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TMI Blog2024 (11) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... LE OF CONTENTS A. FACTUAL BACKGROUND .................................................................................... 3 B. ARGUMENTS RENDERED BY THE PETITIONERS ............................................. 18 C. SUBMISSIONS OF THE RESPONDENTS ........................................................... 43 D. ASSESSMENT UNDER THE CUSTOMS AND FTDR ACT .................................... 47 E. RECOVERY OF DUTY UNDER SECTION 28 AND 28AAA ................................... 59 F. SCOPE OF THE AUDIT POWER ............................................................................ 68 G. THE POWERS OF THE DGFT .............................................................................. 71 H. THE IMPUGNED AUDIT OBJECTION LETTER ................................................ 76 I. THE PURVIEW OF SECTIONS 28(4) AND 28AAA ............................................ 80 J. THE CUSTOMS AND THE DGFT CROSSROAD .............................................. 82 K. PRE-REQUISITES UNDER SECTION 28AAA ................................................... 86 L. DISPUTE OF CLASSIFICATION ........................................................................ 88 M. DETERMINATION..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the operation of the MEIS scheme, which held the field between 2015 upto 2020. The products themselves are described to be handcrafted articles of stone popularly known as 'Chakla Belan' (Rolling Board and Rolling Pin), mortar and pestle and other allied articles. According to the writ petitioner, those products are prepared by combining marble and stone with steel, wood, glass and the composite material being thereafter bound together with the use of adhesives. 4. According to the disclosures made in the writ petition, the shipping bills of the petitioner submitted for the period 2007 to 2009, and in terms of which the products were classified under ITC(HS) 68159990, were duly accepted and cleared. Apart from the aforesaid exports, the petitioner had also exported those articles during the operation of the MEIS during the period 2015 and right up to 2020. It is asserted that various governmental organizations had, from time to time, duly certified the exported articles as being handicraft products and thus no question ever being raised with respect to their classification under CTH 6815. 5. Proceeding on that basis, shipping bills classifying the products under ITC(HS) 68159990 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intensity, employment potential and thereby enhancing India's export competitiveness. 3.04 Entitlement under MEIS Exports of notified goods/products with ITC[HS] code, to notified markets as listed in Appendix 3B, shall be rewarded under MEIS. Appendix 3B also lists the rate(s) of rewards on various notified products [ITC (HS) code wise]. The basis of calculation of reward would be on realised FOB value of exports in free foreign exchange, or on FOB value of exports W.P.(C) 14477/2022 & Connected Matters Page 7 of 91 as given in the Shipping Bills in free foreign exchange, whichever is less, unless otherwise specified. 3.05 Export of goods through courier or foreign post offices using e-Commerce (i) Exports of goods through courier or foreign post office using e-commerce, as notified in Appendix 3C, of FOB value upto Rs. 25000 per consignment shall be entitled for rewards under MEIS. (ii) If the value of exports using e-commerce platform is more than Rs 25000 per consignment then MEIS reward would be limited to FOB value of Rs. 25000 only (iii) Such goods can be exported in manual mode through Foreign Post Offices at New Delhi, Mumbai and Chennai. (iv) Export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appendix 3B which formed a part thereof, listed out the products which were recognized to be eligible under the MEIS and included products classifiable under CTH 6815. CTH 6815 was concerned with "articles of stone or of other mineral substances (including carbon fibres, articles of carbon fibres and articles of peat), not elsewhere specified or included". 10. The petitioners were classifying the exported article specifically under ITC(HS) 68159990 and which constituted the residual clause and read as "others". By virtue of the inclusion of articles falling within the ambit of ITC(HS) 68159990, those products became entitled to claim MEIS rewards @ 5%. The aforenoted Public Notice No. 02/2015 was thereafter amended from time to time including by way of Public Notice No. 44/2015-2020 dated 05 December 2017 in terms of which the MEIS reward was increased from 5% to 7%. 11. The petitioners aver that on 26 July 2018 the Ministry of Finance, in exercise of powers conferred under Section 11 of the Central Goods and Services Tax Act, 2017 CGST Act, 2017 issued Notification No. 21/2018, which exempted the intra-state supply of handicraft goods from tax. Amongst the various goods which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents were to be accepted, it would become ineligible to claim the benefits of the MEIS and which had already been passed on to the buyers. This, according to the Association, would inevitably cause grave hardship and financial loss to its members-exporters. 15. The representation of the Association is stated to have been taken up for consideration in the third meeting of the Board of Trade which was chaired by the Minister of Commerce and Industries and was convened on 15 February 2019. Pursuant to the discussion which ensued in that meeting, the Joint Director of Foreign Trade issued an Office Memorandum dated 26 February 2019 requesting the Department of Revenue as well as other concerned stakeholders in the Union Government to furnish their comments and views. This is evident from a reading of the said Office Memorandum and which enclosed with it a gist of the minutes of the discussion which had been held by the Board of Trade. The said Office Memorandum reads thus: - "OFFICE MEMORANDUM Subject: Minutes of the 3rd meeting of the Board of Trade chaired by Hon'ble Minister of Commerce and Industry held on 15.2.2019 at Vigyan Bhawan, New Delhi. The undersigned is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marine products. * In the Mid-Term Review MEIS rates increased by 2% for MSMEs/labour intensive industries involving an additional outlay of Rs. 7310 crore per annum. * SEIS (Service Export from India Scheme) incentive rate was increased by 2% for all notified services amounting to Rs 1140 crore of additional reward per annum. * MEIS allocation enhanced from 21000 Crores in 2014-15 to 39000 Crores in 2018-19 * GST exemption was restored in October 2017 under the Advance Authorization Scheme, Export Promotion Capital Goods Scheme and 100% Export Oriented Unit for sourcing inputs from abroad without payment of IGST. * GST refunds were expedited through several rounds of Refund Fortnight * The validity period or the Duty Credit Scrips was increased from 18 months to 24 months to enhance their utility in the GST framework o The upper limit of FOB value of goods for exports through courier or foreign post office for obtaining benefits enhanced from Rs. 25,000 to Rs. 5,00,000 in July 2018 o The restriction that benefits would be granted to e-commerce exports only from 3 airports has been removed in July 2018. * Exports of Religious Gold idols of 22k a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el and Company level * Budget for MAI and TIES may be increased significantly for promoting trade in new countries. * The scheme for sales to foreign tourist must be started immediately for handicrafts and textiles items Foreign tourist sale for allowed 20-25 years back. Now if a person is making counter sale to foreign tourist he must get MEIS and GST refund * Interest Equalization Scheme must be introduced for every sector at least for all agricultural commodities * FIEO must continue to be recognized as EPC for service exports other than the 13 services earmarked for SEPC * E-wallet facility may be provided from 01.04.2019. * ITC refund mechanism may be made completely online to save time and cost * Pre import condition should be resolved and uniformity in views 1s expected from the RAs of DGFT * MEIS benefits should be granted as per the Trade Circular released by DGFT to similarly placed exporters and lastly * ECGC may be requested to pursue a liberal view while processing and sanctioning claims of exporters and DGFT may a proposal/policy accordingly xxxx xxxx xxxx 18. Shri Sagar Mehta, Chairman, EPCH * He requested for enhancing the MEIS limit for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to other conditions given in the ENs to this heading, however, classification at 8-digit level will be decided by the concerned Customs formation in light of the factual specifications of individual items at hand. This clarification is formation in light of the factual specifications of individual items at hand. This clarification is germane as far as the classification choice was between CTH, i.e., 6802 and 6815 is concerned. 3. DGFT is also being requested in review the MEIS schedule with regard to above said items. Your's sincerely, Rachna Tanwar OSD, Tariff Unit" 19. The CBIC, while taking note of the conflicting stand taken by parties pertaining to the classification of stone and marble handicrafts under CTH 6802 or 6815 observed that those items would be classifiable under CTH 6802. However, and as is evident from a reading of that communication, the aforesaid conclusion was itself hedged by various caveats. The clarification was firstly qualified with the CBIC observing that its view would be subject to compliance with the other conditions given in the Explanatory Notes accompanying that heading. It was further observed that classification would be decided by the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied by you under CTH 68159990 with an intention to claim higher MEIS benefit instead of correct classification under CTH 68022190 or 68029900. xxxx xxxx xxxx 4. It is informed that after introduction of self-assessment vide Finance Act, 2011, it is the onus on the Exporter/Importer to make true and correct declaration in all aspects like classification, valuation, including calculation of duty & claim of benefit, etc. Further, as per provisions of section 50(2) of the Customs Act, 1962, the Exporter of any goods, while presenting a shipping bill or bill of export, shall make and subscribe to a declaration as to the truth of its contents. As per substantive provisions of section 50(3) of the Customs Act, 1962, the exporter who presents a shipping bill or bill of export under this section shall ensure the following, namely; (a) the accuracy and completeness of the information given therein; (b) the authenticity and validity of any document supporting it, and (c) compliance with the restrictions or prohibition, if any, relating to the goods under this Act or under any other law for the time being in force. 5. However, in the instant case, you have not fulfilled your statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outset, it was submitted that admittedly the petitioners had right from 1991 been placing the exported articles under ITC (HS) 68159990 without any protest or objection being raised by the respondents. It was Mr. Gulati's contention that the validity of the MEIS scrips which were issued had never been questioned by the respondents at any point of time. In fact, according to learned senior counsel, the record would bear out that the self-declarations as made by the petitioner had been duly accepted by the respondents consistently right from 1991. 24. Turning then to the issue of classification itself, Mr. Gulati submitted that the goods were liable to be legitimately placed under the broad generic heading of articles of stone and which formed the subject matter of CTH 6815. Mr. Gulati submitted that apart from the specific articles which are noticed in CTH 6815, handicraft articles made of stone were liable to be placed in the residuary entry represented by ITC(HS) 68159990. 25. According to Mr. Gulati, CTH 6802 principally relates to stone and articles thereof which are used or liable to be employed in monuments and buildings. This since according to learned senior counsel the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or not in the form of finished articles, which has been bossed (i.e., stone which has been given a "rock faced" finish by smoothing along the edges while leaving rough protuberant faces), dressed with the pick, bushing hammer, or chisel, etc., furrowed with the drag-comb, etc., planed, sand dressed, ground, polished, chamfered, moulded, turned, ornamented, carved, etc." 28. Mr. Gulati, while taking us through those Explanatory Notes laid emphasis on that heading being intended to cover natural monumental or building stone which may have been worked upon beyond the stage of normal quarry products. Learned senior counsel also laid emphasis on the Explanatory Notes speaking of stone which may have been further processed therefrom by mere shaping into blocks, sheets or slabs. According to Mr. Gulati, all of the above when examined holistically would lead one to the irresistible conclusion of CTH 6802 being confined to stone which is used for purposes of construction and erection of monuments and buildings. 29. Contrary to the above Mr. Gulati took us through the Explanatory Notes of CTH 6815 and as that article stood at the relevant time and is reproduced hereunder: - "68.15 - Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid heading would not cover articles of stone or of other mineral substances which may be covered by the earlier headings of that Chapter. According to learned senior counsel, this itself is indicative of articles of stone falling within the ambit of CTH 6815 being those which are not used in monuments or buildings. Viewed in the aforesaid light, it was his submission that the stand as taken by the respondents is rendered wholly untenable, since handicraft articles sculpted out of stone and of the kind exported by the petitioner cannot possibly be countenanced as answering to the description of articles which are spoken of in CTH 6802. 31. Mr. Gulati then questioned the view that was expressed by the CBIC and which, according to learned senior counsel, made a broad and sweeping declaration that stone and marble handicrafts were classifiable under CTH 6802. This, according to Mr. Gulati, is an opinion expressed by the Board which is not supported by any reasoning or detailed analysis of the two competing entries falling in Chapter 68. 32. Insofar as the Public Notice is concerned, Mr. Gulati submitted that respondent No. 6 has blindly followed and reproduced the contents of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be rendered with respect to the ingredients of a SCN. Drawing our attention firstly to the decision in Metal Forgings, Mr. Gulati placed reliance upon paras 12 and 20 of the report and which are reproduced hereinbelow:- "12. It is an admitted fact that a show-cause notice as required in law has not been issued by the Revenue. The first contention of the Revenue in this regard is that since the necessary information required to be given in the show-cause notice was made available to the appellants in the form of various letters and orders, issuance of such demand notice in a specified manner is not required in law. We do think that we cannot accede to this argument of the learned counsel for the Revenue. Herein we may also notice that the learned technical member of the Tribunal has rightly come to the conclusion that the various documents and orders which were sought to be treated as show-cause notices by the Appellate Authority are inadequate to be treated as show-cause notices contemplated under Rule 10 of the Rules or Section 11-A of the Act. Even the judicial member in his order has taken almost a similar view by holding that letters either in the form of a suggestion or adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of alleged defaults and breaches of the agreement committed by the appellant the notice specifically mentions that because of the said defaults the appellant was "as such liable to be levied the cost accordingly". It further says "why the action as mentioned above may not be taken against the firm, besides other action as deemed fit by the competent authority". It follows from the above that main action which the respondents wanted to take was to levy the cost. No doubt, the notice