisions of Anglo-Tibetian Trade Regulations of 1914 regarding free export to Tibet out of India. It was one of the contentions on behalf of the State of West Bengal by the Advocate General, inter alia that assuming that under the 1914 Regulation, unfettered export of goods was permitted, the subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced in paragraph 3.7.6 above. Looking to the language of Article 24 juxtaposed with the aspects of the present dispute and the controversy about the contents of RVC in the Country of Origin Certificate, it is debatable and doubtful whether the provisions of Article 24 would apply. What the Article contemplates is that a dispute concerning origin determination, classification of products or other related matters, the Government authorities of the exporting and importing parties may consult each other. In the present case, the origin of goods to be of Malaysia is not in dispute. As stated above, it is the core aspect of misrepresented and fraudulent RVC content. Nor the dispute relates to classification of products or other related matters. However, the contention of the petitioner that Article 24 mechanism should have been resorted to by the respondents may be dealt with irrespective of and independent of the above aspect and consideration. 15.1 Though part of international treaty, AIFTA Article 24 remains at that stage and status. It is not transformed into or converted into State law. While DOGPTA Rules, 2009 have been framed by competent exercise of powers by the Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuant to the treaty to be in uniformity with the treaty provisions and their intent. However, the situation is entirely different where a particular treaty provision is not recognised and is not made part of law of the land by the sovereign legislation. A provision in the treaty not translated into municipal or State law will have no efficacy for invocation, implementation and enforceability. Rights and obligations on such basis could not be pleaded and enforced before the Court. 15.7 In Entertainment Network (India) Limited (supra), the Supreme Court when observed that in interpreting the municipal laws, the international norms can be relied on for the purpose including to fill up the gaps in law, the Supreme Court speaks of gaps to be filled up in the interpretational process only. The Court cannot apply treaty provision not forming part of the State law and fill the gap. Filling of the gap is not to be perceived in this way which otherwise would be contrary to the basic principle that without competent legislation at the sovereign State level, the treaty provision cannot be enforced. 15.8 The gaps to be filled in in the working of international law provision vis-a-vis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is granted where proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty. In Union of India vs. Jain Shudh Vanaspati [AIR 1992 SC 572], it is held that as the goods are cleared under section 47 of the Customs Act, the order of authority clearing the goods can be disturbed, where it is a case of fraud or suppression. 16.2 The suppression of facts is evident from the findings recorded by the Director of Revenue Intelligence which provided the basis for the Customs authorities to act and exercise the powers, was in respect of contents of wrongfully showing of RVC of the goods. The details for arriving at RVC was misleading and there was suppression of due and correct facts. Due to suppression noticed and found as per the facts already recorded hereinabove, the petitioners became disentitled to the concessional rate of duty and preferential treatment under Notification No. 46/2011 to become liable to pay basic customs duty on the goods imported. The facts of the instant cases could attract the provisions of section 28 (4) and attendant provisions. Due to wrongful availment of the concession in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 140 be deemed to be conclusive as to the matters stated therein; or (ii) that the duty with interest and penalty that has been paid falls short of the amount actually payable, then, the proper officer shall proceed to issue the notice as provided for in clause(a) of sub-section(1) in respect of such amount which falls short of the amount actually payable in the manner specified under that subsection and the period of two years shall be computed from the date of receipt of information under sub-section(5). (7) In computing the period of two years referred to in clause(a) of sub-section(1) or five years referred to in sub-section(4), the period during which there was any stay by an order of a court or tribunal in respect of payment of such duty or interest shall be excluded. (7A) Save as otherwise provided in clause(a) of sub-section (1) or in sub-section (4), the proper officer may issue a supplementary notice under such circumstances and in such manner as may be prescribed, and the provisions of this section shall apply to such supplementary notice as if it was issued under the said subsection(1) or sub-section(4). (8) The proper officer shall, after allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the action of recovery under Section 28 will be in respect of duties not levied or not paid or short levied or short paid or erroneously refunded. The consideration of (a) collusion or (b) any willful misstatement or (c) suppression of facts, are mentioned in Sub section (4) to be the grounds where the notice for recovery is issued invoking the extended period of limitation. What is noticeable is that collusion can be the ground to resort to Sub section (4). furthermore, and importantly the word willful does not precede the reason of suppression of facts mentioned in Sub clause (c). In order to invoke Sub section (4) on the ground of suppression of facts, element of willfulness can be said to have been done away with. Suppression of facts simplicitor can be a ground here. 16.7 The suppression of fact is clearly attributed to the petitioners inasmuch as what was required to be disclosed and proof of contents of the Bills of Entry was to be subscribed in form of declaration under Section 46 of the Act. The petitioners had been in regular course of business of import and acted in such course. They were aware about RVC details which was wrongful and suppressive. The import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of facts. The suppression can take form of suggesting wrong facts and to obtain some advantage, which may not be available upon the disclosure of correct and genuine facts. Suppression may manifest itself in misrepresentation also. In the present case, the misrepresentation became suppression, as the exemption benefit or preferential duty benefit was obtained by putting forth wrong facts, which did not constitute eligibility to earn the exemption from the Basic Customs Duty. By suggesting wrong details and by subscribing untruth, essential conditions regarding RVC was not fulfilled. It partook suppression in eye of law and within the meaning of sub-section(4) of Section 28. 17.1 Even if the exemption notification may be construed liberally to extend the benefit thereunder, the eligibility criteria contemplated thereunder has to be strictly construed. This was stated in Commissioner of Customs (imports) Mumbai Vs. Tullow India Operations Limited [2005 (189) ELT 401 SC]. The principles as regard construction of an exemption notification are no longer res integra; whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefor the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this petitions are so founded. This Court is exercising jurisdiction under Article 226 of the Constitution. In that view, the finding of facts stands binding. Even otherwise, having regard to the cogent nature of the findings, they do not warrant any interference by the Court. The action initiated and the impugned order passed needs to be upheld. Summarization 18. In light of all forgoing discussion and delineation, the following propositions could be deduced. (i) Making of international treaty is an executive act by the member countries. Accordingly, the entering into AIFTA was an executive exercise by India. (ii) The rules of international law including the provisions of treaty are not implementable or enforceable per se in the member States. The international law rules have to be transformed into State laws to make them implementable within the State and to make them govern the rights and obligations of the subjects and citizens of the State. (iii) It is the sovereign legislature of the State which would enact the State laws or municipal laws pursuant to the treaty provisions to be applied in the country. The Government of India has enacted Customs Tariff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantive law which were the applicable statutory customs provisions under the Customs Act. (xiv) Non-compliance of the time limit for investigatory action under the Operational Procedures would not render the action taken under substantive law, for, the procedural aspects stand subordinate to substantive provisions. 19. In light of aforesaid discussion and reasons, it has to be held that Order-in-Original dated 29.05.2020 challenged in Special Civil Application No. 14028 of 2020 and in Special Civil Application No. 13365 of 2020, as also Order-in-Original dated 24.06.2020 impugned in Special Civil Application No. 14937 of 2020 passed by Additional Commissioner, Customs House, Kandla and by Assistant Commissioner, Customs House, Mundra, respectively could not be said to be without jurisdiction. They are passed pursuant to competent invocation and upon valid exercise of powers under section 28(4) of the Customs Act, 1962. This exercise of powers has to be held to be an exercise in and under the sovereign law of the land. 20. Accordingly, Special Civil Application No. 14028, 13365 and 14937 are liable to be dismissed. Accordingly, all the three petitions are dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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