Court Rejects Petitioner's Challenge on Jurisdiction and Power of Customs Authorities Pre-Section 28DA Amendment, Emphasizing Suppression of Facts and Domestic Law Primacy over Unincorporated International Treaty Provisions
In a significant judgment dated September 2, 2026, the Delhi High Court (Division Bench comprising Justices Anil Kshetarpal and Shail Jain) dismissed the writ petition filed by M.M. Ceramics & Ferro Alloys challenging the Customs Authorities’ denial of preferential customs duty benefits on imported High Grade Tin Ingots from Malaysia under the ASEAN-India Free Trade Area (AIFTA) framework. The dispute primarily involved the validity of Certificates of Origin (COO) and the Regional Value Content (RVC) claimed by the petitioner to avail concessional Basic Customs Duty (BCD) rates.
Background and Factual Matrix:
The petitioner had imported Tin Ingots manufactured by Malaysia Smelting Corporation (MSC) in Malaysia, relying on COOs issued by the Malaysian Ministry of International Trade and Industry (MITI). These COOs purportedly established that the goods met the Rules of Origin (RoO) criteria under the Customs Tariff (Determination of Origin of Goods under the Preferential Trade Agreement between ASEAN and India) Rules, 2009, enabling the petitioner to claim nil BCD rates under Notification No. 46/2011-Cus.
An investigation initiated by the Directorate of Revenue Intelligence (DRI), Mumbai, revealed that the RVC declared in the COO was based on a limited cost sheet from 2013, which MSC had used repeatedly over several years. Moreover, MSC’s manufacturing process was on a job-work basis, wherein the principal raw material (tin ore) was supplied free of cost by traders, and MSC only charged smelting fees. This setup meant the actual value addition in Malaysia was significantly lower than claimed, failing to satisfy the prescribed origin criteria.
Consequently, Customs issued Show Cause Notices (SCNs) and passed Orders-in-Original (OIOs) denying preferential tariff benefits, demanding differential customs duties with penalties and confiscation of imported goods. The petitioner contested these actions before the Delhi High Court, primarily on two grounds: (i) lack of jurisdiction of Customs Authorities due to Article 24 of AIFTA’s dispute resolution mechanism not being invoked; and (ii) absence of enabling statutory power before the insertion of Section 28DA (Chapter V-AA) in the Customs Act, 1962.
Key Legal Issues and Court’s Analysis:
1. Jurisdiction of Customs Authorities vs. AIFTA Article 24:
The petitioner argued that Article 24 of the AIFTA, which provides a dispute resolution mechanism between contracting states, must be exhausted before Customs can act under domestic law. The Court, relying on the precedents from the Gujarat High Court in Trafigura India Pvt. Ltd. and the Bombay High Court in Purple Products Pvt. Ltd., held that AIFTA provisions, not incorporated into Indian domestic law, do not confer enforceable rights or curtail powers granted by Indian statutes.
The Court emphasized that international treaties like AIFTA require legislative enactment to become part of Indian law. Since Article 24’s consultation and dispute resolution procedures were not incorporated, the Customs Authorities could validly proceed under the Customs Act without invoking AIFTA’s mechanism. This reasoning was consistent with the principle that unincorporated treaties are binding only between states and cannot override domestic statutory powers.
2. Enabling Power of Customs Authorities Prior to Section 28DA:
The petitioner contended that before the Finance Act, 2020 introduced Chapter V-AA and Section 28DA, Customs Authorities lacked statutory power to initiate proceedings on preferential tariff claims.
The Court analyzed Sections 28 and 46 of the Customs Act, 1962, as they stood before the amendment. Section 28(4) explicitly empowered Customs to recover duties within five years where duty was short-paid or not paid due to collusion, willful misstatement, or suppression of facts by the importer or exporter. Section 46(4) imposed a statutory obligation on importers to make truthful declarations in the Bill of Entry and produce supporting documents.
The Court held that these provisions sufficed to empower Customs to act against suppression of facts relating to preferential tariff claims, independent of any COO-specific verification mechanism introduced later. The amendment creating Section 28DA was held to be clarificatory and procedural in nature, not conferring any new substantive powers.
3. Suppression of Facts and Extended Period for Recovery:
The Court noted that the petitioner was required to declare the truth of contents in the Bill of Entry, including RVC details underpinning the COO. The incorrect and repeated reliance on outdated cost sheets, despite knowledge of the true value addition, constituted suppression of facts. Importantly, the Court observed that for invoking extended limitation under Section 28(4), suppression simpliciter suffices without the need to prove willfulness.
Precedents Relied Upon:
The Court extensively referred to the judgments of:
These cases supported the proposition that Customs Authorities have jurisdiction to proceed under Section 28 of the Customs Act and that unincorporated treaty provisions cannot oust domestic statutory powers.
Conclusion and Directions:
Rejecting the petitioner’s jurisdictional objections, the Delhi High Court dismissed the writ petition but granted liberty to file statutory appeals under Section 128 of the Customs Act against the OIOs. The Court clarified that it did not express any opinion on the merits of quantification of duty, confiscation, or penalties, leaving these issues open for adjudication by the Appellate Authority.
Significance:
This ruling reiterates the primacy of domestic law in customs matters and affirms the authority of Customs to act against suppression of facts in preferential tariff claims without being constrained by unincorporated international treaty dispute mechanisms. It also clarifies that the introduction of specific procedural provisions does not negate pre-existing powers under the Customs Act.
Bottom Line:
Customs Law - The Customs Authorities have the jurisdiction to deny preferential tariff benefits under the ASEAN-India Free Trade Area (AIFTA) framework if the Certificate of Origin and Regional Value Content criteria are not satisfied as per the Customs Act, 1962. The introduction of Section 28DA under Chapter V-AA of the Customs Act, 1962, does not imply that Customs Authorities lacked the power to act under Section 28 of the Act prior to its amendment.
Statutory provision(s): Customs Act, 1962 Sections 28(4), 46(4), 28DA (Chapter V-AA); Customs Tariff Act, 1975 Section 5(1); Customs Tariff (Determination of Origin of Goods under ASEAN-India Preferential Trade Agreement) Rules, 2009 (RoO 2009)
M.M. Ceramics & Ferro Alloys v. Union of India, (Delhi)(DB) : Law Finder Doc Id # 2971831
