2025 (5) TMI 2019 - AT - Customs

Demand duty along with interest and penalty - Invocation of extended period of limitation under Section 28(4) of the Customs Act 1962 - availing benefit of Notification No.46/2011- CUS - suppression willful misstatement or collusion in obtaining concessional customs duty benefits - evasion of customs duty - HELD THAT - It is clear from record that the demand made in the impugned show cause notice would not survive as there is nothing in the notice/order to impute knowledge and willful intent on the part of the appellant to deliberately submit an incorrect improper Country of Origin Certificate with intent for evasion of duty. The impugned order passed by the Principal Commissioner of Customs NOIDA is therefore set aside. The Revenue has also filed appeal in the matter seeking to impose penalty on the appellant under Section 114A of the Customs Act 1962 as proposed vide Para 13(iii) of the Show Cause Notice impugned in the matter. However we find that the ld. Principal Commissioner has in pursuance of her order imposed on the appellant equal amount of penalty as the duty confirmed. That being so in the first place there being no demand made to impose recover the penalty equal to the amount of duty interest confirmed the Revenue cannot stake such a claim by way of their cross objections/appeal. Moreover the said question was already answered by the Hon ble Karnataka High Court in the case of Commissioner of Customs Sales Tax, Bangalore v Sony Sales Corporation 2021 (3) TMI 174 - KARNATAKA HIGH COURT that the two expressions were to be read distinctively and the word or in law cannot be read as and. The Revenue s appeal thus lacks merit and cannot be sustained. In view of our discussions above the appeal filed by the appellant importer succeeds while the appeal of the department stands dismissed.

Summary

The core legal questions considered by the Tribunal include:

• Whether the extended period of limitation under Section 28(4) of the Customs Act, 1962, can be invoked against the appellant based on allegations of suppression, willful misstatement, or collusion in obtaining concessional customs duty benefits.
• Whether the appellant importer can be held liable for misrepresentation or evasion of customs duty by relying on allegedly improper or incorrect Country of Origin (COO) Certificates issued by the foreign supplier.
• The applicability and evidentiary requirements for imposing penalty under Section 114A of the Customs Act, 1962, on the appellant.
• Whether the Revenue's appeal for imposition of penalty beyond what was ordered by the adjudicating authority is maintainable.

Issue 1: Invocation of Extended Period of Limitation under Section 28(4)

Legal Framework and Precedents: Section 28(4) of the Customs Act allows demand of duty beyond the normal limitation period if there is suppression of facts or willful misstatement or fraud. The burden lies on the department to establish such elements. The Customs Tariff (Determination of Origin of Goods under Preferential Trade Agreement) Rules, 2009, and Notification No.46/2011-CUS provide the framework for concessional duty under the Indo-ASEAN FTA, contingent on valid COO Certificates.

Court's Interpretation and Reasoning: The Tribunal emphasized that invocation of extended limitation requires a positive act on the part of the importer, such as conscious knowledge or active involvement in procuring or submitting incorrect COO Certificates. The appellant had furnished COO Certificates issued by the appropriate Malaysian authorities, which were accepted by the customs officers at the time of clearance.

Key Evidence and Findings: The show cause notice alleged that the Malaysian supplier had violated Rules of Origin by procuring COO Certificates based on incorrect value addition calculations, but no evidence was produced to show that the appellant importer was involved in or aware of any such irregularities. The investigation's assertions regarding free supply of raw materials to the supplier and incorrect costing were unsubstantiated and did not implicate the appellant.

Application of Law to Facts: The Tribunal held that mere reliance on COO Certificates issued by foreign government authorities does not amount to suppression or misrepresentation by the importer. Absent evidence of willful misstatement or collusion, extended limitation could not be invoked.

Treatment of Competing Arguments: The Revenue argued that the importer "steps into the shoes" of the supplier and hence is liable. The Tribunal rejected this, noting no legal basis for imputing supplier's acts to the importer without evidence of involvement. The appellant's reliance on verified COO Certificates was deemed reasonable and bona fide.

