Commissioner of Customs, Nhava Sheva-II Vs Bharat Rasayan Ltd. (Supreme Court of India)
Summary: The Supreme Court of India in Commissioner of Customs, Nhava Sheva-II Vs Bharat Rasayan Ltd., by its order dated 17 February 2025, dismissed the Revenue’s appeal against the CESTAT Mumbai decision dated 1 May 2024 concerning MEIS duty credit scrips issued for exports of Lambda Cyhalothrin Technical. The Supreme Court noted that the Directorate General of Foreign Trade (DGFT) had already examined and decided the classification of the goods under CTH 38089199 and had issued the corresponding Merchandise Exports from India Scheme (MEIS) scrips. In the particular circumstances, the Court found no sufficient reason to interfere with the Tribunal’s judgment. Crucially, however, it expressly left open the issue of the powers and jurisdiction of Customs authorities. Its dismissal of the appeal should therefore not be read as a comprehensive Supreme Court affirmation of every jurisdictional proposition in the Tribunal’s reasoning.
The dispute before CESTAT arose from exports during 2016–2019. Bharat Rasayan had classified Lambda Cyhalothrin Technical under CTH 38089199 and claimed MEIS benefits, including Rs.14,14,000 against a shipment with an FOB value of Rs.7,07,00,000. Customs officers proposed CTH 38086900 instead and questioned the incentive eligibility. The controversy spread from the shipment dated 9 December 2019 to 53 earlier shipping bills. The Department alleged misclassification and sought recovery of Rs.5,86,95,080 in MEIS benefits, as well as interest, redemption fines and penalties. The exporter maintained that DGFT had examined the classification and issued authorisations and scrips accordingly.
By its adjudication order dated 12 August 2022, the Commissioner rejected the declared classification, ordered confiscation and redemption fines concerning the current and earlier shipments, and directed recovery under Section 28(4) of the Customs Act, 1962, together with interest under Section 28AA and penalties under Sections 114(iii) and 114AA. CESTAT also highlighted striking inconsistencies between figures and words in the adjudication order: a fine of Rs.2,00,000 was expressed in words as Rs.2,70,000; Rs.25,00,00,000 was described as Rs.25 lakh; and a penalty of Rs.25,00,000 was described as Rs.28 crore. The Tribunal found this indicative of non-application of mind but did not infer why the discrepancies arose.
The Tribunal examined MEIS under Chapter III of the Foreign Trade Policy 2015–2020, Section 9(4) of the Foreign Trade (Development and Regulation) Act, 1992 and Rule 10 of the Foreign Trade (Regulation) Rules, 1993. It reasoned that the licensing authority must follow the statutory procedure for cancellation of the relevant licence or scrip and that Customs could not independently nullify subsisting DGFT-issued instruments in the manner attempted. No evidence showed that DGFT had initiated proceedings to cancel the appellant’s authorisations or MEIS benefits. CESTAT also found that the Department had not identified any exclusion under paragraph 3.06 of the Foreign Trade Policy applying to the exports.
On the proposed recovery, the Tribunal held that the alleged MEIS benefit could not be recovered in these circumstances merely through a post-export tariff reclassification under Section 28(4). It examined the distinct roles of DGFT in export incentives and Customs in classification, assessment, export clearance and duty collection. The Tribunal additionally questioned confiscation under Section 113 of the Customs Act of goods covered by 53 shipping bills whose export had already been completed. It relied on the Supreme Court’s decision in Titan Medical Systems (P) Ltd. Vs Collector of Customs, New Delhi and the CESTAT decision in Axiom Cordages Ltd. Vs Commissioner of Customs, Nhava Sheva-II when discussing the effect of an extant licence and the distinction between the functions of DGFT and Customs.
Consequently, by Final Order No. 85446/2024 dated 1 May 2024, CESTAT Mumbai set aside the Commissioner’s order dated 12 August 2022, restored the disputed MEIS benefits and allowed the exporter’s appeal with consequential relief in accordance with law. The Revenue challenged that decision before the Supreme Court in Civil Appeal No. 2602 of 2025, arising from Diary No. 60797 of 2024. The Supreme Court’s dismissal on 17 February 2025 leaves the relief granted to Bharat Rasayan undisturbed in this dispute but retains the jurisdictional question for adjudication in an appropriate future case. That distinction between the case-specific outcome and the unresolved general jurisdictional question is essential when citing the two decisions together.
Related CESTAT Mumbai Proceedings: For the underlying Tribunal decision holding that Customs authorities could not cancel MEIS scrips issued by the Directorate General of Foreign Trade (DGFT), see Customs Cannot Cancel DGFT-Issued MEIS Scrips: CESTAT Mumbai Allows Exporter’s Appeal.
Cases Discussed
1. Titan Medical Systems (P) Ltd. Vs Collector of Customs, New Delhi (Supreme Court) — 2003 (151) E.L.T. 254 (S.C.). CESTAT relied on the principle that an advance licence left unquestioned by the licensing authority could not simply be disregarded by Customs on an allegation of misrepresentation that was for the licensing authority to examine. The linked TaxGuru page discusses the precedent; it is not represented as the original judgment page.
2. Axiom Cordages Ltd. Vs Commissioner of Customs, Nhava Sheva-II (CESTAT Mumbai) — (2023) 4 Centax 120 (Tri.-Bom.), as cited in the source. CESTAT relied on its treatment of the administration of MEIS and the distinct statutory roles of DGFT and Customs. No unverified exact-case TaxGuru URL has been inserted.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Delay condoned.
Having regard to the facts of the present case, especially the fact that the controversy with regard to classification was earlier examined and decided by the Directorate General of Foreign Trade to the effect that the goods, Lamda Cyhalothrin Technical, be classified under the heading “CTH 38089199” and, thereupon, it had issued Merchandise Exports from India (MEIS) Scrips, we do not find any good ground and reason to interfere with the impugned judgment. Hence, the appeal is dismissed.
We, however, clarify that the issue with regard to the power and jurisdiction of the Customs authorities has been left open.
Pending application(s), if any, shall stand disposed of.
Delay condoned.
The appeal is dismissed, in terms of the signed order.
Pending application(s), if any, shall stand disposed of.
