TRAFIGURA INDIA PRIVATE LIMITED v. UNION OF INDIA

CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA

and

HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 05/05/2023

CAV JUDGMENT

(PER : HONOURABLE MR. JUSTICE N.V.ANJARIA)

All these four Special Civil Applications, since involve similar facts and common issues, they were heard together to be finally treated by this common judgment.

The Challenge

2. Invoking the jurisdiction of this Court under Article 226 of the Constitution,

(a) The petitioner of Special Civil Application No. 14028 of 2020 - Trafigura India Pvt. Ltd. seeks to challenge the Order-in-Origin dated 29.05.2020 passed by respondent no.3 - the Additional Commissioner of Customs, Kandla under Section 28 of the Customs Act, 1962. This petitioner came to be imposed penalty of Rs. 25,90,825/- under section 112 (a) of the Customs Act, 1962.

(b) The very aforementioned Order dated 29.05.2020 is challenged by Lykos India Pvt. Ltd. - the petitioner of Special Civil Application No. 13365 of 2020. The customs authority held this petitioner liable to pay the differential customs duty amounting

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to Rs. 3,18,194/-. Interest was ordered to be charged for the confirmed duty amount under Section 28AA of the Customs Act, 1962 (hereinafter referred to as 'the Act'). The goods in question valued at Rs.52,80,791/- was held liable to be confiscated under Section 111(m) and 111(o) of the Act. Penalty of equivalent duty amount of Rs.3,18,194/- was imposed under Section 114A of the Act, giving option under the Proviso to the Section.

(c) The third Special Civil Application No. 14937 of 2020 is also by Lykos India Pvt. Ltd. wherein the challenge is directed against Order-in-Origin dated 24.06.2020 of the Assistant Commissioner of Customs, Mundra, respondent no.3. Thereby, it was directed to recover from the petitioner balance customs duty of Rs. 4,54,979/- under the Proviso to section 28(4) of the Customs Act, since the petitioner importer had already paid Rs.57,96,402/- towards the duty liability. Penalty of equivalent amount was imposed under Section 114A, giving option under the Proviso. Since the goods in this case were physically not available, redemption fine in lieu of confiscation was not imposed.

(d) The petitioner of Special Civil Application No. 3518 of 2022 - M/s. Talin International Pvt. Ltd. impugned Order-in-Appeal dated 15.02.2021 passed by the Commissioner of Appeals. The appellate authority confirmed the Order in Original dated 28.12.2019

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passed by the Joint Commissioner of Customs, Ahmedabad-respondent no.3 herein. The petitioner was asked to pay the differential customs duty of Rs.8,52,700/- under Section 28(4) of the Customs Act. The goods valued at Rs.1,40,31,590/- were held liable to be confiscated. Penalty of equivalent amount of duty under section 114A was imposed.

Basic Facts

3. The petitioner of the first captioned petition- Trafigura India Pvt. Ltd. having its office at village Mithi Rohar, Gandhidham-Kutch, is engaged in the business of trading in non-ferrous metals. The goods-Tin Ingots were imported by this petitioner filing two warehouse Bills of Entry No. 2144316 dated 05.08.2015 and No. 2499949 dated 07.09.2015. The goods were imported from overseas supplier M/s. Trafigura PTE Ltd, Singapore, Malaysia. The goods were manufactured by M/s. Malaysia Smelting Corporation. It was declared in the Bills of Entry that the Country of Origin of the goods was Malaysia. The Country Origin Certificate was produced and under Notification No. 46/2011, Concessional Basic Customs Duty (0%) was claimed.

3.1 In both the Bills of Entry, this petitioner of first petition claimed concessional duty and paid total Rs. 90,10,875/-. As stated in the impugned order, it was based on the duty structure of Basic Customs Duty (BCD)(0%)+(CVD)(12.5%)+Cess(2+1%)

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+SAD(4%)(effectively 17.39%), whereas the actual duty required to be paid was Rs.1,21,33,075/- under the duty structure BCD (5%) + CVD(12.5%)+Cess (2+1)% +SAD(4%) (effectively 23.4155%). Due to above, respondent stated, that there was a short levy of the Basic Customs Duty to the tune of Rs. 41,22,200/-. 3.1.1 Lykos India Pvt. Ltd., the petitioner of second Special Civil Application purchased the goods from M/s. Trafigura India Pvt. Ltd. on ex-warehouse basis and filed ex-bond Bill of Entry. This petitioner also claimed the duty exemption on the basis of the same exemption notification No. 46/2011. 3.1.2 The same party-petitioner Lykos India Pvt. Ltd. in its Special Civil Application No. 14937 of 2020, purchased the Tin Ingots wherein 25 Metric Tons from M/s. Trafigura India Pvt. Ltd. under High Sea Sale Agreement dated 28.04.2017. The Bill of Entry dated 09.05.2017 was filed for home consumption. The petitioner availed the exemption under the very notification.

3.1.3 The petitioner of Special Civil Application No.1835 of 2022 is Talin International Pvt. Ltd. As per the case, it has been engaged in the manufacturing and trading activity to regularly import both ferrous and non-ferrous metals from various countries. It was stated that in regular course of business, the petitioner purchased

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different quantities of Tin Ingots from one M/s. Welcome Impex Pvt. Ltd.. The purchase was on the High Seas Sale Basis by Agreement dated 8.8.2017. The goods were procured by the high seas seller M/s. Welcome Impex Pvt. Ltd.

3.1.4 According to this petitioner also, the goods were under cover of Certificate of Origin issued by the Ministry of International Trade & Industry, Malaysia. The petitioner filed Bill of Entry No. 3084563 dated 2.9.2017, thereby claimed the benefit of concessional rate of Customs duty under the same Exemption Notification. The petitioner- Talin International thereafter preferred appeal on 28.2.2020 before the appellate authority. The appellate authority - the Commissioner of Customs (Appeals) by passing Order-in-Appeal dated 15.02.2021 rejected the appeal of the petitioner. 3.1.5 The show-cause notice dated 06.11.2018 was issued to as many as seven parties, which included the petitioners of first two petitions, Petitioner Ms. Trafigura India Pvt. Ltd. and M/s. Lykos India Pvt. Ltd. asking them to show cause as to why the duty and penalty etc., should not be recovered from the petitioners as the exemption was wrongly availed. The Trafigura was the importer whereas M/s. Lykos India and other noticees were the the ex-bond holders who purchased the goods-Tin Ingots imported by M/s. Trafigura when they were kept in the warehouse,

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availing the duty exemption. In other two cases, show-cause notices dated 21.05.2019 and 29.05.2019 were issued. All the notices culminated into the impugned orders.

3.1.6 The goods-Tin Ingots were purchased by the petitioners from Malaysia, which were manufactured by M/s. Malaysia Smelting Corporation (MSC). In respect of the goods in question, which were of Malaysian origin, the Country of Origin Certificate (COO) was required to be produced. The duty exemption was availed by the petitioners by producing the COO wherein the Regional Value Content (RVC) was misstated and misrepresented. The RVC of the goods was prescribed to be above 35% as per the condition, however, in actuality the RVC was much less than 35%, and found to have been calculated in fraudulent and misrepresented basis to project the goods accordingly.

3.2 The proceedings against the petitioners were taken out by the competent customs authority in exercise of the powers under section 28(4) read with section 46(4) of the Customs Act, 1962 (hereinafter referred to as the 'Act'). All the petitioners had imported goods-Tin Ingots from Malaysia, and claimed exemption from basic Customs duty (0%) under Notification dated 46/2011 dated 01.06.2011. Upon inquiry and investigation, the customs authorities found that the petitioners were not entitled to the

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exemption. Broad Controversy

3.3 Stating the controversy broadly and in brief, leaving elaboration in subsequent stages of discussion, the petitioners came to be subjected to proceedings under Section 28(4) of the Act on the ground inter alia that they, by suppressing the facts and by misrepresenting them, had wrongly availed the benefit of exemption of basic customs duty under Notification No. 46/2011 in respect of the goods imported from Malaysia. The said exemption notification came to be issued by the Customs Authorities in light of an international treaty and the Rules framed by the Government of India, called Rules of Origin, in furtherance of the treaty provisions.

3.3.1 The Government of India signed an agreement on Trade in Goods Under the Framework Agreement on Comprehensive Economic Co-operation between the Republic of India and the Association of Southeast Nations in the year 2009. Malaysia happens to be one of the members of Association of Southeast Nation ('ASEAN' as abbreviated). As per the said international agreement-the Agreement on Trade in Goods Under the Framework Agreement on Comprehensive Economic Co-operation between ASEAN countries ('AIFTA' as abbreviated), preferential tariff treatment was agreed to be accorded by India in

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respect of imports of specified goods, which included Tin Ingots, from ASEAN countries, provided certain conditions are fulfilled. One of the important conditions, which was for determining the origin of the goods, was the fulfillment of the Regional Value Content (abbreviated as 'RVC'). The RVC, the formula and the methodology to arrive at the same was prescribed in AIFTA provisions.

3.3.2 As per Rule 13 of the AFITA Rules of Origin, referred to in detail hereinafter, a certificate of Country of Origin ('COO' as abbreviated) is required to be issued by the government authority designated by the exporting country to support the claim that the product or goods in question shall be accepted as eligible for the preferential treatment.

3.3.3 In all present four cases, the respective petitioners had imported the Tin Ingots (CTH 8001 1090) or had purchased from the importer, while in warehouse or in high sea sale basis, as the case may be, from foreign supplier Trafigura Pte Ltd., Singapore. The goods were manufactured by the Malaysia Smelting Corporation ('MSC' as abbreviated). By presenting Bills of Entry for warehousing in the case of first petitioner and the ex-bond Bill of Entries in rest of the cases, the petitioners produced the Origin Certificate to obtain the customs duty benefit under Notification No. 46/2011

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projecting that the goods satisfied the condition of Malaysian origin requirement of RVC content. 3.3.4 The requisite RVC has to be above 35%, whereas the goods imported by the petitioners and for which the duty benefit was availed and earned, had the RVC less than 35% in each cases. As per respondents' case, it was by wrong, fraudulent and misrepresented presentation of RVC, the petitioners showed higher RVC contents. For instance, as per the case of the authorities in Special Civil Application No. 14028 of 2020, the RVC was shown exorbitantly high to be more than 70% and like did the other petitioners.

Supreme Court Order in Bombay Petition

3.4 At this stage, it may be stated that against the Orders-in-Original, impugned in the first three petitions, remedy of appeal was available and the writ court would have ordinarily relegated the petitioners to such remedy. However, before the Bombay High Court, the writ petitions including the Writ Petition No. 2491 of 2018 by one Kothari Metals Ltd. was filed involving the identical dispute as raised in the present cases. The Customs authorities rejected the Certificate of Origin (COO) and denied the exemption benefit on the goods imported from Malaysia. The Bombay High Court by judgment and order dated 9.7.2021 rejected the petition on the

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ground availability of alternative remedy. The petitioners were directed to pursue the adjudicatory proceedings.

3.4.1 Civil Appeal No. 9010 of 2019 was preferred before the Supreme Court. The writ petitions were restored by the Supreme Court by order dated 25.11.2019. The Apex Court directed the Bombay High Court to decide the petitions on merits and in accordance with law in light of the fact that initiation of proceedings itself was called in question in view of Article 24 in Appendix D of the

AIFTA.

3.4.2 The aforesaid petition is pending before the Bombay High Court, awaiting the decision. Before this High Court, the captioned petition came to be filed under Article 226 of the Constitution, challenging the Orders-in-Original raising the issue in respect of AIFTA Article 24 and its non observance.

3.4.3 The Supreme Court in its order dated 25.11.2019 passed in the said Civil Appeal inter alia observed,

"5. The appellant(s) had challenged the show cause notice(s) not only on merits but had raised foundational issue of the competence of the concerned authority to proceed in the matter in the context of Article 24 of the Appendix 'D' to the Treaty dated 20.08.2009 between the Republic of

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India and the Association of South East Asian Countries (ASEAN).

6. The High Court took notice of that plea in paragraph 6 of the impugned judgment and yet proceeded to dispose of the writ petition (s) on the ground that the appellant (s) could invoke efficacious alternative remedy.

7. Needless to observe that the issue raised by the appellant(s) regarding the efficacy of Article 24 of the Appendix 'D' to the Treaty cannot be adjudicated by the competent authority. That issue needs to be addressed by the High Court in the Writ Petition (s) filed by the concerned appellant (s).

8. In this view of the matter, we set aside the impugned judgment and order and relegate the parties before the High Court by restoring the concerned writ petition (s) to their original number(s), to be decided on their own merits in accordance with the law. All questions are left open.

9. The appeal (s) and pending application

(s) are accordingly disposed of. No costs."

3.4.4 In light of the observations of the Supreme Court as above, the issue regarding competence of the Customs authorities to proceed under the Customs Act in light of Article 24 of the Appendix 'D' to the Treaty - AIFTA dated 30.08.2009 is required to be examined. The Article 24 is reproduced hereinafter. AIFTA & Determination of Origin Rules, 2009

3.5 The AIFTA Agreement aims at fostering and

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promoting economic cooperation between the member countries and has the object also of establishing the ASEAN-India Free Trade Area. India is a signatory to AIFTA. In order to implement the AIFTA provisions, the Central Government, in exercise of powers under Section 5(1) of the Customs Tariff Act, 1975 has framed the Rules called Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Government of Member States of the Association of Southeast Asian Nations (ASEAN) and the Republic of India) Rules, 2009. These Rules are based on AIFTA Rules of Origin referred to in AIFTA Article 7. The 2009 Rules came to be notified by the Central Government by Notification No. 189/2009-Customs dated 31.12.2009. The Rules are described to as the 'DOGPTA Rules of Origin' or '2009 Rules'. They are referred to hereinafter accordingly, or as 'Rules of 2009'.

