In Fraud Cases, DGFT will Form Its Own Views on Licence Cancellation, Customs
cannot Finally Decide DGFT Action on Importability
Ø CBIC Clarification on Section 28AAA SCNs and DGFT Scrip Cancellation
Ø Section 28AAA – Discovery of Duties in Certain Cases
Issued by: CBIC,
Drawback Division, Ministry of Finance
Subject: Adjudication of Show Cause Notices (SCNs) under Section
28AAA of the Customs Act, 1962 where DGFT cancellation of the
instrument/scrip is involved.
1.
Section 28AAA framework
o
Section 28AAA provides for recovery of duty from
the person to whom an instrument/scrip was originally issued where it was
obtained fraudulently through collusion, wilful misstatement or suppression
of facts.
2.
Earlier TRU instruction
o
TRU D.O. letter dated 01.06.2012 advised
field formations to issue demands once DGFT/Regional Authority initiated action
for cancellation.
o
However, the matter was to be decided only after
DGFT had cancelled the instrument/scrip.
3.
Cases involving misdeclaration in Shipping Bill
o
Where Customs/DRI alleges fraudulent procurement
because of misclassification, overvaluation or other incorrect declarations
in the Shipping Bill, Customs must first investigate and adjudicate the matter.
o
Where warranted, Customs must make the consequential
amendment to the Shipping Bill/classification.
4.
DGFT cancellation cannot be based merely on
allegations
o
DGFT has taken the position that scrips should not
be cancelled solely on allegations, suspicions or requests from DRI/Customs.
o
Cancellation can follow only after a final
determination and consequential amendment by Customs, where applicable.
o
The Board has agreed with this position.
5.
Policy/eligibility issues fall to DGFT
o
Where the allegation concerns policy
interpretation, eligibility, entitlement or other matters within DGFT's domain,
the matter should first be referred to DGFT.
o
DGFT is the competent authority for issuance,
administration and interpretation of the relevant instrument/scrip.
o
Customs/DRI proceedings should follow DGFT's
determination on such policy-related issues.
6.
Where DGFT cannot cancel the scrip
o
If cancellation is technically or legally
impossible, including because of a court order/judgment, SCNs under
Section 28AAA should not remain pending merely for want of cancellation.
o
Adjudicating authorities shall proceed with
adjudication on merits and in accordance with law.
7.
General rule for other cases
o
In other cases where fraudulent procurement is
alleged and DGFT has initiated cancellation proceedings, adjudication
should take place only after DGFT cancels the instrument/scrip.
Effect of
the Instruction
·
Misdeclaration in Shipping Bill: Customs
first investigates/adjudicates → amends Shipping Bill where warranted
→ DGFT considers cancellation.
·
Policy/eligibility/entitlement issue: DGFT's
determination governs.
·
Cancellation legally/technically impossible: Customs
can adjudicate the Section 28AAA SCN without waiting for cancellation.
·
Other fraud cases with DGFT cancellation action
pending: Adjudication waits until DGFT cancellation.
[CBIC Instruction No. 17/2026-Cus. Dated 21 September
2026]
Subject: Clarification in
respect of difficulties being faced by field formations in adjudication of
cases where Show Cause Notices have been issued under Section 28AAA of the
Customs Act, 1962 in light of TRU instruction vide D.O. letter dated 01.06.2012
at para II.2.
Attention
is invited to Section 28AAA of the Customs Act, 1962, which provides for recovery
of duty from the person to whom the instrument/scrip was originally issued, where
such instrument had been obtained fraudulently by way of collusion, wilful misstatement
or suppression of facts, and para II.2 of TRU D.O. letter dated 01.06.2012, which
inter alia states that "...Field formations are advised to issue demands as
soon as DGFT/concerned regional Authority initiates action for cancellation of an
instrument but the matter may be decided only after the instrument has been cancelled
by the DGFT."
2.
References have been received from field formations regarding difficulties being
faced in the adjudication of Show Cause Notices issued under Section 28AAA of the
Customs Act, 1962, for want of cancellation of the instrument/scrip by DGFT, as
advised vide TRU D.O. letter dated 01.06.2012.
3.
The matter has been examined in the Board, and it is seen that -
(a) There
are instances where field formations/DRI allege that instruments/scrips have been
obtained fraudulently on the grounds of misdeclaration in the Shipping Bill, including
misclassification, overvaluation, or other incorrect declarations. In such cases,
DGFT has taken a view that where Customs/DRI suspects or alleges misclassification,
the appropriate course is for Customs to undertake an investigation and complete
adjudication under the relevant provisions of the Customs Act, 1962, and where warranted,
conclusively amend the shipping bill/classification. It is only after such final
determination and amendment by Customs that RAs of DGFT can examine consequential
action, including cancellation of scrips, in accordance with the Foreign Trade (Development
and Regulation) Act, 1992, the Foreign Trade Policy, and associated Rules. DGFT
has stated that scrips should not be cancelled solely on the basis of allegations,
suspicions or requests from DRI/Customs without a final determination and an amendment
to the shipping bill by the customs. The Board agrees with the aforesaid position
of DGFT. Accordingly, field formations are instructed that, in such cases, they
shall first investigate and adjudicate the alleged misdeclaration under the applicable
provisions of the Customs Act, 1962, and wherever warranted, make the consequential
amendment to the Shipping Bill. Thereafter, the matter shall be referred to the
concerned authority in DGFT for taking further necessary action, including cancellation
of the instrument/scrip, at their end.
(b) There
are also instances where field formations/DRI allege that instruments/scrips have
been obtained fraudulently on grounds relating to policy interpretation, eligibility,
entitlement, or other matters falling within the domain of DGFT. In such cases,
the matter should first be referred to DGFT, being the competent authority for the
issuance, administration and interpretation of the relevant instrument/scrip. In
such cases, the view of DGFT shall prevail with regard to the validity of, and entitlement
under, the instrument/scrip issued by it, and the proceedings by Customs/DRI should
be decided in accordance with the determination/view conveyed by DGFT in respect
of such policy- related issues.
(c) Further,
there are instances where DGFT is unable to cancel the instrument/scrip on technical
or legal grounds, including where such cancellation is precluded by an order or
judgment of an Hon’ble Court, as in the case of M/s Supreme Castings Ltd. v. Joint
DGFT, Ludhiana, wherein the Court observed that “there being no provision in Section
9(4) to cancel the license with retrospective effect, on the ratio of the aforesaid
case, it has to be held that the DEPB could not have been cancelled ab initio from
the date of issue”. In such cases, there appears to be no reason for keeping such
SCNs issued under Section 28AAA of the Customs Act, 1962 pending for adjudication
for want of cancellation of the instrument/scrip. Accordingly, the adjudicating
authorities shall proceed with the adjudication of such cases and decide the same
on merits, in accordance with law.
4.
In all other cases, where it is alleged that the instrument issued by DGFT has been
obtained fraudulently and where DGFT has initiated action for cancellation of instrument/scrip,
the adjudication should take place only after the instrument has been cancelled
by the DGFT.
Difficulties,
if any, in the implementation of the above instructions may be brought to the notice
of the Board.
F.
No. CBIC-140605/13/2024-DBK