Third-Party Invoicing Not Permitted Under APTA: CAAR Denies Preferential Duty Benefit to Jparks India on China Imports [Read Order]

In a detailed ruling on the scope of preferential customs duty under the Asia-Pacific Trade Agreement (APTA), the Customs Authority for Advance Rulings (CAAR), Mumbai, has held that third-party invoicing is not permissible in the absence of an express enabling provision under the APTA Rules of Origin.

Jparks India Private Limited, an importer engaged in the distribution and marketing of electronic and non-electronic toys in India, approached CAAR seeking an advance ruling on the applicability of concessional customs duty under Notification No. 50/2018-Customs. The benefit was claimed under APTA for goods manufactured in China and imported into India.

Under the proposed transaction structure, the goods were to be manufactured by vendors in China but invoiced by a Swiss entity acting as a global supplier. While the legal title passed from the Swiss supplier to Jparks India, the goods were shipped directly from China to India.

Read more: Omission in Sec.14A Disclosure Enables Reopening Beyond 4 Years: Madras HC Restores Proceedings Against City Union Bank

The applicant asserted that the arrangement constituted a permissible form of third-party invoicing and that the imports satisfied all origin requirements, including the prescribed local value addition, supported by Certificates of Origin (COOs) issued by the Chinese authorities.

The Authority was required to determine whether third-party invoicing is permitted under APTA and, if so, whether imports under such a structure would be eligible for concessional duty under Notification No. 50/2018-Customs. Ancillary issues included the validity of Certificates of Origin in such cases, the relevance of CBIC instructions and circulars, and whether procedural compliance could compensate for the absence of express treaty authorization.

The applicant contended that third-party invoicing is a globally accepted trade practice and is implicitly recognised under APTA through the notes for completion of the Certificate of Origin, which permit the use of the phrase “To Order” in Box 2 for third-party trade.

Reliance was placed on CBIC Instruction No. 23/2024-Customs and Circular No. 53/2020 to argue that Indian Customs authorities have acknowledged third-party invoicing in other preferential schemes.

The applicant further relied on judicial precedents under other free trade agreements, particularly the ASEAN-India FTA, as well as World Customs Organization (WCO) guidelines, to assert that the substance of origin should prevail over invoicing formalities.

It was argued that once the originating status of goods is established through a valid COO, preferential benefits should not be denied on procedural grounds.

After examining the APTA Rules of Origin notified under Notification No. 94/2006-Customs (N.T.), Prabhat K. Rameshwaram observed that the Rules comprehensively lay down the conditions for origin, value addition, cumulation, and direct consignment.

However, they do not contain any substantive provision permitting third-party or third-country invoicing.

The Authority held that the reference to third-party trade in the notes for completing the Certificate of Origin is procedural and cannot be elevated to a substantive right in the absence of corresponding provisions in the Rules of Origin. CAAR noted that procedural instructions cannot override or supplement the treaty framework.

Addressing the reliance on CBIC Instruction No. 23/2024-Customs, the Authority clarified that the instruction applies only to those FTAs that expressly allow third-party invoicing, such as the ASEAN-India FTA.

It cannot be interpreted as creating or implying such a facility under APTA. Similarly, Circular No. 53/2020 was held to be inapplicable, as it pertains exclusively to the Duty-Free Tariff Preference scheme for wholly obtained goods, whereas the present case involved value-added goods.

On the doctrine of substantial compliance, CAAR relied on settled Supreme Court jurisprudence to reiterate that eligibility conditions for exemption notifications are substantive in nature and must be strictly fulfilled. The absence of treaty authorization for third-party invoicing was held to be a substantive defect that could not be cured by procedural compliance or equitable considerations.

The Authority also rejected the argument that a valid Certificate of Origin is conclusive in all circumstances. It held that while a COO is critical evidence of origin, it cannot override the eligibility framework prescribed by the treaty itself.

CAAR ruled that third-party invoicing is not permitted under APTA, as the agreement and its Rules of Origin do not expressly provide for such transactions.

Consequently, Jparks India was held ineligible to claim preferential customs duty under Notification No. 50/2018-Customs for imports made under the proposed invoicing structure.

The Authority further clarified that entries such as “To Order” in the Certificate of Origin, or the non-mentioning of the invoicing entity, cannot substitute for substantive compliance with treaty conditions.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates