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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 ..... - 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. Prior to the amendments which came to be introduced in Section 17 by virtue of Finance Act, 2018, the Proviso to Section 17(2) while identifying the criteria relevant for selection of cases for purposes of verification, had recognised that power being guided by factors such as the valuation of goods, classification, exemption or concessional duties availed in terms of a notification issued under that Act. The Proviso had at the relevant time and prior to the passing of Finance Act, 2018 included the following phraseology regarding valuation of goods, classification, exemption or concessions of duty availed consequent to any notification issued therefore under this Act . 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he FTDR Act. Of critical significance, therefore, would be the issue of which authority should be recognised to have the jurisdiction to undertake the adjudication contemplated under that provision. An adjudication is warranted for the purposes of invoking Section 28AAA cannot possibly be doubted. The usage of the expression proper officer , and which is defined in Section 2(34) of the Customs Act to mean an officer of customs, also cannot be accorded undue significance when one bears in mind Section 28AAA (1) speaking of an instrument issued to a person for the purposes of this Act or the FTDR Act. The former undoubtedly is a reference to the Customs Act. Thus, Section 28AAA is clearly intended to encompass all contingencies arising out of or relating to an instrument issued for the purposes of the Customs Act or the FTDR Act as the case may be. Scope of the audit power which came to be independently incorporated in the Customs Act - 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case. In fact, and contrary to the mandate of Regulation 5, the Assistant Commissioner has required the petitioners to pay sums representing amounts which according to that authority had been wrongly claimed under the MEIS and having clearly failed to abide by the statutory procedure prescribed. Purview of Sections 28(4) and 28AAA of the Act to sustain the direction for 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. 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 neve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracted. Even if it were assumed for the sake of argument that the writ petitioners had wrongly classified or placed articles in question under ITC(HS) 68159990, the same would clearly not amount to it being ipso facto assumed that the same amounted to an act of suppression or wilful misstatement. Rendering of a finding in favour of the respondents on the issue of collusion would have far greater ramifications. A finding on that score, if returned against the writ petitioners, would essentially require us to hold that the MEIS certificates had been obtained by the writ petitioners in collusion with the officers working under the DGFT. That too is not 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. Classification - handicraft articles being liable to be classified as falling under HSN 6815 or not? - The issue of classification was indelibly connected with the right of the writ petitioners to avail benefits under the MEIS. The MEIS scrip was issued by the office of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For R-11 Mr. Tribhuvan Mr. Gokul Sharma, GP for R-2,4,5,8, 9 12. JUDGMENT 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 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 .............. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de Classification (Harmonised System) ITC (HS) 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... especially those having high export 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of, 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 came to be included in that Notification we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 directed to forward herewith a copy of minutes of the 3rd Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and above allowed by modifying restriction on export of gold articles of more than 22 carats. Exports of Gold findings of 3k and above allowed Engaging state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 handicraft sector and propose that the MEIS benefits should be granted as per the export performance of the EPCs. Since they promote reverse buyer seller meet and as per the prevailing provisions of the MAI scheme cost of air tickets hotel accommodation are not reimbursed for the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 concerned customs formations in light of the factual specifications of individual items. 20. It was pursuant to the said communication of the CBIC that Public Notice No. 57/2019 dated 19 June 2019 came to be issued and which is reproduced hereinbelow in its entirety: - PUBLIC NOTICE NO. 57/2019 Subject: Discrepancy in the HSN Code Classifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding 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 statutory obligation of correct and truthful declaration of the material facts of the export document i.e. shipping bills, and thereby mis-classified the goods with an intention to claim higher export benefits in the form of the MEIS as explained above. 