Axiom Cordages LTD. vs. Union Of INDIA Thru The Secretary, Ministry Of Law And Justice , Dept. Of Legal Affairs And Ors

Held

The Court held that the Development Commissioner (2nd respondent) erred by relying on the order-in-original dated November 20, 2018, passed by the Commissioner of Customs (3rd respondent), without affording the petitioner an opportunity to deal with it. The Court noted that the petitioner had not received a copy of the order-in-original before the impugned order was passed by the 2nd respondent, and that an appeal against the order-in-original was pending before CESTAT. The Court found merit in the petitioner's submission that the 2nd respondent should have provided an opportunity to address the impact of the order-in-original on the MEIS claim proceedings. Consequently, the impugned order was quashed and set aside, and the matter was remitted back to the 2nd respondent for fresh consideration. The Court explicitly stated that it was not expressing any opinion on the merits of the matter, and all contentions were kept open. The 2nd respondent was directed to pass a fresh decision within eight weeks after hearing all concerned.

Facts

The petitioner, Axiom Cordages Ltd., a 100% Export Oriented Unit (EOU), challenged an order dated December 3, 2018, by the Development Commissioner, SEEPZ, which denied them a 5% benefit under the Merchandise Exports from India Scheme (MEIS). The petitioner had filed shipping bills for exports classified under RITC 5607 9090. The R&I Department, however, claimed the goods should be classified under 5607 4900, entitling only a 2% MEIS benefit. A show cause notice was issued, and an adjudication order dated November 20, 2018, by the Commissioner of Customs (NS-II) classified the goods under 5607 4900. The petitioner's appeal against this adjudication order is pending before CESTAT. The Development Commissioner denied the MEIS benefit based on this adjudication order, despite the petitioner not having received a copy of it prior to the impugned order.

Key Issues

1. Whether the Development Commissioner (2nd respondent) was justified in denying the MEIS benefit based on an adjudication order (passed by the 3rd respondent) which was not served on the petitioner and against which an appeal was pending before CESTAT? Petitioner's arguments: The petitioner contended that the 2nd respondent blindly followed the 3rd respondent's order-in-original without providing an opportunity to contest it. They argued that the order-in-original was appealable and not yet final, and that the classification under Customs Tariff Act and Central Excise Tariff Act are distinct. They also pointed out that the jurisdictional CGST office had previously clarified the classification under 5607 9090. Revenue's arguments: The revenue argued that the Customs authority is the proper authority to decide classification under the Customs Tariff Act, and the 2nd respondent lacks this power. Therefore, the MEIS benefit should follow the classification decided by the Customs authority. They contended that the classification of goods under heading 5607 4900 was correct, and the petitioner had changed classification to avail ineligible benefits.