further mentions that the competent authority could take other actions as deemed fit. However, that may not fulfil the requirement of putting the defaulter to the notice that action of blacklisting was also in the mind of the competent authority. Mere existence of Clause 27 in the agreement entered into between the parties, would not suffice the aforesaid mandatory requirement by vaguely mentioning other "actions as deemed fit". As already pointed out above insofar as penalty of blacklisting and forfeiture of earnest money/security deposit is concerned it can be imposed only, "if so warranted". Therefore, without any specific stipulation in this behalf, the respondent could not have imposed the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other scheme bestowing financial or fiscal benefits, which may be utilised under the provisions of this Act or the rules made or notifications issued thereunder. Explanation 2: The provisions of this sub-section shall apply to any utilisation of instrument so obtained by the person referred to in this sub-section on or after the date on which the Finance Bill, 2012 receives the assent of the President, whether or not such instrument is issued to him prior to the date of the assent. (2) Where the duty becomes recoverable in accordance with the provisions of sub-section (1), the person from whom such duty is to be recovered, shall, in addition to such duty, be liable to pay interest at the rate fixed by the Central Government under section 28AA and the amount of such interest shall be calculated for the period beginning from the date of utilisation of the instrument till the date of recovery of such duty. (3) For the purposes of recovery under sub-section (2), the proper officer shall serve notice on the person to whom the instrument was issued requiring him to show cause, within a period of thirty days from the date of receipt of the notice, as to why the amount specified in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit and which stands embodied in Section 99A. An audit, according to Mr. Gulati, would inherently be guided by considerations which would be wholly independent and distinct from those which could form the subject matter of an inquiry or determination under Section 28AAA. Tested on that score also the petitioners, according to Mr. Gulati, are entitled to succeed. 40. It was then submitted that the MEIS scheme and the benefits claimed by the writ petitioners thereunder is traceable to the provisions made by the Union under the provisions of the FTDR Act. Mr. Gulati firstly took us through the provisions embodied in Sections 3 and 5 of the FTDR Act and which are extracted hereinbelow: - "3. Powers to make provisions relating to imports and exports.- (1) The Central Government may, by Order published in the Official Gazette, make provision for the development and regulation of foreign trade by facilitating imports and increasing exports. (2) The Central Government may also, by Order published in the Official Gazette, make provision for prohibiting, restricting or otherwise regulating, in all cases or in specified classes of cases and subject to such exceptions, if any, as ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self, Mr. Gulati invited our attention to Para 2.57 thereof and which reads as follows:- "2.57 Interpretation of Policy (a) The decision of DGFT shall be final and binding on all matters relating to interpretation of Policy, or provision in Handbook of Procedures, Appendices and Aayat Niryat Forms or classification of any item for import export in the ITC (HS). (b) A Policy Interpretation Committee (PIC) may be constituted to aid and advise DGFT. The composition of the PIC would be as follows: (i) DGFT: Chairman (ii) All Additional DGFTs in Headquarters : Members (iii) All Joint DGFTs in Headquarters looking after Policy matters: Members (iv) Joint DGFT (PRC/PIC): Member Secretary (v) Any other person/representative of the concerned Ministry / Department, to be co-opted by the Chairman." 44. According to learned senior counsel, Para 2.57 of the FTP 2015- 2020 is a recognition and acknowledgement of the well-settled position of eminence which stands conferred upon the Director General of Foreign Trade DGFT and other officers and authorities enjoined with administering and regulating all aspects pertaining to the FTP as statutorily framed. The submission in essence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be treated as a proof of fulfilment of the eligibility conditions by the importer for obtaining the benefit of the exemption notification. We may add that, the essentiality certificate is also a proof that an item like captive power plant in a given case could be treated as a capital goods for the fertilizer project. It would depend upon the facts of each case. If a project is to be installed in an area where there is shortage of electricity supply and if the project needs continuous flow of electricity and if that project is approved by the sponsoring Ministry saying that such supply is needed then the Revenue cannot go behind such certificate and deny the benefit of exemption from payment of duty or deny nil rate of duty. xxxx xxxx xxxx 17. The essentiality certificate given by the sponsoring Ministry has treated captive power plant, in this case, as "capital goods" along with 13 other items. The assessee has also treated the captive power plant as one of the capital goods required for the expansion of the fertilizer project. In the above circumstances, all the items in the list annexed to the certificate have been certified and recommended by the sponsoring Ministry as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction which authorities independently empowered in terms of those statutes could exercise, Mr. Gulati had submitted that absent any adverse finding with respect to eligibility under the MEIS having been rendered by the competent authorities under the FTDR Act, it would be wholly impermissible for the customs authorities to draw the proceedings impugned before us. 49. In order to buttress the aforesaid submission, Mr. Gulati firstly relied upon a decision of the Gujarat High Court in Alstom India Ltd. v. Union of India and Another (No. 2) 2014 SCC OnLine Guj 15952 and where the said High Court had held as follows:- "31. On going through the provisions of the Foreign Trade (Development and Regulation) Act, 1992, we find that those do not grant power to the respondent No. 2 or its subordinates to redetermine or reverify the deemed export benefits if such benefits have been approved or granted as per the provisions of the Foreign Trade (Development and Regulation) Act, 1992 except by way of review as provided in Section 16. In the absence of any power under Foreign Trade (Development and Regulation) Act, 1992, the Respondent No. 2 or its subordinates cannot assume quasi-judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s juncture, the attention of the court is also drawn to the decision of the Gujarat High Court in Alstom India Ltd. v. Union of India (No. 2) [2014] 26 GSTR 449 (Guj), Special Civil Application No. 11031 of 2013, where various provisions of the policy were challenged. One of the ground of challenge in that case was that (page 458 in 26 GSTR): "The Foreign Trade (Development and Regulation) Act, 1992 or the Foreign Trade Policy does not grant power to respondent No. 2 and its subordinates to redetermine or reverify the deemed export benefits once such benefits have been approved or granted as per the provisions of the Foreign Trade Policy. In the absence of power under the Foreign Trade (Development and Regulation) Act, 1992 or the Foreign Trade Policy, respondent No. 2 and its subordinates cannot assume quasi-judicial power such as power to redetermine or reverify under administrative guidelines, i.e., paragraph 7 of the ANF 8 Form. Therefore, paragraph 7 of the ANF 8 is usurpation of quasi-judicial power by respondent No. 2 and its subordinates and thus, travels beyond the provisions of the Foreign Trade (Development and Regulation) Act, 1992 as well as Foreign Trade Policy and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been conferred on Parliament and the State Legislature. Moreover, the power to frame Duties Drawback Rules under the Foreign Trade (Development and