The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Mumbai has ruled that the customs department cannot deny Merchandise Export India Scheme (MEIS) benefits without Directorate General of Foreign Trade (DGFT) cancellation.
The bench of S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) observed that customs department cannot deny or recover Merchandise Exports from India Scheme (MEIS) incentives unless the Directorate General of Foreign Trade (DGFT) has first cancelled the scrips, and that issuing multiple show cause notices (SCNs) for the same period and goods by different wings of Customs is impermissible.
The dispute concerned exports made between January 2017 and December 2019 of pesticide products, which were classified under tariff headings eligible for 3% MEIS benefits under the Foreign Trade Policy (FTP) 2015-20. The exporter obtained MEIS scrips from DGFT and used them for duty-free imports.
Two Investigations, Same Period
The Directorate of Revenue Intelligence (DRI) first issued an SCN in October 2020 alleging misclassification and excess MEIS claims. Subsequently, the Special Intelligence and Investigation Branch (SIIB) of JNCH issued another SCN in September 2023 for the same products and period, reclassifying them under headings ineligible for MEIS and demanding recovery under Sections 28(4) and 28AAA of the Customs Act, with interest and penalties.
CESTAT found this second SCN invalid, citing the Supreme Court’s Nizam Sugar Factory ruling, which prohibits issuing a fresh notice on the same matter using the extended limitation period when facts were already known to the department during the first SCN.
Jurisdictional Overreach
The tribunal emphasised that DGFT is the sole authority to determine eligibility and cancel MEIS scrips under the Foreign Trade (Development & Regulation) Act, 1992. Customs cannot bypass this process or unilaterally reclassify goods to withdraw benefits. The bench cited the Delhi High Court’s Designco decision and its own earlier judgment in Bharat Rasayan Ltd. (upheld by the Supreme Court) to support its findings.
Internal Classification Dispute Weakens Case
It also noted that DRI and SIIB themselves took differing stands on classification, undermining allegations of suppression or fraud — key elements for invoking the extended limitation period.
Outcome
The bench of Member (Judicial) S.K. Mohanty and Member (Technical) M.M. Parthiban set aside the July 16, 2024 order confirming the demand and allowed the appeal with consequential relief, reinforcing that MEIS benefits cannot be denied without DGFT action.
Read More: Mumbai Customs Foils Narcotics and Wildlife Smuggling in Three Separate Operations at Airport
Mariya is the Senior Editor at Juris Hour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
