Hazoorilal & Sons Jewellers Private Limited Vs Principal Commissioner of Customs (CESTAT Delhi)
Material Facts: The appellant, M/s. Hazoorilal and Sons Jewellers, along with its Director, Shri Sandeep Narang, imported jewellery from Thailand under 19 Bills of Entry. The appellant claimed duty-free import benefits under Exemption Notification No. 85/2004-CUS, dated 31.08.2004, issued under the Free Trade Agreement (FTA) between India and Thailand. To support its claim, the appellant submitted Certificates of Origin issued by the designated competent authority in Thailand. These certificates uniformly reflected a value addition of 22% in Thailand, satisfying the minimum statutory requirement of 20% under the “Interim Rules of Origin” published via Notification No. 101/2004-CUS (NT), dated 31.08.2004. Customs officers initially cleared the goods under the 19 Bills of Entry based on these certificates.
Procedural History: Following an investigation, the Directorate General of Revenue Intelligence (DRI) concluded that the value addition in Thailand could not have exceeded 20%. The DRI issued a Show Cause Notice (SCN) dated 14.07.2014 proposing to deny the exemption, recover differential customs duty with interest, and impose penalties. The Principal Commissioner confirmed the proposals in the SCN via an Order-in-Original dated 16.01.2023. Aggrieved by this order, the appellants filed appeals before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi.
Legal Issues
- Whether the Revenue/DRI can reject or doubt Certificates of Origin issued by a competent authority in an exporting country without following the retroactive verification procedure prescribed under the governing Interim Rules of Origin.
- Whether the differential duty demand, interest, and penalties confirmed in the impugned order are legally sustainable.
Statutory Provisions
- Exemption Notification No. 85/2004-CUS, dated 31.08.2004
- Notification No. 101/2004-CUS (NT), dated 31.08.2004 (“Interim Rules of Origin”)
- Rule 14 and Rule 15 of Annexure B (Operational Certification Procedures) to the Interim Rules of Origin
Parties’ Submissions
- Appellants’ Submissions:
- The imports were accompanied by valid Certificates of Origin issued by the competent government authority in Thailand, showing 22% value addition, which exceeds the required 20% threshold.
- The proper procedure to verify or dispute the authenticity/accuracy of the certificates is laid down under Rule 15 of Annexure B to the Interim Rules of Origin.
- Revenue’s Submissions:
- Supported the findings of the Principal Commissioner in the impugned order, relying on the DRI investigation, which included four recorded statements and a letter from another jeweller regarding making charges.
Tribunal Observations & Findings
- Under Rule 14 and Rule 15 of Annexure B to the Interim Rules of Origin, if the Revenue or DRI entertained reasonable doubts regarding the accuracy of the value addition stated in the Certificates of Origin, the prescribed statutory mechanism was to request a retroactive check from the Issuing Authority in Thailand.
- Instead of initiating the mandatory retroactive check under Rule 15, the DRI recorded statements and relied on a letter from an independent third-party jeweller concerning making charges to issue the SCN.
- Both the SCN issued by the DRI and the subsequent order passed by the Principal Commissioner violated the legally mandated procedure for verifying and rejecting Country of Origin certificates under the Interim Rules of Origin.
Final Decision CESTAT Delhi held that the impugned order dated 16.01.2023 was contrary to law and unsustainable. The Tribunal set aside the order and allowed both appeals with consequential relief to the appellants.
FULL TEXT OF THE CESTAT DELHI ORDER
The order dated 16.1.20231 passed by the Principal Commissioner deciding the proposals made in the show cause notice dated 14.7.20142 issued by the Directorate General of Revenue Intelligence3 is assailed by M/s. Hazoorilal and Sons Jewellers4 and its Director Shri Sandeep Narang (the appellants) in these two appeals.
2. We have heard learned counsels for the appellants and the learned authorized representative for the Revenue and perused the records.
3. The issue in these appeals falls in a narrow compass.
4. Hazoorilal imported jewellery from Thailand with which India had a Free Trade Agreement and claimed the benefit of exemption Notification No. 85/2004-CUS dated 31.8.2004 which provided for duty free import of goods manufactured in Thailand. For this purpose, the Central Government published, by Notification No. 101/2004-CUS (NT) dated 31.8.2004, “Interim Rules of Origin” which, inter alia, provided for issue of „Certificates of origin‟ including the minimum value addition in Thailand required for the goods to qualify as having originated in Thailand.
5. Hazoorilal imported goods along with certificates of origin issued by the competent authority in Thailand showing the value addition in Thailand uniformly as 22% which was above the minimum requirement of 20% value addition. The goods were accordingly cleared by the Customs officers under 19 Bills of Entry filed by Hazoorilal.
6. Thereafter, DRI conducted an investigation and came to the conclusion that the value addition could not have been above 20% and therefore, issued the SCN proposing to deny the benefit of the exemption notification and recover the differential duty with interest and to impose penalties. These proposals have been confirmed in the impugned order.
7. The question which arises for consideration is whether the Country of Origin certificates issued by the competent authority can be doubted and if so, what is the mechanism available to the importing country. The „Interim Rules of Origin‟ notified by the Central Government answer these questions. Rule 14 of these rules reads as follows:
Rule 14. Certificate of origin.-A claim that products shall be accepted as eligible for preferential concessions in the importing Party shall be supported by a Certificate of Origin issued by a Government authority designated by the exporting Party and notified to the other Party to the Agreement in accordance with the Operational Certification Procedures, as set out in Annexure -B.
8. Annexure B to the Rules sets out detailed operational certification procedures. Rule 15 of this Annexure provides for retroactive verification of the certificates of origin at random or when there is a reasonable doubt. It reads as follows:
Rule 15
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 products in question or of certain parts thereof.
b. The request shall be accompanied with the Certificate of Origin concerned and shall specify the reasons and any additional information suggesting that the particular given on the Certificate of Origin may be inaccurate, unless the retroactive check is requested on random basis.
c. The Customs Authority of the importing Party may suspend the provisions on preferential treatment while awaiting the result of verification. However, it may release the products to the importer subject to any administrative measures deemed necessary, provided that they are not held to be subject to import prohibition or restriction and there is no suspicion of fraud.
d. The Issuing Authority receiving a request for retroactive check shall respond within three (3) months after the receipt of the request.
9. If DRI had come to the conclusion after its investigation that the value addition indicated in the Certificates of Origin could not have been correct, the proper procedure, as per the Rules, was to take up the matter with Issuing Authority of the Certificates of Origin in Thailand as per Rule 15 of Annexure B of the “Interim Rules of Origin” notified by the Central Government.
10. Instead, DRI summoned and recorded four statements of different persons, obtained a letter from some other jeweler (Bhola Nath Brothers, New Delhi) expressing what, according to him, must be the making charges of jewelry and based on these issued the SCN seeking to deny the benefit of the exemption notification available based on the Country of Origin Certificates issued by the Authority in Thailand.
11. The proposals in the SCN were confirmed by the Commissioner in the impugned order. Both the impugned order and the SCN issued by DRI are contrary to the procedure prescribed for verification and rejection of Country of Origin certificates as per the Rules.
12. The impugned order, being contrary to the law, cannot be sustained and deserves to be set aside and is set aside. Both appeals are allowed. The appellants will be entitled to consequential relief, if any.
(Order pronounced in open court on 06/04/2026.)
Notes:
1 impugned order
2 SCN
3 DRI
4 Hazoorilal