6. Therefore, in terms of the provisions of section 28(4) or 28AAA of the Customs Act, 1962, you are advised to pay the undue MEIS benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 entry uses the expression worked monumental or building stone . 26. Our attention was also drawn to the Chapter Notes which find place in Chapter 68 and specifically to Note 2 which reads as follows:- 2.- In heading 68.02 the expression worked monumental or building stone applies not only to the varieties of stone referred to in heading 25.12. or 25.16 but also to all other natural stone (for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - Articles of stone or of other mineral substances (including carbon fibres, articles of carbon fibres and articles of peat), not elsewhere specified or included. 6815.10 - Non-electrical articles of graphite or other carbon ^ 6815.20 - Articles of peat ; . - Other articles: 6815.91 - Containing magnesite, dolomite or chromite 6815.99 Other. This heading covers articles of stone or of other mineral substances, not covered by the earlier heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 communication of the Board dated 31 May 2019 while issuing Public Notice No. 57/2019. It was submitted that the aforesaid exercise of classification of handicrafted articles runs contrary to the consistent stand which had been taken by the respondents themselves right from 1991 and had continued even during the currency of the MEIS. 33. Mr. Gulati submitted that the stand as taken is also contrary to Notification No. 21/2018 issued by the Department of Revenue and which had defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants 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 advice or deemed notice issued prior to the finalisation of the classification cannot be taken note of as show-cause notices for the recovery of demand, and we are in agreement with the said findings of the two members of the Tribunal. This is because of the fact that issuance of a show-cause notice in a particular format is a mandatory requirement of law. The law requires the said notice to be issued under a specific provision of law and not as a correspondence or part of an order. The said n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 penalty of blacklisting. 29. No doubt, rules of natural justice are not embodied rules nor can they be lifted to the position of fundamental rights. However, their aim is to secure justice and to prevent miscarriage of justice. It is now well-established proposition of law that unless a statutory provision either specifically or by necessary implication excludes the application of any rules of natural justice, in exercise of power prejudicially affecting another must be in conformity with the rules of nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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 the notice (excluding the interest) should not be recovered from him, and after giving that person an opportunity of being heard, and after considering the representation, if any, made by such person, determine the amount of duty or interest or both to be recovered from such person, not being in excess of the amount specified in the notice, and pass order to recover the amount of duty or interest or both and the person to whom the instrument was issued shall repay the amount so specified in the notice within a period of thirty days from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 may be made by or under the Order, the [import or export of goods or services or technology]: [Provided that the provisions of this sub-section shall be applicable, in case of import or export of services or technology, only when the service or technology provider is availing benefits under the foreign trade policy or is dealing with specified services or specified technologies.] (3) All goods to which any Order under sub-section (2) applies shall be deemed to be goods the import or export of which has been prohibited under section 11 of the Customs Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was that in the absence of the DGFT having raised any doubt or having questioned the eligibility of the writ petitioners to claim benefits under the MEIS, it would be wholly impermissible for the customs authorities to undertake such an inquiry. In support of the aforesaid submission, Mr. Gulati relied upon various decisions which are noticed hereinafter. 45. Mr. Gulati firstly referred to the decision of the Supreme Court in Zuari Industries Limited vs Commissioner of Central Excise Customs (2007) 14 SCC 614 . Zuari Industries was a case where the Supreme Court was called upon to evalua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 entire capital goods required for the substantial expansion of the fertilizer project. Therefore, in our view, the assessee is right in its contention that, in this case, 6 MW captive power plant is one of the items out of 14 items constituting capital goods required for the substantial expansion of the fertilizer project and, therefore, it fell under Serial No. 226(i) as goods required for the fertilizer project entitled to the benefit of nil rate of duty. 47. Proceeding along this line, Mr. Gulati then invited our attention to the decision of the Supreme Court in Titan Medical Systems (P) Ltd. v. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-judicial power for instance, the power to redetermine or reverify under the administrative guidelines i.e. paragraph 7 of the ANF 8 Form. Therefore, by virtue of paragraph 7 of the ANF 8, the respondent No. 2 is deriving the quasi-judicial power which is beyond the provisions of Foreign Trade (Development and Regulation) Act, 1992. We have already pointed out that according to section 6 of the Foreign Trade (Development and Regulation) Act, 1992, the respondent No. 2 or the officer subordinate to him cannot usurp the power under sections 3, 5, 15, 16 and 19 of the FTDR Act. According to section 3, it is for the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 hence, liable to be struck down. 7. The court accepted the submission, and held that there is no power to review previous refunds, otherwise than under section 16 of the Foreign Trade (Development and Regulation) Act. The court held as follows (page 512 in 26 GSTR) : We find that respondent No. 2, namely, the Director General of Foreign Trade, through paragraph 8.3.6 of the Handbook of Procedures has incorporated by reference the provisions of the Duties Drawback Rules mutatis mutandis to the Foreign Trade Policy and Handbook of Procedures. We find substance in the contention of Mr. Ghosh that the Handbook of Procedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 authorised under the Foreign Trade (Development and Regulation) Act, 1992. We are in agreement with Mr. Ghosh, the learned advocate for the petitioner, that the conferment of such power to respondent No. 2 to adopt the Duties Drawback Rules without any power to legislate either expressly or otherwise would amount to permitting the levy or collection of tax without authority of law in violation of article 265 of the Constitution of India ... On going through the provisions of the Foreign Trade (Development and Regulation) Act, 1992, we find that those do not grant power to respondent No. 2 or its subordinates to redetermine or r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless 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), with which this court concurs, there can be no review of an earlier refund except in accordance with the provision of section 16 of the Foreign Trade (Development and Regulation) Act which only permits the Director General of Foreign Trade or the Central Government (in case the original order was by the Director General of Foreign Trade) to exercise the power of review. The declaration in paragraph 7 of ANF 8, that Simplex will return any excess duty refunded, cannot eclipse the narrow statutory power to review provided under the Act. Thus, the impugned order of March 30, 2012, and subsequent recovery proceedings on the basis of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned 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 Foreign Trade (Development and Regulation) Act, 1992. If the DGFT decides after giving an opportunity to the owners of the goods that the goods do not meet the description and classification for DEPB, the owner of the goods may, in addition to the confiscation and penalty under the Foreign Trade (Development and Regulation) Act, 1992, be punished with penalty under the Customs Act, and that he may also be liable for suspension or cancellation of the licence. The customs authority, however, are not entitled to adjudicate over description and classification of the goods for DEPB. 18. In Pradip Polyfils Pvt. Ltd. v. Union of India (2004) 173 ELT 3 (B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 required to be a forged machine part or a fabricated machine part in which different components could be welded or clipped. The goods would not become prescribed goods just because they did not meet the classification, which according to the customs authorities could only be obtained by forging and not by welding or clipping. The customs authorities have thus observed on their own satisfaction that the goods do not meet the classification for which the petitioner was given licence for DEBP credit. 20. It is not a case of misdescription or false declaration of goods. At best it is case in which it was to be found whether the welding or clipping could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance 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 Systems Pvt. Ltd. v. Collector of Customs reported in 2003 (151) E.L.T. 254 (S.C.) has held that once an advance licence is issued and not questioned by the licensing authority, the Customs authorities cannot refuse exemption on an allegations that there was any misrepresentation. In the present case also, the licensing authorities have not found fault with the statement of the petitioner that the die steel is a material required in the manufacture of resultant product and have granted advance licence to the petitioner. Assuming that the licensing authorities have wrongly accepted the statement of the petitioner, so long as the licence is valid and subsisting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Section 17(4) vests the proper officer with the right to re-assess the duty so leviable on such goods. Section 17 requires importers and exporters to make a conscious effort to declare the correct classification, applicable rate of duty, value, benefit of exemption notification claimed, if any, in respect of imported or exported goods while presenting their respective Bills of Entry or shipping bills. However, according to the respondents, the petitioners have deliberately run afoul of the requirement under Section 17 to correctly self-assess their exported goods in order to obtain MEIS benefits that they were not entitled to. 55. According to learned counsel, MEIS was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 this regard that although the writ petitioners had questioned the authority of the respondents on grounds which are refuted by learned counsel for the respondents and noticed above, the same would no longer survive for consideration in light of the recent decision of the Supreme Court in Commissioner of Customs Vs. Canon India Pvt. Ltd 2024 SCC OnLine SC 3188 . We, therefore, do not propose to deal with this aspect. 