The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad Bench, has granted substantial relief to an importer of stainless steel products by holding that 37 Country of Origin (COO) certificates submitted for Malaysian imports could not be treated as unauthentic merely because a subsequent verification by Malaysian authorities found other certificates to be invalid.
The bench of P. K. Choudhary (Judicial Member) and K. Anpazhakan (Technical Member) restored the benefit of preferential customs treatment under Notification No. 46/2011-Cus dated June 1, 2011, rejected the Revenue’s enhancement of declared import value, and set aside the penalties imposed on the importer.
The case concerned imports of stainless steel cold-rolled sheets, coils and circles. During the relevant period, imports of the products from China attracted additional customs levies, including countervailing duty and anti-dumping duty, whereas qualifying imports from ASEAN countries could receive preferential treatment under Notification No. 46/2011-Cus, subject to prescribed conditions and rules of origin.
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The importer therefore sourced stainless steel products from suppliers in Malaysia and claimed the preferential rate available under the notification. The suppliers included Opulent Metals SDN BHD, Artfransi International SDN BHD and CEKAP Prima SDN BHD. The import consignments were accompanied by COO certificates stated to have been issued by Malaysia’s Ministry of International Trade and Industry (MITI). According to the record, the consignments were examined and the certificates were considered by Customs before clearance.
The controversy arose after information received from MITI triggered a wider investigation by the Directorate of Revenue Intelligence (DRI). The investigation eventually resulted in a show cause notice dated March 27, 2024, proposing denial of the preferential duty benefit on the ground that certain Malaysian suppliers allegedly did not possess manufacturing facilities at their declared locations and that the COO certificates relied upon by the importer were not genuine.
The department also alleged that the imported goods had been undervalued with an intention to evade customs duty.
A key issue before the Tribunal was the interpretation of MITI’s verification report.
The investigation had reportedly sent 143 COO certificates to MITI for verification. MITI subsequently informed the Indian authorities that 87 of those certificates were not authentic. The Revenue proceeded on the basis that the finding cast doubt on the certificates relied upon for the imports under consideration.
However, the Tribunal undertook a certificate-by-certificate examination of the documents placed before it.
It found that the importer had submitted 38 COO certificates corresponding to its Malaysian imports. Of those 38 certificates, only one—COO No. KL-2020-AI-21-001652, accompanying Bill of Entry No. 9382115 dated October 30, 2020—appeared in MITI’s list of 87 unauthenticated certificates.
Significantly, the Tribunal recorded that the importer had already paid the differential duty relating to that particular certificate after foregoing the preferential rate.
The remaining 37 certificates were not included in MITI’s list of unauthenticated certificates.
The Tribunal therefore held that the Revenue could not extend MITI’s adverse finding concerning certain certificates to certificates which had never been declared unauthentic by the issuing authority.
The Tribunal rejected the department’s approach of treating all certificates issued in respect of the suppliers as invalid merely because MITI had stated that some certificates were unauthentic.
The Bench observed that where the Malaysian authority had specifically identified certain certificates as unauthentic, that finding had to be applied to those certificates. In the absence of a finding regarding the genuineness of the other certificates, their authenticity could not simply be presumed to be defective.
The Tribunal also noted that the Malaysian issuing authority had not cancelled the COO certificates submitted by the importer in respect of imports from the various suppliers. Consequently, the remaining 37 certificates could not be rejected as unauthentic without supporting evidence.
The Tribunal further found that, at the time of import, the certificates contained the exporters’ declarations and had been authenticated by authorised Malaysian officials. Their signatures had been verified by Indian Customs officials before the goods were cleared at the concessional rate.
According to the Bench, the requirements of Notification No. 46/2011-Cus had therefore been satisfied on the date of import. A subsequent communication from Malaysia, received more than two years later, could not by itself negate those certificates without details of the alleged contravention and action taken by the Malaysian authorities.
Another important factor considered by the Tribunal was that the goods had been examined and assessed by Customs at the time of import.
The Tribunal noted that the certificates of origin were among the documents considered during assessment and that the consignments were released after verification by the proper officer. The assessments had not been challenged and had therefore attained finality.
The Tribunal’s reasoning thus placed emphasis on the documentary position existing at the time of import, rather than allowing a later generalised verification report to retrospectively invalidate certificates that had not themselves been declared defective.
The Tribunal held that the importer was entitled to the benefit of Notification No. 46/2011-Cus for the remaining 37 COO certificates.
The final order expressly records that all 37 COO certificates submitted by the importer were held authentic and acceptable, making the importer eligible for the exemption under Notification No. 46/2011-Cus for the relevant consignments.
The Tribunal also examined the Revenue’s allegation that the stainless steel goods had been undervalued.
The adjudicating authority had rejected the declared transaction value and enhanced the import value by relying on contemporary imports. CESTAT, however, found that the adjudicating authority had not followed the requirements of Rule 9 of the Customs Valuation Rules, 2007 while enhancing the value.
More importantly, the Tribunal found no documentary evidence showing that the importer had paid any amount over and above the invoice price. In the absence of such evidence, rejection of the declared transaction value was held to be legally unsustainable.
The Bench relied upon the principles laid down by the Supreme Court in Eicher Tractor Ltd. v. Commissioner of Customs, Mumbai and Commissioner of Customs, Calcutta v. South India Television P. Ltd. while concluding that the declared value could not be discarded merely on the basis of the material relied upon by the department.
Accordingly, CESTAT set aside the enhanced value determined by the Revenue.
The Tribunal’s findings on the COO certificates and valuation also had a direct impact on the penalties.
The penalties had been imposed on the allegations of mis-declaration of the certificates of origin and undervaluation of the imported goods. Once the Tribunal found that the allegations were not established, it held that suppression of facts with an intention to evade duty had not been established.
Consequently, the Bench held that no penalty was imposable and set aside the penalties.
The record also shows that the importer had argued that there was no evidence that it had forged any COO certificate or knowingly submitted an invalid certificate with an intention to evade duty. The importer had maintained that the certificates were submitted as received from the overseas suppliers and that the adverse information from MITI came only after the imports had taken place.
The Tribunal disposed of the appeal on four principal findings.
Firstly, the 37 COO certificates submitted by the importer were held authentic and acceptable.
Secondly, the importer was held eligible for the preferential exemption under Notification No. 46/2011-Cus dated June 1, 2011.
Thirdly, the declared values in the Bills of Entry were accepted, while the values re-determined by the adjudicating authority were rejected.
Fourthly, since the allegations of COO mis-declaration and undervaluation were not sustained, no penalty was impossible.
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