2025 (5) TMI 589 - AT - Customs

Origin of imported goods - goods loaded in containers at China have come to India merely with change of Bills of Lading (BL) at Malaysia - honoring of COO certificate issued under Free Trade Agreement by another sovereign country - mis-declaration of transaction value along with mis-declaration of actual weight of the goods imported - actual importer of the goods - confiscation - extended period of limitation. Whether the impugned goods loaded in containers at China have come to India merely with change of BL at Malaysia and therefore these goods are not of Malaysian Origin? - HELD THAT - The appellants have stated that the statements do not show any concrete proof and are general in nature. They do not disclose any specific evidence correlating the documents to the goods imported by them. They have been taken from different people with different education qualifications all in English and by different officers but the words and phrases used in the statements are identical including in the handwritten portion hence they appear to be prepared to suit the departments needs and are hence not dependable - A statement cannot be taken as gospel truth without any factual corroboration. There is a difference between admissibility and acceptability of evidence. Admissibility refers to whether a piece of evidence can be legally introduced in a legal proceeding. Acceptability on the other hand pertains to whether the authority will consider the evidence credible and relevant in deciding the case. If the statement is properly corroborated and discussed in the OIO then while the burden of proof would still be that of the department the onus of proof to show otherwise or even to justify the retraction would then shift to the appellant. The appellant has stated that as per the COO certificate the goods were consigned from M/s Topaz Plastic Industries and M/s Malaya Winds Plastics both of whom are manufacturers of PVC flex banners in Malayasia. Proof of the same was also submitted in the reply to SCN. Payments were also made through banking channels to the said Co s as evidenced from the bank statements and mentioned in their reply to SCN. It is found that the regarding the alleged payments for shipments no verification of available bank statements have been discussed neither have records and details of direct payment to Chinese manufacturers been mentioned. The findings in the impugned order hence contains conclusions made without relevant factual evidence being discussed and hence do not succeed in establishing the Chinese origin of the goods. Whether the COO certificate issued under Free Trade Agreement by another sovereign country needs to be honored and if there are doubts then procedure set out in the relevant Rules need to be followed? - HELD THAT - The judicial pronouncements and the irrefutable evidence brought out during the course of investigation buttress the case of the department. What were this irrefutable evidence has not been discussed. There is nothing more by way of explanation and analysis regarding the COO certificate being improper other than a statement. If it is the alleged movement of goods from China to India that is being additionally referred to then it should have been clearly stated. The appellant has stated that the COO certificate have not been verified by the department with Malayasia as per the procedure provided in the Rules of 2009 and none of the certificates were found to be false. Further the goods were cleared by Malaysian Customs after verifying all the documents. The Hon ble Supreme Court in Smt. J. Yashoda Vs. Smt. K. Shobha Rani 2007 (4) TMI 11 - SUPREME COURT stated the Rule of Best Evidence as the rule which is the most universal namely that the best evidence the nature of the case will admit shall be produced. So long as the higher or superior evidence is within your possession or may be reached by you you shall give no inferior proof in relation to it. Although a strict compliance of the Evidence Act will not apply to a quasi-judicial proceedings on the scale for evaluation of evidence a certificate issued by an authorised entity carries more value than an allegation in a third-party statement or of documents that are not correlated to the BE s. Revenue has relied on the judgment of the Hon ble High Court of Gujrat in Trafigura India Private Ltd Vs UOI 2023 (12) TMI 196 - GUJARAT HIGH COURT to support their stand. It has been stated that the substantive provisions of the Customs Act like Section 148 and Section 28 will have dominion over the procedural aspects of the Rules of Origin notified by Rules and Notifications - The Hon ble High Court held that misrepresentation became suppression which provided solid basis for the Customs authorities to proceed under section 28(4) of the Customs Act. However as discussed above in this case there is no proof of any wrong doing or manipulation of data or any action by the Malaysians Authorities in issuing a fake certificate. Hence the judgment is distinguished. Thus revenue has not proved that the impugned goods are not of Malaysian Origin or that the COO is false. Whether the transaction value has been mis-declared along with mis-declaration of actual weight of the goods imported? - HELD THAT - The omission by the officers to find out the central core weight has resulted in the alleged variation in the net quantity of the materials imported. Apart from the above the appellants have submitted information regarding the Malaysian Suppliers and the manufacturing facility they have for manufacturing PVC Flex Banner Sheets. In the light of the above there is no evidence whatsoever to establish that these goods are not of Malaysian Origin or the value and quantity were mis-declared and the impugned order is hence not sustainable - it is found that the weighment process does not inspire confidence in its accuracy and extrapolating it to a larger number of cleared containers is likely to magnify the error. Hence the benefit of doubt must be given to the appellant and the weighment results rejected. There was no detailed discussion in the impugned order showing the description quantity and quality of the goods as imported by the Bhandari Brothers and those of the appellants. Bland statements and generalities alone would not provide the specific detail required to compare the goods. The statements are dependable when correlated with other evidence sufficient to discard the values declared. Neither was a comparison with contemporaneous import prices and current international prices done utilizing the NIDB data to form an opinion on the necessity for re-assessment. Thus revenue has not succeeded in proving that the value of the imported goods needs to be re-assessed and that the re-assessment based on the seized documents was done correctly under Rule 5 of CVR 2007. Who is the actual importer of the goods and whether goods are liable to confiscation and the appellants are liable to penalty and whether the extended period is invokable? - HELD THAT - The appellant Rajesh Surana of Tech Zone Global has averred that as per the documents on record it is seen that the respective importers themselves have placed orders with the manufacturers and the BL invoice and BE were in the importers name. They satisfy the definition of importer as per section 2(26) of the Customs Act 1962. No documents were provided to the contrary. Liability to duty cannot be based on statements alone and that too which were not factually corroborated. Further the order itself demands duty from the said importers jointly and/ or severally and not from him alone - the said averments have not been discredited by any evidence other than the statements of those allegedly involved in letting out their IEC to Tech Zone while the entire documentation was in the name of the IEC holders. Evidences of ownership of the goods post-importation and its disposal have not been examined. The whole discussion hence suffers from the same weakness as discussed above. Hence the impugned goods were not liable to confiscation neither were the appellants liable to penalty. The question of invoking the extended period to demand duty hence does not survive. Conclusion - The impugned order has failed to cogently discuss the evidence and its relevance to the facts of the case relating to all the appellants. Duty cannot be collected on assumptions and presumptions or on the basis of statements that have not been properly linked to evidence to establish its veracity and accuracy. Hence the charge against all the appellants fails. No tax can be imposed by inference. Revenue has failed to prove that the impugned goods were imported from China to India and documents manipulated to show that they had been shipped from Malayasia; that the COO certificate was obtained fraudulently; that the good were mis-declared for weight or value. Hence no action survives against the appellants. The impugned order set aside - appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The Tribunal considered the following core legal questions:

(a) Whether the impugned goods loaded in containers at China have come to India merely with change of Bills of Lading (BL) at Malaysia, thereby negating Malaysian origin and attracting anti-dumping duty (ADD).

(b) Whether the Country of Origin (COO) certificates issued under the Free Trade Agreement by another sovereign country (Malaysia) must be honored, and if doubts arise regarding their genuineness, whether the prescribed procedure under the Customs Tariff (Determination of Origin of Goods Under the Preferential Trade Agreement Between the Member States of ASEAN and the Republic of India) Rules 2009 should be followed.

(c) Whether there has been mis-declaration of transaction value and actual weight of the imported goods, justifying re-determination of customs duty.

(d) Identification of the actual importer of the goods, liability for confiscation, imposition of penalties on appellants, and the applicability of extended limitation period for duty recovery.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Origin of Goods and Change of Bills of Lading

Legal Framework and Precedents: The determination of country of origin under customs law is critical to levy of ADD. The Indian Bills of Lading Act, 1956 vests absolute rights over goods to the consignee named in the BL, making BLs key evidence to establish ownership and movement of goods.

Court's Interpretation and Reasoning: The Department of Revenue Intelligence (DRI) alleged that goods originating from China were transshipped through Malaysia with mere change of BLs to evade ADD. Evidence included statements, emails, hard disk recoveries, and BL copies from shipping lines. However, the Tribunal found that the BLs produced did not correspond to the Bills of Entry (BE) under dispute. The container and seal numbers were not linked to the impugned imports, and the BLs related to different importers and time periods not covered by the demand.

Key Evidence and Findings: The Tribunal noted absence of a linked chain of documentary evidence connecting the shipments from China to Malaysia and then to India for the appellants. Statements relied upon were general, identical in language, and partly retracted, diminishing their credibility. No corroboration by independent evidence was presented. Payment records indicated transactions with Malaysian manufacturers, supported by bank statements, without proof of direct payments to Chinese suppliers.

Application of Law to Facts: The Tribunal emphasized that the adjudicating order must be a speaking order with clear factual linkages, which was lacking. Mere allegations without corroborated evidence cannot sustain the charge that the goods were of Chinese origin. The appellants' COO certificates indicating Malaysian origin remained unchallenged on substantive grounds.

Treatment of Competing Arguments: The appellants challenged the evidence's credibility and linkage, while the department relied on statements and partial documentary evidence. The Tribunal favored the requirement of cogent, corroborated evidence over uncorroborated statements.

Conclusion: The allegation that goods were imported from China via Malaysia with only a change of BL was not proved.

(b) Validity and Honoring of COO Certificates

Legal Framework and Precedents: COO certificates issued under Free Trade Agreements (FTAs) are governed by the Rules of 2009. The burden of proving mala fide or falsity of such certificates is heavy, per Supreme Court precedent, requiring credible proof. The 'Rule of Best Evidence' mandates reliance on superior evidence over inferior or uncorroborated allegations.

