CESTAT Kolkata Restores Preferential Duty Benefit: Prevails in ASEAN-India FTA Customs Dispute Over Stainless Steel Imports

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 27.07.2026

CESTAT Kolkata Restores Preferential Duty Benefit: Prevails in ASEAN-India FTA Customs Dispute Over Stainless Steel Imports

M/s. Balaji Niryaat Private Limited, a Kolkata-based importer, faced denial of customs duty exemption and confiscation of imported stainless steel coils under the ASEAN-India Free Trade Area (AIFTA) agreement. The dispute arose after the Customs authorities alleged misuse of preferential duty benefits, citing non-cooperation by the Malaysian supplier, M/s. Bahru Stainless SDN. BHD., during a verification exercise.

The Dispute

• Imports in Question: Six consignments of cold rolled stainless steel coils imported in 2022-2023, accompanied by Certificates of Origin (COOs) from Malaysia.
• Customs Action: The Principal Commissioner of Customs denied the AIFTA exemption, demanded differential duty of Rs. 1.43 crore, imposed interest, confiscated goods (with a Rs. 3 crore redemption fine), and levied penalties totaling Rs. 3 crore.
• Basis for Denial: The Directorate of Revenue Intelligence (DRI) found that the Malaysian supplier refused to provide documents during an on-site verification, leading authorities to question the genuineness of the COOs and recommend denial of preferential tariff treatment.

Balaji Niryaat’s Arguments

1. Genuine Certificates: The COOs were valid, issued by the competent Malaysian authority, and accepted by Customs at the time of import.
2. No Allegation of Forgery: There was no claim that the COOs were forged or invalid at import.
3. Treaty Mechanism: Disputes over COOs should be resolved between governments under the AIFTA framework, not by unilateral Customs action.
4. No Statutory Suspension: No formal suspension or cancellation of the COOs by the competent authorities of India or Malaysia.
5. Procedural Lapses: The DRI’s verification lacked proper legal authority and did not follow the prescribed treaty mechanism.
6. No Suppression or Fraud: The importer acted transparently, and there was no evidence of willful misstatement or suppression.

Customs Department’s Stand

• The department argued that non-cooperation by the Malaysian supplier justified denial of the exemption and that the penalties and confiscation were legally valid.

Tribunal’s Findings

• No Blanket Denial Permitted: The tribunal held that non-cooperation by a supplier cannot automatically invalidate all COOs issued by them. Each certificate must be examined individually.
• No Evidence of Invalidity: There was no proof that the COOs for Balaji Niryaat’s imports were forged, cancelled, or declared invalid.
• Procedural Impropriety: The denial was based on internal communications and recommendations, not on a formal adjudicatory process as required by law.
• Limitation Barred: The demand was also found to be time-barred, as there was no evidence of fraud or suppression by the importer to justify the extended limitation period.

Outcome

• The CESTAT Kolkata set aside the denial of exemption, the demand for differential duty, confiscation, and penalties.
• Balaji Niryaat was restored the benefit of the preferential duty rate under the AIFTA for the six consignments in question.

Significance

This ruling clarifies that:

• Preferential duty benefits under international trade agreements cannot be denied solely on the basis of supplier non-cooperation unless there is a formal determination of invalidity for each COO.
• Importers cannot be penalized for actions beyond their control, especially when they have complied with all procedural requirements at the time of import.
• Authorities must follow the dispute resolution mechanisms prescribed under international agreements and cannot rely on internal correspondence to deny substantive fiscal benefits.

This decision sets an important precedent for the administration of preferential trade agreements and the rights of importers under such frameworks.

Source: CESTAT Kolkata

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