Legal principle

Without a prior determination by the DGFT that an instrument issued under the FTDR Act (such as an MEIS duty scrip) was obtained by collusion, wilful misstatement or suppression of facts, customs authorities cannot take recovery action under Section 28AAA of the Customs Act — a position that holds good till the Supreme Court pronounces on the issue.

Court decision

The Division Bench (G.R. Swaminathan and K. Rajasekar, JJ.) allowed the writ appeal with no costs. It held that the impugned order, admittedly passed under Section 28AAA without any prior determination by the DGFT, was without jurisdiction; consequently the writ was maintainable and the order impugned in the writ petition was set aside. Liberty was granted to the respondent to take up the matter with the DGFT so that the competent authority there can take appropriate action as per law; connected miscellaneous petitions were closed.

Facts

The appellant, M/s.Kwalitee Fabs of Karur, is an exporter manufacturing both powerloom and handloom textile goods. The Commissioner of Customs, Tuticorin alleged that powerloom goods were misdeclared as handloom goods to avail undue benefits under the MEIS scheme. After a show cause notice, an assessment order dated 30.09.2024 demanded Rs.1,92,88,594/- being the value of ineligible MEIS duty scrips, along with redemption fine and penalty. The writ petition against this order was dismissed on the ground of availability of alternative remedy, prompting this writ appeal. Before the Division Bench, the standing counsel and the official admitted the impugned order was issued by invoking Section 28AAA of the Customs Act.

Key provisions

• Section 28AAA, Customs Act, 1962 — Recovery of duties in certain cases
• Section 5, The Foreign Trade (Development and Regulation) Act, 1992 — Foreign Trade Policy.