M.M. Ceramics & Ferro Alloys v. UoI

What happened

The petitioner imported tin ingots manufactured by Malaysia Smelting Corporation and cleared them at nil basic customs duty under Notification No. 46/2011-Cus. dated 1 June 2011, on certificates of origin issued by Malaysia's MITI. The Directorate of Revenue Intelligence found that the smelter made ingots on job work from tin ore supplied free by traders and had used a cost sheet for July to September 2013 for successive certificates, so that the regional value content declared as above 70 per cent, against a 35 per cent minimum under the 2009 Rules of Origin, was not a true measure of the value added. Show-cause notices were issued on 7 December 2018 and 11 December 2018. The petitioner filed the writ petition against them, and while it was pending the Orders-in-Original followed: 5 July 2019 confirmed differential duty of Rs. 99,84,190 on five bills of entry, ordered confiscation of goods valued at Rs.16,77,69,937 and imposed a penalty of Rs.99,84,190 under section 114AA; 27 September 2019 confirmed Rs. 39,69,936 on two bills of entry and dropped confiscation and penalties. The petitioner argued that Article 24 of the agreement barred proceedings and that customs had no power before section 28DA was inserted.

Questions before the court

• Can customs officers recover duty on a preferential-origin claim under section 28 without first using the agreement's Article 24 consultation, and did they have that power before section 28DA?

Why the court ruled this way

The Court followed Trafigura India Pvt. Ltd. v. Union of India (Gujarat) and Purple Products Pvt. Ltd. v. Union of India (Bombay) on materially identical facts, and the petitioner did not distinguish them (paragraph 47). An unincorporated treaty obligation binds only the contracting States and a private party cannot use it to displace a domestic statute, so Article 24 did not make the proceedings without jurisdiction (paragraphs 31 to 34). Section 28, read with the declaration an importer must make under section 46(4), already allowed recovery of duty short-paid by suppression of facts; Chapter V-AA and section 28DA were an additional and more elaborate mechanism, not a new source of power (paragraphs 35 to 46). The Court added that the Gujarat finding that suppression alone suffices under section 28(4) cannot be mechanically carried over to the amended provision (paragraph 46). Quantification, confiscation and penalty were left to the appellate authority under section 128 (paragraph 48).

Controlling point

Neither jurisdictional objection succeeded; customs authorities could proceed under section 28 of the Customs Act, 1962 despite Article 24 and before section 28DA.

Order and next steps

The petition and the pending application were dismissed with liberty to file statutory appeals against the two Orders-in-Original within four weeks, to be decided on merits without a limitation bar. The Court expressed no opinion on quantification of duty, confiscation or penalty.

Practical implications

An importer who claimed preferential duty on a certificate of origin that is later questioned should expect the recovery proceedings under section 28 to proceed, and should challenge quantum and penalties in the statutory appeal.

Limits of this ruling

• The Court decided only the two jurisdictional objections; it expressly left the quantification of duty, confiscation and penalty open, and noted that suppression-simpliciter reasoning under the old section 28(4) cannot be carried over to the amended provision without further examination.