Legal principle

Customs authorities cannot deny or recover MEIS export benefits, or re-classify export goods for that purpose, where the MEIS scrips have not been cancelled or invalidated by the DGFT under the FTDR Act procedure, and the extended period of limitation cannot be invoked where the department itself holds divergent views on classification.

Court decision

The Tribunal set aside the Order-in-Original confirming the adjudged demands and allowed the appeal with consequential benefit as per law, holding the impugned order unsustainable both on grounds of limitation and on merits/jurisdiction — customs authorities could not take punitive action to deny MEIS benefits when the DGFT had not cancelled the scrips, and the charge of suppression justifying the extended period was not made out.

Facts

Heranba Industries Ltd, a manufacturer of technical grade ingredients and formulations of insecticides, fungicides, herbicides and weedicides, exported four products (Lambda Cyhalothrin, Alphacypermethrin, Deltamethrin and Bifenthrin) under CTH 38089910/38089990 and claimed MEIS benefit @3% of FOB value, with DGFT issuing the scrips which were used for duty-free imports under Notification 24/2015-Cus. After DRI issued an SCN dated 20.10.2020 (not the subject matter of this appeal) alleging the goods should fall under CTH 380891/380892/380893 attracting only 2% MEIS, SIIB-JNCH issued a second SCN dated 28.09.2023 alleging mis-classification under CTH 38089199/38089290/38089910/38089990 instead of CTH 38086100/38086200/38086900, proposing confiscation under Section 113(i), recovery of MEIS benefit under Section 28(4)/28AAA with interest, and penalties under Sections 114(iii), 114AA and 114AB. The Commissioner of Customs, NS-II confirmed these demands by Order-in-Original No. 95/2024-25 dated 16.07.2024, holding the goods classifiable under CTH 38086100/38086200/38086900 per sub-heading Note 2 to Chapter 38 and invoking the extended period of limitation. The appellant appealed to CESTAT Mumbai.

Key provisions

• Section 28AAA, Customs Act, 1962 — Recovery of duties in certain cases
• Section 28(4), Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded