Delhi High Court Dismisses Tin Importer’s Challenge to Customs Proceedings; Holds AIFTA Article 24 Cannot Oust Section 28 Jurisdiction and Pre-2020 Powers Were Already Sufficient
Delhi High Court Rejects Challenge to Preferential Duty Proceedings on Malaysian Tin Ingots; Says Customs Had Power Under Section 28 Even Before Section 28DA
Facts
M.M. Ceramics & Ferro Alloys challenged two show-cause notices dated 7 December 2018 and 11 December 2018 concerning its imports of high-grade tin ingots from Malaysia Smelting Corporation (“MSC”). The petitioner had claimed NIL basic customs duty under Notification No. 46/2011-Cus. based on Malaysian Certificates of Origin.
During the writ proceedings, the SCNs culminated in two Orders-in-Original dated 5 July 2019 and 27 September 2019, which thereafter became the real subject of challenge.
The dispute concerned whether the tin ingots genuinely satisfied the ASEAN-India Free Trade Area (AIFTA) origin requirements, particularly the requirement of at least 35% Regional Value Content (RVC).
The DRI investigation revealed that non-ASEAN traders supplied tin ore to MSC free of cost, while MSC merely converted that ore into tin ingots on a job-work basis. Customs therefore questioned whether the RVC claimed in the Certificates of Origin accurately represented the actual Malaysian value addition.
One adjudication order confirmed ₹99,84,190 differential duty, interest, confiscation of goods valued at approximately ₹16.77 crore and a ₹99,84,190 penalty under Section 114AA. The other confirmed ₹39,69,936 differential duty plus interest, while dropping the proposed confiscation and penalties.
Issues
The central questions were:
- Whether Article 24 of AIFTA required resort to treaty-level dispute resolution before Indian Customs could invoke domestic law.
- Whether the Customs authorities lacked jurisdiction, prior to introduction of Section 28DA in 2020, to investigate or reject preferential tariff claims based on Certificates of Origin.
- Whether Section 28 read with Section 46 of the Customs Act already provided sufficient authority to recover short-paid duty.
- Whether factual issues concerning duty, confiscation and penalties should be examined in writ jurisdiction or statutory appeal.
Petitioner’s Arguments
The petitioner accepted that a statutory appeal was available but urged the High Court to decide the jurisdictional objections directly.
Its two principal arguments were:
- that because the goods were imported on Certificates of Origin issued by Malaysia’s designated authority, Customs could not proceed without first invoking Article 24 of AIFTA; and
- that before the introduction of Chapter V-AA and Section 28DA with effect from 27 March 2020, Customs lacked specific statutory authority to question preferential-origin claims.
Respondents’ Arguments
Customs relied upon Trafigura India Pvt. Ltd. v. Union of India and the Bombay High Court decision in Purple Products Pvt. Ltd., both arising from materially similar Malaysian tin-ingot transactions.
The Department argued that Section 28 already empowered Customs to recover short-levied duty arising from suppression or misrepresentation and that the 2020 amendment merely created an additional procedural framework rather than a new substantive power.
Analysis of the Law
1. Article 24 of AIFTA Could Not Oust Domestic Customs Jurisdiction
The High Court agreed with the Gujarat High Court’s reasoning in Trafigura India.
It held that an international treaty provision which has not been incorporated into Indian municipal law cannot, by itself, curtail powers expressly conferred upon a domestic statutory authority.
Article 24 of AIFTA had not been incorporated into Indian law as an enforceable dispute-resolution mechanism.
Therefore, a private importer could not invoke Article 24 to argue that Customs proceedings under Section 28 were without jurisdiction.
2. Rules of Origin Did Not Incorporate Entire AIFTA Treaty
The Court explained that the Rules of Origin, 2009 gave domestic effect to origin criteria and verification procedures, but did not incorporate the whole of AIFTA, including Article 24’s inter-governmental dispute-resolution mechanism.
Accordingly, Article 24 could not displace or suspend domestic Customs Act proceedings.
3. Section 28 Already Provided Recovery Power Before 2020
The Court rejected the argument that Section 28DA created Customs’ authority for the first time.
Sections 28 and 46 of the pre-2020 Customs Act already empowered authorities to deal with duties that were not levied, short-levied or short-paid.
Section 28(4) specifically provided a five-year extended period where short payment resulted from collusion, wilful misstatement or suppression of facts.
4. Section 28DA Added a Specific Procedure, Not a New Jurisdiction
The High Court held that Chapter V-AA and Section 28DA introduced a more detailed framework specifically designed for preferential tariff and Certificate-of-Origin verification.
But the amendment did not create an entirely new substantive power which was absent earlier.
