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TMI Blog2023 (12) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... he Additional Commissioner of Customs, Kandla under Section 28 of the Customs Act, 1962. This petitioner came to be imposed penalty of Rs. 25,90,825/- under section 112 (a) of the Customs Act, 1962. (b) The very aforementioned Order dated 29.05.2020 is challenged by Lykos India Pvt. Ltd. - the petitioner of Special Civil Application No. 13365 of 2020. The customs authority held this petitioner liable to pay the differential customs duty amounting to Rs. 3,18,194/-. Interest was ordered to be charged for the confirmed duty amount under Section 28AA of the Customs Act, 1962 (hereinafter referred to as 'the Act'). The goods in question valued at Rs. 52,80,791/- was held liable to be confiscated under Section 111(m) and 111(o) of the Act. Penalty of equivalent duty amount of Rs. 3,18,194/- was imposed under Section 114A of the Act, giving option under the Proviso to the Section. (c) The third Special Civil Application No. 14937 of 2020 is also by Lykos India Pvt. Ltd. wherein the challenge is directed against Order-in-Origin dated 24.06.2020 of the Assistant Commissioner of Customs, Mundra, respondent no. 3. Thereby, it was directed to recover from the petitioner balance cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rafigura India Pvt. Ltd. on ex-warehouse basis and filed ex-bond Bill of Entry. This petitioner also claimed the duty exemption on the basis of the same exemption notification No. 46/2011. 3.1.2 The same party-petitioner Lykos India Pvt. Ltd. in its Special Civil Application No. 14937 of 2020, purchased the Tin Ingots wherein 25 Metric Tons from M/s. Trafigura India Pvt. Ltd. under High Sea Sale Agreement dated 28.04.2017. The Bill of Entry dated 09.05.2017 was filed for home consumption. The petitioner availed the exemption under the very notification. 3.1.3 The petitioner of Special Civil Application No. 1835 of 2022 is Talin International Pvt. Ltd. As per the case, it has been engaged in the manufacturing and trading activity to regularly import both ferrous and non-ferrous metals from various countries. It was stated that in regular course of business, the petitioner purchased different quantities of Tin Ingots from one M/s. Welcome Impex Pvt. Ltd. The purchase was on the High Seas Sale Basis by Agreement dated 8.8.2017. The goods were procured by the high seas seller M/s. Welcome Impex Pvt. Ltd. 3.1.4 According to this petitioner also, the goods were under cover of Certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to the exemption. Broad Controversy 3.3 Stating the controversy broadly and in brief, leaving elaboration in subsequent stages of discussion, the petitioners came to be subjected to proceedings under Section 28(4) of the Act on the ground inter alia that they, by suppressing the facts and by misrepresenting them, had wrongly availed the benefit of exemption of basic customs duty under Notification No. 46/2011 in respect of the goods imported from Malaysia. The said exemption notification came to be issued by the Customs Authorities in light of an international treaty and the Rules framed by the Government of India, called Rules of Origin, in furtherance of the treaty provisions. 3.3.1 The Government of India signed an agreement on Trade in Goods Under the Framework Agreement on Comprehensive Economic Co-operation between the Republic of India and the Association of Southeast Nations in the year 2009. Malaysia happens to be one of the members of Association of Southeast Nation ('ASEAN' as abbreviated). As per the said international agreement-the Agreement on Trade in Goods Under the Framework Agreement on Comprehensive Economic Co-operation between ASEAN countries (&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s including the Writ Petition No. 2491 of 2018 by one Kothari Metals Ltd. was filed involving the identical dispute as raised in the present cases. The Customs authorities rejected the Certificate of Origin (COO) and denied the exemption benefit on the goods imported from Malaysia. The Bombay High Court by judgment and order dated 9.7.2021 rejected the petition on the ground availability of alternative remedy. The petitioners were directed to pursue the adjudicatory proceedings. 3.4.1 Civil Appeal No. 9010 of 2019 was preferred before the Supreme Court. The writ petitions were restored by the Supreme Court by order dated 25.11.2019. The Apex Court directed the Bombay High Court to decide the petitions on merits and in accordance with law in light of the fact that initiation of proceedings itself was called in question in view of Article 24 in Appendix D of the AIFTA. 3.4.2 The aforesaid petition is pending before the Bombay High Court, awaiting the decision. Before this High Court, the captioned petition came to be filed under Article 226 of the Constitution, challenging the Orders-in-Original raising the issue in respect of AIFTA Article 24 and its non observance. 3.4.3 The Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to be notified by the Central Government by Notification No. 189/2009-Customs dated 31.12.2009. The Rules are described to as the 'DOGPTA Rules of Origin' or '2009 Rules'. They are referred to hereinafter accordingly, or as 'Rules of 2009'. 3.5.1 It may also be stated that by Notification dated 43/2011 dated 01.07.2011, the Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Governments of the Republic of India and Malaysia) Rules, 2011, are also framed. 