CESTAT Delhi Upholds Validity of Country of Origin Certificates Under India-Thailand FTA

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

Date: 15.07.2026

CESTAT Delhi Upholds Validity of Country of Origin Certificates Under India-Thailand FTA

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, recently delivered a significant judgment in favor of M/s. P.C. Jeweller Limited and its key officials. The case revolved around the import of diamond-studded gold jewellery from Thailand and the validity of Country of Origin (COO) certificates under the India-Thailand Free Trade Agreement (FTA). This article provides a detailed overview of the case, the legal issues involved, and the implications of the Tribunal’s decision.

Background of the Case

Between 2010-11 and 2011-12, P.C. Jeweller Limited imported diamond-studded gold jewellery from Thailand, filing 24 Bills of Entry and claiming preferential customs duty benefits under Notification No. 85/2004-Customs and Notification No. 101/2004-Customs (NT). Each import was accompanied by a COO certificate from Thai authorities, as required under the FTA.

At the time of import, customs authorities cleared the goods without raising any objections regarding the description, quantity, value, or the COO certificates. However, in December 2012, the Directorate of Revenue Intelligence (DRI) initiated an investigation, alleging that the COO certificates reflected inflated local value addition in Thailand, thereby wrongly availing FTA benefits.

Key Allegations and Proceedings

• DRI’s Allegations:
  • The COO certificates did not meet the mandatory regional value content of at least 80% as required for FTA benefits.
  • Value addition was uniformly declared as 22%, regardless of the jewellery’s specifics, suggesting misrepresentation.
  • The investigation relied on statements from third parties and other jewellers, not on direct verification with Thai authorities.
• Show Cause Notice and Adjudication:
  • Based on the DRI’s findings, a show cause notice was issued, demanding duty and proposing penalties against P.C. Jeweller and its officials.
  • The adjudicating authority confirmed the demand and imposed penalties.

Legal Arguments by the Appellants

The appellants argued that:

1. All required documents, including COO certificates, were submitted at the time of import and verified by customs.
2. The DRI’s allegations were based on indirect evidence and not on verification with the issuing authority in Thailand.
3. As per the ‘Interim Rules of Origin’ and related procedures, any doubt about a COO certificate’s authenticity must be resolved by retroactive verification with the issuing authority, which was not done in this case.
4. The Tribunal’s earlier decision in the case of Hazoorilal & Sons Jewellers supported their position.

Tribunal’s Findings and Decision

The CESTAT bench, comprising Hon’ble Mr. Ashok Jindal (Judicial) and Mr. K. Anpazhakan (Technical), made the following key observations:

1. Procedural Lapse by DRI:
   • The DRI did not follow the prescribed mechanism under Rule 14 and Rule 15 of the ‘Interim Rules of Origin’ for verifying COO certificates.
   • Instead of seeking retroactive verification from Thai authorities, the DRI relied on statements from unrelated parties.
2. Importance of Proper Verification:
   • The Tribunal emphasized that doubts about COO certificates must be addressed through official channels, as outlined in the FTA’s operational procedures.
   • Failure to follow these procedures invalidates the basis for denying FTA benefits.
3. Setting Aside the Demand and Penalties:
   • The Tribunal set aside the impugned order, dropped the demand for duty, and nullified all penalties against the appellants.
   • The appeals were allowed with consequential relief.

Implications of the Judgment

This ruling reinforces the importance of adhering to prescribed verification procedures in trade agreement cases. It protects importers from arbitrary denial of benefits based on unverified allegations and upholds the sanctity of international certification processes.

Key Takeaways for Importers

1. Maintain Complete Documentation: Always ensure all required certificates and documents are filed at the time of import.
2. Know Your Rights: If COO certificates are challenged, insist on proper verification with the issuing authority as per the relevant rules.
3. Legal Precedent: This judgment can be cited in similar disputes involving FTAs and COO certificates.

Conclusion

The CESTAT Delhi’s decision in favor of P.C. Jeweller Limited is a landmark in the interpretation of trade agreement procedures and the protection of importers’ rights. It underscores the necessity for authorities to follow due process and provides clarity on the handling of COO certificate disputes under FTAs.

Source: CESTAT Delhi

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