2024 (5) TMI 281 - AT - Customs

Cancellation of MEIS scrips - Re- classification of the goods - Export of Lamda Cyhalothrin Technical - fine - Interest and penalty - Rejection of the classification as declared by the appellant and for rejecting the MEIS benefits of not only the single shipping bill dated 9.12.2019 but also for the past 53 shipping bills pertaining to earlier exports - Non-application of mind - Powers of customs authorities - HELD THAT - The amount of penalty on the appellant u/s 114AA in numerical is mentioned as Rs.25,00,000/- but in words its written Rupees twenty eight crores . This is clear example of non-application of mind and hope the authorities concerned will be more careful while adjudicating or deciding any appeal. We do not propose to draw any inference, adverse or otherwise, about causes of this discrepancy. As per para/clause 3.19 of the Foreign Trade Policy 2015-20 over-claimed or illegally claimed MEIS benefits alongwith interest is recoverable by the Regional Authorities of DGFT, if the scrip is issued to the Exporter and the same is not utilized for the payment of customs duty. Therefore, in the first place only the DGFT is empowered to cancel or recover the MEIS scrips and that too only if it s not utilized for payment of customs duty. What the customs authorities are trying to recover from the appellant u/s. 28(4) ibid is MEIS benefits already availed by the appellant during the years 2016-2019 which certainly they cannot do as under the said provision the customs department can recover only the duty not levied or not paid or short levied or short paid or erroneously refunded or interest not paid, partpaid or erroneously refunded by reason of collusion or willful mis-statement or suppression of facts and not the MEIS benefits and, that, too only on the ground of ineligibility to MEIS. The learned Counsel has also submitted that there is no customs duty liability on export of the impugned product even if the classification is changed and the issue is only about the availability of MEIS benefits to the appellant which we have already made clear. The role of customs authorities, if at all, may commence only upon presentation of scrips for clearance of exported goods that too in accordance with Notification No. 24/2015-dt. 8.4.2015 issued u/s. 25 of the Customs Act, 1962. Once the scrips are issued and are presented before customs authorities to be debited towards duty liability as assessed, the acceptance thereof is governed by the notification (supra) issued u/s. 25 ibid. This is segregation of jurisdiction, which is implicit in the notification applicable to utilization of scrips on imports of goods. There is, thus, no concurrent jurisdiction over the stages involved between export and import and each stage is governed to the limits of licensing and assessment jurisdiction by the respective statutes. It is not for the customs authorities to interpret licensing policy or to enforce the same once a valid licence is produced or to dissect the license granted. This function is of the licensing authority. If this bifurcation of function is not adhered to, there is every likelihood of utter confusion. The licensing authority may interpret the policy one way and the customs authorities may take contrary view producing a conflict between the two authorities resulting in harassment to the importer or exporter, as the case may be. It is therefore, that the function of the two authorities which operate in two different spheres must be kept within their proper ambit. If a licence is granted in respect of a particular item by the licensing authority, the customs authority will have no right or power to go beyond the licence and determine the classification or reclassifying the same. It is only the licensing authority who has to determine the said question at the time of granting licence. The exercise of rejecting the entitlement to the scrip commenced with reclassification of the export goods, for assigning a different tariff item in Schedule to Customs Tariff Act, 1975. The classification of the goods is exclusive to Section 12 of Customs Act, 1962 and that too only for levy of duty. The classification declared by the exporter can be disturbed only by reference to the General Rules for Interpretation of the Export Tariff appended to Customs Tariff Act, 1975. Like undertaking of reclassification for imported goods, it is necessary that the onus of identifying the correct classification as substitute for declared classification rests with the assessing officer/proper officer. Such reclassification is to be undertaken solely for the purpose of conformity with the General Rules for Interpretation and not for any other purpose. Reclassification for any other purpose has no place in adjudication. Thus, we are of the view that the customs authorities have overstepped its jurisdiction by resorting to re-classification of exported goods and cancelling the MEIS scrips. The same are hereby restored to the appellants. Accordingly the impugned order is set aside and the appeal filed by the Appellant is allowed with consequential relief, if any, in accordance with law.

Summary

Issues Involved:
1. Classification of Goods
2. Confiscation and Redemption Fine
3. MEIS Benefits and Recovery
4. Jurisdiction of Customs Authorities

Summary:

1. Classification of Goods:
The appellant exported "Lambda Cyhalothrin Technical" under CTH 38089199 and claimed MEIS benefits. The customs department reclassified the goods under CTH 38086900, which does not qualify for MEIS benefits. The appellant argued that the classification under CTH 38089199 was industry practice and approved by DGFT. The Tribunal noted that the customs department lacks authority to cancel DGFT-issued scrips and emphasized that only DGFT can cancel licenses or MEIS benefits.

2. Confiscation and Redemption Fine:
The Commissioner ordered the confiscation of goods covered under the current and past 53 shipping bills, imposing redemption fines. However, discrepancies in the numerical and written amounts of fines and penalties indicated non-application of mind by the adjudicating authority. The Tribunal highlighted the necessity for careful adjudication.

3. MEIS Benefits and Recovery:
The customs department sought to recover MEIS benefits of Rs. 5,86,95,000/- u/s 28(4) of the Customs Act, 1962, along with interest and penalties. The Tribunal ruled that the customs authorities cannot cancel or recover MEIS benefits without DGFT's action. MEIS benefits are governed by the Foreign Trade Policy 2015-20 and can only be withdrawn by DGFT following due procedure.

4. Jurisdiction of Customs Authorities:
The Tribunal emphasized the distinct roles of DGFT and customs authorities. Customs authorities' jurisdiction is limited to levy and recovery of customs duties, not the administration of MEIS benefits. The Tribunal cited the Supreme Court's ruling in Titan Medical Systems (P) Ltd v. Collector of Customs, New Delhi, affirming that customs authorities cannot question licenses issued by DGFT.

Conclusion:
The customs authorities overstepped their jurisdiction by reclassifying exported goods and canceling MEIS scrips. The Tribunal set aside the impugned order, restored the MEIS benefits to the appellant, and allowed the appeal with consequential relief.