MEIS Certificates Qualify as ‘Instruments’ u/s 28AAA of Customs Act, But Only DGFT Has Authority to Suspend Or Cancel them: Madras HC [Read Order]

In a recent ruling, the Madras High Court held that MEIS certificates qualify as “instruments” under Section 28AAA of theCustoms Act, 1962, but only the Directorate General of Foreign Trade (DGFT) has the statutory authority to suspend or cancel them.

Kwalitee Fabs, the appellant, is a textile exporter manufacturing both handloom and powerloom goods. Customs authorities alleged that the appellant misdeclared powerloom goods as handloom goods and wrongly availed benefits under the Merchandise Exports from India Scheme (MEIS).

A show cause notice was issued and an order dated 30 September 2024 directed the appellant to pay Rs. 1.92 crore, being the value of ineligible MEIS duty scrips, along with redemption fine and penalty. The appellant challenged this order in W.P. (MD) No. 8609 of 2025, which was dismissed on the ground of alternative remedy. The appellant then filed the present writ appeal.

The appellant’s counsel argued that MEIS scrips are instruments issued under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act), and under the law only DGFT has the authority to suspend, cancel, or adjudicate upon their validity. The counsel submitted that Customs had no jurisdiction to invoke Section 28AAA of the Customs Act without a prior determination by the DGFT.

They referred to earlier rulings of the Madras High Court and the Delhi High Court in DESIGNO v. UOI, which held that Customs authorities cannot question MEIS certificates in the absence of DGFT adjudication.

The department’s counsel argued that the appellant misdeclared goods and that Customs was justified in recovering ineligible benefits. They admitted that the impugned order had been issued under Section 28AAA of the Customs Act.

The Division Bench comprising Justice G.R. Swaminathan and Justice K. Rajasekar observed that both the Madras High Court and Delhi High Court had already held that Customs cannot proceed under Section 28AAA unless DGFT first determines that the certificate was wrongly obtained.

The Court explained that MEIS certificates fall within the definition of “instruments” under Section 28AAA, but the power to cancel or suspend such instruments rests only with DGFT. It pointed out that recognising a parallel jurisdiction for Customs to doubt such instruments would be impermissible.

The court held that the impugned order of the Commissioner of Customs was without jurisdiction and liable to be set aside. It gave liberty to Customs to take up the matter with DGFT for appropriate action. The writ appeal was allowed, and connected miscellaneous petitions were closed.

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