Case Law Details

Case Name : In re Boston Scientific India Pvt. Ltd. (CAAR Delhi)
Appeal Number : Advance Ruling No. CAAR/Del/Boston/36/2023
Date of Judgement/Order : 22/12/2023
Related Assessment Year :

In re Boston Scientific India Pvt. Ltd. (CAAR Delhi)

M/s. Boston Scientific India Pvt. Ltd., Unit No. 304, 3rd Floor, Chiranjiv Tower, 43, Nehru Place, New Delhi – 110019 having IEC number 0503039675 (applicant, in short) has filed an application dated 25.09.2023, received in this office on 26.09.2023, seeking advance ruling under section 28-H of the Customs Act, 1962, before the Customs Authority for Advance Rulings, New Delhi (CAAR, New Delhi in short). The application was accordingly registered under Serial No. 28/2023 dated 26.09.2023.

2.1 The applicant has stated that, they are engaged in the business of manufacture, import and sale of healthcare products such as medical equipment and implants into India; they import certain medical goods and re-sells them to third party distributors/ dealers/hospitals for further sale/use in medical procedures; they now propose to import various goods including balloon catheters from its group affiliate, Boston Scientific Medical Device (Malaysia) Sdn Bhd (hereinafter referred to as, ‘Boston Malaysia’); the products mentioned are only illustrative in nature and the present ruling should apply to all imports by them from Malaysia where ‘third country invoicing’ is applicable. It is further stated that on such imports from Boston Malaysia, the applicant seeks to avail the exemption granted to imports from ASEAN countries under the Preferential Trade Agreement between the Governments of Member States of the Association of Southeast Asian Nations (ASEAN) and the Republic of India under the Agreement (`ASEAN India FTA’, in short).

2.2 It is also stated that, an essential condition to be satisfied for availing the benefit of the ASEAN India FTA is that the goods in respect of which the preferential tariff treatment is being claimed are originating in the member countries who are parties to the agreements in question; for determining whether a particular product is originating in the countries/region involved, rules of origin have been set out as per Article 7 of the ASEAN-India FTA which subsequently have been domestically legislated by the Governments of the respective countries in accordance with the rules of origin under the ASEAN-India FTA; for giving effect to the commitments given by India under the ASEAN-India FTA, the Central Government in exercise of its powers under Section 5(1) of the Customs Tariff Act, 1975 has issued the Rules of Origin under the AIFTA vide Notification No. 189/2009-Cus (N.T.) dated 31.12.2009 (189/2009, in short) which are called the Customs Tariff [Determination of Origin of Goods under the Preferential Trade Agreement between the Governments of Member States of the Association of Southeast Asian Nations (ASEAN) and the Republic of India] Rules, 2009 (`ASEAN Rules of Origin’, in short); further, the Central Government has issued a Notification No. 46/2011-Cus., dated 01.06.2011 (46/2011, in short) in exercise of powers under Section 25(1) of the Customs Act which grants concession or exemption to the specified goods listed in Annexure thereto from the levy of basic customs duty.

2.3 According to Rule 13 of the ASEAN Rules of Origin, any claim that a product shall be accepted as eligible for preferential tariff treatment shall be supported by a Certificate of Origin issued by an authority designated by the exporting country and notified to the other parties in accordance with the Operational Certification Procedures; under the ASEAN Rules of Origin and the claim become eligible for the preferential tariff treatment if they confirm to the origin requirement under either of the following —

a. Goods wholly obtained or produced in the territory of exporting party (Rule 4 of the ASEAN Rules of Origin),

b. Goods not wholly obtained or produced in the territory of the exporting party (Rule 5 of the ASEAN Rules of Origin).

2.4 The applicant has further explained that, in the present case, the import goods are not being mined/harvested/grown/extracted from within the territory of Malaysia, and the same are being manufactured using the originating and non-originating materials, thus, they are not concerned with meeting the origin criteria under Ru10 dealing, with goods wholly obtained or produced; in case of goods which are not wholly obtained or produced, to meet the origin requirements, it is important that the regional value content is more than 35% of the FOB value of the finished goods and the non-originating materials used in production of such goods have undergone a change in tariff classification at the six-digit level; to this extent, the import goods proposed to be imported meet both the above conditions and will he supported by the Certificate of Origin to be issued by the certificate issuing authority in Malaysia evidencing that the goods meet the origin criteria; however, the present application relates to the availment of benefit under the ASEAN INDIA FTA, where the goods are being directly shipped from Malaysia, where, the invoicing is routed through more than one party in the transaction; since, they are a group affiliate of a multinational corporation having offices in various countries around the globe, it is their practice to procure goods from its group affiliate under a bill-to ship-to model i.e.. to send purchase order to its group affiliate in such various countries who either directly or through other various group affiliates supply to them, the goods sought by it.

2.5 In the instant case, the applicant proposes to raise the purchase order on its group affiliate Boston Scientific International B.V., Kerkrade, Netherlands (“BSV”, in short) which in turn would raise purchase order on another group affiliate in Ireland, namely Boston Scientific Limited Ireland (`Boston Ireland’, in short); in turn, Boston Ireland would raise purchase order on Boston Malaysia which shall directly make consignment available to the applicant in India; Boston Malaysia would raise an invoice in the name of Boston Ireland, for the exact goods to be exported to the applicant; in turn, Boston Ireland after adding its profit margins would raise an invoice for the exact same goods to BSV; in turn, BSV would finally raise an invoice with its profit markup in the name of the applicant; Boston Malaysia being the country of export would directly consign the goods to the applicant in India, without the goods first being physically exported to Boston Ireland and BSV. The applicant has also explained the transaction through a flow diagram as below:

explained the transaction through a flow diagram

The Airway Bill/ Bill of Lading in such case would be issued from the place of export in Malaysia, having the consignee details of the applicant, and the port of destination would also be India; the commercial invoice issued to Boston Ireland and BSV would also indicate the port of destination to be India; the details of goods (description, quantity etc.) and destination of the goods in the Bill of Lading and the commercial invoice would correspond exactly to each other in these documents; furthermore, the applicant would carry the COO certificate issued by the country of export, herein being Malaysia to show that the goods originating from Malaysia meet the origin criteria prescribed under the ASEAN India FTA; while third country invoicing under ASEAN India FTA is allowed, however, in backdrop of the present factual scenario, the applicant seeks clarity whether the transaction discussed above which involves four parties would get covered in the scope of third country invoicing under ASEAN India FTA and hence become eligible for availing concessional benefit in India; the transaction is in the nature of third-party billing or third-party transactions which does not affect the main transaction between the importer and the exporter; the ASEAN India FTA recognizes the practice of third-country invoicing; operational certification procedures as set out in accordance with Rule 13 of the ASEAN Rules of Origin under Article 22 discuss the clause of third country invoicing, which reads as below:

“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.”;

Third Country Invoicing refers to the arrangement, where an invoice that accompanies the Preferential Certificate of Origin and used for the clearance of goods in the importing party, is not issued by the exporting entity but by another entity residing in another country which may not necessarily be a party to the same FTA; Third country invoicing is an accepted practice under ASEAN India FTA as evident from the perusal of the overleaf notes under point 9 in the operational certification procedures, that the manufacturer in Box 13 in the ASEAN Certificate of Origin is supposed to tick if their case is the case of third country invoicing; in essence, the entity residing in a third country issuing invoice acts as a middlemen; where there is only one such middleman/one entity residing in a third country issuing commercial invoice, the importer would be allowed to get the benefit of FTA exemption, as per the provisions of third-country invoicing as applicable under the FTA; however, where there is more than one middleman residing in various countries other than the country of export and import, and the invoices are issued through each such entity in various subsequent stages of the entire transaction, the question arises whether the benefit would still be available under the relevant FTA, in terms of Third Country Invoicing.

2.6 The applicant has further deliberated upon the issue and stated that, it is imperative to understand the scope of Third Country Invoicing; there are two interpretations possible of “Third Country Invoicing”; first, that third country invoicing does not limit to one country but is without numerical limits; it only refers to an invoice issuing entity residing in such third country (other than the country of exporter) that may not necessarily be a member to the same Trade Agreement; in other words, due to supply chain arrangement, the invoice is not issued by the exporting member country but from another country irrespective of the number of entities in between; second interpretation which merits to be rejected is that the use of the word “third” signifies that the entire transaction at most can have involvement of three countries, namely country one, being signatory country of the importer; one being, the signatory country of the exporter; and third being, the non-party country which is acting as an intermediate and issues invoice to the importer.

