Regional Value Content (RVC) is a critical mechanism in Free Trade Agreements (FTAs) that determines product eligibility for preferential tariff treatment by mandating a minimum percentage of value sourced within the agreement region. India has implemented RVC provisions in multiple trade agreements with ASEAN, Japan, South Korea, UAE, and others, typically setting thresholds between 30-50% to encourage regional economic integration and prevent trade deflection while promoting intra-regional supply chains. It was clarified that FTA benefits can still be availed if customs duties are paid based on the commercial value, which is used for RVC calculations. Proper documentation and compliance with CEPA rules, including recent amendments, are essential for validation and eligibility.
The key aspects of RVC are:
- RVC Calculation: RVC is calculated as a percentage of the local content in a product relative to its ex-works price. Several methods are used to calculate the RVC, and these methods are defined within each FTA.
- Build-up method (Value of Originating Materials): The percentage of the value of materials that originate in the FTA region is added to the price of the finished product.
- Build-down method (Value of Non-originating Materials): The percentage of non-originating materials is subtracted from the price of the finished product.
M/S INDIA TRADE LINK PRIVATE LIMITED VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS, NOIDA AND PRINCIPAL COMMISSIONER OF CUSTOMS, NOIDA VERSUS M/S INDIA TRADE LINK PRIVATE LIMITED 2025 (5) TMI 2019 – CESTAT ALLAHABAD made it clear from record, that the demand made in the impugned show cause notice, would not survive as there is nothing in the notice/order to impute knowledge and wilful intent on the part of the appellant to deliberately submit an incorrect improper Country of Origin Certificate with intent for evasion of duty.
The authorities haven’t shown that the person did anything wrong on purpose, so the demand in the notice doesn’t hold up.
Tribunal in a case of verification of Country of Origin Certificates, doubting the genuineness of the said certificates wherein procedure prescribed under Rule 9 had not been adhered to, did not accept the department’s contention of denial of concessional rate of duty in terms of the relevant exemption Notification. M/S KESAR SPICES VERSUS COMMISSIONER OF CUSTOMS-MUNDRA 2025 (5) TMI 1045 – CESTAT AHMEDABAD made it further clear that on enquiry Revenue found that the certificate of origin was actually issued by the Afghanistan Chamber of Commerce and Industries based upon documents of Customs and Agricultural Department of Kandhar. However, the DRI officials wrote to Director ICD to obtain the copies of the documents filed by Afghan supplier before Afghanistan Chamber of Commerce and Industries (ACCI). Thus, it is clear that the COO filed by the appellant was duly endorsed by the issuing authority. Therefore, neither the certificate can be taken to be denied by the relevant Government authorities nor can the origin of the goods be taken to be of some other country. It is clear that origin from Afghanistan is not specifically denied by the authorities there and department’s case that consignment moved from USA to Dubai and from there to Karachi port and then to India lacks credence as there is otherwise overwhelming documentary evidence available including examination reports before Karachi Customs and Afghanistan Customs, transit certificate and COO, which have not been denied or proved to be incorrect by the departmental authorities. We find the verified country of origin certificate is sufficient proof of the origin criteria and department cannot ignore this record, without the underlying authorities denying the same. We find that in the absence of Afghan Government Authorities or its Chamber of Commerce denying existence of such certificate of origin the requirement of Article 15 of the SAFTA Rules which provide for step to step verification process cannot be taken to be not fulfilled. Authenticity of COO needs to be denied as per the procedure of Article 15.
Furthermore, M/S. TECH ZONE GLOBAL TRADING COMPANY Vs. COMMISSIONER OF CUSTOMS (IMPORT) CHENNAI – II COMMISSIONERATE 2025 (5) TMI 589 – CESTAT CHENNAI: The judicial pronouncements and the irrefutable evidence brought out during the course of investigation, buttress the case of the department.” What were this irrefutable evidence has not been discussed. There is nothing more by way of explanation and analysis regarding the COO certificate being improper other than a statement. If it is the alleged movement of goods from China to India that is being additionally referred to, then it should have been clearly stated. The appellant has stated that the COO certificate have not been verified by the department with Malayasia as per the procedure provided in the Rules of 2009, and none of the certificates were found to be false. Further the goods were cleared by Malaysian Customs after verifying all the documents.
Moreover the Supreme Court in Smt. J. Yashoda Vs. Smt. K. Shobha Rani [2007 (4) TMI 11 – SUPREME COURT] stated the ‘Rule of Best Evidence’ as the rule which is the most universal, namely that the best evidence, the nature of the case will admit shall be produced. ‘So long as the higher or superior evidence is within your possession or may be reached by you, you shall give no inferior proof in relation to it.’ Although a strict compliance of the Evidence Act will not apply to a quasi- judicial proceedings, on the scale for evaluation of evidence, a certificate issued by an authorised entity carries more value than an allegation in a third-party statement or of documents that are not correlated to the BE’s.
Before filing reply to the show cause notice the appellant requested the department to provide them the copies of various documents/information relied upon in the show cause notice so that appellant can properly file their reply and defend them. It is found in the case of M/S JSW VALLABH TINPLATE PVT. LTD. VERSUS THE COMMISSIONER OF CUSTOMS, LUDHIANA 2024 (7) TMI 627 – CESTAT CHANDIGARH that not supplying these documents to the appellant would defeat and violate their fundamental rights of fair hearing inbuilt in the principles of natural justice – all the documents demanded by the appellant do not fall in the category of privilege and confidential documents more so when they have been relied upon while passing the impugned order.
However, to clear any doubt it is the burden on the department to get the verification from the Malaysia Government regarding authenticity of Certificate of origin which has not been discharged by the department in the present matter. Without checking the authenticity of certificate of origins, the certificate of origins cannot be discarded and on that basis benefit cannot be denied – in the interest of justice, one chance is given to the department to get the verification from concerned authorities about the genuineness of the certificate of origin issued by supplier of Malaysia to importers, thereafter to pass a fresh order.
Department has been provided a documentary evidence by way of a stipulated certificate from the designated authority under the agreement. On production of such agreement which is in the nature of the documentary evidence, the onus to prove fakeness of its content or otherwise clearly shifts on the department. Unlike, the course of action adopted in respect of other importers who made imports in the Year-2014, the department has not even attempted to do verification with Government of Malaysia and has proceeded in the instant case, on the basis of following assumptions and presumptions without rebuttal of the documentary evidence procured and produced by the appellant. In the present case in the face of certificate of origin having been produced and no verification process having been conducted before issuance of show cause notice, the demand of duty cannot be sustained – in absence of burden having been discharged or even having been attempted till such belated stage, the show cause notice cannot be sustained. The appeal is allowed with consequential relief as far as duty, penalty and interest are concerned, as held in SYMPHONY INTERNATIONAL VERSUS C.C. – MUNDRA 2024 (1) TMI 988 – CESTAT AHMEDABAD
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