3.5.2 Section 5 of the Customs Tariff Act, 1975, under which the aforementioned 2009 Rules are framed, provides for the levy of a lower rate of duty under a Trade Agreement. It says that whereunder a trade agreement between the Government of India and the Government of foreign country or territory, duty at a rate lower than specified in the First Schedule is to be charged on articles which are produced or manufactured in such foreign country or territory, as the case may be, the Central Government may issue notification in the Official Gazette and make Rules thereunder for determining if any Article is the produce or manufacture of such foreign country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuant to Article 4 of the AIFTA. Appendix D to the AIFTA Agreement sets out Operational Certification Procedures for the AIFTA Rules of Origin. The AIFTA Rules of Origin and AIFTA Certification Procedures are not detailed hereby reproducing them, for the only reason that the aforementioned Customs Tariff DOGPTA Rules, 2009 have roots of their formations into the AIFTA Rules of Origin/Certification Procedure. These DOGPTA Rules, 2009, are extensively referred to and reproduced in the discussion to succeed. 3.7.3 Before adverting to elaboration of DOGPTA Rules, 2009, the comparative chart relating to AIFTA Articles and the provisions in DOGPTA Rules, 2009, would give a beforehand picture. Comparison between Rules of Origin for AIFTA and 2009 Rules framed by Government of India is as under, Title of the Rules Number under Rules of Origin for AIFTA Number under DOGPTA Rules, 2009 Short title and commencement -- 1 Definition 1 2 Origin Criteria 2 3 Wholly produced or obtained products 3 4 Not wholly produced or obtained products 4 5 Cumulative Rule of Origin 5 6 Product Specific Rules 6 - Minimal operations and processes 7 7 Direct consignment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 8, shall be deemed to be originating and eligible for preferential tariff treatment if they conform to the origin requirements under any one of the following:- (a) products which are wholly obtained or produced in the exporting party as specified in rule 4; or, (b) products not wholly produced or obtained in the exporting party provided that the said products are eligible under rule 5 or 6. 3.8.1 Rule 4 is about Wholly produced or obtained products. Rule 5, which is again relevant, deals with Not wholly produced or obtained products, Rule 5. Not wholly produced or obtained products.- (1) For the purpose of clause (b) of rule 3, a product shall be deemed to be originating, if - (i) the AIFTA content is not less than 35 percent. of the FOB value; and (ii) the non-originating materials have under gone at least a change in tariff subheading (CTSH) level i.e. at six digit of the Harmonized System: Provided that the final process of the manufacture is performed within the territory of the exporting party. (2) For the purpose of clause (i) of sub-rule (1), the formula for calculating the 35 per cent. AIFTA content is as follows: (i) Direct Method AIFTA Material Cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to the best of their competence and ability, carry out proper examination upon each application for the AIFTA Certificate of Origin to ensure that- (i) the application and the AIFTA Certificate of Origin are duly completed and signed by the authorised signatory; (ii) the origin of the product is inconformity with the Rules. (iii) other statements of the AIFTA Certificate of Origin correspond to supporting documentary evidence submitted; and (iv) description, quantity and weight of goods, marks and numbers on packages, and number and type of packages, as specified, conform to the products to be exported. (b) Multiple items declared on a single invoice and single AIFTA Certificate of Origin shall be allowed, provided that each item qualifies separately in its own right." 3.8.7 Similarly, paragraph 7 deals with issuance of AIFTA Certificate of Origin, which is also reproduced, "7. Issuance Of AIFTA Certificate Of Origin (a) The AIFTA Certificate of Origin shall bein International Organisation for Standardisation (ISO) A4 size, and white paper in conformity with the specimen as in the Attachment to these Operational Certification Procedures. It shall be made in English ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Certification Procedure as under, VERIFICATION: 16. (a) The importing party may request a retroactive check at random and/or when it has reasonable doubt as to the authenticity of the document or as to the accuracy of the information regarding the true origin of the good in question or of certain parts thereof. The Issuing Authority shall conduct a retroactive check on the producer/exporter's cost statement based on the current cost and prices within a six-months time frame 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 particulars given in the said AIFTA Certificate of Origin may be inaccurate, unless the retroactive check is requested on a random basis; (ii) the Issuing Authority shall respond to the request promptly and reply within three months after receipt of the request for retroactive check; (iii) In case of reasonable doubt as to the authenticity or accuracy of the document, the Customs Authority of the importing party may suspend provision of preferentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of the notification pursuant to sub-paragraph (i), the notifying party may deny preferential tariff treatment to the goods referred to in the said AIFTA Certificate of Origin that would have been subject to the verification visit; and (v) the Issuing Authority receiving the notification may postpone the proposed verification visit and notify the importing party of such intention within fifteen days from the date of receipt of the notification. Notwithstanding any postponement, any verification visit shall be carried out within sixty days from the date of such receipt, or for such longer period as the parties may agree. (b) The importing party conducting the verification visit shall provide the producer/exporter whose goods are subject to the verification and the relevant Issuing Authority with a written determination of whether that goods qualify as originating goods. (c) The determination of whether the goods qualify as originating goods shall be notified to the producer/exporter, and the relevant Issuing Authority. Any suspended preferential tariff treatment shall be reinstated upon a determination that the goods qualify as originating goods. (d) If the goods are deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, a team of DRI Mumbai, visited the unit of MSC Malaysia to examine the value addition and in order to ascertain the originating criteria for Tin Ingots exported. This exercise was undertaken in terms of paragraph 17 of Annexure III of the Rules of Origin read with paragraph 10 of Annexure III of the India Malaysia Preferential Trade Agreement Rules. 