61. Learned counsel, in response to the arguments put forth by the petitioner with regard to the audit objection letter dated 18 November 2019 being ultra-vires Section 99A, contended that the legislative intent behind the introduction of Section 99A was to provide a statutory f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 FTDR ACT 65. In order to evaluate the rival submissions noticed above, it would be appropriate to firstly deal with the scope of the assessment power that stands conferred upon the competent authorities under the FTDR Act and the Customs Act. While examining the ambit and reach of the two statutes in question, if we were to turn our gaze firstly upon the Customs Act, it would be important to firstly take note of how that statute proceeds to define the word assessment . Section 2(2) as it stands presently reads as follows:- 2. Definitions. xxxx xxxx xxxx [(2) assessment means determination of the dutiability of any goods and the amount of duty, tax, cess or any other sum so payable, if any, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 the proper officer. (2) After such examination and testing, the duty, if any, leviable on such goods shall, save as otherwise provided in section 85, be assessed. (3) For the purpose of assessing duty under sub-section (2), the proper officer may require the importer, exporter or any other person to produce any contract, broker's note, policy of insurance, catalogue or other document whereby the duty leviable on the imported goods or export goods, as the case may be, can be ascertained, and to furnish any information required for such ascertainment which it is in his power to produce or furnish, and thereupon the importer, exporter or such other person shall produce such document and furnish such information. (4) Notwithstanding anything con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per 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 pass a speaking order on the re-assessment, within fifteen days from the date of re- assessment of the bill of entry or the shipping bill, as the case may be. (6) [***] Explanation. For the removal of doubts, it is hereby declared that in cases where an importer has entered any imported goods under section 46 or an exporter has entered any export goods under section 50 before the date on which the Finance Bill, 2011 receives the assent of the President, such imported goods or export goods shall continue to be governed by the provisions of section 17 as it stood immediately before the date on which such assent is received.] 68. For the purposes of the question which stands posited for our consideration, suffice it to note that post the introduction of a syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed. 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 Supreme Court, in a batch of appeals in ITC Ltd. v. Commissioner of Central Excise, Kolkata IV (2019) 17 SCC 46 had an occasion to deal with the issue of whether refund applications against assessed duty could be entertained in the absence of any challenge made to an order of assessment. The lead appellant was a paper manufacturer that had been paying duty on the paper cleared from its factory and had filed a refund claim in respect of duty paid by it during the period of July 2001 to March 2002 in light of the exemption Notification No. 67.95-CE, which it had not been aware of at the relevant time. However, the said refund application came to be rejected and which lead to the filing of an appeal before the Supreme Court. The Supreme Court, while deliberating whether self-assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment 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 pass a speaking order on the reassessment, within 15 days from the date of reassessment of the bill of entry or the shipping bill, as the case may be. The Explanation to amended Section 17 has clarified that import or export before the amendment by the Finance Act, 2011 shall be governed by the unamended provisions of Section 17. xxxx xxxx xxxx 41. It is apparent from the provisions of refund that it is more or less in the nature of execution proceedings. It is not open to the authority which processes the refund to make a fresh assessment on merits and to correct assessment on the basis of mistake or otherwise. xxxx xxxx xxxx 43. As the order of self-assessment is nonetheless an assessment order passed under the Act, obviously it would be appealable by any person aggrieved thereby. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue 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 by this Court in Priya Blue Industries Ltd. xxxx xxxx xxxx 47. When we consider the overall effect of the provisions prior to amendment and post-amendment under the Finance Act, 2011, we are of the opinion that the claim for refund cannot be entertained unless the order of assessment or self-assessment is modified in accordance with law by taking recourse to the appropriate proceedings and it would not be within the ken of Section 27 to set aside the order of self-assessment and reassess the duty for making refund; and in case any person is aggrieved by any order which would include self-assessment, he has to get the order modified under Section 128 or under other relevant provisions of the Act. 48. Resultantly, we find that the order(s) passed by the Customs, Excise and Service Tax Appellate Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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 refunded, those powers would not be available to be exercised at the stage of considering an application for refund. Having noticed the statutory position which prevails, we turn then to the decisions which would have a bearing on the question which stands posited. 