3.5.1 It may also be stated that by Notification dated 43/2011 dated 01.07.2011, the Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between the Governments of the Republic of India and Malaysia) Rules, 2011, are also framed.

3.5.2 Section 5 of the Customs Tariff Act, 1975, under which the aforementioned 2009 Rules are framed, provides for the levy of a lower rate of duty under a Trade Agreement. It says that whereunder a trade

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agreement between the Government of India and the Government of foreign country or territory, duty at a rate lower than specified in the First Schedule is to be charged on articles which are produced or manufactured in such foreign country or territory, as the case may be, the Central Government may issue notification in the Official Gazette and make Rules thereunder for determining if any Article is the produce or manufacture of such foreign country and for requiring the owner to make a claim at the time of importation, supported by such evidence as may be prescribed in the Rules, for assessment at the appropriate lower rate under such agreement. Sub- section (2) says that if any question arises whether any trade agreement applies to any country or territory, the decision of the Central Government would be final.

Exemption Notification

3.6 Notification 46/2011 dated 01.06.2011 has been issued by Customs Authorities under Section 25 of the Act, in light of AIFTA. It has genesis in the AIFTA provisions and the Rules of 2009 enacted by the Government of India to implement the AIFTA provisions. Section 25 of the Customs Act is about power to grant exemption from duty. It is provided that if the Central Government is satisfied that it is necessary in public interest so to do, it may by Notification in the official gazette, exempt

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generally either absolutely or subject to such conditions to be fulfilled before or after clearance as may be specified, the goods of any specified description, from the whole or any part of the duty or customs leviable thereon. The further provisions in sub-sections deal with the form and method in relation to rate and duty, continuation of exemption etc.

Eye-view of AIFTA Provisions

3.7 Generally stated, the preferential tariff treatment agreed to be given by India in view of the AIFTA is subject to these conditions-firstly, the goods must fall within a description of goods eligible for the concession in the country of import destination. Secondly, the goods must comply with the consignment condition in accordance with relevant Rule of Rules of Origin. And thirdly, the goods must comply with the origin criteria as prescribed. 3.7.1 Surveying the relevant provisions and procedural contemplation of AIFTA, its preamble states inter alia that the giving of special differential treatment is to achieve economic co- operation and economic integration between the ASEAN countries. The AIFTA Article 7 deals with 'Rules of Origin' and says that these Rules and the Operational Certification Procedures set out in Annexure-2 and its Appendices would apply to the goods covered under the AIFTA. Article 14 deals with customs

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procedures. 3.7.2 Annexure 2 to AIFTA are the Rules of Origin, which deals with determining the origin of the products eligible for the preferential tariff treatment pursuant to Article 4 of the AIFTA. Appendix D to the AIFTA Agreement sets out Operational Certification Procedures for the AIFTA Rules of Origin. The AIFTA Rules of Origin and AIFTA Certification Procedures are not detailed hereby reproducing them, for the only reason that the aforementioned Customs Tariff DOGPTA Rules, 2009 have roots of their formations into the AIFTA Rules of Origin/Certification Procedure. These DOGPTA Rules, 2009, are extensively referred to and reproduced in the discussion to succeed.

3.7.3 Before adverting to elaboration of DOGPTA Rules, 2009, the comparative chart relating to AIFTA Articles and the provisions in DOGPTA Rules, 2009, would give a beforehand picture. Comparison between Rules of Origin for AIFTA and 2009 Rules framed by Government of India is as under,

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3.7.4 Similarly, the Annexure-III Operational

Procedure of AIFTA and the procedure envisaged under

2009 Rules is as per following tabular detail,

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3.7.5 The comparison shows that while AIFTA

Articles and Operational Certification Procedures are

lifted verbatim to be transformed into the 2009 Rules

framed under the Indian law, when the AIFTA Rules of

Origin and the DOGPTA Rules of 2009 are juxtaposed,

certain Rules from AIFTA Rules are not part of 2009

Rules. They are not converted into statutory Rules.

3.7.6 What is importantly and noticeably omitted

is Article 24 of AIFTA Operational Certification

Procedures. Article 24 provision does not figure in

DOGPTA Rules, 2009 enacted by Government of India.

Article 24 reads and provides as under,

Article 24

(a) In case of a dispute concerning origin determination, classification of products or other related matters, the Governmental authorities concerned in the importing and

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exporting Parties shall consult each other with a view to resolving the dispute, and the result communicated to the other Parties.

(b) Where no mutually satisfactory solution to the dispute is reached through consultations, the Party concerned may invoke the dispute settlement procedures under the ASEAN-India DSM Agreement.

DOGPTA Rules, 2009

3.8 Proceeding to highlight and discuss on the relevant amongst the Rules of Origin, 2009, 'Originating products' are defined which would qualify as originating in accordance with the provisions of Rule 3. Rule 3 is about Origin Criteria extracted hereunder,

Rule 3. Origin criteria.- The products imported by a party which are consigned directly under rule 8, shall be deemed to be originating and eligible for preferential tariff treatment if they conform to the origin requirements under any one of the following:-

(a) products which are wholly obtained or produced in the exporting party as specified in rule 4; or,

(b) products not wholly produced or obtained in the exporting party provided that the said products are eligible under rule 5 or

6.

3.8.1 Rule 4 is about Wholly produced or obtained products. Rule 5, which is again relevant, deals

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with Not wholly produced or obtained products, Rule 5. Not wholly produced or obtained products.- (1) For the purpose of clause (b) of rule 3, a product shall be deemed to be originating, if -

(i) the AIFTA content is not less than 35 per cent. of the FOB value; and

(ii) the non-originating materials have undergone at least a change in tariff sub- heading (CTSH) level i.e. at six digit of the Harmonized System:

Provided that the final process of the manufacture is performed within the territory of the exporting party.

(2) For the purpose of clause (i) of sub-rule (1), the formula for calculating the 35 per cent. AIFTA content is as follows:

(i) Direct Method AIFTA Material Cost + Direct Labour Cost + Direct Overhead Cost + Other Cost + Profit

_____________________________________________________ x 100 % ≥ 35% 35% FOB Price

(ii) Indirect Method Value of Imported Non-AIFTA Value of Undetermined Origin Materials, Parts or Produce + Materials, Parts or Produce _____________________________________________________ x 100 % ≤ 65% 65% FOB Price

3.8.2 As could be seen, above Rule 5 deals with

method of calculating AIFTA content or what is also called Regional Value Content (RVC). Sub-rule (6) of Rule 5 says that the method of calculating for AIFTA content is as set out in Annexure-I referable to sub-

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rule 6(5) above titled as Method of Calculation for the AIFTA Content. It is not necessary to detail the Method of Calculation of AIFTA content. 3.8.3 Rule 13 is again important and relevant, dealing with Certificate of Origin, which reads as under,

"Rule 13. Certificate of Origin.- Any claim that a product shall be accepted as eligible for preferential tariff treatment shall be supported by a Certificate of Origin as per the specimen in the Attachment to the Operational Certification Procedures issued by a Government authority designated by the exporting party and notified to the other parties in accordance with the Operational Certification Procedures as set out in Annexure III annexed to these rules. Operational Certification Procedures 3.8.4 Now adverting to the Operational Certification Procedure, Annexure-III referred to in Article 13 deals with such procedure for applying the 2009 Rules to provide that for the purpose of implementing the Rules, the Operational Certification Procedure on the issuance and verification of AIFTA Certificate of Origin and other related administrative matters shall be followed. 3.8.5 Paragraph 1 states that AIFTA Certificate of Origin shall be issued by the Government authority (issuing authority) of the exporting party. The said

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paragraph and paragraphs no.3, 4 and 5 corresponds to Articles 1 to 5 of the AIFTA Rules. Paragraph 6 is regarding pre-exportation examination, which corresponds to Article 6. Similarly, paragraph 7 of the certification procedure is about issuance of AIFTA Certificate of Origin, which is same as Article 7 of the AIFTA Rules.

3.8.6 Paragraph 6 of the Certification Procedure is reproduced,

"6. Pre-Exportation Examination

(a) The Issuing Authority shall, to the best of their competence and ability, carry out proper examination upon each application for the AIFTA Certificate of Origin to ensure that-

(i) the application and the AIFTA Certificate of Origin are duly completed and signed by the authorised signatory;

(ii) the origin of the product is in conformity with the Rules.

(iii) other statements of the AIFTA Certificate of Origin correspond to supporting documentary evidence submitted; and

(iv) description, quantity and weight of goods, marks and numbers on packages, and number and type of packages, as specified, conform to the products to be exported.

(b) Multiple items declared on a single invoice and single AIFTA Certificate of

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Origin shall be allowed, provided that each item qualifies separately in its own right."

3.8.7 Similarly, paragraph 7 deals with issuance of AIFTA Certificate of Origin, which is also reproduced,

"7. Issuance Of AIFTA Certificate Of Origin

(a) The AIFTA Certificate of Origin shall be in International Organisation for Standardisation (ISO) A4 size, and white paper in conformity with the specimen as in the Attachment to these Operational Certification Procedures. It shall be made in English. The AIFTA Certificate of Origin shall comprise one (1) original and three

(3) copies. Each AIFTA Certificate of Origin shall bear a reference number as given separately by each place or office of issuance.

(b) The original copy shall be forwarded, together with the triplicate, by the exporter to the importer. Only the original copy will be submitted by the importer to the Customs Authority at the port or place of importation. The duplicate shall be retained by the Issuing Authority in the exporting party. The triplicate shall be retained by the importer. The quadruplicate shall be retained by the exporter.

(c) In cases where an AIFTA Certificate of Origin is not accepted by the Customs Authority of the importing party, such AIFTA Certificate of Origin shall be marked accordingly in box 4 and the original AIFTA Certificate of Origin shall be returned to the Issuing Authority within a reasonable period but not to exceed two months. The

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Issuing Authority shall be duly notified of the grounds for the denial of preferential tariff treatment.

(d) In cases where an AIFTA Certificate of Origin is not accepted, as stated in paragraph (c), the Issuing Authority shall provide detailed, exhaustive clarification addressing the grounds for the denial of preferential tariff treatment raised by the importing party. The Customs Authority of the importing party shall accept the AIFTA Certificate of Origin and grant the preferential tariff treatment if the clarification is found satisfactory."

3.8.8 Sub-clause (c) thereof provides the procedure if the same is not accepted by the Customs authority of the importing country. Sub-clause (d) enjoins the issuing authority to provide detailed and exhaustive clarification addressing the grounds of denial of preferential treatment by the importing party. If this explanation is found satisfactory, then only the customs authority of the importing party may accept AIFTA Certificate. Return of the AIFTA Certificate by the importing party is contemplated within a period of two months as per sub-clause (c).

3.8.9 While paragraph 13 deals with the presentation of AIFTA Certificate to the Customs Authority at the time of lodging of the import entry for the products concerned, prescribing the procedure therefor, paragraphs 16 and 17 of the certification

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process are important to be noticed. Paragraph 16 of the AIFTA Rules is reproduced from the Certification Procedure as under,

VERIFICATION: 16. (a) The importing party may request a retroactive check at random and/or when it has reasonable doubt as to the authenticity of the document or as to the accuracy of the information regarding the true origin of the good in question or of certain parts thereof. The Issuing Authority shall conduct a retroactive check on the

producer/exporter's cost statement based on the current cost and prices within a six-months time frame prior to the date of exportation subject to the following procedures:

(i) the request for a retroactive check shall be accompanied by the AIFTA Certificate of Origin concerned and specify the reasons and any additional information suggesting that the particulars given in the said AIFTA Certificate of Origin may be inaccurate, unless the retroactive check is requested on a random basis;

(ii) the Issuing Authority shall respond to the request promptly and reply within three months after receipt of the request for retroactive check;

(iii) In case of reasonable doubt as to the authenticity or accuracy of the document, the Customs Authority of the importing party may suspend provision of preferential tariff treatment while awaiting the result of verification. However, it may release the goods to the importer subject to any administrative measures deemed necessary, provided that they are not subject to import prohibition or restriction and there is no suspicion of fraud; and

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(iv) the retroactive check process, including the actual process and the determination of whether the subject good is originating or not, should be completed and the result communicated to the Issuing Authority within six months. While the process of the retroactive check is being undertaken, sub-paragraph (iii) shall be applied.