Regulation) Act, 1992 can be legislated by the Central Government only in exercise of power conferred under section 19 in the manner prescribed under the Foreign Trade (Development and Regulation) Act, 1992 and the same cannot be delegated to respondent No. 2 as expressly prohibited by section 6 (3) of the above Act. We, thus, find that any attempt by the executives to legislate without the authority of law should be branded as a colourable device and therefore, the same is in violation of article 246 of the Constitution of India. If we accept the contention of Mr. Raval that respondent No. 2 is authorised to incorporate the Duties Drawback Rules by reference, it would amount to acceptance of the proposition that respondent No. 2 is authorised to deal with under the Foreign Trade (Development and Regulation) Act, 1992, the similar matters relating to duty and tax refunds as provided under section 75 of the Customs Act, section 37 of the Central Excise Act and section 93A read with section 94 of the Finance Act, 1994 although not aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the other hand, authorises the Central Government, in the case of any decision or order made by the Director General, or the Director General in the case of any decision or order made by any officer subordinate to him, to act on its own motion or otherwise, by calling for and examining the records of any proceeding for the purpose of satisfying itself or himself, as the case may be, as to the correctness, legality or propriety of such decision or order and make such orders thereon as may be deemed fit. The proviso, however, says that no decision or order shall be varied under section 16 so as to prejudicially affect any person unless such person has, within a period of two years from the date of such decision or order, received a notice to show cause why such decision or order shall not be varied and has been given a reasonable opportunity of making representation and, if he so desires, of being heard in defence." 8. In this case, the impugned order-in-original, which acted upon the decision taken by the Policy Interpretation Committee, is of the Joint Director General of Foreign Trade, dated March 30, 2012. Clearly, in terms of the decision in Alstom (2014] 26 GSTR 449 (Guj), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time being in force. If a person is liable under any other law, which may include the Customs Act, 1962 for levy of penalty or confiscation, the same may be in addition to penalty or confiscation provided under section 11 of the Foreign Trade (Development and Regulation) Act, 1992 and is also in addition to the suspension or cancellation of the licence under the Act. 17. The Department of Revenue, Ministry of Finance, Government of India in its circular dated June 3, 1997 had clarified that the role of the Customs authorities in the matter of the DEPB scheme introduced in the new export and import policy for the period 1997- 2002 was confined to verification of the correctness of exporter's declaration regarding description, quantity, and FOB value of the export product. It is for the licensing authority to ensure that the credit is permitted at the correct rate as notified by the DGFT. The word "description" occurring in this circular, does not extend to adjudication on description or classification. If there is any doubt as to the description or classification at the time of verification, the matter has to be referred to the DGFT for declaration under section 13 of the Fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were wrongly issued. The orders of the customs authorities were quashed and set aside. 19. In this case the customs authorities alleged on the basis of a report of CRCL that the goods produced for export were not manufactured through forging process, but were welded or clipped. The report of the CRCL was obtained ex parte without issuing notice or associating the petitioner in the inspections. The report verifies that the "sample" appears to be machine part made by different components by welding or clipping. The different components of the sample conform to the composition of stainless steel, 18/8, except one component (nut part) ; one component (nut part) composition is other than stainless steel. The carbon contained in sample is less than 1.2% by weight, in each component of the sample. The description of the goods at the time of presenting them for export was not reported by CRCL to be non-conforming to the classification of the goods. The contents of the stainless steel was not in dispute. The customs authorities were concerned with the fact whether the goods meet the licence classification, namely, whether the DE-343-5, 19 inches raised hatch (SS) Code No. 74 964, was req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the opinion that the Customs authorities below were not justified in refusing to allow the duty free clearance of the goods on the ground that die steel imported by the petitioner is capital goods and capital goods did not fall within the scope of the Notification No. 116/1988. Admittedly, under the advance licence issued, the petitioner was entitled for duty free import of die steel as a material required in the manufacture of export product. Once the Licensing Authority has accepted that die steel is a material required in the manufacture of the export product, it is not open to the Customs Authorities to go behind the licence and deny duty free clearance of the goods. The exemption Notification No. 116/1988, dated 30th March, 1988 specifically states that the materials that are required to be imported for the purpose of manufacture of resultant products shall include such items as are imported into India against the advance licence for subsequent exportation. In the instant case, the licence specifically states that the petitioner is entitled to import die steel as a material required for the manufacture of resultant products. The Apex Court in the case of Titan Medical Sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities to take steps in that behalf. In the present case, the licensing authority sought to cancel the licenses, but in appeal, the order was set aside and remanded for denovo consideration. No further order has been passed thereafter. In the circumstances, till today the licenses are valid. Even if the license was subsequently cancelled, the Supreme Court in the case of (Sampat Raj Duggar v. Union of India) , 1992 (58) E.L.T. 163 (S.C), following (East India Commercial Co. Ltd. v. Collector), 1962 DGLS 206 : 1963 (3) S.C.R. 338 has held that on the date of the import the goods were covered by a valid import license. The subsequent cancellation of a licence is of no relevance nor does it retrospectively render the import illegal." C. SUBMISSIONS OF THE RESPONDENTS 54. Appearing for the respondents, learned counsels at the outset drew our attention to the procedure of self-assessment under the Customs Act, which finds place in Section 17, whereby importers and exporters are required to self-assess the duty leviable on the goods so imported or exported. In the event of any verification, examination or testing of goods revealing that the self-assessment so done was incorrect, Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner. 58. Learned counsel submitted that the challenge made to the legality of the summons so issued should not be countenanced bearing in mind the undisputed fact that the summons had been issued by gazetted officers under Section 108. It was further contended that since the summons so issued were not established to have transgressed any statutory provision this Court would be justified in refusing to interfere with the same. 59. Learned counsel additionally drew our attention to Section 97 of the Finance Act, 2022 which had proposed changes in the Customs Act and which essentially stated that "anything done or any duty performed or any action taken or purported to have been taken" under the Customs Act as it stood prior to its amendment shall be "deemed to have been validly done" and that any notifications issued shall be "deemed to have been validly issued for all purposes". The respondents further contended that notwithstanding any challenge made to the constitutional validity of the provisions of Finance Act, 2022, this would not constitute a valid ground to prevent statutory authorities from exercising their powers of enquiry and investigation. 60. We may note in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is in the aforesaid backdrop that the respondents drew our attention to the powers vested in customs officers under sub-section (4) of Section 17 to re-assess the duties on the classified imported or exported goods in the event of the importer or exporter failing to declare the correct classification in their respective self-assessed shipping bills or bills of entry. 63. Learned counsel accordingly took the position that notwithstanding the right of the petitioner to self-assess the goods to be exported, the ultimate authority to adjudge the correct classification of goods exported under the Customs Tariff Act, 1975 Tariff Act vests with the customs officer and no other. 64. The role of Respondent No. 11, the Export Promotion Council for Handicrafts EPCH, was explained as being limited to providing its members with guidance in respect of classification of goods imported or exported. However, this according to learned counsel would not detract from the authority of the customs officer to question the classification of goods. That according to learned counsel is a power which the statute places squarely within the domain of customs officers. D. ASSESSMENT UNDER THE CUSTOMS AND ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s nil;" 67. As is manifest from the above, a process of 'self-assessment' was ordained to form part of an 'assessment' as contemplated under the Customs Act. This change had essentially come to be introduced in 2011 and pursuant to which self-assessment was acknowledged to be one of the modes of assessment as contemplated under the Customs Act. The procedure for assessment of duty is prescribed in Section 17 of that enactment. We deem it apposite to extract hereinbelow a table which would highlight the various amendments which have been made to that provision from time to time and as it has come to be modified from 2011 and onwards: - SECTION 17: PRE- AMENDMENT SECTION 17: POST-AMENDMENT Substituted by the Finance Act, 2011, w.e.f. 8-4-2011. Prior to its substitution, section 17, as amended by the Taxation Laws (Amendment) Act, 2006, w.e.f. 13-7-2006, read as under: "17. Assessment of duty.- (1) After an importer has entered any imported goods under section 46 or an exporter has entered any export goods under section 50 the imported goods or the export goods, as the case may be, or such part thereof as may be necessary may, without undue delay, be examined and tested by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imported goods or export goods or such part thereof as may be necessary. [Provided that the selection of cases for verification shall primarily be on the basis of risk evaluation through appropriate selection criteria.] [(3) For [the purposes of verification] under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any document or information, whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained and thereupon, the importer, exporter or such other person shall produce such document or furnish such information.] (4) Where it is found on verification, examination or testing of the goods or otherwise that the self- assessment is not done correctly, the proper officer may, without prejudice to any other action which may be taken under this Act, re- assess the duty leviable on such goods. (5) Where any re-assessment done under sub-section (4) is contrary to the self-assessment done by the importer or exporter [***] and in cases other than those where the importer or exporter, as the case may be, confirms his acceptance of the said re-assessment in writing, the proper officer shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods, classification, exemption or concessions of duty availed consequent to any notification issued therefore under this Act". 70. Section 17 also included a sub-section (6) in terms of which a proper officer was empowered to undertake an audit in respect of duty in case it had failed to undertake a reassessment or pass a speaking order in respect thereof. The aforesaid sub-section (6) as it existed in Section 17 came to be omitted by Finance Act, 2018. Parallelly, Finance Act, 2018 inserted Section 99A and which is extracted hereinbelow: - "99A. Audit. The proper officer may carry out the audit of assessment of imported goods or export goods or of an auditee under this Act either in his office or in the premises of the auditee in such manner as may be prescribed. Explanation: For the purposes of this section, "auditee" means a person who is subject to an audit under this section and includes an importer or exporter or custodian approved under section 45 or licensee of a warehouse and any other person concerned directly or indirectly in clearing, forwarding, stocking, carrying, selling or purchasing of imported goods or export goods or dutiable goods." 71. The Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act of 2011, Section 17(1) has provided to self-assess the duty, if any, leviable on such goods by importer or exporter, as the case may be. Self-assessment is an assessment as per the amended definition of Section 2(2). It is further provided that proper officer may verify the self-assessment of such goods, and for this purpose, examine or test any imported goods or exported goods or such part thereof as may be necessary. The power to verify self-assessment lies with the proper officer and for that purpose under Section 17(3), he may require the importer, exporter or any other person to produce such document and furnish such information, etc. If the proper officer on verification has found on examination or testing of the goods or as part thereof or otherwise that the self-assessment is not done correctly, the proper officer may, without prejudice to any other action which may be taken under the Act, may proceed to reassess the duty leviable on such goods. Section 17(5) of the Act as amended provides that where reassessment done under Section 17(4) is contrary to the assessment done by the importer or exporter regarding the matters specified therein, the proper officer has to pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing amount. It is not assessment or reassessment proceedings at all. Apart from that, there are other conditions which are to be satisfied for claiming exemption, as provided in the exemption notification. Existence of those exigencies is also to be proved which cannot be adjudicated within the scope of provisions as to refund. While processing a refund application, reassessment is not permitted nor conditions of exemption can be adjudicated. Reassessment is permitted only under Sections 17(3), (4) and (5) of the amended provisions. Similar was the position prior to the amendment. It will virtually amount to an order of assessment or reassessment in case the Assistant Commissioner or Deputy Commissioner of Customs while dealing with refund application is permitted to adjudicate upon the entire issue which cannot be done in the ken of the refund provisions under Section 27. In Hero Cycles Ltd. v. Union of India though the High Court interfered to direct the entertainment of refund application of the duty paid under the mistake of law. However, it was observed that amendment to the original order of assessment is necessary as the relief for a refund of claim is not available as held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 17( 4) of the said enactment, if the proper officer on verification, examination or testing of the goods comes to the conclusion that the self assessment is incorrect, it becomes entitled to reassess the duty leviable on goods. It is in extension of the aforesaid power that sub- section (5) of section 17 speaks of reassessment and the obligation of the proper officer to pass a speaking order in support of the exercise of reassessment. 