Supreme Court | DGFT and CBIC Directed to Upgrade Systems | Genuine Exporters’ MEIS Entitlements Cannot Be Defeated by Clerical Errors in Shipping Bills
Kiran Raj
The Supreme Court of India Division Bench of Justice Aravind Kumar and Justice N.V. Anjaria has allowed an appeal and quashed the rejection of benefits under the Merchandise Exports from India Scheme. The Court set aside the High Court judgment which had dismissed the exporter’s writ petition and directed the respondents to process the claim under the scheme on the basis of amended shipping bills. The Court further instructed the authorities to issue appropriate orders within twelve weeks, while recording the necessity for systemic corrections to avoid recurrence of similar disputes.
The matter originated from exports of corn starch effected between July 22, 2017, and October 5, 2017. The appellant, a private company, filed fifty-four shipping bills under Serial No. 467 of Appendix 3B of the Foreign Trade Policy (FTP) 2015–20, thereby making the exports eligible for incentive under Chapter 3 of the Policy. The shipping bills were filed electronically on the ICEGATE platform through a customs broker. In the mandatory declaration column concerning intent to claim reward, the default entry “No” was not altered to “Yes” by the broker. This clerical lapse led to the shipping bills not being transmitted to the Directorate General of Foreign Trade (DGFT), thus preventing processing of the claim.
Upon discovering the error, the appellant made a representation on March 13, 2018, to the Regional Authority of DGFT. Simultaneously, an application was filed before the Deputy Commissioner of Customs, Mundra, under Section 149 of the Customs Act, 1962, seeking amendment of the shipping bills. By an order dated June 8, 2018, the Deputy Commissioner allowed the amendment, correcting the declaration from “No” to “Yes.” This fact remained undisputed in the proceedings.
Despite this correction, the DGFT communicated its inability to manually intervene, noting that unless shipping bills were originally transmitted with the “Yes” declaration, the system would not accept or process the claims. This led the appellant to approach the Policy Relaxation Committee (PRC) on December 5, 2018. The PRC, through a brief communication on March 15, 2019, rejected the request, stating only that no merit or hardship was found, without providing reasons or affording a hearing.
Aggrieved, the appellant approached the Bombay High Court, Nagpur Bench, through Writ Petition No. 4095 of 2019. During its pendency, a Division Bench of the Bombay High Court delivered judgment in Portescap India Private Limited v. Union of India on March 2, 2021, which dealt with a similar issue. A pursis was filed to place this decision before the Court. However, by judgment dated August 2, 2021, the High Court dismissed the petition, holding that the error was attributable to the customs broker, and the exporter could pursue remedies against the broker but could not claim relief under writ jurisdiction.
The appellant then approached the Supreme Court through special leave petition, which was granted. The matter was heard with counsel Mr. Gagan Sanghi representing the appellant, and Shri S. Dwarakanath, Additional Solicitor General, appearing for the respondents.
The appellant argued that exports were genuine, covered under the notified products in Appendix 3B, and that invoices reflected the intent to claim MEIS. It was further submitted that once the Customs authority corrected the bills under Section 149, they stood regularised in law. The rejection by the PRC, it was argued, was arbitrary, lacking reasons and violative of natural justice. Reliance was placed on Portescap India Private Limited, which had attained finality.
In response, the respondents contended that the Foreign Trade Policy and Handbook of Procedures required the declaration of intent to be marked at the time of export. Since the DGFT system could not accept claims unless originally marked “Yes,” and no manual intervention was permissible, the appellant was not entitled to relief. It was argued that MEIS was an incentive scheme requiring strict compliance with procedures, and that the PRC, being the competent authority, had already considered and rejected the claim.
The Supreme Court recorded the central issue as whether inadvertent error in shipping bills, later corrected under Section 149 of the Customs Act, could defeat a legitimate claim under MEIS. The Court observed: “The principal question for consideration is whether an inadvertent error in the shipping bills, which was permitted to be corrected under Section 149 of the Customs Act, can defeat an exporter’s claim under the MEIS?”
