Covestro India Pvt. Ltd. vs. Assistant Commissioner of Customs, Nhava Sheva (2026) 43 Centax 158 (Bom.) [16-04-2026]
Introduction
India's expanding network of Free Trade Agreements (FTAs) plays a pivotal role in facilitating international trade by allowing eligible imports to avail preferential customs duty, subject to compliance with the applicable Rules of Origin (RoO). These rules ensure that tariff concessions are available only to goods genuinely originating from the partner country, thereby preventing misuse of treaty benefits while promoting legitimate trade.
To strengthen the administration of Rules of Origin, Parliament inserted Section 28DA into the Customs Act, 1962, empowering customs authorities to verify claims for preferential tariff treatment. Pursuant thereto, the Government notified the Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR, 2020), prescribing the obligations of importers, the documentation required to support origin claims, and the procedure for verification by customs authorities.
Despite the statutory framework established under Section 28DA and CAROTAR, questions continued to arise regarding the extent to which customs authorities could insist upon documents beyond those prescribed under the Rules while verifying preferential tariff claims. This issue came into sharp focus before the Bombay High Court in Covestro India Private Limited v. Assistant Commissioner of Customs Group II & Anr., where the petitioner challenged the denial of preferential tariff treatment founded upon additional procedural requirements introduced through Public Notice No. 33/2024. Significantly, during the pendency of the proceedings, the CBIC issued Instruction No. 23/2024-Customs, followed by Public Notice No. 10/2025, which modified the earlier procedural framework and ultimately formed the basis for the Court's decision to set aside the impugned assessment order.
The judgment is significant because it clarifies the relationship between Section 28DA, CAROTAR, CBIC Instructions, and the administrative powers of field formations, while reaffirming the need for uniform implementation of India's Free Trade Agreements.
Background and Facts
Covestro India Private Limited imported chemical products from an ASEAN member country and claimed concessional customs duty under the ASEAN–India Free Trade Agreement (AIFTA) in terms of Notification No. 46/2011-Customs. The importer submitted a valid Certificate of Origin (CoO) together with all documents prescribed under the Customs Act and CAROTAR, including the commercial invoice, packing list, inspection certificate, seaway bill and end-user declaration.
During scrutiny of the Bills of Entry, the Turant Suvidha Kendra (TSK) raised additional queries by relying upon Public Notice No. 33/2024, particularly because the imports involved third-party invoicing. The importer was required to furnish the exporter's invoice issued from the originating country, the actual Free on Board (FOB) value of 3rd party invoices and supporting manufacturer details. According to the petitioner, these documents were commercially confidential and were not available despite repeated efforts to obtain them from the overseas supplier.
Considering the urgency of clearing the imported goods for manufacturing operations, the petitioner requested provisional assessment and expressed willingness to pay customs duty under protest until the verification process was completed. However, the request was not accepted. Instead, by an assessment order dated 12 June 2024, the Assistant Commissioner denied the benefit of preferential tariff treatment on the ground that the actual FOB value could not be verified and that the Certificate of Origin had allegedly been obtained through misrepresentation of the FOB value.
Aggrieved by the assessment order, the petitioner invoked the writ jurisdiction of the Bombay High Court, contending that the denial of preferential tariff treatment was based upon additional procedural requirements that were not contemplated under the Customs Act, CAROTAR or the applicable Free Trade Agreement.
Issues Before the Court
The dispute before the Bombay High Court extended beyond the facts of the individual case and raised important questions concerning customs administration under India's Free Trade Agreements. The principal issues before the Court were:
- Whether the customs authorities could deny preferential tariff treatment solely because the importer failed to satisfy additional documentary requirements prescribed through Public Notice No. 33/2024.
- Whether verification of origin claims must be undertaken strictly in accordance with Section 28DA of the Customs Act and CAROTAR, 2020.
- What was the legal effect of the subsequent issuance of CBIC Instruction No. 23/2024-Customs and Public Notice No. 10/2025 on the validity of the impugned assessment order.
- Whether field-level administrative instructions could prescribe procedures affecting treaty benefits independently of directions issued by the Central Board of Indirect Taxes and Customs (CBIC) under Section 151A of the Customs Act.
These issues assumed greater significance because they involved not merely the interpretation of CAROTAR but also the broader principles governing administrative discretion, delegated authority and uniform implementation of customs law.
Judgment and Analysis
Before the Bombay High Court, the petitioner contended that it had complied with every statutory requirement prescribed under Section 28DA of the Customs Act, 1962, CAROTAR, 2020, and Notification No. 46/2011-Customs issued under the ASEAN–India Free Trade Agreement (AIFTA). It argued that a valid Certificate of Origin had been produced along with all prescribed supporting documents and that the customs authorities could not insist upon additional documents such as the exporter's invoice and FOB value details merely because the transaction involved third-party invoicing.
The Revenue, on the other hand, defended the assessment by submitting that the additional information sought under Public Notice No. 33/2024 was necessary to verify compliance with the Rules of Origin and to prevent misuse of Free Trade Agreements. According to the department, customs officers possess adequate powers to seek additional information whenever doubts arise regarding the origin of imported goods.
