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It is very difficult to understand the motivations of the bureaucracy in pretending that they do not understand even the very basics & the system valuing those bureaucrats in increasing the inefficiency in the system. My understanding is that for these reasons, the stooges rise to the top & they have no fear in their mind as they think, they are well protected by their masters & they will get away with anything! Earlier, if you were exposing the wrong doings, the bureaucracy will be compelled to respond but in the present administration, you find the bureaucracy has become been too brazen to be ashamed of any wrong doings & therefore it is becoming almost impossible even to compel them to rectify the wrongs. This is the new hallmark of being very stubborn to continue with the idiocies at the expense of the nation. However, the short point is that you cannot fool all of the people all the time!

This is the story of administration of the MEIS entitlements. The RLA, Mumbai pretended not to understand the cheating & blamed the internal instructions issued by the DGFT (it is difficult to comprehend that how could DGFT indulge into such idiocy i.e. description of the export product in the S/B should match the description given in the MEIS rate list in the first place & why the DGFT could not be transparent & issue a Public notice) therefore the DGFT had to be held responsible for the rectification & the readers will be amused to note that it took more than 18 months for the policymakers to acknowledge the truth & rectify the wrongs. The MEIS is a software administered entitlement therefore the point is simple that there is no scope for withholding the entitlement & holding the exporters to a ransom. This principle can be understood by any sane person but not by those who are bent on cheating. The readers will please note that as on date, finally, the DGFT has been compelled to state upfront at the time of uploading the application on the DGFT website that the entitlement will be issued automatically.

As pointed out, the RLA, Mumbai in the name of DGFT instructions withheld the issue of the MEIS entitlements saying that description of the export product in the S/B should match the description given in the MEIS rate list. The following was brought to the attention of all concerned:

The ITCHS has been used since ages in the manner appearing in the subject Invoices pertaining to the removal of goods from the factory under the aegis of C. Excise. Similarly, the ITCHS has been used since ages in the manner appearing in the subject S/Bs pertaining to the export of goods from India under the aegis of Customs. The ITCHS is the domain of the Customs & the CBEC issues orders in respect of the classification issues. Once the finally assessed S/B is released by the Customs & the ITCHS & country of export qualify for MEIS, there is no way that the DGFT can deny the release of entitlement. The issue of MEIS entitlement in DGFT is a system driven approach i.e. the entitlement is determined by the system based on data fed into the system as per what is appearing on record therefore there is no intervention of any official required.

Now to reach logical conclusion, we need to answer the following 2 questions:

  1. What is the purpose of ITCHS code & why that is mentioned in the S/B.
  2. Why Customs exist & whether they are releasing S/Bs with wrong data?

ITCHS is a generic or product specific code. 

Now, for e. g. S/B contains ITCHS 29349900 & Methoxsalen. ITCHS 29349900 represents Other Heterocyclic Compound. Then what ITCHS 29349900 & Methoxsalen in the S/B effectively represent is Other Heterocyclic Compound Methoxsalen simply by substituting the code by what it represents. Therefore, Methoxsalen is other heterocyclic compound is established beyond doubt.

The goods are bought & sold internationally in terms of market parlance & the use of market parlance is upheld by the Supreme Court therefore mention of generic code as a prefix or suffix is not required because that is read into the document by way of the mention of the ITCHS code in the shipping bill. Further, there is limited number of character space provided in the system for the product description. The Customs official understand the classification. There is appraisal of the S/B & subsequently, the goods are inspected by the examining officer of the customs department in accordance with the Excise Invoice. Thus, there is a second check completed before the export of goods leaving no element of doubt about the ITCHS classification. The classification of goods is for the levy of duty, cess etc. & is in the domain of the Customs authority & therefore beyond the authority of the DGFT. The DGFT should know that the drawback schedule is based on the ITCHS but then there is no generic description relevant to the ITCHS mentioned in the Drawback S/Bs but the drawback is disbursed without any problem being created for the exporters?

Let me explain this by taking an example from the DGFT itself. The Advance Authorization (AA) operates under a Customs Notification & the Notification No. is mentioned in the AA. This effectively means that all the operating conditions of the Customs Notification need not be mentioned in detail in the AA but the Cus. Notfn. No. is the code mentioned in the AA does the job.

The issue of ITCHS is simply arising of ignorance & that is no excuse to harass the exporters. The point is that the DGFT authorities do not understand whether Methoxsalen is a heterocyclic compound or not? Therefore, just because of this ignorance, the objection is being raised without challenging the details appearing in the S/B & the fact that the DGFT system having calculated the entitlement in the application. The moot question is that whether the DGFT software is not proper & determining wrong entitlements?

Let us take the case of Methoxsalen. Just type in the google whether Methoxsalen a heterocyclic compound & you get the answer in seconds that Methoxsalen is a heterocyclic compound. Any person with little knowledge will comprehend that putting the generic description in the S/B will not make Methoxsalen a heterocyclic compound & establish the truth because it is simply documentation. However, as explained, the generic description is already there in the form of the ITCHS code in the S/B.

The other moot question is that why does the Customs exist? Do you mean to say that Customs are allowing wrong ITCHS in the S/Bs? If yes, then DGFT should take up the matter with the Customs by challenging the ITCHS mentioned in the S/B. A little common sense tells you that how without challenging the ITCHS code mentioned in the S/B, the MEIS entitlement can be denied by the DGFT to the exporter? At the very least, we need to respect common sense. No code can be specific for each & every product because of the vast number of products in the market therefore a generic code is used & if the DGFT officials are ignorant about the classification then they simply cannot create nuisance by raising a frivolous query that description does not match the MEIS rate list without challenging the ITCHS appearing in the S/B. If DGFT is to carry out assessment, then the DGFT should have authority in terms of the law to do so. If there is such provision in the law, please specify the same. If the DGFT has to complete the assessment, then please provide adequate training to your officials. Alternatively, DGFT software needs to be respected by the officials because the entitlement is calculated by the Artificial intelligence i.e. a software & this leaves no room for human intervention without challenging the details appearing on the record & this is simply driven by common sense & supported by the law.

Further, it is true that there are many entries in the MEIS application but then there are objections raised in respect of a very few S/Bs per application whereas entitlement in respect of the complete application is illegally withheld. This is again a mischief to inflict pecuniary losses on the exporters by delaying the release of the entitlements.

The readers will not that the policymakers may lack vision, but they cannot pretend to be so dumb that they do not understand the basics. The cunningness & cheating is unacceptable but then in the Indian system, the authorities are there just to abuse & they don’t seem to bother because there is no responsibility & accountability in the system. On the other hand, if you think that the DGFT could not even understand the issue in the proper perspective even when explained in a threadbare manner then whether that DGFT should be allowed to continue & kill the exporters?

There is another issue, which has arisen & once again, the RLA, Mumbai & DGFT continue with harassment for more than a year. I notice that the strategy of the officials is that harass the beneficiaries to an extent that they ultimately give up just by delaying the redressal. This is a pure play in terms of cheating & the manifestation of sick minds.

The facts of the case are such that the shipping bill pertains to export of Erythromycin & the correct ITCHS code is 29415000 & the applicable rate of MEIS entitlement is 3%. However, ITCHS code in the S/B is mentioned as 2914500 & under this code the MEIS entitlement rate is 2%. MEIS entitlement was therefore wrongly issued with ITCHS code 29145000 @2% because it is systems driven. The RLA, Mumbai was therefore asked to delete the S/B from the MEIS entitlement for rectification of the error & restore the S/B in the system. The Customs rectified the ITCHS code by way of manual amendment because no online amendment can be made after the shipment in S/B. (The GoI does not trust their employees to permit post shipment amendments). The exporter applied for the MEIS entitlement on the restored S/B. However, entitlement is once again wrongly issued with ITCHS code 29145000 & @ 2% despite the manual amendment being placed on record. The RLA, Mumbai is given solution to rectify the ITCHS code in the MEIS entitlement & increase the MEIS entitlement value to 3% by way of manual amendment. The RLA, Mumbai refuses to carry out the amendment & on several representations passes the problem to DGFT Headquarters after several months. The simple point of law is that MEIS entitlement is not acceptable under wrong ITCHS code & wrong rate after Customs have carried out the amendment in ITCHS. The DGFT is told in simple words that bonafide errors need to be rectified but to no avail. Think of it that if the entitlement was issued at higher rate due to error in ITCHS then will the DGFT not obligated to reduce the entitlement value. If they would not do that then they are ripping off the exchequer & that is untenable! However, you do not accept any quick & favourable response from the cheats!

Another instance of cheating in case of MEIS entitlements on the part of the DGFT is that of disbursement of entitlement in respect of countries known as tax heavens in the past. This anomaly was brought to the attention of the DGFT. However, the DGFT did not stop the entitlement in respect of the exports to the tax heavens but allowed the MEIS to all the countries universally instead on selective basis. The readers will note that the vested interest of certain beneficiaries has been protected & there is no free lunch in this world? Please note that how the dumb bureaucracy turns extremely intelligent & takes pains to apply their minds to take care of the vested interests! Whose vested interest is being protected at the cost of the nation, therefore needs to be answered! It is not the MSME & the genuine exporters in any case.

 In the early part of the article, I talked about having a vision but then I am still compelled to say that even now, there is a complete lack of vision in facilitation of the exporters. If DGFT is using a software, then why the Customs does not deploy the same software to mark the S/Bs for the MEIS entitlement so that none of the exporter loses the MEIS entitlement. Why the DGFT & CBIC should not implement the mandate of the Parliament in letter & spirit to facilitate the exporters even though it is their bounden duty to do so? As a matter of fact, classification is still the responsibility of the officials & therefore if any exporter loses their MEIS entitlement then the Customs official should be issued SCN to explain the lapse & dereliction of duty to comply with the ease of doing business. Why the Chairman, CBIC & DGFT not willing to own responsibility with accountability? The ease of doing business is not a slogan but an essential & in the first place it is necessary that what does it stand for in each context.

No lip service or slogans help the nation in achieving results. It requires a mindset where the bureaucracy is willing to understand the real problems & find implementable solutions but there is no semblance of it visible & this is the main reason, the growth in exports is not sustainable because no exporter likes to be conned by the cunning bureaucracy. The bureaucracy has been forced to adopt technology per force & that is palmed of as reforms, but this is gimmickry. This die-hard optimist believes that per force technology will force the hand of the bureaucracy in terms of mindset change & improve things for sure & provide the real ease of doing business to the exporters! It is necessary for the industry to take lead & force that change in the mindset expeditiously.

(Author Rajiv Gupta  can be reached at

(Above are personal views of Author)

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May 2024