Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation
Date: 10.04.2026
CESTAT Delhi- Certificate of Origin Cannot Be Rejected Without Following Prescribed Verification Procedure
This Article has been written by Advocate Ravi Shekhar Jha-BALLB & LLM (Constitutional Law) based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email idΒ intelconsul@gmail.com or on his Mobile +91-9999005379. β βββ Β β β
In a recent ruling by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) in New Delhi, the case of M/s Hazoorilal & Sons Jewellers Private Limited and its erstwhile director, against the Principal Commissioner of Customs was brought to a conclusion. This case revolved around the denial of customs duty exemptions claimed by Hazoorilal & Sons Jewellers on imported jewelry from Thailand under the Free Trade Agreement (FTA) between India and Thailand. The tribunal’s decision has significant implications for businesses relying on Certificates of Origin for preferential trade benefits.
Background of the Case
Hazoorilal & Sons Jewellers imported jewelry from Thailand, leveraging the duty-free import benefits provided under Notification No. 85/2004-CUS dated August 31, 2004. This notification allowed for the exemption of customs duties on goods manufactured in Thailand, provided they met the minimum value addition requirement of 20% in Thailand. To substantiate their claim, Hazoorilal submitted Certificates of Origin issued by the competent authority in Thailand, which confirmed a value addition of 22%.
However, the Directorate General of Revenue Intelligence (DRI) conducted an investigation and raised doubts about the authenticity of the value addition claims. The DRI issued a Show Cause Notice (SCN) on July 14, 2014, proposing to deny the exemption and recover differential duties with interest, along with imposing penalties. The Principal Commissioner of Customs upheld these proposals in an order dated January 16, 2023, leading Hazoorilal & Sons Jewellers to challenge the decision before the CESTAT.
Key Legal Issues
The case primarily revolved around the following legal questions:
- Validity of Certificates of Origin: Can the authenticity of Certificates of Origin issued by the competent authority in Thailand be doubted?
- Procedure for Verification: If there is reasonable doubt regarding the accuracy of the Certificates of Origin, what is the prescribed mechanism for verification?
Legal Framework
The case was governed by the “Interim Rules of Origin” notified by the Indian government under Notification No. 101/2004-CUS (NT) dated August 31, 2004. These rules outline the procedures for issuing and verifying Certificates of Origin, including the following key provisions:
- Rule 14: Certificates of Origin must be issued by a government authority designated by the exporting country and notified to the importing country.
- Rule 15: Provides for retroactive verification of Certificates of Origin either randomly or when there is reasonable doubt about their authenticity or accuracy. The importing country must:
- Submit a request for retroactive verification to the issuing authority in the exporting country.
- Provide reasons and supporting information for the request.
- Suspend preferential treatment while awaiting verification results, but allow the release of goods under administrative measures unless fraud or prohibition is suspected.
- Receive a response from the issuing authority within three months.
Tribunal’s Observations and Decision
The tribunal noted that the DRI had failed to follow the prescribed procedure for verifying the Certificates of Origin. Instead of requesting retroactive verification from the issuing authority in Thailand as per Rule 15, the DRI relied on statements from individuals and a letter from another jeweler to question the value addition claims. This approach was deemed contrary to the law.
The tribunal emphasized that the proper procedure for challenging the authenticity of Certificates of Origin is clearly outlined in the Interim Rules of Origin. The failure to adhere to these rules rendered the SCN and the subsequent order by the Principal Commissioner legally unsustainable.
Final Verdict
The tribunal set aside the impugned order and allowed the appeals filed by Hazoorilal & Sons Jewellers and its director. The appellants were granted consequential relief, if any, as per the law.
Implications of the Ruling
For Businesses
This ruling underscores the importance of adhering to established procedures for verifying Certificates of Origin under FTAs. Businesses can take solace in the fact that the legal framework protects their rights when they comply with the rules.
For Customs Authorities
The decision serves as a reminder for customs authorities to follow the prescribed mechanisms for verification and avoid arbitrary actions that could lead to legal challenges.
Conclusion
The CESTAT’s ruling in favor of Hazoorilal & Sons Jewellers highlights the critical role of procedural compliance in customs disputes. By setting aside the impugned order, the tribunal reaffirmed the importance of adhering to the rules governing Certificates of Origin under FTAs.Β This case serves as a precedent for similar disputes and provides clarity on the legal obligations of both importers and customs authorities.
Source: CESTAT Delhi
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