The court affirmed that customs authorities cannot question MEIS benefits without DGFT's prior adjudication on classification issues, ensuring fairness in administrative processes.

J U D G M E N T

YASHWANT VARMA, J.

TABLE 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 Signature Not Verified W.P.(C) 14477/2022 & Connected Matters Page 2 of 91 Digitally Signed 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.............................................................................................. 90 A. FACTUAL BACKGROUND

1. This batch of writ petitions assail the action initiated by the respondents seeking to deprive the benefits claimed and derived by the writ petitioners under the Merchandise Exports from India Scheme1. The dispute itself emanates from the export of what the petitioners contend to be handcrafted articles of stone during the period in question and entitled to benefits under the MEIS by virtue of being classifiable under Harmonised System of Nomenclature2 Code 681599. The dispute appears to have arisen in the backdrop of a letter issued by the Central Board of Indirect Taxes and Customs3 dated 31 May 2019 alluding to a discrepancy in the HSN Code liable to be ascribed to stone and marble handicraft products. Based on a reading of that communication of the CBIC, the respondent No. 6, the Commissioner of Customs, appears to have issued a Public Notice No. 57/2019 in terms of which it was apprised to all that stone and marble handicraft products are liable to be classified under Custom Tariff Heading4 6802, subject to compliance being affected with the other conditions comprised in the various Explanatory Notes attached to that heading. It

1 MEIS 2 HSN 3 CBIC 4 CTH Signature Not Verified W.P.(C) 14477/2022 & Connected Matters Page 3 of 91 Digitally Signed was on a purported reading of the aforesaid communications and the portend of the view taken by the CBIC that action appears to have been initiated against the petitioners. The principal allegation appears to be that the petitioners had illegally obtained benefits under the MEIS and were, therefore, liable to refund the amount of benefit claimed under that scheme. It is this action which also led to the issuance of various summons under Section 108 of the Customs Act, 19625 which are impugned before us.

2. In order to render a context to the issues that arise for our consideration we, for the sake of brevity, propose to take note of the facts as they obtain in W.P. (C) No. 17328 of 2022 and which was designated as the lead writ petition.

3. The petitioner, M/s Sharma International, claims to be a reputed exporter from Agra engaged in the export of handicraft articles made of marble and other material. It avers that it had been exporting those articles since 1991 treating them as classifiable under Indian Trade Classification (Harmonised System)6 68159990, including during 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 w