CESTAT quashes Order Denying Concessional Duty Rate under Preferential Trade Agreement

TCP Limited Vs Commissioner of Customs (CESTAT Chennai)

Introduction:

TCP Limited challenges the rejection of concessional duty rates on the import of Steaming Non-Coking Coal in a case against the Commissioner of Customs. The CESTAT Chennai, after evaluating the grounds for rejection, issues a detailed order. This article provides an in-depth analysis of the case, highlighting the key arguments, legal provisions, and the tribunal’s ruling.

Detailed Analysis:

1. Import and Claimed Benefits: TCP Limited imported Steaming Non-Coking Coal and claimed a 5% Basic Customs Duty (BCD) and exemption of 4% Special Additional Duty (SAD) under specific Customs Notifications. The company later sought the benefit of a 4% BCD under the Preferential Trade Agreement (PTA) with Indonesia.

2. Disputed Grounds for Rejection: The Customs authorities rejected the concessional rate, citing discrepancies in the invoices. They pointed out differences in invoice numbers and supplier names between the Country of Origin Certificate (COO) and the actual supplier’s invoice from Dubai, UAE.

3. Legal Arguments: TCP Ltd. argued that the PTA allows the invoice to be issued by a third-party country. Referring to operational certification procedures, the company contended that the minor discrepancies in invoice numbers were due to the split invoices for convenience.

4. Tribunal’s Analysis: The CESTAT Chennai analyzed the grounds for rejection, focusing on the PTA provisions. It observed that the PTA permits invoices from third-party countries. The tribunal dismissed the rejection based on supplier names and minor discrepancies in invoice numbers, emphasizing that these did not impact the PTA benefits.

Conclusion:

The CESTAT Chennai’s order in TCP Ltd. vs Commissioner of Customs overturns the rejection of concessional duty rates on imported coal. The tribunal clarifies that the PTA allows invoices from third-party countries and considers minor discrepancies irrelevant to PTA benefits. This ruling ensures that TCP Ltd. is entitled to the claimed concessional rates, setting a precedent for similar cases. The detailed analysis of the legal provisions and the tribunal’s reasoning provides clarity on the application of PTA benefits in coal imports.

FULL TEXT OF THE CESTAT CHENNAI ORDER

1.1 Brief facts are that the appellants imported Steaming Non-Coking Coal and filed two Bills of Entry dated 26.11.2010 and 12.01.2011 for clearance of the same. The said imported goods were supplied by M/s. Coal and Oil Company LLC, Dubai UAE at a unit price of $ 60.11/MT and $59.92/MT respectively and the goods were declared to be of Indonesian origin.

1.2  At the time of filing the Bills of Entry, the appellant claimed 5% Basic Customs Duty (BCD) under Customs Notification No. 21/2002 (Sl. No. 17) and exemption of 4% Special Additional Duty (SAD) under Customs Notification No. 20/2006 (Sl.No. 2). Since the imported goods are in bulk in order to verify the exact quantity pending draft survey report, the Bills of Entry were assessed provisionally.

1.3  Later, the appellant vide letter dated 24.11.2011 claimed the benefit of 4% Basic Customs Duty (BCD) under Customs Notification No. 153/2009 (Sl. No. 197) (as amended) by submitting a copy of the Country of Origin Certificate (COO) issued so as to establish that the goods have been imported from Indonesia under the Preferential Trade Agreement (PTA) between ASEAN Countries and Republic of India on fulfilling the conditions stipulated in the Customs Tariff Rules, 2009, as notified under Customs Notification No. 189/2009 (N.T.).

1.4 In view of the claim made by the importer, a personal hearing was accorded. After due process of law, the original authority rejected the claim of the appellant with regard to the concessional rate of duty under the Preferential Trade Agreement. The reason for rejecting the claim was that there were discrepancies in the invoices as the invoice was issued from a third country viz., Dubai, UAE whereas the Country of Origin Certificate was from Indonesia. Secondly, it was also noted that the invoice number noted in the Country of Origin Certificate did not fully tally with that of the invoice issued by the supplier at Dubai.

