• Dated 17^th June, 2025

CESTAT Kolkata extended the Duty exemption benefit under SAFTA considering the Valid COO certificate as reliable document & concrete evidence to substantiate the origin of the goods

Brief Facts

Vippy Industries Ltd. (hereinafter referred to as "VIL"), a company based in Madhya Pradesh, imported a product called Soya Acid Oil (Industrial Monocarboxylic Fatty Acids) from Bangladesh. The company classified the goods under Customs Tariff Heading (CTH) 38231900 and sought exemption from customs duty under the SAFTA (South Asian Free Trade Area) agreement. This exemption was available under Notification No. 99/2011-Customs, which provides for a 'Nil' rate of duty for certain imports from SAARC (South Asian Association for Regional Cooperation) countries. Between December 2020 and April 2022, VIL filed six Bills of Entry for importing the said goods. To support their claim, VIL submitted Certificates of Origin under SAFTA Rules, which confirmed that the goods were produced in Bangladesh. However, the customs authorities expressed doubt about the origin of the goods. They argued that since soybean oil is not widely produced in Bangladesh, the origin of the Soya Acid Oil was questionable. Customs officers then asked the company to submit further documents, including cost sheets and CAROTAR (Customs Administration of Rules of Origin under Trade Agreements) declarations, as required under Notification No. 81/2020-Customs (NT). Since the Company could not immediately produce all documents, the customs authorities denied the exemption and charged full customs duties, including IGST and other applicable charges. VIL paid these under protest and cleared the goods, and later filed appeals.

Assessee's Contention

VIL argued that the Certificates of Origin submitted with each import were valid and compliant with the rules under SAFTA. They pointed out that in all six certificates, the origin criterion was marked as "A", which under the rules means the goods were "wholly obtained or produced" in the exporting country (Bangladesh). VIL claimed that this met the essential requirement to avail duty-free treatment under SAFTA. They also submitted that they were not given sufficient opportunity to produce the additional documents when first requested, and the principles of natural justice were violated. Furthermore, they brought to the Hon'ble Tribunal's notice that in other cases involving the same product imported later, the customs authorities themselves accepted similar documentation and granted the SAFTA benefit. These later cases were even decided in their favour by the same Commissioner (Appeals), Kolkata, and the department did not challenge those favourable orders. Based on this, VIL argued that denying the exemption in their earlier imports was unfair, inconsistent, and arbitrary, and that they should be given the same benefit.

Department's Contention

The customs authorities contended that VIL failed to provide necessary documentation, particularly the detailed information mentioned in Form I under Rule 5 of Notification No. 81/2020, which relates to verifying the origin of goods under trade agreements. According to customs, the Company's inability to produce these details made it ineligible for the SAFTA duty exemption. Additionally, customs argued that since VIL chose to pay the full duty at the time of import (even if under protest), they had effectively waived their right to claim the exemption later. The department stated that the SAFTA benefit cannot be claimed as an afterthought once the goods have already been cleared and duties paid. Thus, they maintained that the orders rejecting VIL's claim were justified and should be upheld.

Decision

The Hon'ble Tribunal reviewed the case and allowed in favour of Vippy Industries Ltd. First, it observed that the six Certificates of Origin submitted by VIL clearly mentioned "A" in the origin criteria, confirming the goods were wholly produced in Bangladesh. The Hon'ble Tribunal noted that such marking is a sufficient basis to claim exemption under the SAFTA notification and that these documents were consistent with the requirements of Notification No. 99/2011-Customs. Moreover, the Hon'ble Tribunal emphasized that merely paying duty under protest does not take away the importer's right to appeal or claim exemption later, especially when there's no fraud or misrepresentation. Importantly, the Hon'ble Tribunal highlighted that in subsequent imports of the same goods, customs authorities themselves granted duty exemption based on the same type of certificates. Therefore, denying the benefit in this instance was both unjustified and inconsistent with past decisions. The Hon'ble Tribunal also found that VIL had submitted additional supporting documents, including cost sheets and CAROTAR-related information, in line with Notification No. 81/2020. In conclusion, the Hon'ble Tribunal held that VIL fulfilled all conditions necessary to claim the exemption. As a result, the Hon'ble Tribunal set aside the earlier orders of the Commissioner (Appeals) that denied the SAFTA benefit and allowed all six appeals. Vippy Industries Ltd. is now entitled to a refund or relief of the duties paid, as per law.

BTA's Comment

In this case, the Hon'ble Tribunal held that the benefit of exemption under the SAFTA agreement cannot be denied merely on the basis of presumptions or doubts regarding the origin of goods, especially when valid Certificates of Origin are produced. The Hon'ble Tribunal emphasized that unless the customs authorities initiate proper verification as per CAROTAR Rules and bring on record concrete evidence to disprove the origin, the preferential benefit must be extended. Accordingly, the denial of exemption and demand for full duties was held to be unjustified, and the appeal was allowed in favour of the importer, with a direction to refund the duties paid under protest.

Author: Harsh Kr Gupta

Edited by: Shaily Gupta