Irregularities in Phytosanitary Certificates Alone Do Not Prove Origin Fraud: CESTAT [Read Order]

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that irregularities in phytosanitary certificates are not sufficient to establish fraud in the declaration of the country of origin under customs law, and such discrepancies relate only to post-import compliance requirements. Kesar Spices, the appellant, imported a consignment of “walnuts in shell” from Afghanistan and claimed exemption from Basic Customs Duty under Notification No. 99/2011-Cus dated 09.11.2011, read with the SAFTA Rules of Origin. The benefit was claimed on the strength of a Certificate of Origin (COO) issued by the Afghanistan Chamber of Commerce and Industries. The goods were imported through Mundra Port and were covered by 1650 bags. Read More: Mere Mismatch in Gold Content in Dore Bar Imports Not Sufficient to Prove Customs Duty Evasion: CESTAT Step by Step Guide of Preparing Company Balance Sheet and Profit & Loss Account Click Here The Directorate of Revenue Intelligence (DRI) initiated an investigation alleging that the goods were of United States origin and that the country of origin had been misdeclared to fraudulently avail the SAFTA exemption. The department’s case was based on three tags found in three of the 1650 bags bearing “USA origin” markings, alleged inconsistencies in phytosanitary certificates, call data records showing contact with persons in Pakistan, a letter purportedly signed by the appellant admitting misdeclaration, and statements from market traders claiming to have purchased California walnuts from the appellant. Read More: Cement Cleared in Packaged Form with RSP Qualifies for Concessional Duty under Notification, Irrespective of Buyer: CESTAT A show cause notice was issued proposing confiscation of the goods, recovery of duty, interest, and imposition of penalties. The appellant argued that a valid COO had been issued by the competent Afghan authority, and its authenticity had been confirmed through official channels. They argued that the presence of tags in three bags was not sufficient to discredit the entire consignment’s origin, especially when the COO remained unrefuted by the issuing government. Know the complete aspects of tax implications of succession, Click here They also pointed out that the alleged confessional letter was not a valid statement under Section 108 of the Customs Act and had been retracted through multiple representations and legal proceedings, including a writ petition. The appellant further argued that the department failed to follow the mandatory verification and consultation procedure laid out under Articles 15 and 21 of the SAFTA Rules. The revenue counsel argued that the goods were of USA origin, and the appellant had misused SAFTA benefits by arranging fabricated documents. It relied on the tags, the alleged confessional letter, call data analysis, and statements from logistics agents and traders. The department maintained that the evidence demonstrated a fraudulent arrangement to evade high customs duties applicable to imports from the USA. Read More: Relief for Hindustan Zinc Ltd: CESTAT Rules Structural Steel Used for Chimney Support Qualifies as Capital Goods, Eligible for Credit Complete Ready to Use PDFs of 200+ Agreements Click here The two-member bench comprising Somesh Arora (Judicial Member) and Satendra Vikram Singh (Technical Member) held that the department had failed to discharge the burden of proof necessary to establish misdeclaration. The tribunal observed that the COO was not invalidated or denied by the Afghan authorities and that no follow-up verification or inter-governmental consultation was undertaken as required under SAFTA. It held that the phytosanitary certificates, even if found to contain errors or inconsistencies, were not determinative of the origin of the goods and could not override the verified COO. The tribunal held that the benefit of the exemption under Notification No. 99/2011-Cus could not be denied and that the irregularities in phytosanitary certificates related only to post-import requirements, not to the origin of the goods. The confiscation, demand, and penalties were found to be unsustainable. The appeal was allowed with consequential relief. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Irregularities in Phytosanitary Certificates Alone Do Not Prove Origin Fraud: CESTAT [Read Order]

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Irregularities in Phytosanitary Certificates Alone Do Not Prove Origin Fraud: CESTAT [Read Order]

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