1.5 Aggrieved by the order of rejection of the concessional rate of duty as per the Preferential Trade Agreement, the appellant filed an appeal before the Commissioner (Appeals) who vide order impugned herein upheld the order passed by the adjudicating authority. Hence, the appellant is now before the Tribunal.

2.1  The Ld. counsel Ms. Shobana Krishnan appeared and argued for the appellant. It is submitted that the appellant had entered into contract with the supplier at Dubai, UAE for supply of the goods. The said supplier has sub-contracted for supply of goods to the Indonesian supplier. There is no dispute that the goods are of Indonesian origin. The authorities below have rejected the benefit of Preferential Trade Agreement alleging that the supplier’s name and invoice number in Country of Origin Certificate are different from the actual supplier name and invoice number.

2.2 The Ld. counsel adverted to Annexure III under Rule 13 prescribing operational certification procedures for Customs Tariff (Determination of Origin of Goods) Rules, 2009 of ASEAN Preferential Trade Agreement at paragraph 22 which states that the sales invoice can be either issued by a company located in a third country or an AIFTA exporter. The relevant para reads as under:-

“22. The Customs Authority in the importing party shall accept an AIFTA Certificate of Origin where the sales invoice is issued either by a company located in a third country or an AIFTA exporter for the account of the said company, provided that the product meets the requirements of these rules.”

2.3  The Ld. Counsel asserted that the Preferential Trade Agreement allows the supply to be made by a third party country and it is only necessary that the goods should originate from Indonesia. In the present case, the Country of Origin Certificate establishes that the goods are of Indonesian origin. The discussions made by the Commissioner (Appeals) in Page 5 was referred to by the Ld. counsel for the appellant to submit that there is a finding made by the Commissioner (Appeals) that there is no dispute with regard to the fact that the goods originate from Indonesia and also that there is no error in filing the invoice of a third party supplier. However, the Commissioner (Appeals) has observed that there are discrepancies noted by the original authority. The Ld. counsel pointed out that the said discrepancies have not been clarified in the impugned order. However, the same may be because the invoice number noted in the Country of Origin Certificate as well as the invoice raised by the supplier at Dubai, UAE shows a very minor difference wherein letters A and B were found added at the end of the number of the invoice on Country of Origin Certificate. It is explained by the Ld. counsel that this is because a single invoice has been split into two for the sake of convenience of the quantity. It is prayed that the appeal may be allowed.

3.1  The Ld. Authorized Representative Shri R. Rajaramanan appeared and argued for the Department. The Ld. AR adverted to the discussions made by the original authority in Paragraph 7 of the order. The discrepancies noted by the original authority are as under:-

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3.2  It is asserted by the Ld. AR as the Country of Origin Certificate does not contain the letters A and B which is mentioned in the invoice issued by the original supplier at Dubai, UAE and therefore authorities below have rightly rejected the benefit of concessional duty as per PTA. It is prayed that the appeal may be dismissed.

4. Heard both sides.

5.1 The issue is the rejection of the benefit of Preferential Trade Agreement on the Steaming Non-Coking Coal imported by the appellant. The first ground on which the authorities below have rejected the benefit is that the invoice has been raised by the third party country. On perusal of the Preferential Trade Agreement, we find that in Paragraph 22, it allows the invoice to be issued by a third party country. We therefore hold that the rejection of the benefit of the Notification on this ground cannot sustain and requires to be set aside.

5.2 The second ground for rejection is that there is a difference in the invoice number as noted in the Country of Origin Certificate compared to the invoice issued by the Dubai supplier. On perusal of the invoice, we find that along with the number of the invoice there is an addition of the letters A and B in the invoices issued by the Dubai, UAE supplier. It is understood that the invoices were split into two for the convenience of the quantity of the goods exported and for issuing the Country of Origin Certificate respectively. These discrepancies do not have any bearing to the benefit under the Preferential Trade Agreement. The Ld. counsel has been able to give plausible explanation for the minor difference in the invoice numbers. We therefore find that the rejection of the benefit on the second ground also cannot sustain and requires to be set aside.

6. From the foregoing, we hold that the impugned order rejecting the benefit of concessional rate of duty as per the Preferential Trade Agreement is not justified. The impugned order is set aside. The appeal is allowed with consequential relief, if any, as per law.

(Order dictated and pronounced in open court)