Court's Interpretation and Reasoning: The impugned order alleged that COO certificates were procured fraudulently through contacts in Malaysian authorities, based on statements by third parties. However, no verification was conducted with Malaysian authorities, nor was any official certificate found false. The Tribunal noted the absence of irrefutable evidence or detailed analysis supporting the department's claim.

Key Evidence and Findings: The appellants submitted COO certificates verified by Malaysian Customs, and payments made to Malaysian manufacturers. The department's reliance on statements without documentary corroboration or official verification was found insufficient.

Application of Law to Facts: The Tribunal applied the principle that serious allegations of mala fide require proof of a high order. The department failed to discharge this burden. The cited Gujarat High Court judgment was distinguished as it involved fraudulent misrepresentation of Regional Value Content, which was not the case here.

Treatment of Competing Arguments: The department's reliance on third-party statements was rejected in favor of authenticated COO certificates and lack of contrary evidence.

Conclusion: The COO certificates issued by Malaysian authorities must be honored, and the department failed to prove their falsity or manipulation.

(c) Mis-declaration of Transaction Value and Weight

Legal Framework and Precedents: Under Rule 12 of the Customs Valuation Rules, 2007, transaction value can be rejected if there is reasonable doubt about its accuracy, with re-determination under Rules 4 to 9. The Customs National Import Database (NIDB) is a recognized tool for value comparison.

Court's Interpretation and Reasoning: The department rejected declared values based on alleged mis-declaration of weight and origin, and custom-made import documents. However, the Tribunal found no proof of falsity in COO or origin. No comparison was made with NIDB data to establish undervaluation. The weighment process was conducted by departmental officers lacking professional expertise, without use of calibrated scales or surveyors. The method included packing materials but omitted the central core weight of rolls, causing unreliable results.

Key Evidence and Findings: Three live consignments were physically weighed, showing higher net weight than declared. The importer admitted to mis-declaration of weight. However, the Tribunal found the weighment process flawed and extrapolation to other consignments unreliable. The value re-determination was based on comparison with other importers' data without detailed matching of description, quantity, or quality of goods.

Application of Law to Facts: The Tribunal held that the department failed to establish reasonable doubt on declared value through credible evidence or proper methodology. The re-assessment under Rule 5 was not supported by detailed comparison or data analysis.

Treatment of Competing Arguments: The appellants challenged the weighment procedure and comparability of data. The Tribunal accepted these challenges due to lack of professional standards and detailed analysis by the department.

Conclusion: No mis-declaration of value or weight was established; re-determination of value was unsustainable.

(d) Identification of Actual Importer, Liability for Confiscation, Penalty, and Extended Period

Legal Framework and Precedents: Section 2(26) of the Customs Act defines 'importer'. Sections 11(d) and 111(m) provide for confiscation and penalty for mis-declaration. Extended limitation period applies in cases of fraud or willful mis-statement.

Court's Interpretation and Reasoning: The department alleged misuse of multiple Importer Exporter Codes (IECs) by appellants, implicating them in importation of Chinese origin goods with mis-declaration. The appellants contended that import documents, BLs, and invoices were in the names of respective importers, satisfying the statutory definition. No evidence disproved their status as importers or proved collusion beyond statements.

Key Evidence and Findings: The Tribunal found absence of evidence on ownership post-importation, disposal of goods, or misuse of IECs substantiated by documents. Statements alone, without corroboration, were insufficient to establish liability. The impugned order failed to cogently analyze evidence against each appellant.

Application of Law to Facts: The Tribunal held that confiscation and penalties cannot be imposed on assumptions or uncorroborated statements. Extended period invocation requires proof of fraud, which was not established.

Treatment of Competing Arguments: The appellants' denials and documentary evidence were accepted over departmental allegations based on statements.

Conclusion: No confiscation or penalty liability arose; extended period for duty demand was not invokable.

3. SIGNIFICANT HOLDINGS

"The order should have determined these issues clearly, supported by factual reasons, which is lacking and hence the allegations are not proved."

"A statement cannot be taken as gospel truth without any factual corroboration. There is a difference between admissibility and acceptability of evidence."

"An official certificate, that too covered under the procedure formulated by a Treaty obligation and issued as per the requirements under Rules of 2009, cannot be lightly discarded."

"The burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demands proof of a high order of credibility."

"Duty cannot be collected on assumptions and presumptions or on the basis of statements that have not been properly linked to evidence to establish its veracity and accuracy."

"Revenue has failed to prove that the impugned goods were imported from China to India and documents manipulated to show that they had been shipped from Malaysia; that the COO certificate was obtained fraudulently; that the goods were mis-declared for weight or value."

Core principles established include the necessity of cogent, corroborated evidence for origin and valuation disputes; respect for COO certificates issued under FTAs unless proven false by credible evidence; the requirement of professional standards in weighment and valuation; and the inadmissibility of penalties or confiscation based on uncorroborated statements or assumptions.

Final determinations were that the impugned order lacked sufficient evidence to sustain allegations of origin mis-declaration, COO falsity, value and weight mis-declaration, misuse of IECs, or justification for penalties and confiscation. The appeals were allowed, and the impugned order set aside.