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TMI Blog2024 (9) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... have been advised to assess the Bill of Entry under a PD Bond and the furnishing of a Bank Guarantee. The impugned orders woefully fail to record any reason which may be reflective of consideration having been accorded to the various factors which would be relevant to an exercise of verification being initiated, for a COO certificate being doubted or the action being necessitated under any provision of the Act, CEPA Rules or CAROTAR. The respondents did not even dispute the assertion of the writ petitioners that such a verification exercise can, in fact, be initiated and completed by way of an online verification process and in real-time. If those certificates were to be loosely brushed aside, it would shake the very edifice of a Trade Agreement and be contrary to the reciprocal arrangement agreed upon by respective States. The stipulation of a Bank Guarantee as security has been applied ostensibly in light of clause 6(b) of Paragraph 3 of the Guidelines. Clause 6(b) of Paragraph 3 would have been attracted provided the proper officer had found it necessary to order a provisional assessment for the purposes of a chemical test, a felt a need for further information being called for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Trade Agreement pending verification or enquiry. It is their contention that the impugned action when tested on those parameters, is rendered wholly illegal and unjust thus warranting the intervention of this Court. For the purposes of examining the challenge which stands raised, we deem it apposite to take note of the following essential facts. 3. The petitioner in W.P.(C) 10943/2024 had imported platinum alloy sheets classifiable under Customs Tariff Heading [CTH] 7110 1900, under 4 Bill of Entries generated between 13 to 16 July 2024. The aforesaid import was sought to be effected on payment of a preferential rate of duty of 5%. A similar importation was made by the petitioner in W.P.(C) 10944/2024 under 10 Bill of Entries submitted between 14 to 19 July 2024 for identical consignments of platinum alloy sheets. The respondents are stated to have raised various queries between 15 to 19 July 2024 and which were duly responded to by the writ petitioners. 4. However, both the writ petitioners were ultimately served the impugned orders dated 31 July 2024 with respect to each Bill of Entry and which reads as under: - THE SIIB HAS CONCLUDED THEIR INVESTIGATION AND HAS ADVISED TO ASSE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to exercise reasonable care. (3) Where the proper officer has reasons to believe that country of origin criteria has not been met, he may require the importer to furnish further information, consistent with the trade agreement, in such manner as may be provided by rules. (4) Where importer fails to provide the requisite information for any reason, the proper officer may, - (i) cause further verification consistent with the trade agreement in such manner as may be provided by rules; (ii) pending verification, temporarily suspend the preferential tariff treatment to such goods : Provided that on the basis of the information furnished by the importer or the information available with him or on the relinquishment of the claim for preferential rate of duty by the importer, the Principal Commissioner of Customs or the Commissioner of Customs may, for reasons to be recorded in writing, disallow the claim for preferential rate of duty, without further verification. (5) Where the preferential rate of duty is suspended under sub-section (4), the proper officer may, on the request of the importer, release the goods subject to furnishing by the importer a security amount equal to the differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... origin criteria, the proper officer may reject the preferential tariff treatment to the imports of identical goods from the same producer or exporter, unless sufficient information is furnished to show that identical goods meet the country of origin criteria. Explanation . For the purposes of this Chapter, - (a) certificate of origin means a certificate issued in accordance with a trade agreement certifying that the goods fulfil the country of origin criteria and other requirements specified in the said agreement; (b) identical goods means goods that are same in all respects with reference to the country of origin criteria under the trade agreement; (c) Issuing Authority means any authority designated for the purposes of issuing certificate of origin under a trade agreement; (d) trade agreement means an agreement for trade in goods between the Government of India and the Government of a foreign country or territory or economic union.] 8. As per Section 28DA of the Act, an importer claiming a preferential rate of duty in terms of a Trade Agreement to which India is a party, is obliged to make a declaration that the goods qualify as originating goods under such an agreement as also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of duty may be denied by the proper officer without verification if the certificate of origin - (a) is incomplete and not in accordance with the format as prescribed by the Rules of Origin; (b) has any alteration not authenticated by the Issuing Authority; (c) is produced after its validity period has expired; or (d) is issued for an item which is not eligible for preferential tariff treatment under the trade agreement; and in all such cases, the certificate shall be marked as INAPPLICABLE . Explanation . Clause (d) of sub-rule (2) includes the cases where goods are not covered in the respective tariff notification or the product specific rule mentioned in the certificate of origin is not applicable to the goods. 10. As is evident from the aforesaid, in order to claim preferential rate of duty under a Trade Agreement, at the time of submission of a Bill of Entry, the importer is not only required to furnish a declaration that the goods qualify as originating goods under that agreement, it must also indicate in the Bill of Entry the respective tariff notification under which a preferential rate of duty is claimed, produce a COO certificate and furnish further details with respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim; or (b) the information and documents furnished by the importer and available on record provide sufficient evidence to prove that goods do not meet the origin criteria prescribed in the respective Rules of Origin. 13. In terms of Rule 6, the proper officer is enabled to undertake a verification of the COO certificate from the concerned verification authority where doubt exists regarding the genuineness or authenticity of the certificate or where it has reason to believe that the COO criteria has not been met. The proper officer is additionally empowered to undertake a verification on a random basis in furtherance of an obligation to exercise due diligence and to verify whether the goods meet the origin criteria. Rule 6 reads as follows:- RULE 6. Verification request. - (1) The proper officer may, during the course of customs clearance or thereafter, request for verification of certificate of origin from Verification Authority where: (a) there is a doubt regarding genuineness or authenticity of the certificate of origin for reasons such as mismatch of signatures or seal when compared with specimens of seals and signatures received from the exporting country in terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orty five days of receipt of the information, or within such extended period as the Principal Commissioner of Customs or the Commissioner of Customs may allow: Provided that where a timeline to finalize verification is prescribed in the respective Rules of Origin, the proper officer; shall finalize the verification within such timeline. (7) The proper officer may deny claim of preferential rate of duty without further verification where : (a) the Verification Authority fails to respond to verification request within prescribed timelines; (b) the Verification Authority does not provide the requested information in the manner as provided in this rule read with the Rules of Origin; or (c) the information and documents furnished by the Verification Authority and available on record provide sufficient evidence to prove that goods do not meet the origin criteria prescribed in the respective Rules of Origin. 14. On 18 February 2022, India and the United Arab Emirates [UAE] entered into a Comprehensive Economic and Partnership Agreement [UAECEPA]. The aforesaid agreement was ratified by the issuance of a notification dated 30 April 2022 providing for reduced and preferential rates of custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Origin. (7) The Certificate of Origin shall be submitted within its validity period. (8) In exceptional circumstances, the Certificate of Origin may be accepted by the Customs Administration in importing Party for the purpose of granting preferential tariff treatment even after the expiry of its validity, provided that the failure to observe the time limit results from force majeure or other valid reasons beyond the control of the exporter and the products have been imported before the expiry of the validity period of the said Certificate of Origin. (9) The Certificate of Origin shall be forwarded by the exporter to the importer and importer shall produce original copy of the Certificate of Origin to the customs authorities. (10) Neither erasures nor superimposition shall be allowed on the Certificate of Origin. Any alterations shall be made by striking out the erroneous material and by making any addition required. Such alteration shall be approved by a person authorised to sign the Certificate of Origin and certified by the appropriate competent authority or by issuing a new Certificate of Origin to replace the erroneous one. Unused spaces shall be crossed out to prevent an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal of Rules 22 and 23 which read as under: - 22. Verification of Certificates of Origin. - (1) For the purpose of determining the authenticity and the correctness of the information given in the Certificate of Origin, the importing Party may conduct verification by means of,- (a) requests for information from the importer; (b) requests for assistance from the competent authority of the exporting Party as provided for in sub-rule (2); (c) written questionnaires to an exporter or a producer in the territory of the other Party through the competent authority of the exporting Party; (d) visits to the premises of an exporter or a producer in the territory of the other Party; or (e) such other procedures as the Parties may agree. (2) For the purposes of clause (b) of sub-rule (1), the competent authority of the importing Party,- (a) may request the competent authority of the exporting Party to assist it in verifying : (i) the authenticity of a certificate of origin; and/or (ii) the accuracy of any information contained in the certificate of origin; and/or (iii) the authenticity and accuracy of the information and documents, including breakup of costs relating to