Bombay High Court Sets Aside Preferential Duty Rejection

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 23.04.2026

Bombay High Court Sets Aside Preferential Duty Rejection

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Covestro India Private Limited, a leading manufacturer and trader of polycarbonate resins and related materials, recently secured a significant victory in the Bombay High Court. The court quashed the customs department’s order denying Covestro’s claim for preferential duty rates under the ASEAN-India Free Trade Agreement (AIFTA), restoring the assessment proceedings for fresh consideration. This article provides a detailed overview of the case, the legal issues involved, and the implications for importers and customs authorities.

Background of the Case

Covestro India regularly imports goods from Thailand, claiming preferential duty rates under various Free Trade Agreements (FTAs), including the AIFTA. The company had been availing these benefits for over a decade, submitting all required documents such as the Certificate of Origin (CoO), commercial invoices, and packing lists.

In March 2024, the Commissioner of Customs issued Public Notice No.33/2024, imposing additional documentary requirements for third-party invoicing cases. Covestro and other importers argued that these requirements deviated from the established rules under the FTAs and CAROTAR 2020 (Customs Administration of Rules of Origin under Trade Agreements Rules).

The Dispute

The customs department rejected Covestro’s claim for preferential duty on the grounds that the FOB (Free on Board) value could not be verified from the submitted invoices, as required by Public Notice No.33/2024. Covestro was unable to provide the exporter’s invoice from the originating country in time, leading to the denial of the FTA benefit and the passing of the impugned order dated 12th June 2024.

Covestro challenged this order, arguing that:

• The public notice was ultra vires (beyond legal authority) and inconsistent with CBIC (Central Board of Indirect Taxes & Customs) instructions.
• The customs department failed to follow the correct legal framework, including the procedures under CAROTAR 2020 and Section 28DA of the Customs Act.

Key Legal Developments

Following industry representations, the CBIC issued clarifications and new instructions:

• CBIC Instruction No.23/2024-Customs (21st October 2024): Clarified that third-party invoicing is permitted under AIFTA and that importers are not obligated to provide commercially sensitive information. The customs department must follow verification procedures consistent with the trade agreement.
• Public Notice No.55/2024 (24th June 2024): Superseded the earlier notice, prescribing updated procedures for document verification.
• Public Notice No.10/2025 (23rd January 2025): Incorporated CBIC’s clarifications, ensuring customs officers follow the correct process.

The Court’s Reasoning and Judgment

The Bombay High Court found that:

• The customs department’s rejection was based on a superseded public notice and not on the current legal framework.
• CBIC instructions and CAROTAR 2020 take precedence over local public notices.
• The impugned order caused serious prejudice to Covestro and was passed without proper jurisdiction.

Order Highlights:

• The impugned order dated 12th June 2024 was quashed and set aside.
• Assessment proceedings were restored for fresh consideration, instructing customs authorities to reassess Covestro’s claim for preferential duty under Notification No.46/2011 (Customs) and the latest CBIC instructions.
• All contentions of both parties were kept open for reassessment.
• All related writ petitions were disposed of in Covestro’s favor.

Implications for Importers and Customs Authorities

This judgment reinforces the importance of adhering to CBIC instructions and the legal framework established under FTAs and CAROTAR 2020. Importers can expect:

• Greater clarity and consistency in customs procedures for preferential duty claims.
• Protection against arbitrary or ultra vires public notices that deviate from national policy.
• The right to have claims reassessed under the correct legal standards.

Customs authorities are reminded to:

• Follow CBIC instructions and trade agreement provisions strictly.
• Avoid imposing additional requirements not supported by law.
• Ensure fair and transparent assessment processes.

Conclusion

The Bombay High Court’s ruling in favor of Covestro India Private Limited is a landmark decision for importers seeking preferential duty benefits under FTAs. It underscores the primacy of CBIC instructions and the need for customs authorities to act within their legal mandate. The reassessment of Covestro’s claims will now proceed under the correct legal framework, setting a precedent for similar cases in the future.

Source: Bombay High Court

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