CESTAT Mumbai Bars Revenue From Recovering Education Cesses In Cash After MEIS Scrip Payment

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal has dismissed Revenue appeals seeking to recover Education Cess and Secondary & Higher Education Cess in cash from importers.

These importers had already paid the amounts using duty credit scrips issued under the Merchandise Exports from India Scheme (MEIS), an export incentive programme under India's Foreign Trade Policy that rewarded exporters with duty credits.

“The attempt by Revenue to recover the same in cash would lead to double recovery, which is impermissible in law.”

A bench of Judicial Member Ajay Sharma and Technical Member Rajeev Tandon held that since the importers had already discharged their duty liability through these MEIS scrips, the department could not reopen those payments.

The dispute arose from departmental audit objections against importers including C.J. Shah, Cadila Healthcare, Bharat Forge, Cipla, Reliance Industries, Tata Motors, and others. These companies had used MEIS duty credit scrips to pay customs duties at the time of import.

The department claimed that while such scrips could be used for certain duties, they could not be used to pay Education Cess and Secondary & Higher Education Cess for the period prior to February 1, 2018. It then issued show cause notices alleging short levy/non-levy of customs duty.

The adjudicating authority had dropped the demands, relying on CBIC Circular No. 02/2020-Customs dated January 10, 2020. The Revenue challenged those orders before the Tribunal.

Before the Tribunal, the department argued that the Foreign Trade Policy and the governing customs notification permitted use of MEIS scrips only for specified customs duties. It said there was no express provision allowing payment of Education Cess and Secondary & Higher Education Cess through such scrips.

The Tribunal, however, said the issue was already settled by precedent.

“Although the Circular explicitly refers to Social Welfare Surcharge, the underlying principle adopted by the Board is one of administrative pragmatism and certainty, namely, that past payments made through MEIS scrips should not be disturbed, and such payments should be treated as valid discharge of duty”

The bench relied on the Madras High Court's ruling in KTV Health Food Pvt. Ltd. v. Commissioner of Customs (Preventive), Tiruchirappalli. That judgment held that Education Cess and Secondary & Higher Education Cess on imported goods are to be treated as duties of customs.

It also relied on its earlier ruling in Wellknown Polyester Ltd. v. Commissioner of Customs, Mumbai, which had taken the same view.

Noting that no superior court had stayed or overturned those rulings, the Tribunal upheld the adjudicating authority's orders and dismissed all Revenue appeals.

For Appellant: Shri Ram Kumar, Authorised Representative 

For Respondent: Advocate Shamita Patel,