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Mahadev Metaliks Pvt. Ltd. Versus Union of India, Ministry of Finance, (Department of Revenue) And Others

2015 (12) TMI 476 - ANDHRA PRADESH HIGH COURT

Import of Gold jewellery under the bilateral agreement (FTA) at concessional rate of duty - doubt has been entertained with regard to the origin of the goods as emanating from Indonesia - Provisional assessment of goods - Held that:- There is a specific procedure notified under FTA and in every aspect, the method and manner of issuance of certificate of origin, the method and manner of authentication and verification of the same and the terms framed within which is required to be made, have all .....

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fending Article 14 of the Constitution of India.

Bill of entry was filed on 23.06.2015 and time within which the Customs Authorities could have refused the certificate and commenced the request for retroactive check would be 22.08.2015. - there is no requirement of rejection (in fact there is no rejection of the Certificate of Origin in the present case), but there being a doubt that is required to be verified into, the same ought to have been commenced as soon as the bill of entry wa .....

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en as on today, there are no steps which have been taken in terms of Rule 16(a) for the purpose of retroactive enquiry.

Specific aspect that Indonesia has the production capacity of only 65 tons of gold is being disputed by the petitioners by making a reference to the information available in public domain, particularly by placing on record a document titled GFMS Gold Survey 2014, update 2 prepared by Thomson Reuters, wherein Indonesia was stated to have produced 109 tons of gold. How .....

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ted in good faith, unfortunately the same is not being in conformity with the procedure prescribed, the demanding of 100% security cannot be justified.

Authorities have failed to adhere to the procedure with respect to entertaining of the doubt within the timeframe which is allowed under the Regulations. In the result, impugned communication is set aside - Decided in favour of assessee. - Writ Petition Nos. 21399, 21443 & 24398 of 2015 - Dated:- 9-9-2015 - G. Chandraiah And Challa Kod .....

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pondent-Deputy Commissioner of Customs which reads as under: As per revised instructions all bills of entry for importing goods at concessional rate of duty under FTA Notifications viz., 46/2011 cuz. Dated 01.06.2011 etc., needs to be assessed provisionally for purpose of verification of documents. Hence you are advised to produce bond along with full purpose of verification of documents. Hence you are advised to produce bond along with full financial guarantee to cover the differential duty. 3. .....

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payment of customs duty on account of the fact that there is an agreement with the Government of Indonesia commonly known as ASEAN-India Free Trade Area (AIFTA). This agreement is on account of notification No.189/2009-CUSTOMS (N.T.) dated 31.12.2009 issued under Section 5 (1) of the Customs Tariff Act, 1975 (for short, the Act). The petitioner has imported certain gold jewellery and filed its bill of entry on 23.06.2015 along with the certificate of origin issued by the designated authority at .....

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equently in terms of notification No.189/2009 dated 31.12.2009 the petitioner is entitled to the benefit of notification No.46/2011. Thus the demand for providing of financial guarantee to the extent of differential duty is totally unauthorized and beyond the scope of making a provisional assessment under Section 18 of the Act. 6. The matters came up for admission and underwent several adjournments. 7. As the matters involve the issue of import of products under the bilateral agreement and as th .....

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of Member States of the Association of Southeast Asian Nations (ASEAN) and the Republic of India Rules, 2009 (for short, the Rules), the 3rd respondent stated that to enable the provisional release of goods in terms of Customs (Provisional Duty Assessment) Regulations, 2011, the petitioner was asked to provide for a demand bank guarantee pending enquiry with regard to the origin of goods. It is also stated that the enquiry had become necessary on account of the information gathered by the Author .....

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. In paras 10 to 12 of the counter affidavit, which are relevant, are extracted hereunder:- 10. In the petitioners case, the exporter is a private company PT. Untung Bersama Sejahtera and can only source God from other refiners or by import for the manufacture of jewellery. The exporter cannot be in position to either state that the gold is wholly produced in Indonesia or verify its originating content. 11. It may be mentioned that over the last few months gold jewellery of over 11 tons involvin .....