3.9.2 It was revealed pursuant to the DRI investigation that for calculating the Free on Board (FoB) and the RVC, period of three months of year 2013 was taken as a base and on the basis of such cost sheet, the RVC was indicated for the goods which was never accurate, much less satisfied the requisite criteria under the Rules of Origin. It was found by the authorities that the Malaysian Smelting Corporation had adopted this method as usual practice since long. On the basis of such methodology, it was observed in the show-cause notice, the RVC for qualifying the origin criteria in Form AI (COO) was claimed in the range above 70%, which was extraordinarily higher. 3.9.3 It was also observed that there was another model of operation wherein the Tin Ingots were exported by the Malaysian Smelting Corporation to the Indian importers after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RI investigation that the petitioners had wrongly availed the benefit on the basis of Origin Certificate, which was fraudulent and that the petitioners were guilty of suppression of material fact to be liable to be subjected to the proceedings under section 28 (4) of the Customs Act. As per the impugned order, as stated, the competent authority confirmed the duty demand and also proceeded to impose the penalty. 3.9.7 The following two issues were addressed by the adjudicating customs authority, while passing the impugned orders, (a) Whether the Importer and Ex-bonders have wrongly availed the benefit of exemption Notification No. 46/2011-Cus dated 01.06.2011 on the basis of fraudulently obtained Country of Origin certificate by the supplier namely MSC, Malaysia by submitting incorrect declaration while presenting the bills of entry under Section 46(4) of the Customs Act, 1962, if so, whether differential duty is to be recovered with appropriate interest under Section 28(4) and 28AA ibid and the subject goods are liable to confiscation under Section 111(0) ibid and they have rendered themselves liable to penal action under Section 112(a), 114A and 114AA of the Customs Act, 1962. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contemporaneous RVC and the FOB of the exported Tin ingots as per the originating criteria mandated under the Rules of Origin of AIFTA." 3.9.10 The findings recorded as above are the findings of fact. As stated, the Directorate of Revenue Intelligence investigated and having regard to the material collected, the factual conclusions were drawn. Case and Submissions of the Petitioners 4. It is the case and the contention of the petitioners in alia that the proceedings initiated by the respondent customs authorities and the orders consequently passed are without jurisdiction. The petitioners have stated that the only premise on which the proceedings were sought to be initiated was that the exporter provided incorrect information in respect of the Certificate of Origin. The dispute with regard to the determination of origin of product, RVC determination, etc., were required to be resolved in the manner provided under Article 24 of the AIFTA, which was a dispute settlement resolution mechanism in the said international agreement. It is the case that once the said procedure is not followed, the entire proceedings stand bad in law. 4.1 It is the further case that while the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, to recall or cancel preferential tariff concession once it is granted. The customs authority may at the best suspend the provision for preferential tariff in terms of Article 16(a)(iii) of the Rules of Origin, 2009. (ii) Paragraph 16(a)(iii) would apply when the process of verification is undertaken. (iii) The certificate of Country of Origin given by the exporting State or issuing authority could not have been rejected by the Customs authority. The Certificate is not cancelled by the issuing authority. (iv) The preferential tariff treatment granted to the importer cannot therefore be unilaterally withdrawn by the importing authority or customs authority. (v) The COOs are valid and subsisting even today. The respondents cannot question the correctness thereof unless the issuing authority confirms the determination of the importing party and consequentially withdraws the COOs. (vi) Process of retroactive check provided under Article 16 cannot be treated as retrospective invalidation of the preferential treatment granted to the importer. (vii) Rules of Origin merely empowers customs authorities of the importing party to perform a retroactive check to ascertain authen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... core, the following submissions were advanced, (a) AIFTA is a complete code in itself and in case of any dispute with regard to origin determination, classification or other related matters, Appendix D - Article 24 of the AIFTA provides that the governmental authorities in the importing and exporting parties shall consult each other for resolving the dispute and in case no