material, labour, othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturer, for such inquiry or documents, as necessary. (5) The competent authority of the exporting Party shall provide the information and documentation requested, within,- (a) fifteen days of the date of receipt of the request, if the request pertains to the authenticity of issue of the Certificate of Origin, including the seal and signatures of the issuing authority; (b) thirty days of the date of receipt of the request, if the request seeks a copy of the relevant document with the minimum required information; or (c) ninety days from the date of receipt of such request, if the request is on the grounds of suspicion of the accuracy of the determination of origin of the product. Such period may be extended through mutual consultation between the Customs Administration of the importing Party and issuing authority of the exporting Party for a period not more than sixty days. (6) If, upon receiving the results of the verification questionnaire pursuant to sub-rules (4) and (5), the competent authority of the importing Party has reasons to believe and therefore deems it necessary to request further investigative actions or information, the competent authority of the importing Party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 reads as under:- 24. Release of Products. - Upon reasonable suspicion regarding the origin of the products, the importing Party may request a guarantee in any of its modalities or may take any action necessary in order to preserve fiscal interests as a pre-condition for the completion of the importation operations, subject to and in accordance with its laws and regulations. 18. Rule 26 enables the Customs Administration of the importing party to deny a claim for preferential tariff treatment or for recovering unpaid duties in the following terms: - 26. Denial of Preferential Treatment. - (1) The Customs Administration of the importing Party may deny the claim for preferential tariff treatment or recover unpaid duties in accordance with its laws and regulations, when,- (a) the Customs Administration of the importing Party determines that the product does not meet the requirements under these rules; (b) it is established that the exporter or producer or manufacturer of the product is failing to maintain records or documentation necessary for determining the origin of the product or is denying access to the records, documentation or visit for verification; (c) the exporter or produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms Tariff Act, 1975 [1975 Act]. Of significance is Note 5 to Chapter 71 which defines a platinum alloy‟ as under: For the purpose of this Chapter, any alloy (including a sintered mixture and an inter-metallic compound) containing precious metal is to be treated as an alloy of precious metal if any one precious metal is to be treated as an alloy of precious metal if any one precious metal constituents as much as 2% by weight, of the alloy. Alloys of precious metal are to be classified according to the following rules: (a) An alloy containing 2% or more, by weight, of platinum is to be treated as an alloy of platinum; (b) An alloy containing 2% or more, by weight, of gold but no platinum, or less than 2% by weight, of platinum, is to be treated as an alloy of gold; (c) Other alloys containing 2% or more, by weight, of silver are to be treated as alloys of silver. 21. Having heard Mr. Gulati, learned senior counsel who appears for the writ petitioners as well as Mr. Singla, learned counsel representing the Customs authorities, we find that the detention of the imported articles, for reasons which we assign hereinafter, is clearly rendered unsustainable on the following counts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the information given in the COO certificate that an exercise of verification is liable to be initiated. 27. In terms of Rule 22(4) of the CEPA Rules, in case the competent authority of the importing party deems it necessary to undertake a process of verification, it is entitled to approach the competent authority of the exporting party specifying whether the verification exercise has been initiated on a random basis or where it doubts the veracity of the information furnished or even in situations where the determination of origin is in doubt. 28. In addition to the aforenoted contingencies, the Customs Administration of the importing Party while initiating a procedure for verification must also specify whether it is required to undertake a verification to rule out forgery, seek minimum required information or verify the determination of origin. None of these circumstances is even remotely alluded to by the respondents while passing the impugned order. They are in fact totally silent with respect to the requisite formation of opinion and which is a sine qua non for the detention of goods or imports under the CAROTAR and CEPA Rules. 29. On a conjoint consideration of Section 28DA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nables the proper officer to seek further information and call for additional documents where it has reason to believe that the origin criteria has not been met. Rule 6 of CAROTAR seeks to statutorily regulate the manner in which a verification request is to be submitted and processed. 33. What we seek to emphasize is that the power to initiate a verification process is neither unbridled nor unfettered. In order to initiate such a process, it is incumbent upon the proper officer to form the requisite opinion in support of a doubt or suspicion that may be harboured in respect of a COO certificate or the origin of the imported articles. It becomes apparent from a reading of those provisions that the detention of the goods or stalling the process of importation and completion of procedures connected therewith, must be preceded by a requisite formation of opinion. 