CESTAT New Delhi Restores India-Thailand FTA Benefit To P.C. Jeweller Citing Verification Rules

On Tuesday, 14 July, the Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) at New Delhi, held that the Directorate of Revenue Intelligence (DRI) cannot deny preferential customs duty benefits under the India-Thailand Free Trade Agreement without following the prescribed procedure to verify Country of Origin (COO) Certificates with the issuing authority.

A Bench of Judicial Member Ashok Jindal and Technical Member K. Anpazhakan allowed a batch of appeals filed by P.C. Jeweller Ltd. and its officials and set aside the customs duty demands and penalties imposed on them. It observed:

“The certificate of country of origin issued by the competent authority can be doubted, if so, the mechanism has been given under Rule 14 and 15 and the same has not been followed by the DRI. In that circumstances, we hold that the benefit of Notification claimed by the appellant cannot be denied.”

P.C. Jeweller Ltd. imported diamond-studded gold jewellery from Thailand during 2010-11 and 2011-12 and claimed preferential duty benefits under Notification No. 85/2004-Customs read with Notification No. 101/2004-Customs (NT) by producing COO Certificates issued by Thai authorities.

Customs authorities cleared the consignments without objection. Later, the DRI investigated the imports and alleged that the certificates incorrectly reflected the local value addition required under the India-Thailand Free Trade Agreement. It issued a show cause notice denying the exemption and demanding duty, interest and penalties.

P.C. Jeweller argued before the Tribunal that the DRI questioned the validity of the COO Certificates without seeking verification from the issuing authority in Thailand, as required under the Interim Rules of Origin. The Revenue argued that the certificates failed to establish the mandatory regional value content of 20% and relied on statements recorded during the investigation and other material gathered in India.

The Tribunal examined the Interim Rules of Origin and held that Rules 14 and 15 provide a complete mechanism for retrospective verification when the importing country doubts the authenticity or accuracy of a COO Certificate. It held that the DRI relied on statements and third-party material collected during the investigation instead of invoking the prescribed verification mechanism. It observed:

“The allegations in the show cause notice are contrary to the procedure prescribed for verification and rejection of country of origin certificates as per the rules. Therefore, the impugned proceedings against the appellants are not sustainable.”

Further, the Bench relied on its earlier decision in Hazoorilal & Sons Jewellers Pvt. Ltd. and held that the Department's failure to follow the prescribed verification procedure rendered the proceedings unsustainable.

Accordingly, the CESTAT set aside the duty demand, dropped the penalties imposed on P.C. Jeweller Ltd. and its officials, and allowed the appeals with consequential relief.

For Appellants: Shri T. Chakrapani and Ms. Pooja, Consultants; Shri Anil Kumar, Shri Jiten Yadav and Ms. Neelam Murpana, Advocates

For Respondent: Shri Rajesh Singh, Authorised Representative