2.7 The applicant has further mentioned that, it becomes imperative to understand the meaning of the term “third-country invoicing”; the term used in the Rules of Origin, is used in the same sense as one uses the term “third party billing” where another company handles all invoicing and payment processes between a company and its customers and vendors; a third party is an entity or an individual who gets involved in a transaction; however, it is not part of the principal and displays lesser interest; for example, when the escrow firm acts as a neutral agent in a real estate transaction by collecting money and the required documents that a buyer and a seller exchange during the completion of a transaction; even a service of a broker could be termed as a third-party transaction, where the broker merely acts in a manner to facilitate the trade transaction between the principal buyer and the seller; there can accordingly be one single third party or multiple levels of third parties involved in the transaction which facilitates the trade; merely because the number of intermediaries increase, that does not change the nature of the transaction; for instance, where a buyer seeks to buy a property and engages services of a broker, on successful purchase of the property, the entire transaction would be categorized as a transaction of purchase of property; having multiple layers of brokers does not affect the transaction between the buyer and the seller of the property; hence having more than one non-party country wherein invoices have been issued by the multiple intermediaries, would not impede in anyway with the transaction between the importer and the exporter in their respective countries which are signatory to the FTA; the interpretation as adopted by the applicant is also supported by the fact that third country invoicing is a prominent international trade practice and same is capable of being done through multiple non-signatory countries in majority of trade transactions undertaken all over the world; to understand the scope of third country invoicing in the international trade practice and how it is construed under different trade agreements, it becomes important to discuss the provisions of third country invoicing under such trade agreements; provisions of international trade and commerce are to be interpreted in a coherent manner to have maximum uniformity amongst global trade laws; this principle is more so relevant for provisions which have specific impact on the procedure of trade, like in the present case of third country invoicing; therefore, it is imperative that interpretation given to ‘third country invoicing’ by the Indian Customs Authorities must be in line with the interpretation adopted internationally to streamline the trade process and promote trade.

2.8 In view of the above, the applicant has also stated that, the principle of uniformity of international law is also highlighted by the United Nations Commission on International Trade in the following terms:

“Harmonization of international trade law in practice requires that the laws concerned are interpreted in a uniform manner. Many UNCITRAL texts contain the principle that in interpreting the texts concerned, judges and arbitrators should consider the international origin of the law and the need to promote uniformity in its application.”; a reference is made to India-Mauritius Comprehensive Economic Cooperation and Partnership Agreement, and the Notification No. 38/2021- Customs (N.T.) notifying the Rules of Origin; in this regard, Rule 15 of the said Rules would clarify the position; the relevant rule is extracted below:

Rule 15: Third Party Invoicing:

“When a good to be traded is invoiced by a non-Party trader, the producer, manufacturer or exporter of the originating party shall inform, in the /field titled “Remarks” of the Certificate of Origin, that the goods shall be invoiced from that non-Party trader, reproducing the following data from the commercial invoice issued by the non-Party trader: name, and address of the non-Party trader, invoice number and date. “;

bare perusal of the said rule would unequivocall reveal that the Department of Customs has deliberately used the term non-party trader and not third country; this shows that the intention of the law makers was to refer to the status of the country with respect to the FTA, meaning whether it is a signatory to the FTA or not, and it did not intend to signify any numerical terms; this has always been the intention of the countries entering into such trade agreements: similarly, under India-Japan Comprehensive Economic Cooperation and Partnership Agreement. read with Notification No. 55/2011 Customs (N.T.), relating to Rules of Origin, under Appendix A. Article 7. relates to third-country invoicing; what merits to be noted is that the heading of the said article is “Invoice of a non-party”; the same is produced below:

“Invoice of a non-Party. –

The customs authority of the importing party shall not refuse to accept a certificate of origin only for the reason that the invoice is issued by either a natural person or a juridical person located in a non-Party.”;

yet again the intention of the countries is clear that when referring to invoices from third country (or in as prevailing times referred to as non-party invoicing) they seek to refer to countries, non-signatory to the FTA and in no sense to indicate that such transactions can only be limited to three parties; another example is of India-Australia Economic Cooperation and Trade Agreement (INDAUS ECTA) between the Government of the Republic of India and the Government of Australia, where a similar provision for Non-Party Invoicing has been provided for under Customs Tariff (Determination of Origin

of Goods under the India-Australia Economic Cooperation and Trade Agreement) Rules, 2022:

“Non-Party Invoicing

1. An importing Party shall not deny a claim for preferential tariff treatment for the sole reason that an invoice was not issued by the exporter or producer provided that the goods meet the requirements of this Chapter

2. The exporter of the goods shall indicate “non-party invoicing” and the name, address, and country of the company issuing the invoice shall appear in a separate column in the Certificate of Origin. “;

it is important to make reference to the Review on the Operational Certification Procedures (OCP) of ASEAN-China FTA as provided for by the official website of Ministry of International Trade and Industry of Malaysia, wherein “third party invoicing” is explained in the following terms:

“Third Party Invoicing” means invoice issued by third non-ACFTA parties provided that the product meets the requirements of the ACFTA ROO and must be shipped out from either one of the ASEAN Member States or China; “;

it must be noted that this explanation is in reference to the ASEAN-China FTA (hereinafter, `ACFTA’), and it clearly states that third party invoicing refers to invoice issued from a country not a party to the ACFTA; this goes on to indicate the interpretation of third country invoicing as understood by the ASEAN region and incorporated in FTAs entered by the ASEAN with other countries; it would be significantly wrong to assume ASEAN region holds this understanding on third country invoicing only under ACFTA and an entirely different understanding on the same issue under ASEAN India FTA; as per the Handbook on Rules of Origin for Preferential Certificates of Origin, released by the Department of Customs, Singapore, Third Country Invoicing is defined as:

“The arrangement, where an invoice that accompanies the Preferential Certificate of Origin (CO) and used for the clearance of goods in the importing Party, is not issued from the exporting Party but from another country who may not necessarily he a Party to the same ETA. In some FTAs, Tel is commonly referred to as Third Party Invoicing (m). However, TPI may also refer to the arrangement, where the invoice is not issued by the exporter or producer of a good, as in the case of RCEP”;

further the handbook provides for an example for better clarity:

“An originating good is exported from Thailand to Singapore with a Form D Preferential CO under ATIGA). However, the invoice billed to Singapore is issued from Switzerland (i.e. any countries except Thailand and Singapore). Singapore can still accept the Form D and grant preferential access to the good indicated in the Form D even though the invoice is not issued from Thailand but another country that is not a Party to ATIGA. Under such circumstances, the applicant of the Preferential CO would have to indicate details of the invoice issued from a third country in the Preferential CO.”,

the World Customs Organization Guidelines on Certification of Origin, third country invoicing is explained as:

“6.2.2 Third country invoice (intermediary trade)- It is a common practice in today’s international trade to involve an intermediary between the importer and the exporter.

This practice must be recognized, and the related procedures must be in place. In trade involving an intermediary residing in a third country, the invoice issued in the third country (a third country invoice) would be submitted to the Customs of the importing country to support the import declaration. In the case where third country invoicing is involved, the following guidelines are provided to ensure the appropriate processing of intermediary trade.”

The guidelines as per World Customs Organization is as follows:

“Guideline:

(INTERMEDIARY TRADE)

8.Recognizing the current practices of trade, a proof of origin issued in the country of origin should be accepted in cases where the commercial invoice is issued in a third country, as long as it is discernible that the goods referred to in the proof of origin and the invoice corresponds to each other and that the goods satisfy the applicable rules of origin.

