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Dated: 20.05.2025

CESTAT Ahmedabad held that verified COO and compliance with SAFTA conditions was sufficient

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench, Ahmedabad, has allowed the appeal of M/s Kesar Spices against the denial of exemption under Notification No. 99/2011-Cus for imports made under the South Asian Free Trade Area (SAFTA) framework.

Background of the Case

• Importer: Kesar Spices, Ahmedabad
• Goods: Walnuts in shell (101,250 kg)
• Exemption Claimed Under: Notification No. 99/2011-Cus read with Notification No. 75/2006-Cus
• Country of Origin Declared: Afghanistan
• Exporting Firm: M/s Kalimullah Hidayat Afghan Ltd., Kandahar, Afghanistan
• Key Allegation: Misdeclaration of U.S. origin goods as Afghan-origin to avail duty concession
• Demand Raised:
  • Customs Duty: ₹2.01 crores
  • Redemption Fine and Penalty under Sections 111(m), 111(o), 112, 114A, 114AA

Customs Department’s Grounds

• Found 3 tags marked “USA” or “California” inside 3 out of 1,650 bags.
• Claimed forged Phytosanitary Certificates were used.
• Alleged the goods originated from the U.S. and were routed via Karachi to India.
• Claimed the declaration was falsified using fabricated COO and other supporting documents.

Importer’s Defense

• Produced valid Certificates of Origin issued by Afghanistan Chamber of Commerce, duly verified by Indian authorities through G2G communication.
• Emphasized only 3 bags out of 1,650 had questionable tags — insufficient to assume the entire consignment was of U.S. origin.
• Relied on multiple legal precedents holding that a valid COO cannot be discarded without following verification and dispute resolution mechanisms under SAFTA.
• Denied all allegations and retracted the confession letter, alleging coercion and demanding refund of forced deposit.

Tribunal’s Key Findings

1. COO is Valid and Verified:
   • Certificate of Origin issued by Afghan authority was confirmed through formal intergovernmental communication.
   • Customs failed to invoke the dispute resolution mechanism prescribed in Article 15 & 21 of SAFTA Rules.
2. Insufficient Evidence from Customs:
   • 3 paper slips in random bags cannot be the sole basis to reclassify the entire consignment.
   • No admissible statement recorded under Section 108 of the Customs Act—only a disputed letter which was later withdrawn and challenged in court.
3. Violation of Procedural Fairness:
   • Customs did not perform any independent verification of the COO.
   • No concrete evidence that goods were of U.S. origin or payments were routed via third countries.
4. Judicial Precedents Cited:
   • RS Industries, Bullion & Jewellers Association, Shirazee Traders, DP Chocolates, and Kothari Metals Ltd.—all emphasizing that a valid COO verified by the issuing country cannot be brushed aside without due process.

Final Verdict by CESTAT Ahmedabad

• Customs demand, penalty, and fine quashed in full.
• Tribunal held that verified COO and compliance with SAFTA conditions was sufficient.
• Appeal of Kesar Spices allowed with consequential reliefs.

Legal Significance

This order reinforces the legal sanctity of:

• Treaty-based trade facilitation under SAFTA,
• Proper valuation and verification procedures, and
• The doctrine that procedural lapses cannot override documentary evidence verified by competent foreign authorities.

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Source: CESTAT Ahmedabad

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