DGFT Can't Deny MEIS Incentives For Mere Non- Declaration In Shipping Bills: Delhi High Court

The Delhi High Court held that DGFT can’t deny MEIS incentives for mere non- declaration in shipping bills.

The bench opined that since the Petitioner has satisfied all the requirements to claim benefits under MEIS which were due to them, the same ought not to be denied on hyper-technical grounds, purely on account of an inadvertent and bona fide error of not declaring the intent to claim MEIS benefits on shipping bills.

It was further opined that this was a procedural lapse which has thereafter been duly rectified under Section 149 of the Customs Act, with Respondent having issued amendments certificates in respect of the deficient shipping bills.

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It was noted by the court that the Petitioner’s request was rejected on account of a system error which was beyond the Petitioner’s control. The Petitioner could not reapply for MEIS benefit as the online request on the DGFT portal for re-validation of shipping bills has not been resolved. Although the system has generated a report indicating that the issue has been resolved, as depicted in the screenshots placed on record by the Petitioner, however, in reality, that is not the case as a result the shipping bills in question are still not reflected on the EDI system.

The court further noted that the Petitioner has received amendment certificates in respect of 7 shipping bills, as there were no deficiency notices issued with respect to the remaining bills.

The bench said that however, that would still not come in the way of the Petitioner receiving benefits under MEIS in light of advisory issued by the Directorate General of Systems and Data Management.

Facts

The Petitioner, Zydus Takeda Healthcare Private Limited, is a 100% Export Oriented Unit (EOI) engaged in the business of pharmaceuticals. In order to avail the benefit under Merchandise Export from India Scheme (MEIS), the Petitioner submitted an online application on website of the Directorate General of Foreign Trade (DGFT).

In terms of Paragraph No. 3.14 of Handbook of Procedure (2015-2020), exporters are required to declare their intent to claim benefit under MEIS at the time of generating shipping bills for both, Export Data Interchange (EDI) generated Shipping Bill and Non-EDI Shipping Bill. For EDI Shipping Bills, the exporter is mandated to mark/ tick either “Y” (for “Yes”) or “N” (for “No”) under the “Reward” column against each item of export. By marking “Y”, the exporter declares their intent to claim reward under MEIS, whereas marking “N” indicates that the exporter does not intend to claim the benefit of reward.

However, for Non-EDI Shipping Bills, in order to be eligible for claiming rewards under MEIS, the exporter is required to mention a declaration on the shipping bills, which reads as follows “We intend to claim rewards under Merchandise Exports From India Scheme (MEIS)”

The Petitioner applied for amendment of the 7 shipping bills under Section 149 of Customs Act, 19622 to rectify their error, on the basis of the documents available at the time of the export. The Assistant Commissioner of Customs, Export (Respondent No. 3) rectified the inadvertent error. However, since the amendment could not be caried out in the automated EDI system after completion of export, Respondent No. 3 issued amendment certificates in respect of the 7 shipping bills which were identified to be deficient.

Although the deficiency was noticed only in 7 shipping bills, Respondent proceeded to issue letters, rejecting the Petitioner’s MEIS claims in respect of all 17 shipping bills, stating that the Petitioner had not submitted compliance to the deficiency notices within the permissible timelines. The Petitioner submitted the aforenoted amendment certificates issued by Respondent No. 3 and requested for grant of MEIS benefits, however, Respondent requested the Petitioner to reapply for MEIS benefits through the DGFT portal. However, these shipping bills were not reflected on the DGFT portal owing to a system error, and therefore, the Petitioner could not re-apply for MEIS benefits.

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Submissions

The petitioner urged that once the amendment certificates were issued under Section 149 of the Customs Act, the Respondents ought to have allowed the Petitioner’s request for the MEIS incentives. The rejection of their claim is arbitrary and unreasonable, and therefore, the orders are liable to be quashed by the Court.

Satya Ranjan Swain, Senior Panel Counsel for Respondents argued that it is not in dispute that the Petitioner did not fill the declaration of intent column. Sufficient opportunity was given to the Petitioner after issuance of deficiencies notices to rectify their mistakes, however, since the Petitioner failed to comply within time, they cannot be afforded the benefit of MEIS.

Conclusion

The bench observed that the PRC ought to have considered all the facts, and particularly that this was a case of pure inadvertent error on the part of the Petitioner which was subsequently rectified.

The court said that therefore, since the Petitioner has already cured the deficiencies and secured amendment certificates, their request should not be rejected on account of amended shipping bills not being reflected on the automates system. Thus, since the Petitioner has fulfilled the pre-requisites to claim the MEIS benefits, the petition deserves to be allowed.

Case Details

Case name: Zydus Takeda Healthcare Private Limited V/S Union Of India & Ors.