9. When a declaration of origin is issued by an approved exporter for goods which are traded via an intermediary business based in a third country, the declaration of origin should be made out on a commercial document other than an invoice which the approved exporter issues on his/her own responsibility and which clearly identified the goods it accompanies. “;

the Handbook on Preferential Market Access for ASEAN Least Developed Countries as issued by United Nations Conference on Trade and Development, under chapter III Introduction to Rules of Origin in the ASEAN Free Trade Agreements has explained third country invoicing as:

“Third country invoicing is a procedure allowing originating goods that are exported to an FTA member country to qualify for preferential tariff treatment, even if the accompanying sales invoice is issued by a company located in a non-FTA member country or by an exporter in an FTA member country for the account of the company”; the intention is clear, a transaction can include more than three entities residing in more than three countries; the usage of the term “third country” is not being used in numerical sense of the word third, but in the sense that it relates to a country which is not privy to the FTA; provided that there are at least 2 parties fioin the signatory countries to the FTA and other remaining parties are residents of non-signatories countries to the FTA, the transaction will fulfill the eligibility under the HA; herein reference is made to the 10th Meeting of the Sub- Committee on ATIGA Rules of Origin (SC-A1200), held between 15th and 16th January, in Brunei Darussalam; one of the issues in the said meeting was relating to third-country invoicing, and the member countries therein had decided and resolved as under:

ASEAN Member States agreed to scenario number two, where the. number of parties involved in TCI can be more than three parties,”;

“ASEAN Member Slates agreed to scenario number two, where the number of parties

involved in TO can he more than three parties.”;

the intention of the ASEAN countries is abundantly clear in adoption of the aforementioned decision, as they recognise the practice of third country invoicing in the sense that invoice can flow from as many countries as the case may be, however the goods in question must strictly comply with the originating criteria as prescribed; re-invoicing in various countries does not alter the Origin of the imported goods which is the basis of benefit under a FTA; the determining factor for whether benefit under a particular FTA is applicable in a particular case or not is dependent on the compliance of the Rules of Origin Criteria; no digression is allowed from this factor; Determination of Origin of goods is an independent exercise which is not affected by such re-invoicing; an inference to buttress the said argument can be made from the reference to the United States- Mexico- Canada Agreement on Free Trade; while the said FTA does not “subject third-country invoicing to a special procedure but just ensures that the certification of origin is not to be provided by the third party.”; hence the claim under an FTA is determined solely on the basis of the Certification of Origin; the relevance of third-country invoicing is evidently clear from the above, in availment of benefit under the FTA; a similar observation can be drawn from the reference to the China-Australia FTA which does not specify whether non-party invoicing would be accepted to apply for preferential treatment under the CN-AU FTA; however, according to the filing instruction of the Certificate of Origin, the relevant information (e.g., name, address, country of the operator) must be disclosed in the certificate if the invoice is issued by a non-party operator; it suggests that benefits may not be denied merely because of non­party invoicing, even though additional documents may be required to ensure compliance with other rules of origin requirements; the very fact that the provision of third-party invoicing was not incorporated in the FTA itself, makes it clear that the same is not a determining factor for eligibility of availing benefit; third-country invoicing is merely a business practice that is generally given statutory recognition under the relevant FTAs and the domestic law of the countries: it has no role in determination of eligibility of availment of benefit under the relevant FTA; the present FTA at the very core of it is an agreement between parties, in the nature of contract, laying down terms and conditions for the regulation of each other’s rights and obligations in respect to the transactions occurring between each other, with the intention to make it legally enforceable by each such party in accordance with their domestic law; the construction of a contract has to determine the common intention of the parties; contract interpretation must not stop at the literal meaning of the terminology used by the parties in their contract but must seek to determine their true intentions at the moment of contract conclusion, taking into account the circumstances of the case; this task involves ascertaining what a reasonable person would have understood the parties to have meant; the relevant reasonable person for that purpose is one who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract; in Codelfa Construction Ply Ltd. v. State Rail Authority of New South Wales, (1982) 149 CLR 337, observed:

“when the issue is which of two or more possible meanings is to be given to a contractual provision we look not to the actual inienlions aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of:tilos within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but would also be unrewarding as it would tend to give too much weight to these jiictors at the expense of the actual language of the contract. “;

the purpose and intention of the ASEAN India FTA can be understood succinctly from

the bare perusal of Article I of the Agreement which is produced as below:

Article I:

“Objectives

The objectives of this Agreement are to:

-strengthen and enhance economic, trade and investment co-operation between the Parties.

-progressively liberalise and promote trade in goods and services as well as create a transparent, liberal and facilitative investment regime.

-explore new areas and develop appropriate measures for closer economic co­operation between the Parties; and

-facilitate the more effective economic integration of the new ASEAN Member Slates and bridge the development gap among the Parties.”;

the purpose of the present FTA is clearly to liberalize and promote trade between the parties, and therefore, any counter interpretation of the FTA which would render the benefits and purpose of trade promotion void, must not be resorted to; the use of the phrase “third-country” under the Rules of Origin, would make minimum to negligible sense if it were to be comprehended in terms of quantity and not rather in the sense that it only refers to that an entity residing in any country, that is not a primary participant to the transaction between the principal importer and the principal exporter; a Free Trade Agreement essentially governs a relationship between an importer and an exporter of the contracting countries; hence the meaning afforded to the words used in such contract must be given a sense so as to bring forth the real intent of the agreement; all such parties/entities who are not party to the principal transaction would be categorized as a third party to the same.

3. The applicant has further stated that the ASEAN India FTA agreement creates benefits for the importer, in the form that the importer shall not be liable to pay Basic Customs Duty to a certain extent on the goods so imported, as provided for in the exemption notification issued by the Government of the respective contracting countries; furthermore, if an interpretation is given to the term “Third-country” to include any number of countries, it would not be prejudicial to the revenue of the Importing country; the same can be understood with the illustrations:

Illustration I: X is an importer residing of Country A and Y is an exporter residing in Country B. Both Country A and B have entered into a Free Trade Agreement which allows third-party invoicing. X approaches Z in country C and raises a purchase order with Z who further raises a purchase order with Y. Y directly makes supplies to X in country A while the invoice is raised by Z in the name of X. Herein no duty will be payable by X on the import of the goods, assuming that the goods fulfil the Rules of Origin criteria, read with Third-Country Invoicing.

Illustration II: X is an importer residing of Country A and Y is an exporter residing in Country B. Both Country A and B have entered into a Free Trade Agreement which allows third-party invoicing. X approaches Z in country C and raises a purchase order with Z who further raises a purchase order with W in country D. W further raises purchase order with Y. Y directly makes supplies to X in country. An invoice is raised by W in the name of Z and Z raises final invoice after adding his profit margins, in the name of X. Herein also no duty will be payable by X on the import of the goods, assuming that the goods fulfil the Rules of Origin criteria. Despite the consideration value flowing from two countries, i.e., Countries C and D, before finally reaching Y, it would have no impact on the leviability of BCD on import mado iX ,in country A.

The reason being that FTA benefit is given qua the import, subject to condition that the import is made from a certain territory to a certain territory and such goods fulfil the Rules of Origin. The manner of flow of consideration from the importer to the exporter’ has no bearing on the determination of eligibility of benefit;

since, adding more number of third countries, via which the consideration for the goods is made payable, would itself have no impact on the revenue of the country of import. the interpretation that third-party can include more than one country wherein the invoice issuing entity is residing must be accepted; an opposite interpretation could be treated as a ground to deny the benefit affordable to the importers under the FTA, by stating that FTA does not recognize fourth or fifth country invoicing in literal and strict sense; therefore, an interpretation must be adopted which seeks to promote trade and transactions between the contracting parties; it is settled principle of law that strict interpretation must be given to an exemption, and that once the assessee fulfils the essential conditions of exemption, the same should be construed liberally; the essential condition to be fulfilled under the FTA is two-fold, i.e., firstly, that the goods must be imported from the one of the contracting parties to the territory of another contracting party and secondly that the goods must fulfill the Rules of Origin criteria; applicability of the exemption notification to an assessee must be determined strictly on the two conditions and the manner of invoicing must not play any role in such determination; in support of the law on interpretation of an exemption notification that it has to be strictly construed according to the language employed therein reliance is made upon the judgment of Commissioner v. Hari Chand Shri Gopal, 2010 (260) ELT 3 (SC); the above-mentioned case law provides that in a taxing statute, an exemption notification should be given a strict meaning; the Hon’ ble Supreme Court has also made similar observation in Collector of Customs, Bangalore v. M/s. Maestro Motors Ltd., 2004 (174) ELT 289 (SC); as discussed in the foregoing part, it is the understanding of the applicant that, the term “third country invoicing” must not be construed in a limited sense to mean only “one” third country, but it includes all such third countries through which invoicing was done and which are non-member countries, as long as the goods meeting the origin criteria are being directly shipped from Malaysia to India and the origin of such goods being shipped is not disturbed; this is because the term ‘third country invoicing’ only refers to the status of such invoice issuing entity residing in such another country and does not limit the number of parties to be involved in the transaction to three parties; hence, based on detailed analysis of the provisions of the exemption Notification No. 46/2011, Rules of Origin and the Free Trade Agreement, applicant is of a considered view that the despite the invoicing is done through multiple entities residing in third countries, the goods imported would be eligible for FTA exemption benefit, as the same is based only on the fulfillment of Rules of Origin criteria and such other condition prescribed under Rules of Origin.

4. In view of the foregoing submissions, the applicant has raised following questions for issue of ruling:

Question 1 — Whether the concept of third country invoicing envisages a tripartite system with involvement of three (3) countries only’?

Question 2 – Whether the concept of third country invoicing envisage within the phrase `third country’ to include any number of countries so long as the imported goods meet the origin criteria under the Rules of Origin?

Question 3 – If the answer to the question 2 is in affirmative, whether the applicant can claim exemption under Customs Notification No. 46/2011 dated 01.06.2011?

Question 4- Any other question that the Learned Authority may deem fit for adjudication.

5. Comments in the matter have been received from the concerned Commissionerate wherein, it is inter-alia stated that, a purchase order would be raised in the name of its group affiliate Boston Scientific International B. V, Netherlands which would further raise purchase order to another group affiliate in Ireland, namely Boston Scientific Limited, Ireland who would raise final purchase order to Boston Malaysia which would make consignment available to the applicant in India. Further Boston Maksia would raise an Invoice in the name of Boston Ireland In turn. Boston Ireland after adding its profit margins would raise an invoice for the same goods to Boston Scientific B. V, Netherlands who in turn would finally raise an invoice with its profit in the name of applicant in India. Rule 13 of the Customs Tariff Determination of Origin of Goods under the Preferential Trade Agreement behveen the Governments of Member States of the Association of Southeast Asian Nations (ASEAN) and the Republic of India Rules, 2009, talks about the Certificate of Origin. It states that, Any claim that a product shall be accepted as eligible for preferential tariff treatment shall be supported by a Certificate of Origin as per the specimen in the attachment to the Operational Certification Procedure issued by a Government Authority designated by the exporting party and notified to the other parties in accordance with the Operational Certification Procedures as set out in Annexure III annexed to these rules. Para 22 of Annexure 111 states that, ‘the Customs Authority in the importing party shall accept an AIFTA (ASEAN-India Free Trade Area) certificate of origin where the sales invoice is issued either by a company located in a third country or an A IFTA exporter for the account of the said company, provided that the product meets requirement of these rules. ‘. Point 9 of the overleaf notes of the Rules regarding Third Country Invoicing in Box 13 should be ticked and such information as name and country of the company issuing the invoice shall be indicated in Box 7. In this case, Boston Scientific Malaysia would raise an invoice to Boston Scientific, Ireland, which in turn after adding profit margins would raise an invoice to Boston Scientific Netherlands, which would finally raise an invoice with its profit margins in the name of importer in India. The Rules, Annexures and Overleaf Notes of AIFTA, only mention about third party invoicing which in this case would have been the invoice raised by Boston Ireland. However, in this case, invoice to importer is being raised by Boston, Netherlands, which is the fourth party invoicing, hence the benefits of concessional rate of duty of Notification No. 46/2011 dated 01.06.2011 does not seem to be admissible in the present case.

6. In response to the comments of the concerned Commissionerate, the applicant has inter-alia stated that vide the comments, it has been summarily concluded that the applicant is not eligible for benefit; such conclusion warrants rejection considering the lack of any explanation or justification to entail the same; it is not considered that the transaction, in the nature of third party billing or third party transactions, does not affect the main transaction between the importer and the exporter; further, the comments have not taken into account the international jurisprudence and accepted practices in international trade on the issue of third-country invoicing. Lastly, it is stated that the applicant’s proposed model is eligible for seeking benefits of concessional rate of duty.

7. Personal hearing in the matter was held on 13.12.2023 wherein, advocate representing the applicant, briefly explained reasons for filing application for advance ruling and mentioned that the applicant is engaged in the business of manufacture, import and sale of healthcare products such as medical equipment and implants into India. She further submitted that the applicant has offices in a number of countries. As regards the instant application, the applicant proposes to place purpose order on another group company in Ireland. Boston, Ireland will place purchase order on Boston, Malaysia who shall make consignment available to the applicant, in India. She then reiterated the submissions made in the application for advance ruling and also stated that third country invoicing under ASEAN India FTA is allowed, however, they seek clarity as to whether the transaction which involves four parties would get covered in the scope of third-party invoicing under ASEAN India FTA for availing concessional rate of duty benefit against the relevant exemption notification. She also referred to comments of concerned Commissioner and gave their submission. She stated that referring to the Rules under the said FTA and other FTAs, meaning of third party may be derived. Lastly, she stated that Bills of Entry concerning import of goods, under the said transaction are being assessed provisionally as they have informed the concerned Authorities regarding filing of application for advance ruling by them, on the issue. The advocate was asked to give details of the Bills of Entry which have been assessed provisionally, on account of import under the said FTA.

8. Vide an email dated 14.12.2023, the authorized representative of the applicant has provided a list of the Bills of Entry, provisionally assessed during the pendency of the application for advance ruling and it is noted that said list contains details of Bills of Entry starting from 03.11.2023 and it is also stated that the applicant had informed the concerned Commissionerate regarding filing of application for advance ruling and sought permission for provisional asscssment on import of the subject goods under the proposed import model and upon grant of such permission for provisional assessment, the applicant has started importing under the subject import model.

9. Finding that the application is valid in terms of the provisions of the Customs Act, 1962 and the Customs Authority for Advance Rulings Regulations, 2021, having gone through submissions of the applicant, comments of the concerned Commissionerate and having heard the applicant, I proceed to examine the question on merits.

10. As regards information furnished by the authorized representative of the applicant in respect of bills of entry, assessed provisionally by the department on import of the subject goods under the proposed import model after the applicant had informed the concerned Commissionerate regarding filing of application for advance ruling, it is noted that under the clause (a) of first proviso under Sub-section (2) of the Section 28­I of the Customs Act, 1962, it is laid down that the authority shall not allow the application where the question raised in the application is, (a) already pending in the applicant’s case before any officer of customs , the Appellate Tribunal or any court. Further, I note that the question raised in the application is pending for final assessment in the Commissionerate of Customs however, such provisional assessment has arisen after filing of the application for advance ruling and during it’s pendency. It has been informed by the authorized representative of the applicant that only after informing the concerned Commissionerate regarding filing of application for advance ruling, permission for provisional assessment has been sought. Thus, to provide certainty to applicability of said Rules of Origin and Tariff Notification, I intend to take up in the instant application for issue of ruling on the question raised in the application.

11. Further, I agree that third country invoicing does not limit to one country but is without numerical limits; it only refers to an invoice issuing entity residing in such third country (other than the country of exporter) that may not necessarily be a member to the same Trade Agreement; in other words, due to supply chain arrangement, the invoice is not issued by the exporting member country but from another country irrespective of the number of entities in between.

Third party invoicing

14. In light of the foregoing, the concept of third country invoicing does not a tripartite system with involvement of three countries only meaning thereby that the concept of third country invoicing envisage within the phrase ‘third country’ to include any, number of countries so long as the imported goods meet the origin criteria under the  Rules of Origin. The transaction, as discussed above, involving four parties would get covered in the scope of third country invoicing under ASEAN India FTA and hence become eligible for availing concessional benefit in India, if otherwise in order.

15. I rule accordingly

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