58. Section 27 enables a person to claim refund of duty or interest which may have been either paid or borne by it. Section 27(2) of the Customs Act, in terms identical to section 118(2) of the Excise Act, speaks of refunds being effected upon the proper officer being satisfied that the whole or any part of the duty paid is refundable. Section 27(2) is thus a provision which is pari materia with section 118(2) of the Excise Act. 59. The Supreme Court in ITC Limited. notwithstanding section 27 (2) employing the expression "satisfied" held that unless a self assessed return is revised or doubted in exercise of powers of reassessment, best judgment assessment or where it be alleged that duty had been short-levied, short- paid or erroneously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes added significance, in so far as the present case is concerned, in light of it having found that a self-assessment return, even in the absence of a formal order dealing with the same, would nonetheless amount to an assessment. We had in this regard and in the preceding parts of this decision noticed the definition of the expression "assessment" as contained in rule 2(b) of the 1994 Rules which includes a self-assessment of service tax and thus being evidence of a position similar and akin to that which obtains under the Customs and Excise Acts. 63. Their Lordships in ITC Limited categorically held that notwithstanding a self-assessed bill of entry having been merely endorsed by the competent authority, the same would nonetheless amount to an "assessment". It was in that backdrop that it was held that once a self-assessed return had been duly accepted, the same could not be modified or varied by an authority while considering an application for refund. 64. It becomes pertinent to note that the appellant before the Supreme Court in that case, had sought to press the claim for refund asserting that it had due to inadvertence failed to submit a self assessment return taking int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the absence of the self- assessed return having been questioned, reviewed or re- assessed, the claim for refund of Cenvat credit could not have been denied by the respondents. When confronted with the application for refund, all that the respondents could have possibly examined or evaluated was whether the provisions of rule 5 read along with the various prescriptions contained in the notification dated June 18, 2012 had been complied with. The respondents, at this stage of the proceedings, could not have doubted, questioned or undertaken a merit review of the self-assessed return which had been submitted." 74. The observations appearing in ITC Limited and BT India assume significance when viewed in light of the various Bills of Entry as submitted by the writ petitioners on a self-assessment basis having been duly accepted and no questions in respect thereof having been raised. The Bills of Entry would thus be liable to be viewed as having been duly assessed and accepted. Undisputedly, it is decades after those exports had been affected and assessments completed that the respondents now seek to reopen those transactions and seek to question the benefits claimed by the writ petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest so paid or any penalty leviable under the provisions of this Act or the rules made thereunder in respect of such duty or interest: [PROVIDED that where notice under clause (a) of sub- section (1) has been served and the proper officer is of the opinion that the amount of duty along with interest payable thereon under section 28AA or the amount of interest, as the case may be, as specified in the notice, has been paid in full within thirty days from the date of receipt of the notice, no penalty shall be levied and the proceedings against such person or other persons to whom the said notice is served under clause (a) of sub-section (1) shall be deemed to be concluded.] (3) Where the proper officer is of the opinion that the amount paid under clause (b) of sub-section (1) falls short of the amount actually payable, then, he shall proceed to issue the notice as provided for in clause (a) of that sub-section in respect of such amount which falls short of the amount actually payable in the manner specified under that sub-section and the period of 2 [two years] shall be computed from the date of receipt of information under sub-section (2). (4) Where any duty has not been [levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch amount which falls short of the amount actually payable in the manner specified under that sub-section and the period of [two years] shall be computed from the date of receipt of information under sub-section (5). (7) In computing the period of [two years] referred to in clause (a) of sub-section (1) or five years referred to in sub-section (4), the period during which there was any stay by an order of a court or tribunal in respect of payment of such duty or interest shall be excluded. [(7A) Save as otherwise provided in clause (a) of sub-section (1) or in sub-section (4), the proper officer may issue a supplementary notice under such circumstances and in such manner as may be prescribed, and the provisions of this section shall apply to such supplementary notice as if it was issued under the said sub- section (1) or sub-section (4).] (8) The proper officer shall, after allowing the concerned person an opportunity of being heard and after considering the representation, if any, made by such person, determine the amount of duty or interest due from such person not being in excess of the amount specified in the notice. (9) The proper officer shall determine the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d shall be recovered along with interest thereon at the rate fixed by the Central Government under section 28AA, from the date of refund up to the date of recovery, as a sum due to the Government. (10B) A notice issued under sub-section (4) shall be deemed to have been issued under sub-section (1), if such notice demanding duty is held not sustainable in any proceeding under this Act, including at any stage of appeal, for the reason that the charges of collusion or any wilful mis-statement or suppression of facts to evade duty has not been established against the person to whom such notice was issued and the amount of duty and the interest thereon shall be computed accordingly.] [(11) Notwithstanding anything to the contrary contained in any judgment, decree or order of any court of law, tribunal or other authority, all persons appointed as officers of Customs under sub- section (1) of section 4 before the 6th day of July, 2011 shall be deemed to have and always had the power of assessment under section 17 and shall be deemed to have been and always had been the proper officers for the purposes of this section.] Explanation 1: For the purposes of this section, "relevant date" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations are tainted by suppression and wilful misrepresentation. 78. The authority of the respondents to demand a return of the amounts derived as benefits under the MEIS from the petitioners when tested on the anvil of Section 28(1) falters and disintegrates for two reasons. Firstly, Section 28(1) applies to cases where a reassessment or reopening is sought to be initiated for reasons other than collusion, wilful misstatement or suppression of facts and which is the suggestion underlying the allegations levelled against the petitioners. Secondly, the action under Section 28(1) postulates action being initiated within two years from the "relevant date" and which expression stands defined in the provision itself. Undisputedly, the impugned action would fail to meet this threshold requirement. 79. That then takes us to examine the case set up by the respondents on the anvil of sub-section (2) of Section 28. Sub-section (2) enables demand of duty notwithstanding an assessment having been made in cases of collusion, wilful misstatement and suppression of facts. Those allegations would sustain only if we were to find that the respondents assert that the MEIS scrips are tainted by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raise are the provisions enshrined in Section 28AAA. As was contended by Mr. Gulati, Section 28AAA clearly brings within its ambit situations where the statutory authorities may harbour a doubt with respect to the benefit that an exporter or importer may have claimed by virtue of an instrument. Explanation 1 to Section 28AAAA, in clear and unambiguous terms, while defining that expression had explained it to mean any scrip, authorization, license, certificate or other document by whatever name called issued under the FTDR Act. Section 28AAA is thus clearly concerned with the validity of a scrip or certificate which may have been issued under the FTDR Act and on the basis of which a benefit may have been obtained. It thus now enables the respondents to cast aside the instrument issued under the FTDR Act and to initiate steps for recovery of duty benefits that may have been claimed by the person concerned while holding the instrument so issued. Section 28AAA thus and in furtherance of the aforesaid legislative objective, introduces a legal fiction by employing the phrase "shall be deemed never to have been exempted or debited......". 83. The provisions of Section 28AAA are attracte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n instrument issued for the purposes of the Customs Act or the FTDR Act as the case may be. F. SCOPE OF THE AUDIT POWER 86. Let us then proceed to consider the scope of the audit power which came to be independently incorporated in the Customs Act. Section 99A, as noticed hereinabove, embodies the power conferred on the customs authorities to undertake an audit in respect of an assessment of imported or exported goods. The power that stands enshrined in Section 99A stands further articulated in the Audit Regulations which have come to be framed. Those regulations define the word 'audit' as follows:- "2. Definitions xxxx xxxx xxxx (b) "audit" includes examination or verification of declaration, record, entry, document, import or export licence, authorisation, scrip, certificate, permission, etc., books of account, test or analysis reports, and any other document relating to imported goods or export goods or dutiable goods, and may include inspection of sample and goods, if such sample or goods are available and where necessary, drawl of samples;" 87. The procedure for the conduct of an audit is set out in some detail in Audit Regulation 5 and which reads thus: - "5. Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is followed by the proper officer requiring the auditee to furnish requisite information, documents or for that matter even samples of the goods imported or exported. It is only thereafter and in terms of Audit Regulation 5(5) that the proper officer would proceed to formalise the objections in respect of the assessment. 89. As we read Audit Regulation 5, it becomes apparent that it is only after the disposal of any such objections that may have been invited that a final report containing the audit findings would come to be drawn. What however needs to be borne in mind is that the family of provisions pertaining to audit do not, at least in explicit terms, include a power to review, suspend or cancel an instrument issued either under the Customs or the FTDR Act. While hypothetically speaking an audit could contain findings or observations doubting a benefit or exemption claimed, we find ourselves unable to construe those provisions as enabling the customs authorities to suspend or cancel an instrument itself, be it under the Customs or the FTDR Act. G. THE POWERS OF THE DGFT 90. This then takes us to the provisions contained in the FTDR Act and which we had an occasion to revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and (c) be subject to such terms, conditions and restrictions as may be prescribed or as specified in the [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] with reference to the terms, conditions and restrictions so prescribed. (4) The Director General or the officer authorised under sub- section (2) may, subject to such conditions as may be prescribed, for good and sufficient reasons, to be recorded in writing, suspend or cancel any [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] granted under this Act: Provided that no such suspension or cancellation shall be made except after giving the holder of the [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] a reasonable opportunity of being heard. (5) An appeal against an order refusing to grant, or renew or suspending or cancelling, a [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] shall lie in like manner as an appeal against an order would lie under section 15." 91. By virtue of amendments which came to be introduced by Act 25 of 2010, sub-section (3) of Section 9 came to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efits]; (i) the applicant or any agent or employee of the applicant with his consent has been a party to any corrupt or fraudulent practice for the purposes of obtaining any other [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits]; (j) the applicant is not eligible for a [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] in accordance with any provision of the policy; (k) the applicant fails to produce any document called for by the Director-General or the licensing authority; (l) in the case of a [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] for import, no foreign exchange is available for the purpose; (m) the application has been signed by a person other than a person duly authorised by the applicant under the provisions of the policy; [(n) the applicant has attempted to obtain or has obtained or has erroneously claimed Terminal Excise Duty, duty drawback, cash assistance benefits admissible to Importer-exporter Code holder or any other similar benefits from the Central Government or any agency authorised by the Central Government in relation to exports mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited liability partnership) or company or a firm or any other entity], when the order of detention made against such person,- (i) being an order of detention to which the provisions of section 9 of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974) do not apply, has been revoked on the report of Advisory Board under Section 8 of that Act or before receipt of the report of the Advisory Board or before making a reference to the Advisory Board; or (ii) being an order of detention to which the provisions of Section 9 of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974) apply, has been revoked on the report of the Advisory Board under Section 8 read with sub-section (2) of Section 9 of that Act or before receipt of such report; (iii) has been set aside by a court of competent jurisdiction. (2) The Director-General or the licensing authority may by an order in writing suspend the operation of any 62[licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] granted under these rules, where proceedings for cancellation of such [licence, certificate, scrip or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its. A reading of the audit objection letter constrains us to observe that it clearly does not read as being the embodiment of the intent of the Assistant Commissioner to apprise the writ petitioners of any tentative conclusion that it may have arrived at. On the contrary, the audit objection letter is replete with definitive conclusions and thus clearly deprives the writ petitioners of the right to represent or establish that the issue of classification or the view harboured is incorrect or untenable. The petitioners would thus be clearly justified in asserting that they are essentially faced with a determination already made and a conclusion reached. 95. The tone and tenor of the audit objection letter and the language in which it is framed could legitimately be construed by the noticee of the issue having been predetermined and no useful purpose being served by representing or responding to the same. This we observe notwithstanding the audit objection letter neither feigning nor posturing itself to be a notice to show cause. This is evident from the said communication advising the petitioners to pay the amount as determined and thus closing all avenues of contestation. 96. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an idle ceremony. 