solution is reached through consultations, the parties to AIFTA may invoke Dispute Settlement procedures under the ASEAN India DSM Agreement. (b) AIFTA does not give a primacy to the finding or conclusion of either nation, that is, exporting party or importing party and instead provides for a procedure for mutual consultation and arbitration under Article 24. AIFTA also doesn't give primacy of the decision taken either by the exporting party or importing party about the validity of the certificate. (c) AIFTA does not stipulate that in case of conflict, whose view or determination will prevail, rather, prescribes a specific procedure of mutual consultation and arbitration under Article 24 of the agreement read with DSM Agreement. (d) The customs department does not have powers to discount or not consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... code of law which is to be applied by the courts of all the signatory nations in a manner that leads to the same result in all the signatory nations." (para 24) 4.2.4 Next relied on was decision also of the Apex Court in Entertainment Network (India) Limited and Anr. vs. Super Cassettee Industries Ltd. and Ors. [(2008) 13 SCC 30]. The Supreme Court while dealing with the application of international conventions in India, observed that while interpreting the municipal laws, conventions and norms can be relied for the following purposes, "In interpreting the domestic/municipal laws, this Court has extensively made use of International law inter alia for the following purposes: (i) As a means of interpretation; (ii) Justification or fortification of a stance taken; (iii) To fulfill spirit of international obligation which India has entered into, when they are not in conflict with the existing domestic law; (iv) To reflect international changes and reflect the wider civilization; (v) To provide a relief contained in a covenant, but not in a national law; (vi) To fill gaps in law." (para 71) 4.2.5 It was further observed in Entertainment Network (supra), submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Stand of Respondents 4.3 On behalf of the respondents, detailed affidavit-in-reply was filed to contest the petition, oppose the prayers and answer the various contentions raised. It was stated that the show-cause notice was issued for denial of exemption benefit under Notification No. 46/2011 after necessary verification and investigation done by the Directorate of Revenue Intelligence regarding authenticity of Certificate of Origin, which was done as per the procedure provided under Rules of Origin. It was stated that in the instant cases, the petitioners failed to provide correct Country of Origin Certificate(COO) issued on the basis correct and authentic information and supporting documents by the supplier-exporter as per the provisions under the Rules of Origin. It was contended that the goods could not have been availed the benefit of exemption under the said notification to earn the concessional basic customs duty. 4.3.1 It was contended that as revealed, the importer had imported the goods through the manufacturer Malaysian Smepting corporation to avail zero basic customs duty under Serial No. 100(I) of the Notification No. 46/2011 by misrepresenting the RVC to be abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Rules of Origin and Customs Tariff (DOGPTA between ASEAN & India) Rules, 2009. (ii) The Articles of Agreement and provisions stand in harmony with other. The Articles of Agreement AIFTA speak about operation and implementation of provisions of Customs Act, 1962. (iii) The Customs authority is referred in several articles. The powers of the Customs authorities are accepted in the treaty provisions. (iv) None of the Articles or clauses of the Agreement or Rules of Origin have been breached. The Malaysian authorities have endorsed to the non-compliance of Rule 4 of Rules of Origin in respect of the requirement of requirement of 35% AIFTA contain calculation by the exporters. (v) The minimum requirement of 35% Regional Value Content was a pre-condition for availing the benefit of differential tariff under the Agreement. The said pre-condition was not satisfied therefore importers were not entitled to differential tariff treatment on such import. (vi)The Malaysian authorities did not cooperate at the stage when the Customs authorities acted themselves in accordance with Rule 16. Thereafter, notification under Rule 17 was issued. (vii) Any strict-time line is not pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, it is quite necessary to examine the legal principles in respect of applying and implementing the international law within the State or particular country. It is pertinent to discuss for the purpose, the interrelationship between the international law provisions and municipal laws-more appropriately described as State laws. 5.1 International laws may find their exposition in form of customary international law, international Conventions or the international treaty provisions. International treaties are the pacts entered into by two or more nations out of politically inclined union or to develop and foster international political relations. 