However, during the pendency of the writ petition, the legal position underwent a significant change. The Central Board of Indirect Taxes and Customs (CBIC) issued Instruction No. 23/2024-Customs dated 21 October 2024, clarifying the procedure to be followed while examining claims involving third-party invoicing. Pursuant to this Instruction, the Commissioner of Customs issued Public Notice No. 10/2025 dated 23 January 2025, modifying the earlier verification procedure.
Significantly, during the hearing before the High Court, the Revenue itself acknowledged that the CBIC Instruction was binding on field formations and accepted that the petitioner's claim required reconsideration in light of the revised framework. This concession became one of the decisive factors influencing the Court's decision.
The Bombay High Court observed that the impugned assessment order had been passed on the basis of the procedural framework prevailing under Public Notice No. 33/2024. However, once the CBIC issued Instruction No. 23/2024 and the Commissioner aligned the procedure through Public Notice No. 10/2025, the legal foundation on which the assessment order rested had materially changed. Consequently, the Court held that the very basis of the impugned assessment order stood extinguished, making it necessary to reconsider the petitioner's claim under the revised legal framework.
An equally significant aspect of the judgment is its discussion on Section 151A of the Customs Act, 1962, which empowers the CBIC to issue orders, instructions and directions to customs officers for ensuring uniform implementation of customs law. During the hearing, the Court questioned the Revenue regarding the statutory authority under which Public Notice No. 33/2024 had been issued. The Revenue was unable to identify any provision authorising the Commissioner to prescribe an independent verification mechanism affecting the implementation of India's Free Trade Agreements.
The Court observed that matters concerning implementation of Free Trade Agreements and verification of preferential tariff claims should ordinarily be governed through CBIC Instructions issued under Section 151A, thereby ensuring consistency across customs formations. Although the Court did not expressly declare Public Notice No. 33/2024 to be ultra vires, it emphasised that field-level administrative instructions cannot dilute statutory provisions, operate inconsistently with binding CBIC directions or create a parallel framework for administration of treaty benefits.
The judgment therefore reinforces an important principle of customs administration: while Commissioners may issue procedural guidance to facilitate implementation of the law, such guidance cannot travel beyond the statutory framework enacted by Parliament or the binding instructions issued by the CBIC. Court also said that there is no specific provision under which Commissioner was empowered to issue public notice which directly dealt with issues under free trade agreements.
Relief Granted
In light of these subsequent developments, the Bombay High Court quashed the assessment order dated 12 June 2024 and restored the Bills of Entry to the file of the Assistant Commissioner of Customs for fresh adjudication. The Court directed the customs authorities to reconsider the petitioner's claim in accordance with the Customs Act, Section 28DA, CAROTAR, 2020, the applicable Free Trade Agreement, CBIC Instruction No. 23/2024, and Public Notice No. 10/2025. A fresh order was directed to be passed within eight weeks, after granting the petitioner an adequate opportunity of being heard, while keeping all contentions of both parties open.
Practical Implications
The judgment has implications extending far beyond the facts of the present case. First, it underscores that uniformity in customs administration is essential for the effective implementation of India's Free Trade Agreements. Instructions affecting preferential tariff administration should emanate from the CBIC under Section 151A rather than through divergent practices adopted by individual Commissionerate’s.
Secondly, the decision provides much-needed clarity for importers engaged in third-party invoicing arrangements, a common feature of modern international trade. The judgment recognises that such commercial arrangements cannot, by themselves, justify denial of preferential tariff treatment. Where customs authorities entertain genuine doubts regarding origin, they must invoke the statutory verification mechanism under CAROTAR instead of rejecting claims solely because commercially sensitive documents are unavailable with the importer.
Finally, the judgment demonstrates that subsequent statutory or administrative developments may materially affect pending assessments. Where the legal basis of an assessment is altered by binding CBIC Instructions or revised procedural directions, customs authorities are expected to reconsider the matter in accordance with the prevailing legal framework.
Conclusion
The decision in Covestro India Private Limited v. Assistant Commissioner of Customs Group II & Anr. is an important addition to the jurisprudence governing preferential tariff administration under India's Free Trade Agreements. Its significance lies not in declaring Public Notice No. 33/2024 invalid, but in recognising that the foundation of the impugned assessment order had ceased to exist following the issuance of CBIC Instruction No. 23/2024 and Public Notice No. 10/2025.
More importantly, the judgment reinforces the institutional framework established under the Customs Act by emphasising the role of the CBIC under Section 151A in ensuring uniform implementation of customs law. It serves as a reminder that while customs authorities possess ample powers to verify origin claims and safeguard revenue, such powers must always be exercised within the statutory framework prescribed by Parliament.
For importers, the ruling provides greater certainty that preferential tariff claims will be examined in accordance with the law rather than evolving administrative practices. For customs authorities, it highlights the importance of maintaining consistency with statutory provisions and binding Board instructions. As India's network of Free Trade Agreements continues to expand, the principles laid down in this judgment are likely to play a significant role in balancing trade facilitation, revenue protection, and the rule of law in customs administration.