The Court noted that the Bombay High Court in Portescap India Private Limited dealt with a situation where “N” was inadvertently marked instead of “Y.” The High Court had held the mistake was purely procedural and, once corrected, could not extinguish substantive entitlement. The Court stated: “The ratio of Portescap (supra) is squarely applicable to the present case.”
Further, in Technocraft Industries (India) Limited v. Union of India, the Bombay High Court directed that such inadvertent lapses, once corrected, should not cause denial of MEIS benefits. The Court cited the judgment: “The High Court noted the hardship faced by exporters and directed the Customs and DGFT authorities to take appropriate steps to prevent recurrence of such disputes, observing that systemic rigidity cannot be allowed to defeat substantive rights.”
In Larsen and Toubro Limited v. Union of India, a similar rejection of MEIS claims despite correction was considered, where the High Court held: “Technical or systemic constraints cannot override statutory entitlements.” While the High Court imposed costs upon DGFT, the Supreme Court noted agreement with the principle, stating: “Beneficial schemes must be construed liberally and that procedural lapses, once rectified, cannot be allowed to defeat substantive rights.”
The Court stated: “These decisions, read together, demonstrate a consistent judicial approach that distinguishes between procedural formalities and substantive entitlements. The scheme under Chapter 3 of the FTP is a beneficial one, intended to reward exporters. Once exports are genuine and fall within the notified category, inadvertent mistakes of procedure cannot be treated as fatal, especially where they are corrected under statutory authority.”
The Court also remarked that the rejection by the PRC was violative of natural justice: “The rejection by the PRC, bereft of reasons and passed without hearing, falls foul of the principles of natural justice.” It further observed: “The High Court’s view that the appellant may proceed against the customs broker fails to address the statutory entitlement which accrues to the exporter under the scheme. Administrative technology must aid, not obstruct, the implementation of the law.”
Allowing the appeal, the Supreme Court issued categorical directives. It declared: “The judgment of the High Court dated 02.08.2021 is set aside. The rejection by the Policy Relaxation Committee is quashed.” The Court further directed: “The respondents are directed to process the appellant’s claim for MEIS benefit on the basis of the amended shipping bills and to pass appropriate orders in accordance with law within a period of twelve weeks from the date of this judgment.”
While refraining from imposing costs, the Court noted the recurring nature of such disputes. It stated: “We cannot but observe that the recurrence of such disputes, despite authoritative pronouncements in Portescap, Technocraft Industries and Larsen and Toubro Limited, underscores the need for systemic correction.” The Court directed: “The Union of India, acting through the Directorate General of Foreign Trade and the Central Board of Indirect Taxes and Customs, must take appropriate measures, whether by issuing comprehensive instructions or by suitable technological adjustments, to ensure that genuine exporters are not driven to needless litigation on account of inadvertent procedural lapses which have been rectified in accordance with law.”
Finally, the Court concluded: “The appeal is allowed in the above terms. There shall be no order as to costs.”
Advocates Representing the Parties:
For the Petitioners: Mr. Gagan Sanghi, Adv., Mrs. Farah Hashmi, Adv., Mr. Rameshwar Prasad Goyal, AOR
For the Respondents: Mr. Raj Bahadur Yadav, AOR, Mr. S. Dwarakanath, A.S.G., Mr. Gurmeet Singh Makker, AOR, Mr. Rohit Khare, Adv., Mr. Digvijay Dam, Adv., Mr. Navanjay Mahapatra, Adv., Mr. Ishaan Sharma, Adv., Mr. Raghav Sharma, Adv., Rajat Vaishnaw, Adv., Abhyudey Kabra, Adv.
Case Title: M/s Shah Nanji Nagsi Exports Pvt. Ltd. v. Union of India & Ors.
Neutral Citation: 2025 INSC 1032
Case Number: Civil Appeal No. of 2025 (@ Special Leave Petition (C) No. 14919 of 2021)
Bench: Justice Aravind Kumar, Justice N.V. Anjaria