5.2 In the present controversy, the issue is about applicability of international treaty provision visa-vis the State law, although it could be safely said that whether it is customary international law, convention or treaty, the principles regarding their applicability and efficacy vis-a-vis the State law would be parallel and same. 5.3 In Union of India Vs. Agricaps LLP [(2020) 3 73 ELT 752 (SC): 2020 (10) Scale 740], the Supreme Court observed, "Application of treaties into national legal systems and the hierarchical status of the nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the contracting States, their Courts, officials, and the like, these States must take steps as are necessary according to their Municipal Law, to make these provisions binding upon their subjects, Courts, officials, and the like. 5.6 In order to implement the stipulations in any treaty, enactment of municipal or State law is necessary. International treaty provisions find their implementative efficacy in the member State or country through the laws enacted by the Sovereign legislature of such State. Theories on Relationship 6. A brief discourse on the theories governing the relationship of international law and municipal law, would provide a preface. This relationship is always a complex question, more particularly when the question arises for implementing the international law in particular state or country to regulate the rights and obligations of the citizens of the State. 6.1 One is the monistic theory, pronounced by German Scholar Moser and Martens, later developed in the early 20th century by the Australian jurist Kelsen. This school of thought perceives only one legal system. Its view is that the municipal law or the state law as well as international law are part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the member countries. 6.7 The monistic theory preaches and follows the principle of incorporation. It treats the international law principles to have been incorporated as State laws to operate effective within the State. The dualistic theory embraces the doctrine of transformation. In order to apply any or all international laws within the State, they must be transformed and converted into State laws enacted by the sovereign law making body. Transformation Into State Laws 7. The two theories also explain the difference between the doctrine of incorporation and the doctrine of transformation in the context of the implementation of the international law provisions and rules. The difference is that the process of incorporation is to adopt the international law principles into the municipal law just because it is international law. The international law in other words becomes automatically applicable within the sphere of municipal law within the State. On the other hand, the doctrine of transformation necessitates a conscious act on part of the State concerned to transform the rules of international law as part of State sovereign law so as to implement them for the subjects and ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chanism defining Indian law relationship with international law provisions, in the present case the treaty provisions, is the Constitutional framework envisaged under the Constitution. 8.1 Since advent of our sovereign Constitution, Indian practice with regard to relationship of international law and Indian law is governed and guided by Constitutional provisions. Article 51 in Part IV of the Constitution, under the head "Directive Principles of State Policy" inter alia provides that the States shall endeavour to (a) promote international peace and security, (b) maintain just and honourable relations between nations; (c) foster respect for international law and treaty obligations in the dealings of organised people with one another and (d) encourage settlement of international disputes by arbitration. 8.2 It is well settled that the Directive Principle provisions of Part IV of the Constitution are not enforceable in the Court of law, however, it is true that they are guiding principles fundamental to the governance of the country and that in interpretation of the fundamental rights, and in constitutional interpretation in any area, the Directive Principles become an aid to play th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to make laws. Thus, the Constitution contemplates enactment of law by the Parliament to regulate the executive power of entering into treaties and their implementation. As already noticed, treaty remains in the realm international political, and the implementation of provisions of treaty would be a legal exercise to be finally undertaken through domestic laws and rules enacted by the law making bodies of the country and then enforced by the Courts of law as arbiters of all laws. 8.8 In Agricas LLP (supra), the Supreme Court stated that law of India vis-a-vis implementation of treaty provisions and the international law are not very different from other Commonwealth countries. The constitutional scheme in this regard highlighted above was delineated by the Apex Court in following words, "Article 73 of the Constitution delineates the extent of executive power of the Union which extends to all matters with respect to which the Parliament has the power to make laws and it extends to the exercise of such rights, authority and jurisdiction as are exercisable by the Central Government by virtue of any treaty or agreement. Proviso to the Article deals with limitation of the executive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an executive act and the second a legal act if domestic law is required. Unless the Parliament assents to the treaty and accords its approval to the first executive act, the performance has no force of law though the treaties created by the executive action bind the contracting States and, therefore, means must be found for their implementation within law. Consequently, whenever a peace treaty involves municipal execution, statutes have to be passed. While accepting the contention that precedents of this Court are clear that no cession of Indian territory can take place without constitutional amendment, the Constitution Bench held that the settlement of a boundary dispute cannot be held to be cession of territory. Accordingly, the decision to implement the award by exchange of letters treating the award as an operating treaty by demarcating the correct boundary line was within the executive power of the government, and no constitutional amendment was required." (para 30) 9.3 The Supreme Court referred to its own earlier Constitution Bench decision in Reference President of India under Article 43(1) of the Constitution on the implementation of Indo-Pakistan Agreement relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y concerned, then only they affect, regulate and govern the rights of the subjects, to find teeth for implementation and enforceability. 