Court Upholds Customs Authority's Jurisdiction in Tin Ingot Import Dispute.


13-June-2025 Custom Duty >> Tax Laws  

In a significant ruling on June 13, 2025, the High Court of Judicature at Bombay, in the case of Purple Products Private Limited, Mumbai & Another v/s Union of India, affirmed the jurisdiction of customs authorities to issue show cause notices in disputes concerning imported goods, even when an international treaty with a specialized dispute resolution mechanism exists. The decision, delivered by Justice M.S. Sonak and Justice Jitendra Jain, dismissed writ petitions challenging the show cause-cum-demand notices issued under Section 28 of the Customs Act, 1962.

The case revolved around the import of "Tin Ingots" from Malaysia, where the petitioners, including Purple Products Pvt Ltd and Kothari Metals Ltd, had claimed benefits under Customs Notification No. 46/11 dated June 1, 2011. The impugned show cause notices alleged that these benefits were secured by misrepresenting the Regional Value Content (RVC) of the Tin Ingots as being more than 35%, when it was not.

 
 

The petitioners' primary contention was that the Free Trade Agreement dated August 30, 2009 (AIFTA), between India and ASEAN, governed the transaction and prescribed a specific dispute resolution mechanism under Article 24. They argued that initiation of adjudication proceedings under the Customs Act without observing this treaty-prescribed process was without jurisdiction. This argument was previously accepted by the Supreme Court, which had set aside an earlier dismissal of these petitions by the High Court and restored them for consideration on their merits, leaving all questions open.

However, the High Court, after an exhaustive review of rival contentions, ultimately sided with the respondents (Union of India). The Court emphasized the principle that international treaties, unless incorporated into or transformed into municipal (domestic) laws, cannot be directly enforced in domestic courts. While the Customs Tariff (DOGPTA) Rules 2009 were enacted to give effect to some AIFTA provisions, these rules notably made no reference to Article 24.

The Court noted that the petitioners were unable to identify any parliamentary statute that endorsed or transformed the provisions of Article 24 of AIFTA into national law. The absence of such a statute, coupled with the omission of Article 24 in the 2009 Rules, led the Court to conclude that Article 24 could not be enforced before it to question the customs authorities' actions as being without jurisdiction.

Furthermore, the High Court referenced the Gujarat High Court's decision in Trafigura India Private Limited V/s. Union of India, which had similarly addressed the invocability of Article 24 of AIFTA in the context of tin ingot imports from Malaysia and rejected identical contentions. The Bombay High Court found the reasoning in Trafigura persuasive and applicable to the current case.

The Court clarified that the dispute was not about the origin of the goods but about misrepresentation and fraud concerning the Regional Value Content (RVC). It held that Article 24 of AIFTA does not deprive customs authorities of their powers under Section 28 of the Customs Act to investigate cases of misrepresentation, suppression, or fraud. The Court also highlighted that the introduction of Chapter VAA, including Section 28DA, to the Customs Act, effective from March 27, 2020, specifically dealing with Country-of-Origin Criteria/Certificate disputes, does not imply that customs authorities lacked such jurisdiction prior to its enactment.

Ultimately, the High Court ruled that the primary argument challenging the show cause notices as ultra vires due to non-compliance with Article 24 of AIFTA lacked merit. The Court stated that attempts to stall or prevent adjudication proceedings based on such arguments cannot be encouraged, especially when exercising extraordinary jurisdiction. The interim application was accordingly disposed of.


Section 28, Customs Act - 1962  

Customs Act, 1962