3.8.10 Paragraph 17, same as Article 17 of the AIFTA Rules provides in the event the importing party is not satisfied with the outcome of the retroactive check, in which circumstances, the importing party may request for verification visits to the exporting party. Paragraph 17 is reproduced,

17. (a) If the importing party is not satisfied with the outcome of the retroactive check, it may, under exceptional circumstances, request verification visits to the exporting party. Prior to conducting a verification visit-

(i) the importing party shall deliver a written notification of its intention to conduct the verification visit, through the competent authority, simultaneously to,-

1. the producer/exporter whose premises are to be visited;

2. the Issuing Authority of the party in the territory of which the verification visit is to occur;

3. the competent authority of the party in the territory of which the verification visit is to occur; and

4. the importer of the goods subject to the

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verification visit;

(ii) the written notification mentioned in sub-paragraph (i) shall be as comprehensive as possible and include:

1. the name of the competent authority issuing the notification;

2. the name of the producer/exporter whose premises are to be visited;

3. the proposed date of the verification visit;

4. the coverage scope or purpose of the proposed verification visit, including reference to the goods subject to the verification; and

5. the names and designation of the officials performing the verification visit;

(iii) an importing party shall obtain the written consent of the producer/exporter whose premises are to be visited;

(iv) when a written consent from the producer/exporter is not obtained within thirty days from the date of receipt of the notification pursuant to sub-paragraph (i), the notifying party may deny preferential tariff treatment to the goods referred to in the said AIFTA Certificate of Origin that would have been subject to the verification visit; and

(v) the Issuing Authority receiving the notification may postpone the proposed verification visit and notify the importing party of such intention within fifteen days from the date of receipt of the notification. Notwithstanding any postponement, any verification visit shall

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be carried out within sixty days from the date of such receipt, or for such longer period as the parties may agree.

(b) The importing party conducting the verification visit shall provide the producer/exporter whose goods are subject to the verification and the relevant Issuing Authority with a written determination of whether that goods qualify as originating goods.

(c) The determination of whether the goods qualify as originating goods shall be notified to the producer/exporter, and the relevant Issuing Authority. Any suspended preferential tariff treatment shall be reinstated upon a determination that the goods qualify as originating goods.

(d) If the goods are determined to be non- originating, the producer/exporter shall be given thirty days from the date of receipt of the written determination to provide any written comments or additional information regarding the eligibility of the goods for preferential tariff treatment. If the goods are still found to be non-originating, the final written determination issued by the importing party shall be communicated to the Issuing Authority within thirty days from the date of receipt of the

comments/additional information from the producer/exporter.

(e) The verification visit process, including the actual visit and the determination whether or not the goods subject to verification is originating, shall be carried out and its results communicated to the Issuing Authority within a maximum period of six months from the date when the verification visit was conducted.

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While the process of verification is being undertaken, sub-paragraph a(iii) of paragraph 16 shall be applied. Basis Of Action

3.9 The representations were received from the domestic industries stating about violation of Rules of Origin in respect of import of Tin Ingots from Malaysia manufactured by MSC. It was suggested to the authorities in the said representation that the importers and other parties had wrongfully availed the benefit of Notification No. 46/2011. It was alleged that certain importers had been importing Tin Ingots from MSC either directly from them or through dealers and traders by availing the concessional rate of duties under the said Notification by misrepresenting the RVC to be above 35% whereas the actual RVC, in all such cases, was much less than required 35%. The authorities referred to Rule 3 and Rule 5 of the Rules of Origin to further mention that the Tin Ingots has to have RVC of 35% or above to be termed as goods 'deemed originating'. 3.9.1 The issue was therefore taken up for investigation by the Director of Revenue Intelligence (DRI), Mumbai Zonal Unit. The DRI initiated the process of 'retroactive check'. In accordance with paragraph 16 of Annexure III of the Rules of Origin, (DOGPTA Rules, 2009), request was made to the Board by DRI by letter dated 06.04.2017 on sample basis by

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sending Origin Certificates (Form AI) by India to Malaysia. It was recorded by the authorities that there was lack of response from Malaysia to the request for retroactive checks. Therefore, a team of DRI Mumbai, visited the unit of MSC Malaysia to examine the value addition and in order to ascertain the originating criteria for Tin Ingots exported. This exercise was undertaken in terms of paragraph 17 of Annexure III of the Rules of Origin read with paragraph 10 of Annexure III of the India Malaysia Preferential Trade Agreement Rules.

3.9.2 It was revealed pursuant to the DRI investigation that for calculating the Free on Board (FoB) and the RVC, period of three months of year 2013 was taken as a base and on the basis of such cost sheet, the RVC was indicated for the goods which was never accurate, much less satisfied the requisite criteria under the Rules of Origin. It was found by the authorities that the Malaysian Smelting Corporation had adopted this method as usual practice since long. On the basis of such methodology, it was observed in the show-cause notice, the RVC for qualifying the origin criteria in Form AI (COO) was claimed in the range above 70%, which was extraordinarily higher.

3.9.3 It was also observed that there was another model of operation wherein the Tin Ingots were exported by the Malaysian Smelting Corporation to the

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Indian importers after getting the goods manufactured on job work or works contract basis on behalf of other traders and suppliers and that the other traders and suppliers used to supply free of cost raw material Tin Ore of the origin of non-ASEAN countries. It was further stated that the MSC used to undertake the conversion of Tine Ore into Tin Ingots on job charges and that in such cases, smelting charges paid by suppliers for such conversion actually reflected the Regional Value Addition in Malaysia. This in percentage terms of FoB value did not fulfill the criteria of origin. The MSC raised invoices on Indian importers for amount of FoB value on the basis of the Supplier's invoices, which were submitted along with the cost data sheet pertaining to July to September 2013, as stated above, thereby showed the higher RVC to wrongly project the satisfaction of Rules of Origin conditions in that regard.

3.9.4 A verification report pursuant to the above investigation was prepared incorporating due contents therein. The outcome of the verification visit and denial of the preferential benefits in respect of all Certificates of Country Origin issued to MSC Malaysia was communicated by letter dated 10.05.2018 to the issuing authority by the Ministry of International Trade and Industry (MITI), the crux as mentioned in the said letter reads as under,

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"Further, during the verification visit conducted at the premises of the exporter M/s. Malaysia Smelting Corporation (MSC), it was noted by the officers that a cost sheet depicting costs incurred in

production/manufacture of tin ingots during the period of 2013(July-September) has been used by MSC to obtain COO over a long period of time. This cost sheet reflects a particular sourcing mix for a specific period. This sheet applicable for a three month period in 2013 cannot be used to compute the Regional Value Content (RVC) for prospective periods."

3.9.5 The petitioners filed reply dated 28.08.2019 to the show-cause notice. The thrust of the reply was that the goods were imported from Malaysia and the Malaysia Smelting Corporation were the manufacturer and that the goods were supported by the Certificate of Origin as issued by the exporting country and that the petitioners as importers or purchasers of the goods, were entitled to rely on the certificate and the contents thereof. 3.9.6 The Customs Authorities found on facts and upon DRI investigation that the petitioners had wrongly availed the benefit on the basis of Origin Certificate, which was fraudulent and that the petitioners were guilty of suppression of material fact to be liable to be subjected to the proceedings under section 28 (4) of the Customs Act. As per the impugned order, as stated, the competent authority confirmed the duty demand and also proceeded to

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impose the penalty. 3.9.7 The following two issues were addressed by the adjudicating customs authority, while passing the impugned orders,

(a) Whether the Importer and Ex-bonders have wrongly availed the benefit of exemption Notification No.46/2011-Cus dated 01.06.2011 on the basis of fraudulently obtained Country of Origin certificate by the supplier namely MSC, Malaysia by submitting incorrect declaration while presenting the bills of entry under Section 46(4) of the Customs Act, 1962, if so, whether differential duty is to be recovered with appropriate interest under Section 28(4) and 28AA ibid and the subject goods are liable to confiscation under Section 111(0) ibid and they have rendered themselves liable to penal action under Section 112(a), 114A and 114AA of the Customs Act, 1962.

(b) Whether non-observance of provisions of Section 46(4) of the Customs Act, 1962 by the importer and Ex-banders have resulted in to mis- declaration and thereby they have rendered the goods of declared value Rs. 5,18,16,414/-, as mentioned in the Table enclosed to the SCN, liable to confiscation under Section 111(m) ibid and they have rendered themselves liable to penal action under Section 112(a), 114A and 114AA of the Customs Act, 1962.

3.9.8 The powers under Section 28 of the Customs Act, 1962 came to be exercised having found that the Country of Origin Certificate (COO) was not entertained under reasonable doubt that the Country of Original was not authentic and that there was non-

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observance of provisions of section 46(4) of the Customs Act, 1961. The exemption benefit was claimed by suppression of facts and fraudulent declaration of details regarding Regional Value Content of the Goods. The set of the facts obtained provided to the Customs authorities the necessary platform to invoke the powers under section 28 of the Act to proceed against the importers regarding short levy or non- levy of basic customs duty on the goods in question. 3.9.9 Following were the findings recorded in the impugned order, extracting from first petition, on the aspects highlighted in relation to non- acceptability of COO and about misrepresented RVC content in the Certificate of Origin.

"(a) Further, during the verification visit conducted at the premises of the exporter M/s, Malaysia Smelting Corporation (MSC), it was noted by the officers that a cost sheet depicting costs incurred in production/manufacture of tin ingots during the period of 2013 (July-September) has been used by MSC to obtain COO over a long period of time. This cost sheet reflects a particular sourcing mix for a specific period. This sheet applicable for a three month period in 2013 cannot be used to compute the Regional Value Content (RVC) for prospective periods.

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(b) Further, it was also found by the officers that Tin ingots were being exported to Indian importers on the basis of job work/works contract basis by MSC, on behalf of other traders/suppliers. In such cases, MSC raised invoices only for smelting charges. The conversion charges alone cannot fulfill the required value addition under AIFTA.

(c) Thus, it is evidenced that the cost sheet submitted by MSC to MITI does not accurately reflect the contemporaneous RVC and the FOB of the exported Tin ingots as per the originating criteria mandated under the Rules of Origin of AIFTA."

3.9.10 The findings recorded as above are the findings of fact. As stated, the Directorate of Revenue Intelligence investigated and having regard to the material collected, the factual conclusions were drawn.

Case and Submissions of the Petitioners

4. It is the case and the contention of the petitioners in alia that the proceedings initiated by the respondent customs authorities and the orders consequently passed are without jurisdiction. The petitioners have stated that the only premise on

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which the proceedings were sought to be initiated was that the exporter provided incorrect information in respect of the Certificate of Origin. The dispute with regard to the determination of origin of product, RVC determination, etc., were required to be resolved in the manner provided under Article 24 of the AIFTA, which was a dispute settlement resolution mechanism in the said international agreement. It is the case that once the said procedure is not followed, the entire proceedings stand bad in law.

4.1 It is the further case that while the Government of India has questioned the validity of the Certificate of Origin in respect of the Tin Ingots manufactured by the Malaysian Smelting Corporation, on the other hand, the Ministry of International Trade and Industry, Malaysia has maintained its stand about the validity of the said Certificate; therefore, the Customs authorities were not justified in invoking the powers under the provisions of the Customs Act.

4.1.1 According to the petitioners, the Bills of Entry were filed on 07.01.2016, however the department objected the import and upon assessment by issuing show-cause notice on 06.11.2018, which was after a gap of 3 years. The department ought to have objected the Origin Certificate at that juncture only, it was stated.

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4.1.2 The petitioners referred to and relied on Rules 9 and 10 of the aforementioned Preferential Trade Agreement between the Governments of the Republic of India and Malaysia) Rules, 2011. Rested on the said Rules, it was the case that the verification process as set out in Rule 10 of the Rules, which is in turn has adopted the provisions under Rules 16 and 17 of the Rules of Original, was not undertaken. In view of the said Rules, stated the petitioners, the conduct of retroactive check and the verification to resolve the doubt was required to be completed within a period of six months from the date of presentation of COO to the Customs authority of the importing party, however, in the instant case, the retroactive inquiry was communicated to the petitioners after three years.

4.1.3 It was also the case that there was no misdeclaration in the Bill of Entry or Warehousing filed by the petitioner under Section 46(4) of the Act. According to the petitioners, the requirement under section 46(4) was duly fulfilled and that the supporting documents provided by the supplier or exporter were produced by the importer. According to the petitioners, the declaration as to truth of contents in the Bills of Entry with copy of invoice was duly filed and subscribed to. It was submitted that in any case, the allegation about the Regional Value Content to be less than 35% was baseless and that there was certification of RVC to 47.85%

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Certificate of Origin.

4.2 Learned senior advocate Mr. Mihir Joshi with learned advocate Mr. Hardik Modh for the petitioners raised following submissions,

(i) There is no provision in the entire legal framework as above, to recall or cancel preferential tariff concession once it is granted. The customs authority may at the best suspend the provision for preferential tariff in terms of Article 16(a)(iii) of the Rules of Origin, 2009.

(ii) Paragraph 16(a)(iii) would apply when the process of verification is undertaken.

(iii) The certificate of Country of Origin given by the exporting State or issuing authority could not have been rejected by the Customs authority. The Certificate is not cancelled by the issuing authority.

(iv) The preferential tariff treatment granted to the importer cannot therefore be unilaterally withdrawn by the importing authority or customs authority.

(v) The COOs are valid and subsisting even today. The respondents cannot question the correctness thereof unless the issuing authority

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confirms the determination of the importing party and consequentially withdraws the COOs.

(vi) Process of retroactive check provided under Article 16 cannot be treated as retrospective invalidation of the preferential treatment granted to the importer.

(vii) Rules of Origin merely empowers customs authorities of the importing party to perform a retroactive check to ascertain authenticity and accuracy of COO, but there is no power available to reject the Origin Certificate.

(viii) The entire AIFTA and the Rules made thereunder deal with the pre-importation situation and the eligibility for preferential treatment in course of the import.

(ix) Post-import verification is not covered, therefore, the preferential treatment cannot be denied retrospectively after import has taken place.

(x) As per Rule 9 of Annexure III of India- Malaysia Preferential Trade Agreement Rules, the result of the retroactive check should be communicated to the importer within six months. In the present case, the outcome was communicated after three years after presentation of COO to the Customs authority.

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(xi) In terms of Article 17(a)(iv), when a written consent is not obtained from the exporter within 30 days from the receipt of the notification provided under sub-para (17)(i), the notifying party may deny the preferential tariff treatment. Under Article 17(b), if the goods are determined to be non-originating, the exporter is given 30 days to provide any written comment or additional information regarding eligibility of the goods for preferential treatment.

(xii) The exercise undertaken by the customs department to perform a retroactive check and to ascertain the authenticity of the COOs was not permissible and by conducting some local investigation, the authenticity could not have been questioned.

(xiii) The petitioners submitted COOs and the entire set of documents which established the genuineness of the importer goods and the declarations on the invoice and supporting documents with the Bill of Entry which also substantiated that the goods of Malaysian Origin had been imported from Malaysia only.

(xiv) The COO also bore a specific certification from the concerned statutory authorities in Malaysia to the effect that the

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declaration made by the exporter that the goods are of Malaysian Origin is correct. Notwithstanding that the above certificates were produced, the investigation team from DRI, MZU, Mumbai to the unit of MSC, was sent. Submissions about AIFTA Article 24 4.2.1 With his usual vehement yet calm assertiveness, learned senior advocate for the petitioner harped to submit that the matter ought to have been resolved through the dispute resolutions as provided under Article 24 of the AIFTA read with ASEAN-India DSM Agreement. On this score, the following submissions were advanced,

(a) AIFTA is a complete code in itself and in case of any dispute with regard to origin determination, classification or other related matters, Appendix D - Article 24 of the AIFTA provides that the governmental authorities in the importing and exporting parties shall consult each other for resolving the dispute and in case no solution is reached through consultations, the parties to AIFTA may invoke Dispute Settlement procedures under the ASEAN- India DSM Agreement.

(b) AIFTA does not give a primacy to the finding or conclusion of either nation, that is,

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exporting party or importing party and instead provides for a procedure for mutual consultation and arbitration under Article 24. AIFTA also doesn't give primacy of the decision taken either by the exporting party or importing party about the validity of the certificate.

(c) AIFTA does not stipulate that in case of conflict, whose view or determination will prevail, rather, prescribes a specific procedure of mutual consultation and arbitration under Article 24 of the agreement read with DSM Agreement.

(d) The customs department does not have powers to discount or not consider the COO on their own. The DOGPTA Rules, 2009 although bodily incorporated the Rules and the mechanism provided in the AIFTA but failed to provide the dispute resolution mechanism as provided under Rule 24 of the AIFTA and therefore, the importing party is bound to follow the procedure prescribed under AIFTA otherwise, Article 24 would become redundant and nugatory.

(e) Even though the Government of India has questioned the validity of COO, the Ministry of International Trade and Industry (MITI), Malaysia having continued its stand on the validity of the COO, certificate. The same

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neither stands revoked nor cancelled, and when COOs are not cancelled, in that view, the Customs department instead of going by wrongful route for directly denying the exemption to the Petitioner, ought to have followed the due process provided under Appendix D - Article 24 of AIFTA before initiating the present proceedings.

4.2.2 It was submitted that without following the said process under the AIFTA Appendix-Article 24, the unilateral act of issuance of the show cause notice by rejecting the COOs which is validly and admittedly issued by a proper authority is without jurisdiction and therefore the entire proceedings so initiated and become liable to be set aside.

4.2.3 Learned senior advocate for the petitioners pressed nito service the following observations from Supreme Court decision in Commissioner of Customs, Bangalore vs. G.M. Exports[(2016) 1 SCC 91: 2015

(324) ELT 2090],

"(3) In a situation where India is a signatory nation to an international treaty, and a statute is made in furtherance of such treaty, a purposive rather than a narrow literal construction of such statute is preferred. The interpretation of such a statute should be construed on broad principles of general acceptance rather than earlier domestic precedents, being intended to carry out treaty obligations, and not to be inconsistent with them.

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(4) In a situation in which India is a signatory nation to an international treaty, and a statute is made to enforce a treaty obligation, and if there be any difference between the language of such statute and a corresponding provision of the treaty, the statutory language should be construed in the same sense as that of the treaty. This is for the reason that in such cases what is sought to be achieved by the international treaty is a uniform international code of law which is to be applied by the courts of all the signatory nations in a manner that leads to the same result in all the signatory nations."

(para 24)

4.2.4 Next relied on was decision also of the Apex Court in Entertainment Network (India) Limited and Anr. vs. Super Cassettee Industries Ltd. and Ors. [(2008) 13 SCC 30]. The Supreme Court while dealing with the application of international conventions in India, observed that while interpreting the municipal laws, conventions and norms can be relied for the following purposes,

"In interpreting the domestic/municipal laws, this Court has extensively made use of International law inter alia for the following purposes: (i) As a means of interpretation; (ii) Justification or fortification of a stance taken; (iii) To fulfill spirit of international obligation which India has entered into, when they are not in conflict with the existing domestic law; (iv) To reflect international changes and reflect the wider civilization; (v) To provide a relief contained in a covenant, but not in a national law; (vi) To fill gaps in law."

(para 71)

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4.2.5 It was further observed in Entertainment Network (supra), submitted learned senior advocate,

"Beginning from the decision of this court in Kesavananda Bharati v. State of Kerala [(1973) 4 SCC 225], there is indeed no dearth of case laws where this Court has applied the norms of international laws and in particular the international covenants to interpret domestic legislation. In all these cases, this court has categorically held that there would be no inconsistency in the use of international norms to the domestic legislation, if by reason thereof the tenor of domestic law is not breached and in case of any such inconsistency, the domestic legislation should prevail."

(para 72)

4.2.6 Learned senior advocate further submitted that petitioners have complied with all provisions. The Certificate of Origin was produced, it was submitted, and whatever documents were received from the exporting party was disclosed. It was submitted that in any event, the allegation about RVC being less than 35% was baseless. It was next submitted that the respondents were not justified in invoking the extended period of limitation under section 28(4) of the Customs Act since there was no misstatement or suppression of facts. According to learned senior counsel, there was breach of principles of natural justice. It was submitted that provisions regarding penalty and confiscation of goods could not have been resorted to in the facts of the case. 4.2.7 It was submitted that on a bare perusal of

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the Rules of Origin under AIFTA qua DOGPTA Rules 2009, it is revealed that there is a gap in domestic law to the extent that dispute resolution clause is not provided whereas the Rules of Origin under AIFTA read with ASEAN-India DSM Agreement clearly provides dispute settlement procedure and therefore, the India being a signatory to AIFTA is bound to follow and implement the mechanisms provided under the international treaty.

4.2.8 It was next submitted that considering the above principles laid down by the Apex Court, the dispute on the validity of the COO ought to have been resolved between the Government of India and Malaysia following the process as agreed in the AIFTA and that no proceedings before the conclusion of process, said could have been taken out against the petitioners. Even if there was any mis-declaration by MSC, no role was played by the petitioner-importers in issuance of the COO by MITI to allege any foul play against the petitioners.

Stand of Respondents

4.3 On behalf of the respondents, detailed affidavit-in-reply was filed to contest the petition, oppose the prayers and answer the various contentions raised. It was stated that the show-cause notice was issued for denial of exemption benefit under Notification No. 46/2011 after necessary verification

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and investigation done by the Directorate of Revenue Intelligence regarding authenticity of Certificate of Origin, which was done as per the procedure provided under Rules of Origin. It was stated that in the instant cases, the petitioners failed to provide correct Country of Origin Certificate(COO) issued on the basis correct and authentic information and supporting documents by the supplier-exporter as per the provisions under the Rules of Origin. It was contended that the goods could not have been availed the benefit of exemption under the said notification to earn the concessional basic customs duty. 4.3.1 It was contended that as revealed, the importer had imported the goods through the manufacturer Malaysian Smepting corporation to avail zero basic customs duty under Serial No.100(I) of the Notification No. 46/2011 by misrepresenting the RVC to be above 25% whereas the actual RVC was less than 35%. It was stated in the affidavit, which was filed with reference to the first captioned petition inter alia that in both the Bills of Entry, the importer claimed concessional duty to be Nil for Serial No. 1002 (I) under the Notification. The duty paid was Rs. 90,10,875/- on the strength of duty structure adopted by the petitioners whereas the actual duty required to be paid was Rs. 1,21,33,075/- under the correct duty structure. Due to this misapplication, there was a short-levy of duty to the tune of Rs.31,22,200/- as per the details given in the table

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in the affidavit-in-reply. All the other petitioners were found to be guilty of wrongfully availing duty concession in the same fashion and in each case thus, there was short levy of the Customs duty. 4.3.2 The respondents while asserting that the Origin Certificate was submitted with misleading facts and it did not satisfy the condition of deemed originating goods, relied on the details gathered in the investigation and verification. It was stated that consequent upon investigation and thereafter, the verification visit, the report was submitted by the verification team which contained relevant facts as per Rule 17(e) of the Operational Procedure Rules. The outcome of the verification visit, it was stated, as well as the denial of preferential benefits in respect of all the certificates of origin issued by MSC was communicated by the Board to the issuing authority, that is, Ministry of International Trade and Industry, Malaysia by letter dated 10.05.2018. 4.3.3 The respondents contended that there was suppression of facts by the petitioners and when the investigation or verification as above disclosed the short levy of duty and as the goods of petitioners were to claim duty exemption, extended period of demand under section 28(4) of the Customs Act was applied. It was submitted that there was a wrong declaration in the Origin Certificate. It was pointed out that under section 46(4) of the Customs

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Act, 1962, the importer while presenting the Bill of Entry will have to make necessary declaration as to the truth of the content.

4.4 Learned Additional Solicitor General Mr. Devang Vyas with learned advocate Mr.Priyank Lodha with learned advocate Mr. Utkarsh Sharma for the respective respondents submitted,

(i) There is no conflict between the Articles of AIFTA and the Rules of Origin and Customs Tariff (DOGPTA between ASEAN & India) Rules, 2009.

(ii) The Articles of Agreement and provisions stand in harmony with other. The Articles of Agreement AIFTA speak about operation and implementation of provisions of Customs Act,

1962.

(iii) The Customs authority is referred in several articles. The powers of the Customs authorities are accepted in the treaty provisions.

(iv) None of the Articles or clauses of the Agreement or Rules of Origin have been breached. The Malaysian authorities have endorsed to the non-compliance of Rule 4 of Rules of Origin in respect of the requirement of requirement of 35% AIFTA contain calculation by the exporters.

(v) The minimum requirement of 35% Regional

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Value Content was a pre-condition for availing the benefit of differential tarrif under the Agreement. The said pre-condition was not satisfied therefore importers were not entitled to differential tariff treatment on such import.

(vi) The Malaysian authorities did not co- operate at the stage when the Customs authorities acted themselves in accordance with Rule 16. Thereafter, notification under Rule 17 was issued.

(vii) Any strict-time line is not prescribed in rule 16. The time provided only for the purpose of streamlining the action of the parties. A mere deviation will not render the action bad.

(viii) There are no gaps or gray area in the AIFTA Agreement vis-a-vis the provisions of the Customs Act. The entire object of both is different, yet interwoven. The AIFTA provisions require fulfillment of conditions for availing differential tariff treatment and contains broad guidelines for that purpose.

(ix) The powers exercised by the customs authorities under section 28(4) read with section 46(4) of the Act read with other provisions are competent exercise of jurisdiction.

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(x) The Customs Act is the law of the land which could be invoked in cases of breach or non-compliance of statutory provisions. Broad Questions

4.5 From the facts and aspects emerging in the controversy as above and having regard to the rival case and contentions, the moot questions which arise in their length and breath are -

(i) whether it was necessary to go for dispute resolution under the Article 24 of AIFTA.

(ii) Whether the customs authorities were not entitled to exercise their powers under the Customs Act, without the importing party/country first taking recourse to AIFTA Article 24 mechanism; Whether on that count the proceedings under the Customs Act, 1962, were rendered without jurisdiction or bad in law.

(iii) whether the customs authorities in India had the jurisdiction to proceed against the petitioners in wake of provisions of AIFTA provisions and the Rules of Origin transformed as 2009 Rules;

(iv) whether the respondents were justified in denying the benefit of exemption in duty to the petitioners availed under the Notification No. 46/2011 dated 01.06.2011

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(v) Whether the respondent authorities could properly proceed under Section 28(4) of the Customs Act, 1962 and whether the invocation of extended period under sub-section (4) of section 28 of the Act was proper;

(vi) Whether the alleged breach of time limit of procedural part of Operational Certification Procedures rendered the action under the Customs Act, 1962, to be bad in law.

(vii) Whether or not the substantive provisions of Customs Act, 1962, have dominion effect over procedural aspect of Rules of Origin. International versus State Laws

5. In order to appreciate the dimensions of the above questions and so as to address them resolution- bound, it is quite necessary to examine the legal principles in respect of applying and implementing the international law within the State or particular country. It is pertinent to discuss for the purpose, the interrelationship between the international law provisions and municipal laws-more appropriately described as State laws.

5.1 International laws may find their exposition in form of customary international law, international Conventions or the international treaty provisions. International treaties are the pacts entered into by two or more nations out of politically inclined union

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or to develop and foster international political relations.

5.2 In the present controversy, the issue is about applicability of international treaty provision vis- a-vis the State law, although it could be safely said that whether it is customary international law, convention or treaty, the principles regarding their applicability and efficacy vis-a-vis the State law would be parallel and same.

5.3 In Union of India Vs. Agricaps LLP [(2020) 3

73 ELT 752 (SC): 2020 (10) Scale 740], the Supreme Court observed,

"Application of treaties into national legal systems and the hierarchical status of the norms to be so applied are extraordinarily complex and vary from country to country depending upon constitutional and other municipal rules. Further, a number of legal and constitutional issues regarding international treaties arise in domestic law, like the power to negotiate, sign and exit a binding international obligation or treaty, validity of a treaty under the national constitutional law, power to implement the treaty obligations and applicability of treaty in domestic law including the principle of invocability or justiciability as contrasted from direct applicability and hierarchy of norms in domestic law where the treaty norms conflict with the norms of the domestic law. There is no uniformity in approach on these aspects as there are different national systems of treaty applications 8. Two aspects relevant in the present case are; (i) applicability of the international treaty in domestic law and (ii) 'invocability' of the treaty in municipal law

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and before the municipal courts."

(para 25)

5.4 International treaties and agreements, as entered, define mutual obligations between the member countries. They do not operate directly upon the subjects and citizens of the member country. The rights and obligations of citizens of member country arise not because of treaty provisions but by virtue of State laws enacted pursuant to international treaty provisions.

5.5 Stated Oppenheim's in his International Law, 8^th Edition, thus,

"...Such treaties as affect private rights and, generally, as required for their enforcement by English Courts a modification of common law or of a statute must receive parliamentary assent through an enabling Act of Parliament. To that extent binding treaties which are part of International Law do not form part of the law of the land unless expressly made so by the Legislature."

5.5.1 It was further stated,

"The binding force of a treaty concerns in principle the contracting States only, and not their subjects. As International Law is primarily a law between States only and exclusively, treaties can normally have effect upon States only. This rule can, as has been pointed out by the Permanent Court of International Justice, be altered by the express or implied terms of the treaty, in which case its provisions become self- executory. Otherwise, if treaties contain provisions with regard to rights and duties

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of the subjects of the contracting States, their Courts, officials, and the like, these States must take steps as are necessary according to their Municipal Law, to make these provisions binding upon their subjects, Courts, officials, and the like.

5.6 In order to implement the stipulations in any treaty, enactment of municipal or State law is necessary. International treaty provisions find their implementative efficacy in the member State or country through the laws enacted by the Sovereign legislature of such State.

Theories on Relationship

6. A brief discourse on the theories governing the relationship of international law and municipal law, would provide a preface. This relationship is always a complex question, more particularly when the question arises for implementing the international law in particular state or country to regulate the rights and obligations of the citizens of the State.

6.1 One is the monistic theory, pronounced by German Scholar Moser and Martens, later developed in the early 20th century by the Australian jurist Kelsen. This school of thought perceives only one legal system. Its view is that the municipal law or the state law as well as international law are part of one universal legal system, and that the whole legal system is unified.

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6.2 This theory advocates that the international rules can be applied by the country's courts without any need for their transformation into State laws. In other words, according to this theory, the international law provisions could be readily treated as incorporated to be applied within the State and that the transformation of international laws into state laws is not necessary. The monistic opines that the international law is superior even within the municipal or national sphere.

6.3 As per the other theory known as the dualistic theory, the international law and state laws of the several states are distinct systems, operating separately in self-content legal framework. The dualistic school of thought was developed by a German scholar Triepel in 1899, and was followed by Italian jurist Anzilotti. According to this theory, the two laws operate on separate planes. The international law governs international relations while the state law applies amongst between the individuals and between the individuals and the State in the State concerned.

6.4 The dualistic theory does not endorse to the doctrine of incorporation. In order to apply and implement the international law in the State or at domestic level, the international provisions will have to be transformed into domestic legislation or municipal laws. This transformation takes place in

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accordance with the Constitutional provisions of the State concerned. The dualistic theory accords primacy to State laws to operate against the international law provision.

6.5 The dualistic theory and the monistic theory differ in their content perceptions in several ways. First is the sources. The source of State law is sovereign enactment, which may be based on the customs developed in the politico-cultural climate of particular State. The source of international law is either customary international law or the treaty provisions.

6.6 The other distinguishing factor is the subjects governed by the both. The state law is a sovereign law governing the individuals whereas the international law defines the relationship between the two States. In terms of principle also, the two theories differ as the State law has legal sanctity whereas the international law obligations are guided by international political relations and cooperative- bond between the member countries.

6.7 The monistic theory preaches and follows the principle of incorporation. It treats the international law principles to have been incorporated as State laws to operate effective within the State. The dualistic theory embraces the doctrine of transformation. In order to apply any or

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all international laws within the State, they must be transformed and converted into State laws enacted by the sovereign law making body.

Transformation Into State Laws

7. The two theories also explain the difference between the doctrine of incorporation and the doctrine of transformation in the context of the implementation of the international law provisions and rules. The difference is that the process of incorporation is to adopt the international law principles into the municipal law just because it is international law. The international law in other words becomes automatically applicable within the sphere of municipal law within the State. On the other hand, the doctrine of transformation necessitates a conscious act on part of the State concerned to transform the rules of international law as part of State sovereign law so as to implement them for the subjects and citizens.

7.1 For carrying the international law and the treaty provisions at national level, the State legislation has to be enacted. As stated by Lord Denning MR in Trendtex Trading Corporation vs. National Central Bank of Nigeria [1977 (1) All ER 881], there are two school of thoughts, one propounds the doctrine of incorporation and the other advocates the doctrine of transformation.

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7.2 It is the jurisprudence canvassed by the dualist theory that international law rules or provisions do not become the enforceable law or enforceable within the within the particular State for rights and obligations of its subjects and citizens, until and unless the international law is transformed into competent domestic legislation called municipal law or State law. It is the application of doctrine of transformation.

7.3 The treaty provisions to be applied to accordingly define the rights and obligations of the citizens of the member state would necessarily require an enabling legislation by the soverign state, opines D.W. Greig in his International Law, 1976, observing, "while it is possible to regard customary international law as part of English law, a similar principle does not apply to treaty rules. Although a treaty duly ratified by the Crown will be binding under the international law, if the treaty is to have internal effect in the sense of changing legal rights, it will require enabling legislation by the Parliament."

7.4 The British practises in this sphere lean towards this approach. Where a state contains provision which is not consistent to the treaty provision, the British Court would prefer to apply the statute over the treaty provision. The American practice is entirely different. Article VI, clause 2

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of the Constitution of United States provides that

"....all treaties, made or which shall be made under the authority of United States shall be the supreme law of the land". Thus, the constitution of United State expressly recognises the dominance of international law to become law of the land.

7.5 It could be said that our Constitutional scheme is nearer to, and stands to recognise the doctrine of transformation known to dualistic approach. Constitutional Framework

8. In India, though the general principle is accepted that the implementation of the international law provisions shall be harmonised through transformation into the State laws, the final mechanism defining Indian law relationship with international law provisions, in the present case the treaty provisions, is the Constitutional framework envisaged under the Constitution.

8.1 Since advent of our sovereign Constitution, Indian practice with regard to relationship of international law and Indian law is governed and guided by Constitutional provisions. Article 51 in Part IV of the Constitution, under the head

"Directive Principles of State Policy" inter alia provides that the States shall endeavour to

(a) promote international peace and security,

(b) maintain just and honourable relations between

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nations; (c) foster respect for international law and treaty obligations in the dealings of organised people with one another and (d) encourage settlement of international disputes by arbitration.

8.2 It is well settled that the Directive Principle provisions of Part IV of the Constitution are not enforceable in the Court of law, however, it is true that they are guiding principles fundamental to the governance of the country and that in interpretation of the fundamental rights, and in constitutional interpretation in any area, the Directive Principles become an aid to play their role, however, for non- compliance of any of the Directives in Part IV, a citizen cannot seek remedy through courts. The Court also cannot compel the State to implement the Directives.

8.3 The most important amongst the provision relating to giving effect to International Agreements is Article 253. Article 253 is reproduced hereunder,

"253. Legislation for giving effect to international agreements.— Notwithstanding anything in the foregoing provisions of this Chapter, Parliament has power to make any law for the whole or any part of the territory of India for implementing any treaty, agreement or convention with any other country or countries or any decision made at any international conference, association or other body."

8.4 Entry 10 in the Union list under the Seventh

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Schedule is in respect of Foreign affairs, all matters which bring the Union into relation with any foreign country. Entry No.11 in the same list is diplomatic, consular and trade representation. Entry No. 13 is about Participation in international conferences, associations and other bodies and implementing of decisions made thereat. The aforesaid entries are required to be read with entry no.14, which is about entering into treaties and agreements with foreign countries and implementing of treaties, agreements and conventions with foreign countries.

8.5 In view of Entry 14 in List I, the Parliament is competent to enact law entering into treaties and agreements with foreign countries. No such law is made by the Parliament, therefore, the power of the President to enter into treaties is unfettered, however, as discussed hereinafter, making of treaty is different from implementing the provisions of treaty and in order to implement the treaty provisions, the law will have to be enacted which will have the jurisdictional force in the country to govern the rights of the subjects in relation to and with reference to the treaty provisions.

8.6 Article 53 of the Constitution vests the Executive Power of the Union in the President of India. It provides that the executive power of the Union shall be vested in the President and shall be

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exercised by him either directly or through officers subordinate to him in accordance with this Constitution.

8.7 Under Article 73 of the Constitution, the Executive power of the Union shall extend to the maters with respect to which the Parliament has powers to make laws. Thus, the Constitution contemplates enactment of law by the Parliament to regulate the executive power of entering into treaties and their implementation. As already noticed, treaty remains in the realm international- political, and the implementation of provisions of treaty would be a legal exercise to be finally undertaken through domestic laws and rules enacted by the law making bodies of the country and then enforced by the Courts of law as arbiters of all laws.

8.8 In Agricas LLP (supra), the Supreme Court stated that law of India vis-a-vis implementation of treaty provisions and the international law are not very different from other Commonwealth countries. The constitutional scheme in this regard highlighted above was delineated by the Apex Court in following words,

"Article 73 of the Constitution delineates the extent of executive power of the Union which extends to all matters with respect to which the Parliament has the power to make laws and it extends to the exercise of such rights,

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authority and jurisdiction as are exercisable by the Central Government by virtue of any treaty or agreement. Proviso to the Article deals with limitation of the executive power under sub- clause (a) with which we are not concerned. Chapter I of Part XI of the Constitution, captioned 'Relations between the Union and the Sates' vide different Articles stipulates that in respect of List 1 of the 7th Schedule the Parliament has exclusive power to make laws for the whole or any of the territory of India; in respect of List II (State List) the legislatures of the States have exclusive power to make laws for the whole or any part of the States; and in respect of List III (Concurrent List) the Parliament and the State Legislatures have the power to make laws. For the purpose of the present case, Article 253 of the Constitution is important as it states that notwithstanding anything in the foregoing provisions of this Chapter, the Parliament has the power to make laws for the whole or any part of the territory of India for implementing any treaty, agreement or convention with any other country or countries or decisions made at any international conference, association or body."

(para 34)

Treaty an Executive Act

9. It is judicially tested proposition that formation of international treaty and its implementation are different stages. The two exercise are entirely different in their nature and kind. Making of treaty or entering into international covenant is an executive act. On the other hand, the performance of obligations flowing from such treaty would necessitate the legal enactment and/or alteration of domestic laws. The implementation of

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treaty provisions at the State level requires legislative action. This legislative action is a sovereign exercise. The Supreme Court has already ruled that entering into a treaty is merely an executive act.

9.1 In Maganbhai Ishwarbhai Patel vs Union Of India And Anr. [(1970) 3 SCC 400], also known as Kutch case, the facts inter alia were that the petitioners sought to restrain the Union of India from ceding without approval of the Parliament, the areas of Rann of Kutch to Pakistan in accordance with Indo-Pakistan Western Boundary case award dated 19.02.1968, whereby it was held that cessation of the territory could take place without Constitutional amendment. In that case, the decision of the Supreme Court was on the basis of noticing the distinction between the formation of treaty on one hand and performance of treaty obligations on the other hand.

9.2 The Supreme Court observed,

"The first is an executive act and the second a legal act if domestic law is required. Unless the Parliament assents to the treaty and accords its approval to the first executive act, the performance has no force of law though the treaties created by the executive action bind the contracting States and, therefore, means must be found for their implementation within law. Consequently, whenever a peace treaty involves municipal execution, statutes have to be passed. While accepting the contention that precedents of this Court are clear that no

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cession of Indian territory can take place without constitutional amendment, the Constitution Bench held that the settlement of a boundary dispute cannot be held to be cession of territory. Accordingly, the decision to implement the award by exchange of letters treating the award as an operating treaty by demarcating the correct boundary line was within the executive power of the government, and no constitutional amendment was required."

(para 30)

9.3 The Supreme Court referred to its own earlier Constitution Bench decision in Reference President of India under Article 43(1) of the Constitution on the implementation of Indo-Pakistan Agreement relating to Berubari Union and Exchange of Enclaves [AIR 1960 SC

845] Similar proposition was laid down in Ram Kishore Sen And Others vs Union Of India And Others

[AIR 1966 SC 644].

9.4 The Apex Court in Agricas LLP (supra) summarised propositions in Maganbhai Ishwarbhai Patel (supra) on international law vis-a-vis State laws thus,

"(i) The stipulations of a treaty duly ratified by the Central Government, do not by virtue of the treaty alone have the force of law.

(ii) Though the Executive (Central Government) has power to enter into international treaties/agreements/ conventions under Article 73 (read with Entries 10 & 14 of List I of the VII Schedule to the Constitution of India) the power to legislate in respect of such treaties/agreements/conventions, lies with Parliament. It is open to Parliament to refuse

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to perform such treaties/agreements/conventions. In such a case, while the

treaties/agreements/conventions will bind the Union of India as against the other contracting parties, Parliament may refuse to perform them and leave the Union of India in default.

(iii) Though the applications under such treaties/agreements/conventions are binding upon the Union of India (referred to as "the State"

in Maganbhai's case) these treaties/agreements/ conventions "are not by their own force binding upon Indian nationals".

(iv) The making of law by Parliament in respect of such treaties/agreements/conventions is necessary when the treaty or agreement restricts or affects the rights of citizens or others or modifies the law of India,

(v) If the rights of citizens or others are not affected or the laws of India are not modified then no legislative measure is needed to give effect to such treaties/agreements/conventions."

(para 37)

Treaty Not Law per se For the State

10. Until and unless the international treaty or covenant therein is translated into municipal legislation or State laws, it remains not only executive in nature but stands confined to operate accordingly only. Unless the law is enacted in terms of and in order to implement the treaty, private individual rights are not readily affected by virtue of existence of international treaty. The international treaties are of international character

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and its periphery is international-political relations between the party States. When the provisions of such treaty become law of the land of the member country concerned, then only they affect, regulate and govern the rights of the subjects, to find teeth for implementation and enforceability.

10.1 English decision in Maclaine Watson & Co. Ltd.

v. Department of Trade and Industry & Anr. [(1989) 3 All ER 523], was narrated by the Supreme Court in Agricas LLP (supra), observing that making of treaty itself does not alter the law nor has any effect of changing or modulating rights of the individuals.

"...as a matter of the constitutional law of the United Kingdom, the royal prerogative, whilst it embraces the making of treaties, does not extend to altering the law or conferring rights on individuals or depriving individuals of rights which they enjoy in domestic law without the intervention of Parliament. Treaties, as it is sometimes expressed, are not self-executing. Quite simply, a treaty is not part of English law unless and until it has been incorporated into the law by legislation."

(para 32)

10.2 It was apropos observed by the Supreme Court in Agricas LLP (supra) that a treaty becomes incorporated into the laws by the statute, the Courts in United Kingdom have no power to enforce treaty rights and obligations at the behest of foreign government or even a citizen of the United Kingdom. Though it may be true that the executive has accepted

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to act in conformity with the unincorporated international treaty provisions, enforcement of treaty provisions shall be by the Court of law so as to define, cover and regulate the rights of the individuals, would be possible only if the treaty provisions are translated in the statute enacted by the country's law making body.

10.3 The effect of international treaty on the rights of the subjects of the member State was highlighted by Oppenheim's International Law, 8th Edition,

"...Such treaties as affect private rights and, generally, as required for their enforcement by English Courts a modification of common law or of a statute must receive parliamentary assent through an enabling Act of Parliament. To that extent binding treaties which are part of International Law do not form part of the law of the land unless expressly made so by the Legislature. (page 40)

10.3.1 It was further expressed,

"The binding force of a treaty concerns in principle the contracting States only, and not their subjects. As International Law is primarily a law between States only and exclusively, treaties can normally have effect upon States only. This rule can, as has been pointed out by the Permanent Court of International Justice, be altered by the express or implied terms of the treaty, in which case its provisions become self- executory. Otherwise, if treaties contain provisions with regard to rights and duties

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of the subjects of the contracting States, their Courts, officials, and the like, these States must take steps as are necessary according to their Municipal Law, to make these provisions binding upon their subjects, Courts, officials, and the like."

(page 924)

10.4 The proposition was made clear by the Supreme Court in Maganbhai Ishwarbhai Patel (supra), observing thus,

"By Article 73, subject to the provisions of the Constitution, the executive power of the Union extends to the matters with respect to which the Parliament has power to make laws. Our Constitution makes no provision making legislation a condition of the entry into an international treaty in times either of war or peace. The executive power of the Union is vested in the President and is exercisable in accordance with the Constitution. The Executive is qua the State competent to represent the State in all matters international and may by agreement, convention or treaties incur obligations which in international law are binding upon the State. But the obligations arising under the agreement or treaties are not by their own force binding upon Indian nationals. The power to legislate in respect of treaties lies with the Parliament under Entries 10 and 14 of List I of the Seventh Schedule. But making of law under that authority is necessary when the treaty or agreement operates to restrict the rights of citizens or others or modifies the laws of the State. If the rights of the citizens or others which are justiciable are not affected, no legislative measure is needed to give effect to the agreement or treaty."

(para 80)

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Sovereign Will and Treaty Provisions

11. Enactment of laws pursuant to international law rules in the member country is a sovereign function of the Parliament and legislative organs which are the law making bodies of the country. Treaty provisions are made to operate in statutory formation. There would be no gainsaying that how to have intake of the treaty provisions, in what manner and to what extent into the municipal laws, would be the sole right and discretion of the authority of the law making body. The existence of treaty by itself cannot compel the sovereign Parliament to adopt its provision automatic or in wholesale.

11.1 It would be competent for the legislature to adopt and define the treaty provisions in the terms it may deem fit. Even while following the treaty provisions, the law making body of member country in its wisdom may not adopt, accept or incorporate any of the provisions of international treaty. The sovereign law when enacted pursuant to the treaty provisions may remain respectful to the international understanding reflected in the treaty, at the same time, it is competent for State that it can indeed alter, omit or rescind any of the treaty provisions from being translated or transformed into implementable law.

11.2 As the implementation of treaty provisions by member country is an exercise by such member country

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in its sovereign domain, the law of the member country to be enacted pursuant to the treaty provisions is not to be mandated by the treaty provisions. In ultimate analysis, the extent of transforming the international treaty provisions into State laws will be decided by the sovereign legislature. It is for the Sovereign State legislature to decide in what manner, to what extent and in what fashion, the international law or treaty provision should be adopted to operate to regulate the rights and obligations of subjects and citizens. Sovereign Dominates When In Conflict

12. It is held trite that when international law and State law stand in conflict with each other and become irrconcilable, it is the State law or municipal law, that would prevail. The philosphy behind this proposition is same, namely that the international law has no force of its own unless drawn as State law by the sovereign legislation. Therefore, in case of conflict, it is natural that the State law would override. The logical corolory of this position of international law vis-a-vis State law is that when there is an ommission of international law rule or treaty provision in the State law, it is provided in the State law only would prevail to become implementable.

12.1 The Supreme Court in Gramophone Company of India Ltd. vs. Birendra Bahadur Pandey [1982 (2) SCC

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534] unequivocally observed that when the conflict between the international law and State law is inevitable, the international provision must submit to State law,

"There can be no question that nations must march with the international community and the Municipal law must respect rules of International law even as nations respect international opinion. The comity of Nations requires that Rules of International law may be accommodated in the Municipal Law even without express legislative sanction provided they do not run into conflict with Acts of Parliament. But when they do run into such conflict, the sovereignty and the integrity of the Republic and the supremacy of the constituted legislatures in making the laws may not be subjected to external rules except to the extent legitimately accepted by the constituted legislatures themselves. The doctrine of incorporation also recognises the position that the rules of international law are incorporated into national law and considered to be part of the national law, unless they are in conflict with Act of Parliament. Comity of Nations or no, Municipal Law must prevail in case of conflict. National Courts cannot say yes if Parliament has said no to a principle of international law."

(para 5)

12.1.1 It was pertinently observed further that the courts of the country are also bound by the State law,

"National Courts will endorse international law but not if it conflicts with national law. National courts being organs of the National State and not organs of international law must perforce apply national law if international law conflicts with it. But the Courts are under an

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obligation within legitimate limits, to so interpret the Municipal Statute as to avoid conformation with the comity of Nations or the well established principles of International law. But if conflict is inevitable, the latter must yield. "

(para 5)

12.2 In Tractoroexport, Moscow Vs. Tarapor and Company [1969 3 SCC 562], it was observed to assert that the statutory enactments, when clear will have to be construed despite they stand contrary to international law.

"Now, as stated in Halsboury's Laws of England, Vol. 36, page 414, there is a presumption that Parliament does not assert or assume jurisdiction which goes beyond the limits established by the common consent of nations and statutes are to be interpreted provided, that their language permits, so as not to be inconsistent with the comity of nations or with the established principles of international law. But this principle applies only where there is an ambiguity and must give way before a clearly expressed intention. If statutory enactments are clear in meaning, they must be construed according to their meaning even though they are contrary to the comity of nations or international law".

(para 15)

Without Law, No Implementation

13. Unless the international treaty provision has backing of legislation enacted by the member country, the provisions of treaty would have no enforcibility for rights and obligations in relation to which the

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treaty operates. The Supreme Court in Jolly George Verghese Vs. Bank of Cochin [1980 AIR 470] was considering the provision of Section 51 read with Order XXI Rule 37 of the CPC, in respect of arrest and detention in civil prison of judgment debtor unable to satisfy the decree, which provision was found to be violative of the Article 11 of the International Covenant on civil and political rights which banned the imprisonment merely for not discharging the decree debt.

13.1 While dealing with the question of effect of said international provision and the enforcibility thereof at the instance of individuals within the State- this country, the Supreme Court stated, 'The positive commitment of the States parties ignites legislative action at home but does not automatically make the covenant an enforceable part of corpus juris of India.'

13.2 The above proposition of law was enunciated by the Supreme Court after quoting with approval, the observations of the Kerala High Court in Xavier Vs. Canara Bank Limited [(1969) KER LT 927], which dealt with the very Article 11, and stated in para 10,

"...... The remedy for breaches of International law in general is not to be found in the law courts of the State because International Law per se or proprio vigore has not the force or authority of civil law, till under its inspirational impact actual legislation is undertaken. I agree that the Declaration of

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Human Right merely sets a common standard of achievement for all peoples and all nations but cannot create binding set of rules. Member States may seek through appropriate agencies, to initiate action when these basic rights are violated; but individual citizens cannot complain about their breach in the municipal courts even if the country concerned has adopted the covenants and ratified the Optional Protocol. The individual cannot come to court but may complain to the Human Rights Committee, which, in turn, will set in motion other procedures. In short, the basic human rights, enshrined in the International Covenants above referred to, may at best inform judicial institutions and inspire legislative action within member States, but apart from such deep reverence, remedial action at the instance of an aggrieved individual is beyond the area of judicial authority......".

13.3 Following the dictum in Jolly George Verghese (supra), the Karnataka High Court categorically held in Civil Rights Vigilance Committee S.L.S.R.C, College of Banglore Vs. Union of India [AIR 1983 Karnataka 85] that if the Parliament does not enact any law for implementing the obligations under a treaty entered into by the Government of India with foreign countries, the court cannot force Parliament to make such law. In the absence of such law, it was held, courts cannot also enforce obedience of Government of India to its treaty obligations.

13.4 The facts of Karnataka decision to be noted with interest were inter alia that two English cricketers named Geof Boycott and Geof Cook who were

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the citizens of United Kingdom were included by the Marylbourne Cricket Club (MCC) in its team which was to visit India between November, 1981 and February, 1982 to play six test matches and other matches at different places in India.

13.5 In those times different countries of the world had been showing solidarity against the evil of apartheid practised especially in the South Africa. The Government of India was a party to Gleaneagles Accord of June, 12, 1977 which was entered into by the member countries of Commonwealth wherein the members reaffirmed their support for international campaign against apartheid. The efforts taken by United Nations in relation to the sporting contacts with South Africa was endorsed to.

13.6 The two cricket players, Boycott and Cook were amongst the sportsmen blacklisted by the United Nations on account of their participation in sports events in South Africa between 1.12.1980 and 31.3.1981. In view that the Government of India was one of the member countries of Gleaneagles Accord, it was under obligation not to allow to blacklisted English cricketers who had contact with South Africa. The Government of India allowed the English Cricket Team including those two players to come to the country and play the scheduled matches. The controversy arose as to whether the Government of India should allow the said cricket players despite

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their links with South Africa, in view of the obligation arising under the said international Gleaneagles Accord.

13.7 Referring to Article 51 Part IV of the Constitution, it was observed by the Karnataka High Court in paragraph 10 said that the same was not enforceable by the court of law, which was only Directive Principle,

"The provisions in Part-IV of the Constitution contain the directive principles of State policy. The provision in Article 51, occurring in that part, provides, inter alia, that the State shall endeavour to foster respect for inter-national law and treaty obligations in dealings of organised peoples with one another. The provision in Article 37 occuring in the same part, though it declares that the directive principles in part-IV are fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws, states that the provisions in that part shall not be enforceable by any court."

13.7.1 It was further stated in same paragraph,

"From this it follows that the provision in Article 51 is not enforceable by any court and if parliament does not enact any law for implementing the obligations under a treaty entered into by the Govt. of India with foreign countries. courts cannot compel Parliament to make such law. In the absence of such law, court cannot also, in our view enforce obedience of the Government of India to its treaty obligations with foreign countries."

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13.7.2 The following was the argument advanced, as recorded in para 11,

"However, Shri Ravivarma Kumar contended that any treaty entered into by the Government of India with a foreign country, forms part of the Municipal law of India unless rights and obligations under such treaty even in the absence of any legislation incorporating in the domestic law, the terms of such treaty. He sought to derive sustenance of this Constitution which provides that subject to the provisions of the Constitution, all the laws in force in the territory of India immediately before the commencement of the Constitution shall continue to be in force therein until altered, repealed or amended by a competent legislature or other competent legislature or other competent authority. According to him, as under the common law rule in England, international treaties entered into by that country with other countries, become enforceable as part of its Municipal law unless such treaty obligations conflict with its own statute law or principles of, common law and that further as the common law of England was applicable in India before the coming into force of the Constitution, international treaties entered into by this country with foreign countries are to be regarded as part of the Municipal law of this country and enforced by Courts of this country as was done by courts in England."

13.7.3 The Court held, extracting para 18,

"We are, therefore, of the opinion that the Government of India's obligations under the Gleneagles Accord and obligations attached to its membership of United Nations, cannot be enforced at the instance of citizens of this country or associations of such citizens of this country or associations of such citizens, by courts in India, unless such obligations are

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made part of the law of this country by means of appropriate legislation."

13.8 Similar was held by the Division Bench of Rajasthan High Court in Birma Vs. State of Rajasthan [AIR 1951 Rajasthan 127], the question was whether a treaty with the British Government and the princly State of Dholapur which was not given effect to, by means of a legislative enactment, could be regarded as part of Municipal Law of the then Dholapur State. It was observed that, "....Treaties which are part of the international law do not form part of the law of the land unless expressly made so by the legislative authority. In the present case the treaty remained a treaty only and no action was taken to incorporate it into a law. That treaty cannot, therefore, be regarded as a apart of the Municipal law of the then Dholapur State "

Role of Courts

14. International law rules or treaty provisions are not per se enforceable in the courts of sovereign country. The courts especially the Constitutional courts, are mandated to implement and interpret the sovereign laws. The power of judicial review exercised by the constitutional courts is, in itself an instance of sovereign function. When it comes to weighing or giving effect to the provisions of international law translated into municipal laws, the court would be concerned with giving effect to the

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law made by the sovereign nation for which it exists.

14.1 The provisions of international laws as given effect of in form of municipal laws, would be implemented by the courts. If any provision in the international treaty stands in variance, or is in conflict or does not figure in the domestic laws corresponding to international laws, though find place in the international law provision, the courts would follow State laws to implement as they stand.

14.2 The harmonization in construction of the municipal or State law may be advocated, still the court will be bound by the State law provisions. The court will not advert to give effect to any international law provision, which is omitted to be incorporated in the municipal law. The courts of the country, indeed in the India are wedded to sovereign democratic status of governance. The international political inclinations converted into international treaties of international laws would not override, unless the international principle laws are expressly adopted, incorporated and in-taken in the sovereign State laws. The sovereign laws will have an dominion effect.

14.3 Referring to Jolly George Varghese (supra), the Apex Court in Agricas LLP (supra), made reiterative observations,

"...the remedy for breaches of International Law

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in general is not to be found in the law courts of the State because International Law per se or proprio vigore has not the force or authority of civil law, till under its inspirational impact actual legislation is undertaken. The individual citizens, therefore, cannot complain about their breach in the municipal courts even if the country concerned has adopted the covenants and ratified the operational protocol."

(para 39)

14.4 'Lauterpacht in International Law (General Works)' summarise the principles, extracting from paragraph 4 of Gramaphone Company of India Ltd. (supra),

"While it, is clear that international law may and does act directly within the State, it is equally clear that as a rule that direct operation of international law is, within the State subject to the overriding authority of municipal law. Courts must apply statutes even if they conflict with international law. The supremacy of international law lasts, pro foro interno, only so long as the State does not expressly and unequivocally derogate from it. When it thus prescribes a departure from international law, conventional or customary, judges are confronted with a conflict of international law and municipal law and, being organs appointed by the State, they are compelled to apply the latter".

14.5 Decision of Calcutta High Court in Shri Krishna Sharma vs. The State of West Bengal & Ors. [AIR 1954 Cal. 591] deserves to be referred to. The Division Bench of Calcutta High Court was concerned with applying the provisions of Anglo-Tibetian Trade

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Regulations of 1914 regarding free export to Tibet out of India. It was one of the contentions on behalf of the State of West Bengal by the Advocate General, inter alia that assuming that under the 1914 Regulation, unfettered export of goods was permitted, the subsequent Indian statutes such as Essential Supplies Act, 1946 and the various Orders passed thereunder, Import and Exports (Control) Act, regulating the export etc. would prevail over the implied provisions of earlier Anglo-Tibet Regulations 1914 and the export of goods out of India to Tibet would be in violation of Indian statutes.

14.6 On the other hand, petitioners argued to invoke the Maxim Generalia Specialibus Nonderogant to contend that the Anglo-Tibet Trade Regulations governing the special case of trade and commerce between India and Tibet should prevail over the general Indian law enshrined in the statutes of the country. It was contended that the Indian statutes concerned were general in nature.

14.7 Negativing the argument of the petitioners, the Court observed in para 19,

"This contention of Mr. Kar would have been more convincing, however, if it was a case of conflict between two Indian statutes only--the prior enactment being special and the subsequent enactment being general. The conflict in the present case goes deeper however in that there is conflict between non-Indian law, assuming for a moment that the implied provisions of Anglo-

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Tibet Trade Regulations, 1914 constitute law, and subsequent Indian statutes."

14.8 In the same paragraph, it was in terms observed that, in such circumstances the international law cannot override in the municipal courts,

"The language of the Indian Statutes is clear enough: in the interests of India, they seek to put restrictions in the way of trade between India and other countries. If that language be in conflict with any principle of international law as is said to be deducible from the implied provisions of the Anglo-Tibet Trade Regulations of 1914, municipal Courts of India have got to obey the laws passed by the Legislature of the country to which they owe their allegiance. In interpreting and applying municipal law, these Courts will try to adopt such a construction as will not bring it into conflict with rights and obligations deducible from rules of international law. If such rules, or rights and obligations are inconsistent with the positive regulations of municipal law, municipal Courts cannot override the latter. It is futile in such circumstances to seek to reconcile, by strained construction, what are really irreconcilable."

AIFTA Article 24 Not Invocable

15. Article 24 is reproduced in paragraph 3.7.6 above. Looking to the language of Article 24 juxtaposed with the aspects of the present dispute and the controversy about the contents of RVC in the Country of Origin Certificate, it is debatable and doubtful whether the provisions of Article 24 would apply. What the Article contemplates is that a dispute concerning origin determination,

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classification of products or other related matters, the Government authorities of the exporting and importing parties may consult each other. In the present case, the origin of goods to be of Malaysia is not in dispute. As stated above, it is the core aspect of misrepresented and fraudulent RVC content. Nor the dispute relates to classification of products or other related matters. However, the contention of the petitioner that Article 24 mechanism should have been resorted to by the respondents may be dealt with irrespective of and independent of the above aspect and consideration.

15.1 Though part of international treaty, AIFTA Article 24 remains at that stage and status. It is not transformed into or converted into State law. While DOGPTA Rules, 2009 have been framed by competent exercise of powers by the Government of India under the Customs Tariff Act, 1975, Article 24 or any similar or analogous provision is not made part of the Rules. It is these Rules, which carry forward the international treaty provisions into statutory rules to be accordingly applied to the rights and obligations within the country for the citizens and subjects. Article 24 is expressly omitted and not recognised to be transformed into statutory law of the land. When Article 24 is not included in the domestic statutory rules framed by the law making body, it cannot be implemented.

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15.2 In Agricas LLP (supra), the Supreme Court made following observations after analysing various decisions,

"Afore-quoted decisions are on the legal effect of international treaties in the domestic law in India. The ratio of these decisions primarily relates to and is confined to the requirement and mandate of the need for 'act of transformation' to be a part and parcel of domestic law, which confers a right to invocability."

(para 40)

15.3 In the Court of law, Article 24 cannot be invoked or enforced. Any contention to enforce it and regulate the rights of the parties in accordance with the mechanism provided in the said Article would not stand good. For the purpose of invocation, implementation and enforceability within the State, provisions of Article 24 and dispute resolution mechanism provided therein stand excluded, once it is not part of State enacted law.

15.4 The submission was sought to be canvassed on behalf of the petitioners on the basis G.M. Exports (supra), that the treaty provisions would be respected in respect of international treaty in which India is signatory and treaty obligation will have to be enforced. The principle is that "if there be any difference between the language of such statute and the corresponding provision of the treaty, the statutory language to be construed in the same sense as that of treaty".

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15.5 Therefore, what is required is to interpret the statutory law by respecting and duly interpreting the treaty provisions. However, when particular provision in the treaty does not form part of statute law, the question of giving effect to such treaty provision does not arise.

15.6 It is only for the purpose of interpretation of statute law that the treaty provisions will have to be taken into consideration to be applied to make existing State law enacted pursuant to the treaty to be in uniformity with the treaty provisions and their intent. However, the situation is entirely different where a particular treaty provision is not recognised and is not made part of law of the land by the sovereign legislation. A provision in the treaty not translated into municipal or State law will have no efficacy for invocation, implementation and enforceability. Rights and obligations on such basis could not be pleaded and enforced before the Court.

15.7 In Entertainment Network (India) Limited (supra), the Supreme Court when observed that in interpreting the municipal laws, the international norms can be relied on for the purpose including to fill up the gaps in law, the Supreme Court speaks of gaps to be filled up in the interpretational process only. The Court cannot apply treaty provision not forming part of the State law and fill the gap. Filling of the gap is not to be perceived in this way

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which otherwise would be contrary to the basic principle that without competent legislation at the sovereign State level, the treaty provision cannot be enforced.

15.8 The gaps to be filled in in the working of international law provision vis-a-vis State law provision are to be of those nature to render the State law become applicable in tune with the international law. Filling up the gap cannot be construed, nor it is so suggested by the Supreme Court to mean reading any provision in the State law merely because such provision is there in the international treaty, when such provision is not consciously accepted and not transformed by the legislature in the law enacted by it. Article 24 of AIFTA not figuring in the Indian law is not an issue in the realm of interpretation, but it is an instance of State law expressly omitting and rescinding an international treaty provision.

15.9 When AIFTA Article 24 is not part of State law and Indian law making body has not recognised it for its implementation by excluding it from statutory law and rules, the proceedings taken out against the petitioner under the substantive provision of Customs Act, cannot become bad or stand illegal on their count.

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Substantive Provisions Applicable

16. The impugned orders are based on and are passed upon application of substantive provisions of the law of the land-the Customs Act, 1962. What could be invoked by the Customs authorities in light of the fact situation obtained upon investigation, was the provisions of section 28 of the Act. Section 28 deals with recovery of duties not levied or not paid or short levied or shord paid. As per sub-section

(1) of section 28, if the non-payment or short- payment is on account of reasons other than collusion or willful misstatement or suppression of facts, the proper officer may act within two years to exercise is powers. It is sub-section (4) of Section 24 which is invoked in the present case wherein exercise of powers by the competent authority is permissible within 5 years if the duty is not paid or is short- levied on the ground of collusion or any willful misstatement or suppression of facts.

16.1 Before looking at the relevant substantive provisions of Section 28 (4) of the Act applied in the present case, noticing other attendant provisions, Chapter VII of the Customs Act relate to clearance of imported goods and export goods. Section 45 is in respect of restrictions on custody and removal of imported goods. Section 46 is in respect of entry of goods on importation whereunder, declaration is required to be subscribed to.

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Section 47, clearance of goods for home consumption is granted where proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty. In Union of India vs. Jain Shudh Vanaspati [AIR 1992 SC 572], it is held that as the goods are cleared under section 47 of the Customs Act, the order of authority clearing the goods can be disturbed, where it is a case of fraud or suppression.

16.2 The suppression of facts is evident from the findings recorded by the Director of Revenue Intelligence which provided the basis for the Customs authorities to act and exercise the powers, was in respect of contents of wrongfully showing of RVC of the goods. The details for arriving at RVC was misleading and there was suppression of due and correct facts. Due to suppression noticed and found as per the facts already recorded hereinabove, the petitioners became disentitled to the concessional rate of duty and preferential treatment under Notification No. 46/2011 to become liable to pay basic customs duty on the goods imported. The facts of the instant cases could attract the provisions of section 28 (4) and attendant provisions. Due to wrongful availment of the concession in the duty(0%), there was non-payment or short levy of the Customs duty in the goods and the exemption notification benefit was not available.

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16.3 The provisions from sub-section (4) to sub- section (8) of Section 28 of the Act, are reproduced hereinbelow,

"(4) Where any duty has not been levied or not paid or has been short-levied or short-paid or erroneously refunded, or interest payable has not been paid, part-paid or erroneously refunded, by reason of,-

(a) collusion; or

(b) any wilful mis-statement; or

(c) suppression of facts, by the importer or the exporter or the agent or employee of the importer or exporter, the proper officer shall, within five years from the relevant date, serve notice on the person chargeable with duty or interest which has not been so levied or not paid or which has been so short-levied or short-paid or to whom the the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.

(5) Where any duty has not been levied or not paid or has been short-levied or short paid or the interest has not been charged or has been part-paid or the duty or interest has been erroneously refunded by reason of collusion or any willful mis-statement or suppression of facts by the importer or the exporter or the agent or the employee of the importer or the exporter, to whom a notice has been served under sub- section(4)by the proper officer, such person may pay the duty in full or in part, as may be accepted by him, and the interest payable thereon under section 28AA and the penalty equal to fifteen per cent of the duty specified in the notice or the duty so accepted by that person, within thirty days of the receipt of the notice

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and inform the proper officer of such payment in writing.

(6) Where the importer or the exporter or the agent or the employee of the importer or the exporter, as the case may be, has paid duty with interest and penalty under sub-section(5), the proper officer shall determine the amount of duty or interest and on determination, if the proper officer is of the opinion -

(i) that the duty with interest and penalty has been paid in full, then, the proceedings in respect of such person or other persons to whom the notice is served under sub-section (1) or sub- section (4), shall, without prejudice to the provisions of sections 135, 135A and 140 be deemed to be conclusive as to the matters stated therein; or

(ii) that the duty with interest and penalty that has been paid falls short of the amount actually payable, then, the proper officer shall proceed to issue the notice as provided for in clause(a) of sub-section(1) in respect of such amount which falls short of the amount actually payable in the manner specified under that sub- section and the period of two years shall be computed from the date of receipt of information under sub-section(5).

(7) In computing the period of two years referred to in clause(a) of sub-section(1) or five years referred to in sub-section(4), the period during which there was any stay by an order of a court or tribunal in respect of payment of such duty or interest shall be excluded.

(7A) Save as otherwise provided in clause(a) of sub-section (1) or in sub-section (4), the proper officer may issue a supplementary notice under such circumstances and in such manner as may be prescribed, and the provisions of this

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section shall apply to such supplementary notice as if it was issued under the said sub- section(1) or sub-section(4).

(8) The proper officer shall, after allowing the concerned person an opportunity of being heard and after considering the representation, if any, made by such person, determine the amount of duty or interest due from such person not being in excess of the amount specified in the notice."

16.4 Thus, sub-section (4) of section 28 provides that where any duty has not been levied or not paid, etc., on account of the reasons of (a) collusion (b) any willful misstatement or (c) suppression of facts by the importer or exporter or agent or employee of the importer or exporter, the competent officer may act within five years from the relevant date and serve notice on the person chargeable with duty or interest, which has not been paid. In other words, the provisions of sub-section(4) contemplates extended period of limitation for taking duty proceeding for non-payment or short-levy of customs duty.

16.5 Section 28 of the Customs Act is pari materia with Section 11A of the Central Excise Act. In the context Section 28 of the Customs Act as it existed prior to amendment by Act 8 of 2011, the Supreme Court, in Aban Loyd Chiles Offshore Limited Vs. Commissioner of Customs, Maharashtra [2006 (200) ELT

370 SC], observed that there was material difference

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between the provisions in the Customs Act and that of in Central Excise Act. It was observed that the word 'fraud' and words 'with intent to evade payment of duty' occurring in Proviso 2 Section 11A of the Central Excise Act are missing in Section 28(1) of the Customs Act and the Proviso in particular. It was further observed by the Apex Court that Proviso of Section 28 can be invoked where the payment of duty has escaped by reason of collusion or any willful misstatement or suppression of facts, the Supreme Court stated that, 'sofaras misstatement or suppression of facts are concerned, they are qualified by the words 'willful'. The 'willful' preceding the words 'misstatement or suppression of facts' clearly spells out that there has to be an intention on part of the assessee to evade the duty'.

16.6 The newly substituted Section 28 of the Customs Act by Act 8 of 11, when closely read brings out different situation. In Sub section (1) of Section 28 it is provided that recovery of duty would be in respect of duties not levied or not paid etc. for any reason other than the reasons of collusion or any willful misstatement of suppression of facts. Therefore the action of recovery under Section 28 will be in respect of duties not levied or not paid or short levied or short paid or erroneously refunded. The consideration of (a) collusion or (b) any willful misstatement or (c) suppression of facts,

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are mentioned in Sub section (4) to be the grounds where the notice for recovery is issued invoking the extended period of limitation. What is noticeable is that collusion can be the ground to resort to Sub section (4). furthermore, and importantly the word 'willful' does not precede the reason of 'suppression of facts' mentioned in Sub clause (c). In order to invoke Sub section (4) on the ground of suppression of facts, element of willfulness can be said to have been done away with. Suppression of facts simplicitor can be a ground here.

16.7 The suppression of fact is clearly attributed to the petitioners inasmuch as what was required to be disclosed and proof of contents of the Bills of Entry was to be subscribed in form of declaration under Section 46 of the Act. The petitioners had been in regular course of business of import and acted in such course. They were aware about RVC details which was wrongful and suppressive. The importer of any goods thereunder is required to present to the proper officer Bill of Entry for home consumption or warehousing in the manner prescribed in sub-section (2). The Bill of Entry shall include all the goods mentioned in the Bill of Lading or other receipt given by the carrier to the consignee. Under sub- section (4), the importer while presenting a Bill of Entry has to subscribe and make a declaration regarding the truth of the contents of the Bill of Entry. In the present case, the Origin Certificate

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containing the RVC value details was part and parcel of the documents for which truthfulness was declared.

16.8 Sub-section (4) of section 46 reads as under,

"(4) The importer while presenting a bill of entry shall make and subscribe to a declaration as to the truth of the contents of such bill of entry and shall, in support of such declaration, produce to the proper officer the invoice, if any, and such other documents relating to the imported goods as may be prescribed."

16.9 The documents relating to the calculation of RVC remained part of the documents including the Bill of Entry submitted to claim exemption from Customs duty under the Notification No. 46/2011. The petitioners who were engaged in the import in their normal course of business could not have been disclaimed the knowledge that on factual calculation and the criteria adopted, the RVC was wrongly stated. The petitioners were importers engaged in similar import business, were well aware and conversant with the affairs. When the RVC content was calculated on the basis of few months of 2013 cost-sheet, the calculation was evidently erroneous and misapplied, to which the petitioners could not have disclaimed the knowledge. The petitioners were well aware about the nature of details given in relation to RVC, which were wrong. Still however, they suppressed the fact and claimed the benefit of preferential duty treatment under the Exemption Notification. It could be said that while presenting the documents including

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the RVC content in the Origin Certificate, there was suppression of facts.

Solid Base, Factual Finding

17. The extended period of five years under sub- section (4) of Section 28 could indeed be invoked by the authorities since the petitioners were found guilty of suppression of facts regarding RVC content in the Origin Certificate. The suppression is not always concealment of facts. The suppression can take form of suggesting wrong facts and to obtain some advantage, which may not be available upon the disclosure of correct and genuine facts. Suppression may manifest itself in misrepresentation also. In the present case, the misrepresentation became suppression, as the exemption benefit or preferential duty benefit was obtained by putting forth wrong facts, which did not constitute eligibility to earn the exemption from the Basic Customs Duty. By suggesting wrong details and by subscribing untruth, essential conditions regarding RVC was not fulfilled. It partook suppression in eye of law and within the meaning of sub-section(4) of Section 28.

17.1 Even if the exemption notification may be construed liberally to extend the benefit thereunder, the eligibility criteria contemplated thereunder has to be strictly construed. This was stated in Commissioner of Customs (imports) Mumbai Vs. Tullow India Operations Limited [2005 (189) ELT 401 SC].

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"The principles as regard construction of an exemption notification are no longer res integra; whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefor the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed liberally. An eligibility criteria, therefore, deserves a strict construction, although construction of a condition thereof may be given a liberal meaning.

(para 36)

17.2 The findings about the fraudulent and suppressive contents about RVC and the consequential wrongful Origin Certificates produced by the petitioners-importers, and taking erroneous preferential duty benefit by them under the Exemption Notification, provided solid base for the Customs authority to proceed under section 28(4) of the Act. It is to be noticed that it was the Directorate of Revenue Intelligence who conducted the inquiry and the retroactive check, which was done in accordance with the Operational Certification Procedure. The factual findings were arrived at by the Directorate of Revenue Intelligence, which became base for the Customs authorities. The Custom authorities issued show cause notice. Petitioners defended themselves by filing reply to show cause.

17.3 Notably the Malaysian Authority did not cooperate. When the DRI proceeded and conducted the check, the submissions in respect of observance of

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time limit under the Operational Certification Procedure sought to be raised on behalf of the petitioners paled into insignificance. The substantive provisions of the Customs Act, when could be properly invoked and applied, even otherwise the Operational Certification Procedure provisions which were procedural, would stand subordinated. Non- observance of a particular procedural time limit thereunder cannot negate operation of substantive law, and effect and consequences of substantive provisions.

17.4 Procedural provisions cannot override the substantial statutory provisions of the Customs Act. It is trite that non-compliance of procedural law would not automatically vitiate the legally permissible action taken under the substantive legal provisions. When the procedural aspects and time limit for certain stages mentioned in the Operational Certification Procedure, are pitted against the provisions of Customs Act, the procedural requirements shall stand subordinated and subjugated. It is the substantive law which would govern and override.

17.5 The Orders-in-Original passed by the Customs authority challenged in this petitions are so founded. This Court is exercising jurisdiction under Article 226 of the Constitution. In that view, the finding of facts stands binding. Even otherwise,

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having regard to the cogent nature of the findings, they do not warrant any interference by the Court. The action initiated and the impugned order passed needs to be upheld.

Summarization

18. In light of all forgoing discussion and delineation, the following propositions could be deduced.

(i) Making of international treaty is an executive act by the member countries. Accordingly, the entering into AIFTA was an executive exercise by India.

(ii) The rules of international law including the provisions of treaty are not implementable or enforceable per se in the member States. The international law rules have to be transformed into State laws to make them implementable within the State and to make them govern the rights and obligations of the subjects and citizens of the State.

(iii) It is the sovereign legislature of the State which would enact the State laws or municipal laws pursuant to the treaty provisions to be applied in the country. The Government of India has enacted Customs Tariff (DOGPTA between ASEAN and Republic of India) Rules, 2009.

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(iv) In the process of enactment of laws to give effect to the treaty provisions, the sovereign legislature would be competent not to recognize, except, give effect to and not to transform any of the treaty provisions into the municipal statutes.

(v) The legislature of the State may, while enacting the law, omit or rescind any of the treaty provisions. A treaty provision omitted to be transformed would not be implementable nor it could be enforced in court of law of particular State.

(vi) AIFTA Article 24, though figures in the said international treaty, it is not enacted in the Customs Tariff (DOGPTA between ASEAN and Republic of India) Rules, 2009. The Article is not given statutory recognition in this country.

(vii) Therefore AIFTA Article 24 lacks invocability to be enforced and no remedy would lie qua the provisions of the treaty in Indian Courts.

(viii) The State Laws would prevail over the international rules or treaty provisions. Even in situation of conflict between the two, the municipal law or State law will prevail.

(ix) Therefore, AIFTA Article 24 not transformed into legislative measure, cannot have efficacy of law within the State. A contention to enforce the same does not lie.

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(x) Non-observance of mechanism for dispute resolution as per AIFTA Article 24 cannot have the effect and consequence of invalidating the action taken by the Customs authorities under the provisions of the Customs Act. The exercise of powers by them would not render without jurisdiction on such score.

(xi) The petitioners were found upon investigation, to have imported the goods Tin Ingots by producing misleading Certificate of Country Origin, by misrepresenting and suppressing the Regional Value Content, thereby wrongfully claiming preferential treatment in payment of basic Customs duty (0%).

(xii) In the facts of the case, the petitioners could be lawfully subjected to proceedings under Section 28

(4) read with Section 46 (4) of the Customs Act on the ground of non-levy and/or short-levy of basic customs duty in respect of goods imported by them. Extended period of limitation under Section 28(4) of the Act could be rightly invoked on the ground of suppression.

(xiii) The proceedings taken out resulting into interim orders against the petitioners were under the substantive law which were the applicable statutory customs provisions under the Customs Act.

(xiv) Non-compliance of the time limit for investigatory action under the Operational Procedures would not render the action taken under substantive

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law, for, the procedural aspects stand subordinate to substantive provisions.

19. In light of aforesaid discussion and reasons, it has to be held that Order-in-Original dated 29.05.2020 challenged in Special Civil Application No. 14028 of 2020 and in Special Civil Application No. 13365 of 2020, as also Order-in-Original dated 24.06.2020 impugned in Special Civil Application No. 14937 of 2020 passed by Additional Commissioner, Customs House, Kandla and by Assistant Commissioner, Customs House, Mundra, respectively could not be said to be without jurisdiction. They are passed pursuant to competent invocation and upon valid exercise of powers under section 28(4) of the Customs Act, 1962. This exercise of powers has to be held to be an exercise in and under the sovereign law of the land.

20. Accordingly, Special Civil Application No. 14028, 13365 and 14937 are liable to be dismissed. Accordingly, all the three petitions are dismissed.

21. Similarly, on the same lines and for the same reasons, Order-in-Original dated 20.12.2019 passed by the Joint Commissioner of Customs, Ahmedabad and the order in Appeal dated 15.03.2021 passed by the Commissioner (Appeals) impugned in Special Civil Application No.1835 of 2022 are upheld.

22. Special Civil Application No. 1835 of 2022 also stands dismissed.

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23. All the four petitions are dismissed. Notice is discharged in each. Interim orders are vacated.

(N.V.ANJARIA, J)

(BHARGAV D. KARIA, J)

BIJOY B. PILLAI/MANSHI

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