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2025 (5) TMI 1045 - AT - CustomsDenial of exemption from Basic Customs Duty (BCD) on the import of walnuts-in-shell from Afghanistan - Benefit of Notification No. 99/2011-Cus read with Notification No.75/2006-Cus. - determination of origin of goods - claim of Pythosanitory Certificate having been manipulated/tampered -evidentiary value of paper tags/stickers found on a few bags indicating California origin - HELD THAT - It is clear that on enquiry Revenue found that the certificate of origin was actually issued by the Afghanistan Chamber of Commerce and Industries based upon documents of Customs and Agricultural Department of Kandhar. However the DRI officials wrote to Director ICD to obtain the copies of the documents filed by Afghan supplier before Afghanistan Chamber of Commerce and Industries (ACCI). Thus it is clear that the COO filed by the appellant was duly endorsed by the issuing authority. Therefore neither the certificate can be taken to be denied by the relevant Government authorities nor can the origin of the goods be taken to be of some other country. The DRI it appears approached the Quarantine Authority in India who in turn wrote to the Quarantine Authorities in Afghanistan and got a report in relation to Phytosanitary Certificate which indicated that the same were interpolated or tampered with in relation to columns specially relating to type of treatment given to the consignment. It is clear that origin from Afghanistan is not specifically denied by the authorities there and department s case that consignment moved from USA to Dubai and from there to Karachi port and then to India lacks credence as there is otherwise overwhelming documentary evidence available including examination reports before Karachi Customs and Afghanistan Customs transit certificate and COO which have not been denied or proved to be incorrect by the departmental authorities. Coming to the case law as has developed in relation to exemption benefit vis- -vis the certificate of origin various case laws quoted by the party come to their defense and supports their case that verified certificate of origin by the relevant authorities under SAFTA is conclusive evidence for claiming the benefit. We find the verified country of origin certificate is sufficient proof of the origin criteria and department cannot ignore this record without the underlying authorities denying the same. We find that in the absence of Afghan Government Authorities or its Chamber of Commerce denying existence of such certificate of origin the requirement of Article 15 of the SAFTA Rules which provide for step to step verification process cannot be taken to be not fulfilled. Authenticity of COO needs to be denied as per the procedure of Article 15. We also find that three tags/stickers found in three wallnut bags out of total 1650 bags are also of different names and different in contents. It will be preposterous to hold whole consignment on the basis of these tag/stickers as of any other origin despite so much evidence having been produced which has not been proved to be incorrect by the department. Some claim of Pythosanitory Certificate having been manipulated/tampered cannot be taken as proof of goods not having originated from Afghanistan. Such evidence could have at the most allowed department to allege ITC violation but cannot be used to deny exemption notification benefit. We also find that the earlier consignment was duly cleared by the department and other is stated to be not cleared till date and might have become Junk and expired food item. In any case the fumigation as per notification is permitted to be done in either the country of export or the country of import. Such allegation has been made without testing the veracity of the third agency and document collected by it without examining the official by the adjudicating authority or of the authority in the Afghanistan can have co-relation with origin of the country being Afghanistan only. We find that the country of origin in the face of overwhelming documentary evidence confirmed by Ministry of Finance cannot be overlooked on the basis of mere presumption to be of California origin . Thus we find no reason to sustain order passed on legality of the issue as well as on the basis above stated facts and appreciation of evidence has done by us. Appeal is therefore liable to be accepted and is ordered accordingly. Appeal is allowed.
The core legal issues considered in this case revolve around the denial of exemption from Basic Customs Duty (BCD) on the import of walnuts-in-shell, purportedly originating from Afghanistan, under Notification No. 99/2011-Cus dated 09.11.2011 read with Notification No. 75/2006-Cus dated 30.06.2006, and the related South Asian Free Trade Area (SAFTA) Rules for determination of origin. The principal questions include:
Issue-wise Detailed Analysis: 1. Authenticity and Sufficiency of Certificate of Origin (COO) and Origin of Goods The legal framework governing this issue is the Customs Tariff Act, 1975, and the Notifications granting exemption under SAFTA, which require the importer to prove the origin of goods in accordance with the SAFTA Rules, 2006. The COO issued by the Afghanistan Chamber of Commerce and Industry is the primary document relied upon by the appellant to claim exemption. The department challenged the COO's authenticity, alleging fraudulent import of US-origin walnuts disguised as Afghan origin to evade customs duty. The department's case was supported by the discovery of paper slips/stickers in three bags (out of 1650) indicating "California" origin, statements and intelligence suggesting the goods were imported via Karachi, Pakistan, and alleged forgery of Phytosanitary Certificates. The Tribunal noted that the COO was duly verified by the Afghanistan authorities and that the COO had not been cancelled or denied by the issuing authority. The department's reliance on mere presence of stickers in three bags was deemed insufficient to establish that the entire consignment was of US origin. The principle that a verified COO is conclusive evidence of origin under SAFTA was emphasized, supported by precedents such as RS Industries Ltd v. Commissioner of Central Excise Jaipur-II and others. The Tribunal further held that the burden of proof lies on the department to disprove the COO, and mere allegations or isolated evidence such as stickers cannot override a verified COO. The department's failure to undertake the verification and consultation process mandated under Article 15 and Article 21 of SAFTA Rules was highlighted as a procedural lapse. 2. Evidentiary Weight of Paper Tags/Stickers and Phytosanitary Certificates The department's case heavily relied on the discovery of paper tags/stickers indicating "California" origin on three bags, and on the finding that the Phytosanitary Certificates submitted were forged or interpolated. However, the Tribunal found that the tags/stickers were found only in a negligible fraction of the consignment and were inconsistent in content and names, thus lacking probative value to discredit the COO for the entire consignment. Regarding the Phytosanitary Certificates, the Tribunal clarified that such certificates attest to the pest-free status and safety of goods for consumption but do not determine country of origin. The alleged forgery of PSCs, while serious, was not relevant to the question of origin and exemption eligibility. The Tribunal also noted that no evidence was produced to link the tampering of PSCs to mis-declaration of origin or to justify denial of exemption or imposition of penalties. 3. Compliance with SAFTA Rules and Procedural Requirements The SAFTA Rules prescribe a stepwise verification process for COO authenticity (Article 15) and a dispute settlement mechanism (Article 21) between contracting states in case of disagreement on origin. The department did not follow these procedures adequately before denying exemption benefits. The Tribunal observed that no consultation or further verification with Afghan authorities was undertaken beyond initial correspondence, which confirmed the COO's validity. Furthermore, the department raised a new issue regarding non-compliance with Article 18 concerning transport of goods through non-contracting parties. The appellant demonstrated that the goods were transported from Afghanistan to India through Pakistan, a SAFTA contracting party, thereby rendering Article 18 inapplicable. The Tribunal held that procedural non-compliance cannot override the substantive entitlement to exemption when a valid COO exists. 4. Burden of Proof and Evidentiary Standards The Tribunal underscored the fundamental principle of evidentiary jurisprudence that the burden of proof lies with the party making the allegation (Ei incumbit probatio qui dicit, non qui negat). The show cause notice serves only as a statement of allegations and does not shift the burden onto the importer. The department failed to produce admissible evidence, such as statements recorded under Section 108 of the Customs Act, to substantiate its claims. The only purported confession was a letter by the proprietor, which was later vehemently denied and retracted in judicial proceedings, diminishing its evidentiary value. The Tribunal found that the department's case was based largely on presumption and uncorroborated intelligence rather than concrete proof. 5. Applicability of Sections 111(m), 111(o), 28AA, 114A, 114AA of the Customs Act, 1962, and Section 28DA of the Finance Act, 2020 The department invoked Section 111(m) concerning mis-declaration and Section 111(o) relating to violation of post-import conditions of exemption notifications. The Tribunal clarified that Section 111(o) is not applicable as the case concerns denial of exemption due to origin criteria, not post-import conditions. Section 111(m) was found inapplicable due to lack of evidence of mis-declaration. Regarding interest and penalty under Sections 28AA, 114A, and 114AA, the Tribunal held that these cannot be imposed when the duty demand itself is unsustainable. The appellant's imports predated the enforcement of Section 28DA (July 2020), which imposes obligations on importers to verify Regional Value Content and product-specific criteria. Therefore, the valid COO at the time of import sufficed to claim exemption, as supported by the Bullion and Jewellers Association case. 6. Application of Law to Facts and Treatment of Competing Arguments The Tribunal carefully weighed the documentary evidence, including verified COO, transit certificates, customs examination reports from Afghanistan and Pakistan, and statements of independent third parties. The department's reliance on isolated stickers, alleged forged PSCs, and a retracted letter was found insufficient to rebut the presumption of correctness of the COO. The appellant's arguments were supported by multiple judicial precedents emphasizing that a valid COO, duly verified by competent authorities, is conclusive proof of origin for exemption claims. The Tribunal also stressed the requirement for the department to follow prescribed verification and dispute resolution procedures under SAFTA, which were not adhered to. The department's failure to produce admissible evidence under Section 108 and reliance on uncorroborated intelligence weakened its case. The Tribunal rejected the department's contention that the entire consignment should be treated as US origin based on stickers found in three bags, deeming it unreasonable and unsupported by the preponderance of evidence. Significant Holdings: "It is cardinal principle of evidentiary jurisprudence that, the 'one who alleges needs to prove'. By simply alleging in the show cause notice there is no shifting of the burden to the other side. Ei incumbit probatio qui dicit, non qui negat (Latin) is the guiding principle to emphasize that the burden of proof lies on the one who asserts, and not on the one who denies." "We find that the importer had claimed concessional rate on the imported goods under SAFTA Agreement and related notification issued under Customs Tariff Act; As per notification, document required for claiming concessional rate of duty was the certificate of origin which was duly produced and in normal course, should have made the importer entitled to concessional rate of duty." "Slips indicating 'California origin' were found only in three bags out of 1650 bags of Walnuts, which cannot be the basis to say that the whole consignment is of 'California Origin' by any sense of imagination, even if, the yardstick of pre-ponderance of probabilities is applied." "The verified country of origin certificate is sufficient proof of the origin criteria and department cannot ignore this record, without the underlying authorities denying the same." "In the absence of Afghan Government Authorities or its Chamber of Commerce denying existence of such certificate of origin the requirement of Article 15 of the SAFTA Rules which provide for step to step verification process cannot be taken to be not fulfilled." "Such evidence could have at the most allowed department to allege ITC violation but cannot be used to deny exemption notification benefit." "The benefit of exemption notification cannot be denied merely on the basis of procedural non-compliance when the substantive requirement of a valid COO is fulfilled." Final determinations on each issue were that the exemption benefit under Notification No. 99/2011-Cus and SAFTA Rules was rightly claimed by the appellant based on a valid COO; the department failed to discharge its burden of disproving the origin; the stickers and alleged forged PSCs were insufficient to deny exemption; procedural lapses by the department in verification and dispute resolution were noted; and consequently, the demand of customs duty, interest, and penalties was unsustainable. The appeal was allowed and the impugned order set aside accordingly.
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