10.1 English decision in Maclaine Watson & Co. Ltd. v. Department of Trade and Industry & Anr. [(1989) 3 All ER 523], was narrated by the Supreme Court in Agricas LLP (supra), observing that making of treaty itself does not alter the law nor has any effect of changing or modulating rights of the individuals. "...as a matter of the constitutional law of the United Kingdom, the royal prerogative, whilst it embraces the making of treaties, does not extend to altering the law or conferring rights on individuals or depriving individuals of rights which they enjoy in domestic law without the intervention of Parliament. Treaties, as it is sometimes expressed, are not self-executing. Quite simply, a treaty is not part of English law unless and until it has been incorporated into the law by legislation." (para 32) 10.2 It was apropos observed by the Supreme Court in Agricas LLP (supra) that a treaty becomes incorporated into the laws by the statute, the Courts in United Kingdom have no power to enforce treaty rights and obligations at the behest of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent the State in all matters international and may by agreement, convention or treaties incur obligations which in international law are binding upon the State. But the obligations arising under the agreement or treaties are not by their own force binding upon Indian nationals. The power to legislate in respect of treaties lies with the Parliament under Entries 10 and 14 of List I of the Seventh Schedule. But making of law under that authority is necessary when the treaty or agreement operates to restrict the rights of citizens or others or modifies the laws of the State. If the rights of the citizens or others which are justiciable are not affected, no legislative measure is needed to give effect to the agreement or treaty." (para 80) Sovereign Will and Treaty Provisions 11. Enactment of laws pursuant to international law rules in the member country is a sovereign function of the Parliament and legislative organs which are the law making bodies of the country. Treaty provisions are made to operate in statutory formation. There would be no gainsaying that how to have intake of the treaty provisions, in what manner and to what extent into the municipal laws, would be the sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision must submit to State law, "There can be no question that nations must march with the international community and the Municipal law must respect rules of International law even as nations respect international opinion. The comity of Nations requires that Rules of International law may be accommodated in the Municipal Law even without express legislative sanction provided they do not run into conflict with Acts of Parliament. But when they do run into such conflict, the sovereignty and the integrity of the Republic and the supremacy of the constituted legislatures in making the laws may not be subjected to external rules except to the extent legitimately accepted by the constituted legislatures themselves. The doctrine of incorporation also recognises the position that the rules of international law are incorporated into national law and considered to be part of the national law, unless they are in conflict with Act of Parliament. Comity of Nations or no, Municipal Law must prevail in case of conflict. National Courts cannot say yes if Parliament has said no to a principle of international law." (para 5) 12.1.1 It was pertinently observed further that the courts of the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court stated, 'The positive commitment of the States parties ignites legislative action at home but does not automatically make the covenant an enforceable part of corpus juris of India.' 13.2 The above proposition of law was enunciated bythe Supreme Court after quoting with approval, the observations of the Kerala High Court in Xavier Vs. Canara Bank Limited [(1969) KER LT 927], which dealt with the very Article 11, and stated in para 10, "...... The remedy for breaches of International law in general is not to be found in the law courts of the State because International Law per se or proprio vigore has not the force or authority of civil law, till under its inspirational impact actual legislation is undertaken. I agree that the Declaration of Human Right merely sets a common standard of achievement for all peoples and all nations but cannot create binding set of rules. Member States may seek through appropriate agencies, to initiate action when these basic rights are violated; but individual citizens cannot complain about their breach in the municipal courts even if the country concerned has adopted the covenants and ratified the Optional Protocol. The individual cannot co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scheduled matches. The controversy arose as to whether the Government of India should allow the said cricket players despite their links with South Africa, in view of the obligation arising under the said international Gleaneagles Accord. 13.7 Referring to Article 51 Part IV of the Constitution, it was observed by the Karnataka High Court in paragraph 10 said that the same was not enforceable by the court of law, which was only Directive Principle, "The provisions in Part-IV of the Constitution contain the directive principles of State policy. The provision in Article 51, occurring in that part, provides, inter alia, that the State shall endeavour to foster respect for inter-national law and treaty obligations in dealings of organised peoples with one another. The provision in Article 37 occuring in the same part, though it declares that the directive principles in part-IV are fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws, states that the provisions in that part shall not be enforceable by any court." 13.7.1 It was further stated in same paragraph, "From this it follows that the provision in Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether a treaty with the British Government and the princly State of Dholapur which was not given effect to, by means of a legislative enactment, could be regarded as part of Municipal Law of the then Dholapur State. It was observed that, "....Treaties which are part of the international law do not form part of the law of the land unless expressly made so by the legislative authority. In the present case the treaty remained a treaty only and no action was taken to incorporate it into a law. That treaty cannot, therefore, be regarded as a apart of the Municipal law of the then Dholapur State" Role of Courts 14. International law rules or treaty provisions are not per se enforceable in the courts of sovereign country. The courts especially the Constitutional courts, are mandated to implement and interpret the sovereign laws. The power of judicial review exercised by the constitutional courts is, in itself an instance of sovereign function. When it comes to weighing or giving effect to the provisions of international law translated into municipal laws, the court would be concerned with giving effect to the law made by the sovereign nation for which it exists. 14.1 The provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f international law and municipal law and, being organs appointed by the State, they are compelled to apply the latter". 14.5 Decision of Calcutta High Court in Shri Krishna Sharma vs. The State of West Bengal & Ors. [AIR 1954 Cal. 591] deserves to be referred to. The Division Bench of Calcutta High Court was concerned with applying the provisions of Anglo-Tibetian Trade Regulations of 1914 regarding free export to Tibet out of India. It was one of the contentions on behalf of the State of West Bengal by the Advocate General, inter alia that assuming that under the 1914 Regulation, unfettered export of goods was permitted, the subsequent Indian statutes such as Essential Supplies Act, 1946 and the various Orders passed thereunder, Import and Exports (Control) Act, regulating the export etc. would prevail over the implied provisions of earlier Anglo-Tibet Regulations 1914 and the export of goods out of India to Tibet would be in violation of Indian statutes. 14.6 On the other hand, petitioners argued to invoke the Maxim Generalia Specialibus Nonderogant to contend that the Anglo-Tibet Trade Regulations governing the special case of trade and commerce between India and Tibet should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot in dispute. As stated above, it is the core aspect of misrepresented and fraudulent RVC content. Nor the dispute relates to classification of products or other related matters. However, the contention of the petitioner that Article 24 mechanism should have been resorted to by the respondents may be dealt with irrespective of and independent of the above aspect and consideration. 15.1 Though part of international treaty, AIFTA Article 24 remains at that stage and status. It is not transformed into or converted into State law. While DOGPTA Rules, 2009 have been framed by competent exercise of powers by the Government of India under the Customs Tariff Act, 1975, Article 24 or any similar or analogous provision is not made part of the Rules. It is these Rules, which carry forward the international treaty provisions into statutory rules to be accordingly applied to the rights and obligations within the country for the citizens and subjects. Article 24 is expressly omitted and not recognised to be transformed into statutory law of the land. When Article 24 is not included in the domestic statutory rules framed by the law making body, it cannot be implemented. 15.2 In Agricas LLP (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the municipal laws, the international norms can be relied on for the purpose including to fill up the gaps in law, the Supreme Court speaks of gaps to be filled up in the interpretational process only. The Court cannot apply treaty provision not forming part of the State law and fill the gap. Filling of the gap is not to be perceived in this way which otherwise would be contrary to the basic principle that without competent legislation at the sovereign State level, the treaty provision cannot be enforced. 15.8 The gaps to be filled in in the working of international law provision vis-a-vis State law provision are to be of those nature to render the State law become applicable in tune with the international law. Filling up the gap cannot be construed, nor it is so suggested by the Supreme Court to mean reading any provision in the State law merely because such provision is there in the international treaty, when such provision is not consciously accepted and not transformed by the legislature in the law enacted by it. Article 24 of AIFTA not figuring in the Indian law is not an issue in the realm of interpretation, but it is an instance of State law expressly omitting and rescind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contents of wrongfully showing of RVC of the goods. The details for arriving at RVC was misleading and there was suppression of due and correct facts. Due to suppression noticed and found as per the facts already recorded hereinabove, the petitioners became disentitled to the concessional rate of duty and preferential treatment under Notification No. 46/2011 to become liable to pay basic customs duty on the goods imported. The facts of the instant cases could attract the provisions of section 28 (4) and attendant provisions. Due to wrongful availment of the concession in the duty(0%), there was non-payment or short levy of the Customs duty in the goods and the exemption notification benefit was not available. 