Madras HC Quashes DGFT Order on MEIS Scrip Cancellation for Daimler India [Read Order]

The High Court also criticized the Appellate Authority for failing to apply its mind and for issuing a mechanically reasoned order without addressing key legal requirements. In an important judgment related to export incentive, the Madras High Court has quashed an order passed by the Additional Director General of Foreign Trade ( DGFT ) that had retrospectively - partially cancelled Merchandise Exports fromIndia Scheme (MEIS) scrips issued to Daimler India Commercial Vehicles Pvt. Ltd.

The Court found procedural and legal lapses in the DGFT's approach, observing that the cancellation order lacked proper reasoning and did not satisfy statutory requirements.

The classification of exported commercial vehicle goods from 2016 to 2019 was at the core of the contention. Exporting chassis with an engine, cabin, wheels, and fuel tanks, Daimler India claimed 3% MEIS benefits under ITC(HS) code 87060042.

However, the customs authorities contended that the appropriate classification fell under other codes such as 87012090, 87042219, and 87054000 each attracting only a 2% benefit. Following this, DGFT issued a show cause notice in August 2023, alleging misclassification and seeking recovery of excess scrips.

Despite Daimler’s submissions and participation in personal hearings, the DGFT passed an order partially cancelling the MEIS scrips, effectively reducing the reward rate from 3% to 2%. The Appellate Authority upheld this decision. However, Daimler challenged the appellate order through a series of writ petitions before the Madras High Court.

Justice N. Anand Venkatesh, delivering the judgment on July 11, 2025, noted that the DGFT had exercised its powers under Section 9(4) of the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), read with Rule 10 of the Foreign Trade (Regulation) Rules, 1993.

However, the Court noted that any cancellation of scrips under these rules must satisfy one of the specific grounds listed in Rule 10, such as fraud, misrepresentation, or contravention of customs or foreign exchange laws.

The Court found that the DGFT had not demonstrated how any of these conditions were met. It was already acknowledged that Daimler’s misclassification was bona fide, and no penal proceedings had been pursued on grounds of fraud or misrepresentation.

Furthermore, Rule 10(d), which pertains to contraventions of customs or foreign exchange laws, could not be invoked as the issue was one of compliance with foreign trade policy not customs law per se.

The High Court also criticized the Appellate Authority for failing to apply its mind and for issuing a mechanically reasoned order without addressing key legal requirements. The Court stated that power under Section 9(4) cannot be exercised in a vacuum and must be traceable to specific statutory provisions. A failure to do so, the Court held, renders such orders illegal and beyond jurisdiction.

The Court concluded that neither the original adjudicating authority nor the appellate authority had identified or reasoned which clause of Rule 10 applied to Daimler’s case. The cancellation of MEIS scrips was therefore based on doubtful legal grounds.

The High Court accordingly quashed the impugned order of the Appellate Authority and remanded the matter back for fresh consideration, directing that the DGFT re-examine the case in light of the Court’s findings within three months.

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