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Dated: 23.01.2025

FTA benefit denied based on intelligence is not sustainable when further investigation was not done says CESTAT Ahmedabad

The Customs, Excise & Service Tax Appellate Tribunal ruled in favor of D.P. Chocolates, overturning Customs’ denial of FTA benefits on imported cocoa powder from Malaysia. The tribunal cited procedural lapses and lack of evidence to dismiss the department’s claims, granting relief to the appellant.

Key Highlights of the Proceedings:

1. Background of the Case:

• D.P. Chocolates imported alkalized cocoa powder from Malaysia and claimed FTA benefits under Customs Notifications No. 46/2011-Cus and No. 53/2011-Cus.
• Customs denied these benefits, alleging non-compliance with the 35% value addition requirement, leading to show cause notices and subsequent penalties.

2. Appellant’s Arguments:

• The certificate of origin issued by Malaysian authorities was valid and not verified or invalidated by Customs.
• Previous rulings in similar cases favored importers, establishing the validity of certificates unless proven otherwise.
• The denial of benefits was based on assumptions and lacked supporting evidence or verification.

3. Respondent’s (Customs) Arguments:

• Reiterated findings from the original order, alleging non-compliance with FTA conditions and arguing that benefits were wrongly availed.

4. Tribunal’s Observations:

• No evidence of verification of the certificate of origin by Customs as required under the FTA rules.
• Cases cited by the appellant, including rulings in similar disputes, supported their claim.
• Procedural lapses, such as failure to conduct proper origin verification and reliance on presumptions, rendered the Customs’ stance unsustainable.

5. Judgment:

• The tribunal ruled in favor of D.P. Chocolates, setting aside the impugned orders.
• Highlighted the lack of substantive evidence and procedural compliance by Customs in denying FTA benefits.
• Appeals were allowed, granting relief to the appellant.

6. Significance:

• The ruling underscores the importance of adherence to verification procedures by Customs before denying FTA benefits.
• Reinforces the validity of certificates of origin unless proven otherwise through proper inquiry.

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Source: CESTAT Ahmedabad

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