Wilful Misstatement in Availing SEIS Benefits Invokes S. 28AAA: CESTAT Upholds Customs Duty Recovery

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi Bench, has upheld the recovery of customs duty along with penalties for fraudulently availing benefits under the Service Exports from India Scheme (SEIS). The bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) has granted partial relief by setting aside the penalty imposed on the company’s Chief Financial Officer (CFO), Shri Rajesh Shetty. The dispute arose from allegations that the appellant company had mis-declared the nature of services exported in order to claim SEIS benefits. The company classified its services as “Management Consulting Services” under the relevant Central Product Classification (CPC), whereas investigations revealed that the actual services rendered were in the nature of Information Technology (IT) and IT-enabled services, which were not eligible for SEIS benefits under the Foreign Trade Policy. Based on investigations conducted by the Directorate of Revenue Intelligence (DRI), it was found that the company had obtained three SEIS scrips through misrepresentation. These scrips, which are freely transferable, were subsequently sold and utilized by a third party importer, M/s MMTC PAMP India Pvt. Ltd., for payment of customs duties. Following the investigation, the Directorate General of Foreign Trade (DGFT), Bengaluru, cancelled the SEIS scrips ab initio, holding that they were obtained through mis-declaration. This cancellation formed the basis for the Customs Department to initiate proceedings under Section 28AAA of the Customs Act, 1962 for recovery of duty amounting to over ₹2.05 crore, along with interest and penalties. The Tribunal, while examining the applicability of Section 28AAA, observed that the provision is triggered when duty credit instruments such as scrips are obtained by means of collusion, wilful misstatement, or suppression of facts and are subsequently utilized. It held that both conditions were clearly satisfied in the present case. The mis-declaration of services to fall within an eligible category enabled the company to wrongfully obtain SEIS benefits, which were later transferred and used for duty exemption. Rejecting the appellant’s contention that the cancellation of scrips was not based on fraud, the Tribunal noted that the DGFT’s findings were based on detailed investigation and clearly established wilful misstatement. It emphasized that once the scrips were cancelled ab initio, the exemption availed through their use automatically became invalid, and the duty was liable to be recovered from the original holder of the scrips. The Tribunal dismissed the argument that reliance on the CFO’s statement was improper. It observed that the statement was voluntary, not retracted, and corroborated by documentary evidence. Furthermore, the company had already deposited the duty along with interest during the investigation, reinforcing the validity of the findings. The Tribunal also upheld the confiscation of goods under Sections 111(m) and 111(o) of the Customs Act and confirmed penalties imposed under Sections 112(a), 114AB, and 114AA. It noted that the company had deliberately misrepresented facts to obtain ineligible benefits and evade customs duty. The Tribunal set aside the penalties imposed on Shri Rajesh Shetty, CFO of the company. It observed that he had acted in his capacity as an employee and had voluntarily admitted the ineligibility of SEIS benefits and facilitated payment of duty with interest. Considering these factors, the Tribunal held that no separate penalty was warranted against him. The Tribunal dismissed the appeal filed by the company and upheld the duty demand and penalties, while allowing the appeal filed by the CFO and quashing the penalties imposed on him. Case Details Case Title: M/s.MetricStream Infotech (India)Pvt.Ltd. Versus Principal Commissioner of Customs Citation: JURISHOUR-469-CES-2026(DEL) Case No.: Customs Appeal No. 50201 Of 2024 Date: 23.03.2026 Counsel For Appellant: V. Raghuraman, Senior Advocate Counsel For Respondent: M.K. Shukla, Authorised Representative Click Here To Read Order Read More: Arrest Held Illegal for Recording ‘Reasons to Believe’ After Authorization Under CGST Act: Allahabad High Court Orders Immediate Release

Ask Jurishour AI

Wilful Misstatement in Availing SEIS Benefits Invokes S. 28AAA: CESTAT Upholds Customs Duty Recovery

Membership Required

Latest articles

JURISHOUR | TAX LAW DAILY BULLETIN : 25 AUGUST, 2026

GSTAT Denies S. 128A Amnesty for Excess ITC Availed in December 2020 Despite Assessee’s Claim That Underlying Debit Notes Pertained to FY 2018-19

Assessment Invalid Where AO Acted Under Directions of Superior Authority: ITAT Deletes Rs. 11.12 Crore ‘On-Money’ Addition

No Pre-Deposit Where Proceedings Began Before 01.10.2025: Bombay High Court

More like this

JURISHOUR | TAX LAW DAILY BULLETIN : 25 AUGUST, 2026

GSTAT Denies S. 128A Amnesty for Excess ITC Availed in December 2020 Despite Assessee’s Claim That Underlying Debit Notes Pertained to FY 2018-19

Assessment Invalid Where AO Acted Under Directions of Superior Authority: ITAT Deletes Rs. 11.12 Crore ‘On-Money’ Addition

About us

Company

Categories