No AIFTA Benefit Without Valid Certificate: Madras HC Sets Aside CESTAT Order [Read Order]

The Madurai Bench of the Madras High Court ruled that exemption under the ASEAN-India Free Trade Agreement (AIFTA) cannot be granted without a valid and genuine certificate of origin.

The Court held that a Certificate of Origin under the ASEAN-India Free Trade Agreement (AIFTA) must be valid, genuine, and strictly conform to the rules, and that mere circumstantial matches are insufficient to claim exemption. Olam Enterprises India Pvt. Ltd., which had imported teak round logs. The company initially paid customs duty but later filed for a refund, claiming an exemption under Notification No. 46/2011-Cus. They supported their claim with AIFTA Certificates of Origin, which stated the goods were consigned from Myanmar Timber Enterprises.

The original customs authority and the Commissioner (Appeals) both rejected the exemption claim. They found that the AIFTA certificates did not correspond to the actual consignments imported by Olam Enterprises, as the documents showed a different supply chain and contained discrepancies. However, the CESTAT later overturned these decisions and allowed the exemption, leading the Commissioner of Customs to appeal to the High Court.

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The core issue revolved around the authenticity of the AIFTA certificates. The customs department argued that the certificates were fundamentally flawed. A major red flag was a critical date mismatch. The bill of lading showed the vessel, MV Sioux Maiden, departed from Myanmar on March 31, 2014. However, key invoices used to support the origin certificate were dated May 23, 2014, nearly two months after the shipment had already sailed. The Court agreed with the department, stating that an invoice created long after the goods had been shipped cannot reliably prove their origin. This cast serious doubt on the entire documentation.

Furthermore, the AIFTA certificate failed to correctly identify the parties involved. The certificate mentioned a company named Concorde Commodities, Singapore, but the actual supplier to Olam Enterprises was M/s Panasia International Ltd., Dubai. The Court emphasized that such an omission is not a minor clerical error but a fundamental defect that undermines the certificate's reliability. It noted that the burden of proving eligibility for a tax exemption rests entirely on the importer, and this burden must be discharged by producing a flawless and compliant certificate.

The High Court found that the CESTAT had erred in its reasoning. The tribunal had granted the benefit primarily because details like the quantity of goods and the vessel name matched the import documents. The High Court firmly rejected this logic, stating that matching particulars cannot be a substitute for the mandatory legal requirement of producing a valid certificate of origin. When the certificate itself is defective on its face, the claim for exemption must fail, regardless of other matching details.

The Bench comprising Justice P. Velmurugan and Justice K.K. Ramakrishnan allowed the appeal filed by the Customs department. The Court set aside the order of the CESTAT and consequently restored the original orders that had denied the duty exemption to Olam Enterprises.

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