60. Flock (India) was one of the earliest decisions which dealt with the aspect of a claim for refund emanating from a return which had been duly assessed. In Flock (India), the self-assessed returns had been duly assessed by the Assistant Collector and the issue of classification was answered against the assessee. The aforesaid order of the Assistant Collector came to be affirmed by the Collector (Appeals). It was thereafter and while seeking to prosecute a claim for refund that the assessee sought a review of the aforesaid decisions which had been rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 into consideration an exemption notification. It was this claim which came to be ultimately negatived by the Supreme Court and which held that a claim for refund cannot be entertained unless the order of assessment, and which would include a self-assessment return, is modified in accordance with the procedure prescribed in the statute. In our considered opinion, it is these principles enunciated in Flock (India), Priya Blue Industries and ITC Limited, which compel and convince us to observe that the impugned order is clearly rendered unsustainable. 65. Undisputedly, the petitioner had submitted self-assessment returns proceeding on the basis that the output services rendered by it would qualify as an export of service and thus it being not exigible to service tax. The aforesaid self-assessment returns remained untouched and had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 petitioners. 75. Undisputedly, consequent to the self-assessed Bills of Entry having been accepted and thus liable to be viewed as assessed, the stage of enquiry contemplated in terms of Section 17 of the Customs Act has clearly passed. That then leaves us to identify and determine the avenues which would otherwise be available to the customs authorities to reopen or review an assessment duly made. E. RECOVERY OF DUTY UNDER SECTION 28 AND 28AAA 76. This leads us firstly to Section 28 of the Customs Act and which deals with recovery of duties either not levied or paid, short levied or short paid or erroneously refunded. Section 28 reads thus: - 28. Recovery of [duties not levied or not paid or short-levied or short-paid] or erroneously refunded. (1) Where any [duty has not been levied or not paid or short- levied or short-paid] or erroneously refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 [levied or not paid or has been short-levied or short-paid] or erroneously refunded, or interest payable has not been paid, part-paid or erroneously refunded, by reason of, (a) collusion; or (b) any wilful mis-statement; or (c) suppression of facts, by the importer or the exporter or the agent or employee of the importer or exporter, the proper officer shall, within five years from the relevant date, serve notice on the person chargeable with duty or interest which has not been [so levied or not paid] or which has been so short-levied or short-paid or to whom the the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. (5) Where any [duty has not been levied or not paid or has been short-levied or short paid] or the interest has not been charged or has been part-paid or the duty or interest has been erroneously ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned 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 duty or interest under sub-section (8), (a) within six months from the date of notice, [***] in respect of cases falling under clause (a) of sub- section (1); (b) within one year from the date of notice, [***] in respect of cases falling under sub-section (4): [PROVIDED that where the proper officer fails to so determine within the specified period, any officer senior in rank to the proper officer may, having regard to the circumstances under which the proper officer was prevented from determining the amount of duty or interest under sub-section (8), extend the period specified in clause (a) to a further period of six months and the period specified in clause (b) to a further period of one year: PROVIDED FURTHER that where the proper officer fails to determine within such extended period, such proceeding shall be deemed to have concluded as if no notice had been issued;] [(9A) Notwithstanding anythin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 means, (a) in a case where duty is [not levied or not paid or short- levied or short-paid], or interest is not charged, the date on which the proper officer makes an order for the clearance of goods; (b) in a case where duty is provisionally assessed under section 18, the date of adjustment of duty after the final assessment thereof or re-assessment, as the case may be; (c) in a case where duty or interest has been erroneously refunded, the date of refund; (d) in any other case, the date of payment of duty or interest. Explanation 2: For the removal of doubts, it is hereby declared that any non-levy, short-levy or erroneous refund before the date on which the Finance Bill, 2011 receives the assent of the President, shall continue to be governed by the provisions of section 28 as it stood immediately before the date on which such assent is received.] [Explanation 3: For the removal of doubts, it is hereby declared that the proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 aforenoted factors. However, the respondents do not even suggest or lay that charge against the writ petitioners at least in explicit terms. The respondents stop short of laying this allegation since that would necessarily entail it being urged that the DGFT office had colluded with the petitioners. 