28. Justice is rooted in confidence and justice is the goal of a quasi- judicial proceeding also. If the functioning of a quasi-judicial authority has to inspire confidence in the minds of those subjected to its jurisdiction, such authority must act with utmost fairness. Its fairness is obviously to be manifested by the language in which charges are couched and conveyed to the person proceeded against. xxxx xxxx xxxx 31. It is of course true that the show-cause notice cannot be read hypertechnically and it is well settled that it is to be read reasonably. But one thing is clear that while reading a show-cause notice the person who is subject to it must get an impression that he will get an effective opportunity to rebut the allegations contained in the show- cause notice and prove his innocence. If on a reasonable reading of a show-cause notice a person of ordinary prudence gets the feeling that his reply to the show-cause notice will be an empty ceremony and he will merely knock his head against the impenetrable wall of prejudged opinion, such a show-cause notice does not commence a fair procedure especially when it is issued in a quasi-judicial proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deposit as framed. Section 28(4) of the Act, as noted above, could have been invoked only if the Assistant Commissioner had come to the conclusion that the goods had escaped duty by reason of collusion, wilful misstatement or suppression of facts. It is only in those contingencies that Section 28(4) could have enabled the proper officer to reopen an assessment. However, all that is alleged in this respect is that the petitioners had failed to make a correct and truthful declaration and thereby mis-classified the goods with the avowed objective of claiming benefits under the MEIS. 99. We find ourselves unable to appreciate how the petitioners could have been charged of having failed to make a "correct and truthful" declaration when the imports were affected under the cover of MEIS certificates granted by the DGFT and which had never been questioned. In fact, the DGFT has not even and till date initiated any action against the writ petitioners alleging that the MEIS Certificate had been wrongly obtained. This too leads us to conclude that the impugned action is rendered wholly illegal, arbitrary and unsustainable. 100. Regard must also be had to the fact that the power under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means of collusion, wilful misstatement, or suppression of facts. The word "instrument" is defined by Explanation 1 to Section 28AAA to include any scrip, authorization, license, certificate, or any other document by whatever name called issued under the FTDR Act. We have already held that the MEIS certificate would clearly fall within the ambit of that expression in the preceding parts of this decision. J. THE CUSTOMS AND THE DGFT CROSSROAD 104. As we read the various provisions enshrined in the FTDR Act alongside the FTP as well as the FTDR Rules, we find ourselves unable to recognize a right that may be said to inhere in the customs authorities to doubt the issuance of an instrument. We, in the preceding parts of this decision, had an occasion to notice the relevant provisions contained in the FTDR Act and which anoint the DGFT as the central authority for the purposes of administering the provisions of that statute and regulating the subject of import and exports. The FTP 2015-20 in unequivocal terms provides in para 2.57 that it would be the decision of the DGFT on all matters pertaining to interpretation of policy, provisions in the Handbook of Procedures, Appendices, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the FTDR Act before action relating to recovery of duty could be possibly initiated. A harmonious interpretation of the two statutes, namely, the Customs and the FTDR Acts leads us to the inescapable conclusion that the law neither envisages nor sanctions a duality of authority inhering in a separate set of officers and agents simultaneously evaluating and adjudging the validity of an instrument which owes its origin to the FTDR Act alone. It is these factors, as well as the role assigned to the DGFT which perhaps weighed upon courts to acknowledge its position of primacy when it come to the interpretation of policy measures referable to the FTDR Act as well as issues of classification emanating therefrom. 108. This clearly flows from what our High Court held in Simplex Infrastructure when it approved the view expressed by the Gujarat High Court in Alstom India and which had held that export benefits claimed and enjoyed pursuant to approvals granted as per the provisions of the FTDR Act could not be reviewed or redetermined except in accordance with the procedure prescribed therein. A similar view came to be expressed by the Allahabad High Court in PTC Industries and where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents not just in these proceedings but as evidenced from the commencement of the audit proceedings itself, the solitary charge that stood laid against the writ petitioners was with respect to the alleged incorrect classification of the exported items. The petitioners had consistently taken the position that the exported articles were classifiable under ITC (HS) 68159990 and not CTH 6802. 110. It is this controversy which appears to have been raised from time to time with the respondents being urged by the writ petitioners as well as industry associations to lend clarity and lay all doubts at rest. The record further bears out that taking cognizance of the issues which were arising at different customs outposts, the industry associations had also approached the Ministry of Commerce and Industry and which had in turn convened a meeting of all concerned stakeholders so as to elicit their views. That process of deliberation, however, has yet not translated into a stated or principled view being expressed by that Ministry. 111. It is only much later and on 31 May 2019 that the CBIC issued a communication attempting to resolve questions pertaining to the classification of stone an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the allegation which is levelled by the respondents against the writ petitioners. The controversy, therefore, as to whether the subject articles were liable to be classified under CTH 6802 or 6815, would clearly not qualify the tests constructed by Section 28AAA. L. DISPUTE OF CLASSIFICATION 115. Let us then proceed to briefly touch upon the issue of classification itself. Chapter 68 is principally concerned with articles of stone, plaster, cement, asbestos mica or similar materials. CTH 6802 deals with "Worked Monumental or Building Stone". CTH 6815, on the other hand, pertains to articles of stone or of other mineral substances "not specified or included elsewhere". As CTH 6815 stands, it clearly does not appear to be associated with stone that may be used in a monument or a building. Of equal significance are the Explanatory Notes which stand appended to CTH 6802 and which explain the scope of that entry as being intended to cover all natural, monumental or building stone which may have been worked upon beyond the stage at which they would be found at the mouth of a quarry. The Explanatory Notes proceed further to explain the width of that entry as being not only confined t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefits under the MEIS, it would be wholly impermissible for the respondents to take punitive action against the writ petitioners. The subject of classification stands explicitly reserved for the consideration of the DGFT in terms of Para 2.57 of the FTP. This too convinces us to conclude that the action as initiated by the respondents is rendered arbitrary. M. DETERMINATION 121. Accordingly, and for all the aforesaid reasons, we allow the present writ petitions on the following terms. We hereby quash the audit objection letters dated 27 August 2019 [W.P.(C) 17314/2022] and 18 November 2019 [W.P.(C) 17328/2022]. We consequently also quash the summons dated 07 October 2022 and 14 October 2022 [W.P.(C) 14477/2022]; 15 November 2021, 13 January 2022, 24 January 2022, 17 May 2022 and 30 September 2022 [W.P.(C) 17314/2022]; 15 November 2021, 24 January 2022, 17 May 2022, 06 June 2022 and 30 September 2022 [W.P.(C) 17328/2022]. 122. As a consequence of the above and absent an adjudication sustainable in law, we direct the respondents to refund the amounts collected from the writ petitioners being INR 5,47,000/- [W.P.(C) 17314/2022] and INR 5,00,000/- [W.P.(C) 17328/2022] forthwith. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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