2025 (5) TMI 1040 - AT - Customs

Benefit of SAFTA exemption notification - Demand under Section 28(8) along with interest and penalty - jointly and severally on two partners of the importing firm - confiscation of 200 metric tonnes of Fortified Refined Palm Olien - COO certificates furnished not give the value of non-originating material - evasion of basic customs duty - Ignorantia Juris Non Excusat - HELD THAT - We find that the said two certificates of Country of Origin read along with their supporting invoices do satisfy the percentage of value addition as required in terms of the Rules of Origin. The fact of non-indication of the percentage on the body of the certificate cannot be held against the appellant as they are not the certificate issuing authorities. As long as the importer-assessee/appellant is able to justify and meet the satisfaction of the norms along with the cost sheets that have been furnished which indeed are issued by the overseas suppliers in the country of export viz. Megha Edible Oil Refinery Limited Dhaka and Shabnam Vegetable Oil Industries. Dhaka we are of the view that the appellant has satisfied the norms pertaining to value addition. They are therefore eligible to avail of duty concession in terms of Notification No. 99/2011-CUS dated 9 11. 2011. No doubt the appellant has admitted to their lapse in the matter and it is common knowledge that ignorance of law is no excuse at the same time we find that the department has no explanation for having continued to hold on to the good in custody well after the duty payment was done without assigning any reason or intimating the importer to the said effect. Not having given out of charge for nearly two months quietly putting the blame on the appellant/importer for removal of said goods from the specified area (private parking space) is indeed quite bizarre and unjustified. In the least the importer ought to have been intimated in writing for the hold up of clearance with reasons thereto. No such action was taken by the department. We are of the view that benefit of SAFTA exemption notification is rightly admissible to the imported goods. Therefore under the circumstances no question of confiscation of the goods and their release upon redemption and payment of differential duty is called for . The violation of removal of goods without Out of Charge (OOC) order however remains. However considering the fact of their being first time importers and no revenue loss was caused to the Revenue as a result of the aforesaid action of the appellants and that the Revenue had failed to either give Out of Charge or communicate to the importer about the reasons for hold up of clearance or detention etc. of duty paid goods for almost two months we refrain from imposing any penalties in the matter on the appellants. The order of the lower authority is therefore set aside and the appeals allowed with consequential relief if any as per law.

The core legal questions considered by the Tribunal are:

1. Whether the Country of Origin (COO) certificates submitted by the appellant complied with the requirements under the South Asian Free Trade Agreement (SAFTA) Rules of Origin, particularly regarding the declaration of value addition and percentage of non-originating materials, thereby entitling the appellant to exemption from basic customs duty.

2. Whether the appellant was entitled to clearance of the imported goods for home consumption under the Customs Act, 1962, specifically the necessity of an order under Section 47(1) for clearance and the implications of removal of goods from the customs area without such clearance.

3. Whether the confiscation of goods and imposition of penalties on the appellant was justified in light of the procedural and substantive facts of the case.

Issue 1: Validity and sufficiency of the Country of Origin Certificates under SAFTA

The relevant legal framework includes the Rules of Determination of Origin of Goods under SAFTA, 2006, particularly Rule 8(b) and Annex-A which specify the conditions for products to qualify for preferential treatment. The rules require that the final product must be classified differently at the six-digit Harmonized System Code level compared to non-originating materials and that the minimum value addition (DVA) in the exporting country must be at least 30% for the product in question (CTSH & 30% DVA for HS heading 151190).

The Court examined the COO certificates issued by the Export Promotion Bureau, Dhaka, Bangladesh, and the supporting commercial invoices from the exporters. Though the COO certificates themselves did not explicitly state the percentage of non-originating materials or value addition, the annexed commercial invoices indicated DVA figures of approximately 31.07% and 32.58%, with corresponding non-originating material percentages of 68.93% and 67.42%. These figures satisfy the minimum value addition criteria under SAFTA Rules.

The Tribunal rejected the Revenue's contention that absence of explicit value addition percentages on the COO certificates rendered them invalid for claiming SAFTA benefits. It held that the annexures and supporting documents accompanying the certificates sufficiently demonstrated compliance with the origin criteria. The Court emphasized that the certificates were issued by the appropriate authority of the exporting country and had not been found false or fraudulent by Indian authorities. Therefore, the customs department was obligated to accept them under the mutual agreement embodied in SAFTA.

The Revenue's allegation that the appellant submitted these certificates with intent to evade basic customs duty was found to be unsubstantiated and based on mere presumption without credible evidence.

Issue 2: Requirement of clearance order under Section 47(1) of the Customs Act and legality of removal of goods

Sections 46 and 47 of the Customs Act, 1962, govern the import process and clearance of goods. Section 46 requires the importer to present a bill of entry with a declaration of truth, while Section 47(1) mandates that the proper officer must issue an order permitting clearance of goods for home consumption only after satisfaction of all conditions including payment of duty.

Section 42 prohibits the departure of conveyances carrying imported goods from customs areas without written clearance orders.

In the present case, although the appellant paid the applicable Integrated Goods and Services Tax (IGST) and the goods were examined with test reports received, no formal clearance order under Section 47(1) was issued by the Customs authorities. The appellant removed the goods from the notified customs parking area without such clearance, under the bona fide belief that payment of duty and examination sufficed for clearance.

The Tribunal held that payment of duty alone does not constitute clearance for home consumption. The absence of an explicit clearance order meant that the goods remained under customs control and their removal without authorization was a violation of the Customs Act. The appellant's ignorance of the law was noted but held not to excuse the breach (Ignorantia Juris Non Excusat).

However, the Tribunal also observed that the Customs department failed to communicate any reasons for withholding clearance or detention of the goods to the importer for nearly two months after duty payment. This lack of communication and delay was characterized as unjustified and contributed to the appellant's confusion and subsequent removal of goods.

Issue 3: Justification for confiscation and penalty imposition

The confiscation of the goods and imposition of penalty were challenged on the grounds that the appellant was entitled to SAFTA benefits and that no revenue loss occurred as the duty was paid. The Tribunal found that since the appellant complied with the origin criteria and was eligible for exemption under Notification No. 99/2011-CUS dated 09.11.2011, the demand for differential duty and confiscation was not justified.

Regarding penalty, the Tribunal took into account the fact that the appellant were first-time importers and that the removal of goods without clearance order was due to ignorance compounded by the department's failure to notify or clarify the status of the goods. Given no revenue loss and the mitigating circumstances, the Tribunal exercised discretion to refrain from imposing penalties.

Significant holdings include:

"We find that the said two certificates of Country of Origin read along with their supporting invoices, do satisfy the percentage of value addition as required in terms of the Rules of Origin. The fact of non-indication of the percentage on the body of the certificate cannot be held against the appellant, as they are not the certificate issuing authorities."

"Payment of duty on imported goods is one of the several acts as may be required to be satisfied, before allowing the imported goods to move out of the Customs area, into the domestic sector."

"Ignorantia Juris Non Excusat - thus."

"No question of confiscation of the goods and their release upon redemption and payment of differential duty, is called for."

"Considering the fact of their being first time importers and no revenue loss was caused to the Revenue as a result of the aforesaid action of the appellants and that the Revenue had failed to either give Out of Charge or communicate to the importer about the reasons for hold up of clearance or detention etc. of duty paid goods, for almost two months, we refrain from imposing any penalties in the matter on the appellants."

The Tribunal ultimately set aside the impugned order confirming demand and confiscation, allowed the appeal, and granted consequential relief as per law.

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