80. The invocation of Section 28 in the context of an MEIS scrip would also not sustain in light of the ambivalent stand taken by the DGFT who despite being a party to these proceedings has refrained from filing any affidavit or striking a principled stand. We take note of the following instructions that were provided by the DGFT to its counsel dated 11 January 2023 and which was placed on the record of these proceedings for our consideration: - OFFICE MEMORANDUM Subject: - W.P (C) No. l7314 of 2022 in the matter of M/s Amit Exports v/s UOl Others. filed before the Hon'ble High Court of Delhi. Please refer to writ petition in the above mentioned subject matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 attracted where it is found that an instrument issued to a person under the FTDR Act was obtained by means of collusion, wilful misstatement or suppression of facts. While Section 28AAA does undoubtedly statutorily empower the respondents to recover duty benefits illegitimately claimed by virtue of an instrument, the larger question which merits consideration is of identifying the authority which could be recognized in law to undertake a determination with respect to whether an instrument could be said to have been obtained by way of collusion, wilful misstatement or suppression of facts. 84. While we propose to return to this principal question a little later and in the subsequent parts of this decision, suffice it to note that Section 28AAA is a provision which stands at the crossroads of the Customs Act and the FTDR Act. It constitutes, in that sense, a junction or an intersection where the two statutes meet. Section 28AAA deals with situations of convergence and where a demand of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Manner of conducting audit. (1) The proper officer may conduct audit either in his office or in certain cases at the premises of an auditee. (2) The proper officer may, where considered necessary, request the auditee to furnish documents, information or record including electronic record, as may be relevant to audit. (3) The proper officer shall give not less than fifteen days advance notice to the auditee to conduct audit at the premises of the auditee. (4) The proper officer may, where considered necessary, inspect the imported goods or export goods or dutiable goods at the premises of the auditee or request the auditee to produce sample, if available with him. (5) The proper officer shall inform the auditee of the objections, if any, before preparing the audit report to provide him an opportunity to offer clarifications with supporting documents. (6) Where the auditee is in agreement with the audit findings, he may make voluntary payments of duty, interest or other sums, due, if any, in part or in full and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms 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 review while noticing the submissions which were addressed by Mr. Gulati. Undoubtedly, it is the DGFT who is liable to be recognized as the pivotal authority and one who is enjoined to administer the provisions of that statute. With a view to develop and regulate foreign trade, the Union stands conferred with the power to issue appropriate orders prohibiting, restricting or regulating the import or export of goods. An order referable to Section 3(2) of the FDTR Act and all goods to which that statutory instrument may extend leads to those goods being deemed to be goods the import or export of which is prohibited under Section 11 of the Customs Act. As was noted by us hereinbefore, the FTP itself is a statutory instrument and derives that status by virtue of Section 5 of the FTDR Act. The word license has been defined in the FTDR Act to mean a license to import or export as also to include within its ambit a customs clearance permit as well as any other permission issued or granted under that statute. The DGFT or an officer authorized by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 be amended with the Legislature extending the width of its applicability beyond a mere license and thus including within its ambit a certificate, script or any instrument bestowing financial or fiscal benefits . Corresponding amendments are also found in Section 9(1) and which too added certificates, scrips and instruments bestowing fiscal benefits as falling within the ambit of that provision. 