2026-VIL-1008-CESTAT-CHE-CU
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CUSTOMS CESTAT Cases

Customs - Certificate of Origin under Indo-Thailand Free Trade Agreement - Rejection and Recomputation of Local Value-Added Content – Appellant-importer imported gold jewellery studded with diamonds/ruby from Thailand and claimed exemption under Notification No. 85/2004-Cus based on CoO certifying 22% local value-added content - Department initiated investigation alleging that the declared value addition was incorrect and actual value addition was only 6.5% based on its own computation considering only labour and handling charges -Whether the Department is justified in rejecting the Certificate of Origin issued by the designated authority of the exporting country and recomputing Local Value-Added Content through an alternate methodology contrary to the Interim Rules of Origin, and whether such verification burden lies on the importer – HELD - The rejection of the Certificate of Origin and recomputation of LVAC by the Department is contrary to the Interim Rules of Origin. Rule 6(d) of the Interim Rules of Origin prescribes a specific statutory formula requiring computation of LVAC as the difference between the FOB value of the export product and the CIF value of non-originating materials, divided by the FOB value, which includes manufacturing, processing, overheads and profit components and is not restricted to labour and handling charges alone. By reducing value addition solely to labour and handling charges, the Department has impermissibly substituted the statutory formula with an artificial and truncated computation - The Interim Rules of Origin constitute a complete and self-contained code governing determination of origin and the Department cannot deviate from or substitute the statutory mechanism by adopting alternate methodologies. The importer, who does not have access to the cost structure of the foreign supplier, is required only to produce the Certificate of Origin. Unilateral rejection of the Certificate of Origin based on departmental computation, without invoking the statutory verification mechanism prescribed under Rule 15, strikes at the root of the statutory scheme – The Customs authorities cannot substitute the statutory formula by adopting alternate methodologies nor can they assume the role of the issuing authority in determining origin - The impugned Order-in-Appeal is set aside and the appeal is allowed
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