34. Since those provisions speak of reasons to believe and reasonable apprehension that may weigh in the mind of the proper officer, the record itself must reflect the material on the basis of which that formation of opinion rests. In our considered opinion, the foundation of the requisite opinion must be demonstrably apparen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted or the action being necessitated under any provision of the Act, CEPA Rules or CAROTAR. 39. The respondents also do not appear to have initiated any process of reciprocal verification as is envisaged under the CEPA Rules or CAROTAR. The need to verify or enquire must necessarily be preceded by the formation of opinion of a justiciable doubt or suspicion being harboured with respect to the validity of the import and the same in turn resting on any one of the stated contingencies which the statute speaks of. 40. Regard must also be had to the fact that the COO certificate when found to have been issued by the competent authority of the reciprocal State, cannot be lightly ignored or questioned except on the basis of well-substantiated grounds resting on valid, credible and reasonable belief which constrains the authority to initiate a verification exercise. Before us, the respondents did not even dispute the assertion of the writ petitioners that such a verification exercise can, in fact, be initiated and completed by way of an online verification process and in real-time. If those certificates were to be loosely brushed aside, it would shake the very edifice of a Trade Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed provisionally if the importer or the exporter, as the case may be, furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty as may be finally assessed or re-assessed as the case may be, and the duty provisionally assessed.] [(1-A) Where, pursuant to the provisional assessment under sub-section (1), if any document or information is required by the proper officer for final assessment, the importer or exporter, as the case may be, shall submit such document or information within such time, and the proper officer shall finalise the provisional assessment within such time and in such manner, as may be prescribed.] (2) When the duty leviable on such goods is assessed finally [or re-assessed by the proper officer] in accordance with the provisions of this Act, then (a) in the case of goods cleared for home consumption or exportation, the amount paid shall be adjusted against the duty [finally assessed or re-assessed, as the case may be] and if the amount so paid falls short of, or is in excess of, [the duty [finally assessed or re-assessed, as the case may be]], the importer or the exporter of the goods shall pay the def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, the respondent has failed to sustain its action based on any of the grounds which are contemplated under those clauses of Section 18 (1). 45. More importantly, we note that the stipulation of a Bank Guarantee as security has been applied ostensibly in light of clause 6(b) of Paragraph 3 of the Guidelines. Clause 6(b) of Paragraph 3 would have been attracted provided the proper officer had found it necessary to order a provisional assessment for the purposes of a chemical test, a felt a need for further information being called for from the importer or causing further inquiries. Even these situations and conditions which would have justified a demand for a Bank Guarantee are neither spelt out nor are they discernible from the reasons assigned. The respondent has also abjectly failed to bear in consideration clause 5(b) of Paragraph 3 of the Guidelines and which stipulates that where cases are selected on a random basis for verification of origin, there would be no justification for a Bank Guarantee or cash deposit being obtained as security. As we read the orders impugned, it becomes apparent that the condition relating to the submission of a Bank Guarantee has been mechanicall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quately secure the Revenue and ensure uniformity of provisional assessments across all ports. The said circular does not leave the issue of what conditions should be imposed for provisional assessment to the concerned customs officer. It requires the officer to demand 100 per cent bank guarantee even in respect of those bills of entries which have been provisionally assessed under section 18 of the Act. It certainly is contrary to proviso (a) to section 151A inasmuch it dictates to the customs officer in what manner he should complete a provisional assessment. The consequent impugned letter dated January 22, 2016 came to be issued to M/s. J. B. Overseas only on the basis of the said circular. 56. The court, therefore, holds that the impugned circulars dated October 6, 2015 and January 20, 2016 are ultra vires section 151A of the Act and unsustainable in law. 47. While Mr. Singla had also alluded to a perceived abuse of CEPA Rules, specifically Rule 7, and the import of platinum alloys being motivated by an unstated intent to import gold by circumventing the relevant procedural stipulations, we find that it is not their case that the imports effected by the writ petitioners failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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