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h security from all importers seeking to claim benefit of the duty concessions envisaged under notification 46/20110Cus dated 1.6.2011 as amended. 10. In the additional counter-affidavit, a reference also has been made with respect to bill of entry No.9694074/25.06.2015 (not relating to the petitioners) and the enquiry conducted with respect to said bill of entry and a confirmation received from M/s.PT ANTAM (a Government of Indonesia enterprises). A further reference was also made about the cap .....

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which directed the field formations all over India to secure the revenue including in all the cases retroactive verification by way of bank guarantee covering the full differential duty amount. 11. A specific objection was also raised about the maintainability of the writ petition under Article 226 of the Constitution of the India. A further reference was made to the orders passed by the Hon ble Madras High Court in W.P.No.22749 of 2015 in the case of M/s.Nakoda Unique Gold Private Limited, in w .....

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and forwarded the same to the Director, International Customs Division, Central Board of Excise & Customs (CBEC) Department of Revenue, Ministry of Finance, New Delhi for taking up further action with Indonesian Government through the Ministry of External Affairs, New Delhi. A reference was made to Rules 7 (c) and 16(a)(iv) of the Rules. It is further stated that FTA notification is a self contained code and Regulation 4 of the Customs (Provisional Duty Assessment) Regulations, 2011 (for sho .....

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as been taken up at all India level, so as to avoid discriminative treatment from officer to officer. 12. The communication letter addressed by the 3rd respondent to the Commissioner of Customs, Hyderabad dated 04.08.2015, in turn, the Commissioner of Customs addressed a letter dated 12.08.2015 to the Director (International Customs Division), Central Board of Excise and Customs, New Delhi, and they were placed on record. 13. With the above contentions, the respondents prayed for dismissal of th .....

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duty. There is a specific procedure notified under FTA and in every aspect, the method and manner of issuance of certificate of origin, the method and manner of authentication and verification of the same and the terms framed within which is required to be made, have all been specified in detail. The respondent Authorities, without following the procedure as prescribed in the Regulations, merely on suspicion, had issued the impugned communication, thereby putting the onerous condition on the pe .....

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der passed under Section 18 of the Act and that the communication is only a kind of offer given to the petitioners to get the goods released, if they so desire subject to the condition. The impugned communication has been necessitated on account of the material available with the department with respect to excessive import of the goods by misusing the FTA notification. As there was a surge of gold jewellery, particularly, from the Indonesia and Malaysia, a uniform trade alert was issued to the F .....

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SEAN countries have been given preferential treatment in import of goods as specified in the notification read with Notification No.46/2011. The goods from ASEAN countries attract nil rate of duty. There is an agreement known as Agreement on Trade in Goods under the Framework Agreement on the Comprehensive Economic Co-operation between the Republic of India and the Association of Southeast Asian Nations (ASEAN). The terms of agreement is defined in Rule 2(a) of the Rules. Analysis of the said ag .....

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t for the present cases. Rules 7 to 11 are not required to be referred to for the purpose of this case. Rule 12 deals with methodology of determination of origin of a product, when it is manufactured utilizing both originating and non-originating materials, mixed or physically combined, the origin of such materials can be determined by generally accepted accounting principles of stock control applicable or inventory management practiced in the exporting party. 19. Rule 13 deals with Certificate .....

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tification, Operational Certification Procedures for issuance and verification of the AIFTA (ASEAN-India Free Trade Area) Certificate of Origin and other related administrative matters are notified. Under these Rules, there is a clear procedure laid down with respect to the Authorities for issuance of AIFTA Certificate of Origin. There is a procedure contemplated for making application for Certificate of Origin by the exporter and/or the manufacturer. The Authorities who are empowered to issue t .....

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the triplicate, by the exporter to the importer. Only the original copy will be submitted by the importer to the Customs Authority at the port or place of importation. 21. Rule 7 (c) provides in cases where an AIFTA Certificate of Origin is not accepted by the Customs Authority of the importing party, such AIFTA Certificate of Origin shall be marked accordingly in box 4 and the original AIFTA Certificate of Origin shall be returned to the Issuing Authority within a reasonable period but such per .....

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xhaustive clarification addressing the grounds for the denial of preferential tariff treatment raised by the importing party. The Customs Authority of the importing party shall accept the AIFTA Certificate of Origin and grant the preferential tariff treatment if the clarification is found satisfactory. Rules 13 to 15 deal with submission of original AIFTA Certificate of Origin to the Customs Authorities at the time of lodging the import entry. Rules 15 makes it clear that if there are minor disc .....

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rding the true origin of the good in question or of certain parts thereof. The Issuing Authority shall conduct a retroactive check on the procedure/exporters cost statement based on the current cost and prices within a six-months timeframe prior to the date of exportation subject to the following procedures. (i) the request for a retroactive check shall be accompanied by the AIFTA Certificate of Origin concerned and specify the reasons and any additional information suggesting that the particula .....

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on. However, it may release the goods to the importer subject to any administrative measures deemed necessary, provided that they are not subject to import prohibition or restriction and there is no suspension of fraud; and (iv) The retroactive check process, including the actual process and the determination of whether the subject good is originating or not, should be completed and the result communicated to the Issuing Authority within six months. While the process of the retroactive check is .....

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context as Importing Authority. 25. The contention of the learned Additional Solicitor General that there is six months timeframe available for the purpose of conducting a retroactive check, the same is liable to be rejected, for the reason that the time limit provided to the Issuing Authority in Rule 16(a)(ii) is itself three months after receipt of the request for retroactive check, which contemplates two kinds of check one is a longtime check, which is not relating to any party and the other .....

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ule 3 to 6 of the Rules. The outer limit of six months is provided to the exporting party and not to the Customs Authorities in considering the validity or otherwise of the certificate. Further, Rule 16(a)(i) makes it clear that the entire process of retroactive enquiry would commence only after the Customs authorities of Importing party notifying about the non- acceptance or rejection of the Certificate or Origin in terms of the procedure. In other words the question of conducting retroactive e .....

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e within which the Customs Authorities could have refused the certificate and commenced the request for retroactive check would be 22.08.2015. 27. The question of conducting a retroactive check even assuming that there is no requirement of rejection (in fact there is no rejection of the Certificate of Origin in the present case), but there being a doubt that is required to be verified into, the same ought to have been commenced as soon as the bill of entry was presented or within a reasonable ti .....

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ich have been taken in terms of Rule 16(a) for the purpose of retroactive enquiry. 28. We may take note of the fact that the writ petition came to be filed in July 2015. The counter-affidavit filed by the 3rd respondent into the Court on 10.08.205 and the aspect of the communication dated 04.08.2015 of the 3rd respondent addressing the letter to the Commissioner is not mentioned in the counter-affidavit. Even in the additional counter-affidavit, the respondents have not stated about the steps th .....

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ns. 29. We are also not impressed with the arguments of the learned Additional Solicitor General that the writ petition is not maintainable as there is no order passed by the Authorities and it is only a take it or leave offer communication made to the petitioner. If the argument of the learned Additional Solicitor General has to be accepted the natural consequence of sending of such communication is totally outside the purview of the Act and Rules, in which event the Authorities themselves are .....

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icle 226 of the Constitution of India. 30. The further aspect that is required to be considered by this Court is with regard to the relief that can be granted in a case of this nature. So far as the respondent Authorities are concerned they assert that there is information and material available with the Government of India that there is a surge of importing gold from Indonesia and Malaysia and there is an element of doubt with regard to the production capacity of the same in those countries. Th .....

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eatment basis the same would have to be done in accordance with law and by adhering to the prescribed procedure. Mere entertaining of suspicion cannot be basis to put a citizens right to do business in jeopardy, which is a guaranteed freedom under Article 19(1)(g) of the Constitution of India. In the present set of facts, we are satisfied that the Authorities though acted in good faith, unfortunately the same is not being in conformity with the procedure prescribed, the demanding of 100% securit .....

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