16.3 The provisions from sub-section (4) to sub-section (8) of Section 28 of the Act, are reproduced hereinbelow, "(4) Where any duty has not been levied or not paid or has been short-levied or short-paid or erroneously refunded, or interest payable has not been paid, part-paid or erroneously refunded, by reason of,- (a) collusion; or (b) any wilful mis-statement; or (c) suppression of facts, by the importer or the exporter or the agent or employee of the import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n(4), the period during which there was any stay by an order of a court or tribunal in respect of payment of such duty or interest shall be excluded. (7A) Save as otherwise provided in clause(a) of sub-section (1) or in sub-section (4), the proper officer may issue a supplementary notice under such circumstances and in such manner as may be prescribed, and the provisions of this section shall apply to such supplementary notice as if it was issued under the said subsection(1) or sub-section(4). (8) The proper officer shall, after allowing the concerned person an opportunity of being heard and after considering the representation, if any, made by such person, determine the amount of duty or interest due from such person not being in excess of the amount specified in the notice." 16.4 Thus, sub-section (4) of section 28 provides that where any duty has not been levied or not paid, etc., on account of the reasons of (a) collusion (b) any willful misstatement or (c) suppression of facts by the importer or exporter or agent or employee of the importer or exporter, the competent officer may act within five years from the relevant date and serve notice on the person chargeable with du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, element of willfulness can be said to have been done away with. Suppression of facts simplicitor can be a ground here. 16.7 The suppression of fact is clearly attributed to the petitioners inasmuch as what was required to be disclosed and proof of contents of the Bills of Entry was to be subscribed in form of declaration under Section 46 of the Act. The petitioners had been in regular course of business of import and acted in such course. They were aware about RVC details which was wrongful and suppressive. The importer of any goods thereunder is required to present to the proper officer Bill of Entry for home consumption or warehousing in the manner prescribed in sub-section (2). The Bill of Entry shall include all the goods mentioned in the Bill of Lading or other receipt given by the carrier to the consignee. Under subsection (4), the importer while presenting a Bill of Entry has to subscribe and make a declaration regarding the truth of the contents of the Bill of Entry. In the present case, the Origin Certificate containing the RVC value details was part and parcel of the documents for which truthfulness was declared. 16.8 Sub-section (4) of section 46 reads as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 28. 17.1 Even if the exemption notification may be construed liberally to extend the benefit thereunder, the eligibility criteria contemplated thereunder has to be strictly construed. This was stated in Commissioner of Customs (imports) Mumbai Vs. Tullow India Operations Limited [2005 (189) ELT 401 SC]. "The principles as regard construction of an exemption notification are no longer res integra; whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefor the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed liberally. An eligibility criteria, therefore, deserves a strict construction, although construction of a condition thereof may be given a liberal meaning. (para 36) 17.2 The findings about the fraudulent and suppressive contents about RVC and the consequential wrongful Origin Certificates produced by the petitioners-importers, and taking erroneous preferential duty benefit by them under the Exemption Notification, provided solid base for the Customs authority to proceed under section 28(4) of the Act. It is to be noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot implementable or enforceable per se in the member States. The international law rules have to be transformed into State laws to make them implementable within the State and to make them govern the rights and obligations of the subjects and citizens of the State. (iii) It is the sovereign legislature of the State which would enact the State laws or municipal laws pursuant to the treaty provisions to be applied in the country. The Government of India has enacted Customs Tariff (DOGPTA between ASEAN and Republic of India) Rules, 2009. (iv) In the process of enactment of laws to give effect to the treaty provisions, the sovereign legislature would be competent not to recognize, except, give effect to and not to transform any of the treaty provisions into the municipal statutes. (v) The legislature of the State may, while enacting the law, omit or rescind any of the treaty provisions. A treaty provision omitted to be transformed would not be implementable nor it could be enforced in court of law of particular State. (vi) AIFTA Article 24, though figures in the said international treaty, it is not enacted in the Customs Tariff (DOGPTA between ASEAN and Republic of India) Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X
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