The Court agreed with the Bombay High Court in Purple Products that it would be incorrect to infer from the 2020 amendment that Customs authorities previously lacked authority to investigate fraud, suppression or misrepresentation.
5. Importer Has Statutory Duty to Make Truthful Declaration
Section 46(4) requires the importer, while presenting a Bill of Entry, to declare the truthfulness of its contents and produce supporting documents.
The Court treated particulars underlying a preferential tariff claim, including RVC particulars in a Certificate of Origin, as forming part of this statutory disclosure obligation.
Therefore, where incorrect or suppressed particulars result in preferential duty being claimed, Section 28 can operate independently of Section 28DA.
6. Customs Could Examine Regional Value Content
The verification revealed that MSC had used a three-month cost sheet from July–September 2013 for successive Certificates of Origin over an extended period and claimed RVC exceeding 70%, while the statutory minimum was 35%.
Customs was therefore entitled to investigate whether the economic activity actually undertaken in Malaysia satisfied the origin requirements.
7. Similar Gujarat and Bombay High Court Judgments Were Indistinguishable
The Court placed significant reliance on:
- Trafigura India Pvt. Ltd. v. Union of India — Gujarat High Court; and
- Purple Products Pvt. Ltd. v. Union of India — Bombay High Court.
Both involved materially identical imports of tin ingots manufactured by MSC, Malaysian Certificates of Origin and Customs verification proceedings.
The petitioner failed to demonstrate any material factual or legal distinction justifying a different conclusion.
Precedent Analysis
Trafigura India Pvt. Ltd. v. Union of India
This was the principal authority followed by the Delhi High Court.
The Gujarat High Court held that:
- Article 24 AIFTA did not oust Indian Customs jurisdiction;
- Customs could act under Section 28 despite the international agreement;
- the extended limitation provision could be invoked where statutory conditions were satisfied; and
- the preferential-origin regime did not eliminate substantive Customs Act powers.
Purple Products Pvt. Ltd. v. Union of India
The Bombay High Court followed Trafigura in materially identical MSC tin-ingot cases.
It specifically rejected the argument that introduction of Section 28DA implied that Customs lacked equivalent investigative or recovery power before March 2020.
Aban Loyd Chiles Offshore Ltd. v. Commissioner of Customs
Discussed in the context of Section 28 and the extended limitation period, particularly the statutory treatment of misstatement and suppression of facts.
Court’s Reasoning
The petitioner’s challenge rested entirely on jurisdiction.
The High Court rejected both jurisdictional propositions:
First, AIFTA Article 24 did not form part of enforceable Indian municipal law and therefore could not prevent Customs from exercising statutory powers under the Customs Act.
Second, Section 28DA was not the source of Customs’ first-ever power to investigate preferential tariff claims. Sections 28 and 46 already created the substantive authority to examine short payment and incorrect declarations.
Once those jurisdictional objections failed, the Court saw no reason to examine factual questions concerning:
- correct RVC;
- duty quantification;
- confiscation; or
- penalties
under Article 226, particularly because Section 128 provided an efficacious statutory appeal.
Conclusion
The Delhi High Court found no merit in the challenge to the SCNs or Orders-in-Original on the ground of want of jurisdiction.
It expressly concurred with the reasoning of the Gujarat High Court in Trafigura India and the Bombay High Court in Purple Products.
Accordingly, the writ petition was dismissed.
However, the petitioner was granted liberty to file statutory appeals against both Orders-in-Original within four weeks, and the appellate authority was directed not to dismiss such appeals on limitation if otherwise maintainable.
The High Court expressly left open all contentions concerning duty quantification, confiscation and penalties for determination by the appellate authority.
Case Details
Case: M.M. Ceramics & Ferro Alloys v. Union of India & Ors.
Court: High Court of Delhi at New Delhi
Case Number: W.P.(C) 10535/2019 & CM APPL. 6825/2020
CNR No.: DLHC010394992019
Bench: Justice Anil Kshetarpal and Justice Shail Jain
Judgment by: Justice Anil Kshetarpal
Reserved on: 17 August 2026
Date: 2 September 2026
Subject Matter: Preferential customs duty on Malaysian high-grade tin ingots under ASEAN-India FTA
Major Differential Duty Confirmed: ₹99,84,190 under one OIO and ₹39,69,936 under the other
Relevant Provisions: Sections 28, 46, 111, 112, 114A, 114AA and 128, Customs Act, 1962; Section 28DA/Chapter V-AA; AIFTA Rules of Origin, 2009
Result: Writ dismissed on jurisdictional grounds; petitioner granted four weeks to pursue statutory appeal, with limitation protection; merits of quantification, confiscation and penalties left open.
