Imports made using validly issued MEIS scrips cannot be retrospectively taxed or penalized if the scrips are subsequently cancelled or modified, as the validity of the scrip at the time of import is the determining factor, regardless of whether the original holder or a transferee used them.

JUSTICE DILIP GUPTA

M/s NACL Industries Ltd¹the appellant has filed this appeal for quashing the order dated 02.01.2023 passed by the Commissioner of Customs (Adjudication), Delhi Zone²the Commissioner by which the classification of the goods in the Shipping Bills under Customs Tariff Item³CTI 3808 99 10 or CTI 3808 99 90 has been rejected and the Shipping Bills have been reassessed.

The Commissioner has confirmed the demand of duty with interest and penalty.

2. It transpires from the records that under the Merchandise Exports from India Scheme⁴MEIS, scrips were issued to the appellant by the Director General of Foreign Trade⁵DGFT and these scrips were utilized by the appellant for discharge of customs duty liability on the import of raw materials used for manufacturing exported goods during the period 23.01.2016 to 04.03.2020.

3. The department believed that the appellant had availed higher MEIS benefit @ 3% on the exported goods by mis-classifying the goods under CTI 3808 99 10 and CTI 3808 99 90 instead of the respective Customs Tariff Sub-Heading for the exported goods on which MEIS benefit of 2% is available as per the Public Notice dated 01.04.2015.

4. A show cause notice was, accordingly, issued to the appellant proposing to reject the classification of the exported goods in the Shipping Bills and for re-classifying the same under the respective customs tariff items. This show cause notice was adjudicated by order dated 02.01.2023 by the Commissioner. The classification of the exported goods was rejected and the duty proposed in the show cause notice was confirmed under section 28(4) of the Customs Act 1962⁶the Customs Act with applicant rates.

5. The submission advanced by Shri B.L. Narasimhan, learned counsel appearing for the appellant assisted by Ms. Anjali Gupta and Mr. Ashwani Bhatia is that the order passed by the Commissioner deserves to be set aside for the sole reason that the duty scrips were valid at the time of import and, therefore, imports made using such scrips cannot be impacted even if scrips were later cancelled. Learned counsel submitted that the appellant had used MEIS scrips issued on the exported goods and utilized the same for import of goods and, therefore, subsequent cancellation of the scrips after the utilization to the extent of availing excess 1% credit cannot be made the basis to demand duty for the goods imported using such MEIS scrips. To support this contention, learned counsel placed reliance upon decisions of this Tribunal in M/s APAR Industries vs. Commissioner of Customs ⁷2025-VIL-731-CESTAT-MUM-CU, K.K. Exports vs. C.C., New Delhi (Import & General)⁸2025-VIL-1760-CESTAT-DEL-CU and Pankaj Chordia vs. The Commissioner of Customs, Air Cargo Complex, New Delhi ⁹2025-VIL-1434-CESTAT-DEL-CU. Learned counsel for the appellant also made other submissions, including that relating to the invocation of the extended period of limitation.

6. Shri Girijesh Kumar, learned authorized representative appearing for the department, however, supported the impugned order and submitted that the appellant had deliberately misclassified the goods before the DGFT for issuance of the scrips with 3% Customs duty benefit and, therefore, it is not open to the appellant to now contend that the appellant should be entitled to the benefit of the scrips. Learned authorized representative