2021 (2) TMI 370 - HC - Customs

Merchandise Exports from India Scheme - export of scented candles - whether classified under Tariff Entry 3406 00 10 and are entitled to MEIS scrips under Entry 2290 and 2291 of the Foreign Trade Policy since Handicraft goods classified are entitled to higher reward rate? - HELD THAT - It is not in dispute that the matter with regard to the eligibility of MEIS scheme has not attained finality. Hence, respondent No. 4 is not justified in proposing to reject the claim of the petitioner for refund of amount of ₹ 2,74,78,495/- as incomplete and premature as the investigation conducted by respondent No. 4 has not attained finality. Respondent No. 3 ought to have awaited the outcome of the investigation being conducted by respondent No. 4 before issuing the impugned show cause notice proposing to reject the claim for refund. The respondent No. 3 is directed to keep impugned show cause notice as well as the petitioner s application for refund in abeyance till the investigation is concluded by respondent No. 4 - petition disposed off.

Summary

Issues:
1. Writ petition for quashing show cause notice and mandamus for refund under Customs Act.
2. Eligibility of MEIS scheme for scented candles classified as handicraft goods.
3. Discrepancy in MEIS benefit deposits and refund claim.
4. Authority of law in issuing show cause notice by respondent No. 3.

Analysis:
1. The petitioner filed a writ petition seeking to quash a show cause notice issued by respondent No. 4 and mandamus for a refund under the Customs Act. The petitioner, engaged in manufacturing and exporting scented candles, claimed entitlement to rewards under the MEIS scheme. The dispute arose when respondent No. 4 initiated an inquiry into the classification of the candles as handicraft goods. The petitioner deposited a sum with respondent No. 4, claiming differential MEIS benefit, pending the investigation. Subsequently, the petitioner applied for a refund, which was met with a show cause notice from respondent No. 3, deeming it incomplete and premature due to the ongoing investigation.

2. The core issue revolved around the eligibility of the petitioner for MEIS benefits concerning the classification of scented candles as handicraft goods. The petitioner contended that no final decision had been reached on this matter by respondent No. 4, thus justifying the claim for a refund. On the other hand, respondent No. 4 argued that the refund could not be granted until a conclusive decision was made regarding the petitioner's entitlement to benefits under the scheme as handicrafts.

3. The Court, after considering the arguments presented by both parties, found that the investigation by respondent No. 4 had not reached a final conclusion on the eligibility of the petitioner for the MEIS scheme. Consequently, the show cause notice issued by respondent No. 3 proposing to reject the refund claim was deemed premature and incomplete. The Court directed respondent No. 3 to suspend the show cause notice and the petitioner's refund application until the investigation by respondent No. 4 was completed.

4. In conclusion, the Court disposed of the writ petition by instructing respondent No. 3 to keep the show cause notice and the refund application on hold until the investigation by respondent No. 4 was finalized. Additionally, respondent No. 4 was urged to expedite the pending proceedings to reach a resolution promptly. This judgment emphasized the importance of awaiting the outcome of an investigation before making decisions on refund claims under the Customs Act, ensuring a fair and just process for all parties involved.