Conclusion: Invocation of extended limitation period under Section 28(4) was unsustainable due to lack of evidence of suppression or willful misstatement by the appellant.

Issue 2: Liability of the Importer for Misrepresentation Based on COO Certificates

Legal Framework and Precedents: Under Customs law, the importer self-assesses duty liability and is responsible for correctness of declarations under Section 17 and Section 46. However, the validity of COO Certificates issued by foreign authorities is a key factor in claiming preferential rates.

Court's Interpretation and Reasoning: The Tribunal reiterated that the importer is entitled to rely on COO Certificates issued by the competent foreign authorities. Any infirmity or misrepresentation in such certificates must be shown to be with the importer's knowledge or involvement to hold them liable for evasion or penalty.

Key Evidence and Findings: The COO Certificates were issued by Malaysian government authorities and verified through Government-to-Government processes. There was no evidence that the appellant had procured or manipulated these certificates or had knowledge of any incorrect data used by the supplier.

Application of Law to Facts: The Tribunal applied precedents where similar reliance on COO Certificates was accepted, including a recent order where the burden of proof on cost data lay with the department and not the importer. The appellant's production of prescribed documents shifted the burden to the department, which was not discharged.

Treatment of Competing Arguments: The Revenue's contention that the importer should be aware of the underlying cost data and origin criteria was rejected. The Tribunal noted that cost data is generally confidential and failure of Indian authorities to obtain such data from Malaysian government cannot be held against the importer.

Conclusion: The appellant cannot be held liable for misrepresentation or evasion solely on the basis of alleged irregularities in COO Certificates issued by the foreign supplier's country.

Issue 3: Penalty under Section 114A of the Customs Act

Legal Framework and Precedents: Section 114A provides for penalty equal to the amount of duty evaded if the importer is found liable for misrepresentation or evasion. The penalty must be imposed by the adjudicating authority in the order.

Court's Interpretation and Reasoning: The Tribunal observed that the adjudicating authority had imposed penalty equal to the confirmed duty but the Revenue's appeal sought to impose penalty beyond what was ordered. The Tribunal held that the Revenue cannot claim penalty beyond the order passed.

Key Evidence and Findings: The penalty was imposed pari passu with the duty confirmed. The Revenue's attempt to increase penalty by way of appeal was found to be without merit.

Application of Law to Facts: The Tribunal relied on a precedent from the Karnataka High Court that the expressions relating to duty and penalty must be read distinctly and not conjunctively, disallowing the Revenue's claim.

Treatment of Competing Arguments: The Revenue's appeal lacked legal foundation as the penalty imposed was in accordance with the show cause notice and adjudicating order.

Conclusion: The Revenue's appeal for enhanced penalty was dismissed.

Issue 4: Timeliness of Adjudication

The appellant contended that the show cause notice was not adjudicated within prescribed timelines. The Tribunal refrained from adjudicating this issue after concluding that invocation of extended limitation was unsustainable, rendering this argument unnecessary for determination.

Significant Holdings

"The extended period of limitation would not be applicable to the present proceedings...to charge the appellant invoking extended period, the department has to establish that the appellant had willfully got it manipulated, had knowledge about the impugned infirmities and lacunae and the usage of wrong figures...Any wrong detected as a result of the said certificate issued in the country of export...without establishing knowledge on part of the importer and his active collusion in the matter cannot be sustained."

"No malafides can thus be attached to the importer. Nothing prevented the authorities to slap the notice within normal period of limitation."

"Failure of Indian authorities to get more detailed verification or underlying cost data from the Malaysian Government authorities cannot be held against the appellant, who discharged their burden to claim benefit by producing the relevant prescribed document under the agreement and the Customs notification."

"The Revenue's appeal thus lacks merit and cannot be sustained."

The Tribunal set aside the order confirming duty and penalty and dismissed the Revenue's appeal, allowing the appellant's appeal. The core principles established include the necessity of positive evidence of suppression or willful misstatement to invoke extended limitation, the importer's right to rely on COO Certificates issued by competent foreign authorities, and the limitation on Revenue's power to seek penalty beyond adjudicated orders.