DGFT Office Memorandum Can’t Retrospectively Invalidate Valid PSIC; No Misdeclaration in UAE Scrap Imports: CESTAT

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that a valid Pre-Shipment Inspection Certificate (PSIC) cannot be retrospectively invalidated through a Directorate General of Foreign Trade (DGFT) Office Memorandum, while setting aside confiscation, redemption fine and penalty imposed on an importer of ferrous scrap. The bench of S. S. Garg (Judicial Member) ruled that where all import conditions under Indian law were complied with and no misdeclaration existed, subsequent developments or retrospective restrictions could not be used to penalize the importer. The dispute arose after M/s Fortune Metals Ltd. imported 105.720 metric tonnes of LMS Bundle Scrap from the United Arab Emirates through Bill of Entry dated May 2, 2023. The imported goods, valued at approximately ₹35.55 lakh, were declared as LMS Bundle Scrap under ISRI 200–206 standards. Customs authorities alleged that the importer had incorrectly declared the country of origin as UAE and claimed that export of ferrous scrap under the relevant tariff heading from UAE had been prohibited. Based on this allegation, the goods were seized under Section 110 of the Customs Act on the ground that they were liable for confiscation under Section 111 for misdeclaration and violation of Section 46(4). The adjudicating authority subsequently ordered confiscation of the goods under Section 111(d) of the Customs Act, while allowing redemption upon payment of a fine of ₹80,000. Additionally, a penalty of ₹20,000 was imposed under Section 112(a)(i) of the Customs Act. Before the Tribunal, the importer argued that there was no prohibition under Indian law against importing ferrous waste and scrap from Dubai or UAE. It contended that all required documents, including commercial invoices, packing lists, certificate of origin, bill of lading, PSIC and container tracking details had been furnished. The importer further maintained that there had been complete transparency in the import process and no misdeclaration whatsoever. The appellant also challenged the department's reliance on a DGFT Office Memorandum issued later in time. It argued that such an Office Memorandum was not a statutory instrument and could not invalidate an otherwise valid PSIC retrospectively. The importer emphasized that the customs authorities had not identified any specific provision under the Customs Act or Foreign Trade Policy under which the PSIC had become invalid. Another significant argument revolved around the timeline of Dubai Customs notifications. The importer pointed out that Dubai Customs Notice No. 08/2022 was effective only up to March 19, 2023, while the subsequent Notice No. 05/2023 was issued only on April 19, 2023. Since the inspection by the Pre-Shipment Inspection Agency (PSIA) had been conducted on April 12, 2023, the importer argued that no operative ban existed on the date of inspection. The department argued that the ban had subsequently been given retrospective effect from March 20, 2023 and that the DGFT Office Memorandum dated June 13, 2023 clarified that certificates issued by the PSIA would not be considered valid because Dubai Customs had prohibited export of scrap. CESTAT observed that Indian law freely permits imports of ferrous waste and remelting scrap from Dubai and UAE and there existed no statutory prohibition against such imports. The Tribunal found that all requisite import documents had been furnished and that there was “absolutely no mis-declaration” by the importer. It further observed that a DGFT Office Memorandum could not retrospectively invalidate a validly issued PSIC. The Tribunal also noted that on the date when the goods were inspected by the PSIA, there was no active ban on export of scrap from Dubai. Consequently, even if a later notification imposed a retrospective restriction, such a measure could not adversely affect imports undertaken after complying with all applicable conditions under Indian law and the Foreign Trade Policy. Holding that the finding of misdeclaration was legally unsustainable, the Tribunal set aside the redemption fine of ₹80,000 imposed under Section 125 and the penalty of ₹20,000 imposed under Section 112(a)(i) of the Customs Act, thereby allowing the appeal in favour of the importer. Case Details Case Title: M/s Fortune Metals Ltd. Versus Commissioner of Customs, Ludhiana Citation: JURISHOUR-1359-CES-2026(CHAN) Case No.: Customs Appeal No. 60559 of 2024 Date: 19.05.2026 Counsel For Appellant: Vinay Goyal, Advocate Counsel For Respondent: Anurag Kumar, Authorized Representative Click Here To Read Order Read More: Service Receiver Can’t Bypass S. 11B Limitation: CESTAT

DGFT Office Memorandum Can’t Retrospectively Invalidate Valid PSIC; No Misdeclaration in UAE Scrap Imports: CESTAT

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