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Home Case Index All Cases Customs Customs + HC Customs - 2025 (7) TMI HC This

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2025 (7) TMI 1092 - HC - Customs


ISSUES:

    Whether MEIS scrips already availed and expired can be retrospectively cancelled under Section 9(4) of the FTDR Act read with Rule 10 of the Foreign Trade (Regulation) Rules, 1993.Whether the authorities were required to and did satisfy themselves on the fulfillment of relevant statutory requirements before ordering retrospective cancellation of MEIS scrips.Whether the Appellate Authority properly applied its mind and assigned valid reasons in dismissing appeals against cancellation orders.Whether misclassification of exported goods under incorrect ITC(HS) codes resulting in excess MEIS benefits justifies cancellation and recovery of excess incentives.Whether the petitioner's challenge to classification of commercial vehicles under ITC(HS) code 87060042 instead of 87012090, 87042219, and 87054000 is sustainable.Whether the Customs Department's independent proceedings for recovery of import duty set off against MEIS scrips are maintainable pending appellate remedies.

RULINGS / HOLDINGS:

    The Court held that MEIS scrips already availed and whose validity period of 24 months has expired can be cancelled retrospectively by the authority under Section 9(4) of the FTDR Act read with Rule 10, provided "good and sufficient reasons, to be recorded in writing" exist and the holder has been given a reasonable opportunity of being heard.The authorities were required to verify fulfillment of statutory conditions before cancellation; the orders demonstrated that the licensee had obtained MEIS benefits at 3% instead of 2% due to misclassification, justifying cancellation.The Appellate Authority properly applied its mind by considering the grounds raised and assigning cogent reasons in confirming the cancellation and directing refund of excess benefits.Misclassification of goods under incorrect ITC(HS) codes leading to excess MEIS benefits constitutes grounds for cancellation under Rule 10(a) and (d) as the scrip was obtained by misrepresentation and contravened customs laws.The classification of commercial vehicles as "motor chassis fitted with cabs" under ITC(HS) 87060042 was held incorrect; such goods fall under headings 8702 to 8704, not 8706, as per Chapter 87 Note 3, supporting the Customs Department's reclassification.The Customs Department's independent proceedings for recovery of import duty set off against MEIS scrips are maintainable notwithstanding pending appeals before CESTAT, as Customs duties and MEIS incentives are distinct regulatory regimes.

RATIONALE:

    The Court applied the statutory framework under Section 9 of the Foreign Trade (Development and Regulation) Act, 1992, particularly subsection (4), which empowers the Director General to suspend or cancel licenses or scrips for "good and sufficient reasons" with due process.Rule 10 of the Foreign Trade (Regulation) Rules, 1993, was interpreted to permit cancellation where the scrip was obtained by "fraud, suppression of facts or misrepresentation" or where the licensee contravened customs laws.The Court referred to the Foreign Trade Policy (2015-2020), including Appendix 3B, which prescribes differential MEIS reward rates based on correct ITC(HS) classification, making correct classification a statutory prerequisite for entitlement.Chapter 87 Note 3 of the ITC(HS) classification was relied upon to clarify that "motor chassis fitted with cabs" fall under headings 8702 to 8704, not 8706, thus invalidating the classification adopted by the petitioners.The Court noted that the Customs Department's recovery proceedings under customs laws are independent and can proceed notwithstanding pending appeals, as MEIS incentives and customs duties are regulated under separate legal provisions.No dissent or doctrinal shift was indicated; the Court followed established principles of administrative law requiring reasoned orders, opportunity of hearing, and adherence to statutory classification norms for export incentives.

 

 

 

 

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