92. The power to suspend or cancel any of those instruments is then spoken of in the Foreign Trade (Regulation) Rules, 1993 FTDR Rules . It would thus be pertinent to notice Rules 7, 9 and 10 thereof and which are reproduced hereinbelow: - 7. [Refusal to grant licence, certificate, scrip or any instrument bestowing financial or fiscal benefits and recovery of benefits]. (1) The Director-General or the licensing authority may for reasons to be recorded in writing, refuse to grant or renew a [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] if (a) the applicant has contravened any law relating to customs or foreign exchange; (b) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Government or any agency authorised by the Central Government in relation to exports made by him on the basis of any false, fraudulent or misleading statement or any document which is false or fabricated or tampered with.] (2) The refusal of a 52[licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] under sub-rule (1) shall be without prejudice to any other action that may be taken against an applicant by the licensing authority under the Act. [(3) In case of any erroneous payment of 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 made by him, the Director General or the licensing authority may, after giving to that person a notice in writing informing him of the details of erroneous payment for which recovery or adjustment of arrears or claims is to be made and after giving a reasonable opportunity of making a representation in writing within such time, as specified therein and, if that person so desires, of being heard, authorise: (a) recovery of benefits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings for cancellation of such [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] has been initiated under rule 10. 10. Cancellation of a [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] . The Director- General or the licensing authority may by an order in writing cancel any [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] granted under these rules, if (a) the [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] has been obtained by fraud, suppression of facts or misrepresentation; or (b) the [licensee or transferee] has committed a breach of any of the conditions of the [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits]; or (c) the [licensee or transferee] has tampered with the [licence, certificate, scrip or any instrument bestowing financial or fiscal benefits] in any manner; or (d) the [licensee or transferee] has contravened any law relating to customs or foreign exchange or the rules and regulations relating thereto. 93. The FDTR Rules thus confer a power on the DGFT or the licensing authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us closing all avenues of contestation. 96. The Supreme Court in Oryx Fisheries Private Limited v. Union of India and Others (2010) 13 SCC 427 while dealing with a challenge to the cancellation of the registration certificate of the appellant, had rendered the following illuminating observations with regard to the need for notices issued by any statutory authority to consist of reasoning as opposed to a simpliciter recordal of definitive conclusions and which would thus lead the noticee to arrive at the inevitable conclusion that a right of representation would be an empty formality. This becomes evident from a reading of the following passages of that decision:- 23. Relying on the underlined portions in the show-cause notice, the learned counsel for the appellant urged that even at the stage of the show-cause notice the third respondent has completely made up his mind and reached a definite conclusion about the alleged guilt of the appellant. This has rendered the subsequent proceedings an empty ritual and an idle formality. 24. This Court finds that there is a lot of substance in the aforesaid contention. It is well settled that a quasi-judicial authority, while acting in exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a quasi-judicial proceeding under a statutory regulation which promises to give the person proceeded against a reasonable opportunity of defence. 32. Therefore, while issuing a show-cause notice, the authorities must take care to manifestly keep an open mind as they are to act fairly in adjudging the guilt or otherwise of the person proceeded against and specially when he has the power to take a punitive step against the person after giving him a show-cause notice. xxxx xxxx xxxx 37. Therefore, the bias of the third respondent which was latent in the show-cause notice became patent in the order of cancellation of the registration certificate. The cancellation order quotes the show- cause notice and is a non-speaking one and is virtually no order in the eye of the law. Since the same order is an appealable one it is incumbent on the third respondent to give adequate reasons. Tested on the aforesaid precepts, it becomes apparent that the audit objection letter teems with definitive and predetermined conclusions and would not sustain when tested on the principles enunciated by the Supreme Court in Oryx Fisheries. 97. We then find ourselves unable to sustain the audit objection letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 28(4) additionally could have been invoked only within a period of five years from the relevant date, an expression which stands duly defined in that provision by virtue of the Explanations appended to that section. The aforesaid provisions assume significance when we view the power that is sought to be invoked with the assistance of sub-section (4) of Section 28 in juxtaposition with the period during which the exports were affected and which in the facts of these cases was between 1991 to 2018. The earliest proceedings which appear to have been initiated by the respondents from the disclosures made in the writ petitions appears to be the issuance of the post clearance audit objection on 18 November 2019. The impugned action is thus rendered untenable on this score also. 101. While on Section 28(4), it becomes relevant to note that the said provision could have been invoked only if the statutory preconditions embodied therein were satisfied. As is manifest from a reading of sub- section (4), the exercise of power is predicated upon the respondents finding that an assessment made under the Customs Act suffered from the vice of collusion, wilful misstatement, or suppre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d more importantly, classification of any item for import/export in the ITC (HS) which would be final and binding. The FTP undoubtedly stands imbued with statutory authority by virtue of Section 5 of the FTDR Act. 105. Of equal importance are the FTDR Rules and which too incorporate provisions conferring an authority on the Director General or the licensing authority to suspend or cancel a license, certificate, scrip or any instrument bestowing financial or fiscal benefits. Once it is held that the MEIS would clearly qualify as an instrument bestowing financial or fiscal benefits, the power to cancel or suspend would be liable to be recognized as being exercisable by the Director General on the licensing authority alone. It would thus be wholly impermissible for the customs authorities to either ignore the MEIS certificate or deprive a holder thereof of benefits that could be claimed under that scheme absent any adjudication or declaration of invalidity being rendered by the DGFT in exercise of powers conferred by either Rules 8, 9 or 10 of the FTDR Rules. The customs authorities cannot be recognised to have the power or the authority to either question or go behind an instrument i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that any doubt with respect to the description or classification of exported goods would have to be referred for the consideration of the DGFT. The Allahabad High Court had thus concurred with the view expressed by the Bombay High Court and which too had observed that benefits which could be claimed under a Duty Entitlement Pass Book license could not be denied by the customs authorities on the basis of their own perception on the subject of appropriate classification. The Bombay High Court had held that as long as the licensing authority had desisted from either reviewing the grant or cancelling the license, it would be wholly impermissible for the customs authorities to deprive the importer or the exporter of benefits. The view expressed by the Gujarat, Allahabad and the Bombay High Courts stands reiterated in the two subsequent decisions of Autolite and Jupiter Exports. The principles culled out in the aforenoted decisions are in line with what the Supreme Court had succinctly observed in Titan Medical Systems (P) Ltd. Vs. Collector of Customs (2003) 9 SCC 133 . We are thus of the firm opinion that it would be impermissible for the customs authorities to either doubt th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e handicraft items which were being exported. While that communication did hold that stone and marble handicrafts were liable to be classified under CTH 6802, it too left various aspects pertaining to classification subject to verification and examination of individual items. As we read this communication of the CBIC, we find ourselves unable to construe the same as conclusively determining all possible issues concerned with the classification of stone and marble handicraft products. This since the communication itself is caveated and leaves various issues open to examination in individual cases. It is this communication of the CBIC which appears to have led to respondent no. 6 issuing Public Notice No. 57/2019. 112. Without going into the merits or otherwise of the position expressed by the CBIC at this stage, it is pertinent to note that the classification of the exported articles under ITC(HS) 68159990 has nowhere been alleged to have been prompted by collusion, wilful misstatement or suppression of facts. Regard must also be had to the undisputed provision which emerges from the record namely of these articles having been consistently placed under ITC(HS) 68159990 right from 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stone but also to articles such as steps, cornices, pediments balustrades and others. 116. CTH 6815 is the residual entry falling in Chapter 68. Although it too relates to articles of stone or of other minerals substances, it is clearly distinct and separate from what could be said to possibly fall under CTH 6802. The various products, minerals and materials which are spoken often in CTH 6802 appear to be those which would be found in buildings and monuments or used in the course of construction. It is perhaps on this reasoning, and since the articles were handicraft products that the writ petitioners chose to classify the exported articles under CTH 6815. The petitioners also appear to have borne in consideration the contents of Public Notice No. 02/2015, as well as subsequent notices issued for implementation of the MEIS Scheme and which had continued to include articles falling under CTH 6815. 117. Though not necessarily binding, the petitioners had also relied upon Notification No. 21/2018 issued by the Ministry of Finance, and which had exempted handicraft goods from the scope of intra-state supplies insofar as tax under the CGST Act was concerned. All of the above appears to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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