Legal principle

Customs authorities cannot reclassify goods after export or deny/cancel MEIS scrips, since export benefits fall within the exclusive domain of the DGFT under the FTDR Act, 1992, exports attain finality under Section 51 of the Customs Act, 1962, and Sub-Heading Notes to the First Schedule (import tariff) do not govern classification under the Second Schedule (export tariff).

Court decision

The Tribunal set aside the impugned order on grounds of limitation as well as merits, allowed the appeal in favour of Bayer Crop Science Ltd with consequential relief, and restored the MEIS scrips to the appellants, holding that customs authorities had overstepped their jurisdiction by re-classifying exported goods and cancelling the MEIS scrips.

Facts

Bayer Crop Science Ltd, a manufacturer of agrochemicals, exported insecticides such as 'ADMIRE', 'DECIS', 'SHOONA', 'SOLFAC' and 'SOLOMON' under CTI 3808 91 99 of the Customs Tariff Act, 1975 and claimed MEIS benefits under the Foreign Trade Policy 2015-2020. The department proposed reclassification of these exports under CTI 3808 6100/3808 6200/3808 6990 based on Sub-Heading Note 2 to Chapter 38 of the First Schedule, alleging mis-declaration in the shipping bills. On this basis the Commissioner of Customs (NS-II), JNCH denied the MEIS benefits, confirmed recovery under Sections 28(4)/28AAA with interest, confiscated the goods under Section 113(i) with a redemption fine of Rs. 3 crores under Section 125, and imposed penalties of Rs. 3 crores each under Sections 114(iii), 114AA and 114AB vide Order-in-Original dated 06.12.2023. The appellants appealed to the CESTAT Mumbai against this order.

Key provisions

• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 113(i), Customs Act, 1962 — Confiscation of goods attempted to be improperly exported
• Section 114AB, Customs Act, 1962 — Penalty for obtaining instrument by fraud
• Section 28AAA, Customs Act, 1962 — Recovery of duties in certain cases
• Section 12, Customs Act, 1962 — Dutiable goods
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 114(iii), Customs Act, 1962 — Penalty for attempt to export goods improperly etc
• Section 25, Customs Act, 1962 — Power to grant exemption from duty
• Section 2, Customs Tariff Act, 1975 — Duties specified in the Schedules to be levied
• Section 51, Customs Act, 1962 — Clearance of goods for exportation
• Section 17, Customs Act, 1962 — Assessment of duty
• Section 50, Customs Act, 1962 — Entry of goods for exportation