In re Jparks India Private Limited (CAAR Mumbai)
The Authority for Advance Rulings, Customs (CAAR), Mumbai examined whether preferential customs duty benefits under the Asia-Pacific Trade Agreement (APTA) could be claimed in cases involving third-party invoicing, with reference to Notification No. 50/2018-Customs dated 30 June 2018 and the Rules of Origin notified under Notification No. 94/2006-Customs (N.T.).
The applicant sought advance rulings on multiple questions, primarily whether third-party invoicing is permissible under APTA and, if so, whether preferential duty benefits could still be claimed when invoices are issued by an entity located in a third country, with variations in the details mentioned in different boxes of the Certificate of Origin (COO).
The Authority first confirmed that the application was maintainable under Section 28H of the Customs Act, 1962, as it concerned the applicability of a notification issued under Section 25(1), and that the applicant was a valid applicant holding an Importer Exporter Code.
The ruling then examined the legal framework governing APTA. Preferential treatment under APTA is governed by the Rules of Determination of Origin of Goods, 2006. Under these rules, goods must qualify as “originating products” by being either wholly produced in the exporting participating state or satisfying prescribed value-addition criteria, including limits on non-originating materials and performance of final manufacture in the exporting state. Certain minimal or simple operations are specifically excluded from conferring origin. Origin may also be established through cumulation, subject to a minimum aggregate originating content. Additionally, goods must meet the direct consignment requirement, and preferential treatment can be claimed only when supported by a valid Certificate of Origin issued by the designated authority of the exporting participating state.
The Authority noted that these substantive Rules of Origin contain no provision permitting third-country or third-party invoicing. While the notes for completing the Certificate of Origin refer to third-party trade and allow the use of the words “To Order” in Box 2, this reference was held to be procedural in nature. It does not amount to a substantive authorization for third-party invoicing, as no corresponding enabling provision exists in the Rules of Origin themselves.
The applicant relied on CBIC Instruction No. 23/2024-Customs dated 21 October 2024, which clarifies issues related to third-party invoicing under certain free trade agreements. The Authority held that this instruction applies only to agreements that already expressly permit third-party invoicing, such as the ASEAN-India FTA, and cannot be used to create or imply such permission under APTA, which lacks any such clause.
The applicant also relied on CBIC Circular No. 53/2020 dated 8 December 2020 relating to the Duty-Free Tariff Preference Scheme for Least Developed Countries. The Authority found this circular inapplicable, as it was limited to “wholly obtained” goods where origin is not based on value addition. In the present case, origin under APTA depends on value-addition criteria, making the circular irrelevant.
Judicial precedents cited by the applicant were examined. Decisions relating to agreements that explicitly permit third-party invoicing were held to be distinguishable. Supreme Court judgments emphasizing strict interpretation of exemption notifications were relied upon to reiterate that substantive conditions for exemptions must be complied with strictly and cannot be relaxed or inferred by implication. Advisory guidelines issued by the World Customs Organization were also held to be non-binding and incapable of expanding rights not provided in the governing rules.
On this basis, the Authority concluded that, in the absence of an express enabling provision in the APTA Rules of Origin, third-party invoicing is not permitted under APTA. Procedural references in the Certificate of Origin instructions or general clarifications issued for other trade agreements cannot be construed to create such a right.
Accordingly, the Authority ruled that the concept of third-party invoicing is not allowed under APTA. It further held that references such as “To Order” in Box 2 of the Certificate of Origin do not provide a basis for claiming preferential benefits and merely relate to procedural handling. Questions relating to omission or variation of exporter details in Box 1 of the Certificate of Origin were held to be not applicable in light of the primary finding. The ruling reaffirmed that preferential benefits under exemption notifications must be claimed strictly in accordance with the express provisions of the applicable trade agreement and rules of origin.
FULL TEXT OF THE ORDER OF CUSTOMS AUTHORITY OF ADVANCE RULING, MUMBAI
