Incorrect Classification Is Not By Itself Collusion/ Wilful Misstatement U/S 28AAA Customs Act; Prior Determination By DGFT Must: Delhi HC

The Delhi High Court has held that a misclassification or an incorrect classification of goods to be imported or exported would not ipso facto amount to collusion, wilful misstatement, or suppression of facts under Section 28AAA Customs Act, 1962. “Undisputedly, consequent to the self-assessed Bills of Entry having been accepted and thus liable to be viewed as assessed, the stage of enquiry contemplated in terms of Section 17 of the Customs Act has clearly passed.” Misclassification and Section 28AAA Coming to Section 28AAA, the High Court said the provision would have to be interpreted as contemplating a prior determination on the issue of collusion, wilful misstatement or suppression of facts tainting an instrument, before action relating to recovery of duty could be possibly initiated. However, in the same breath, it added, “Even if it were assumed for the sake of argument that the writ petitioners had wrongly classified or placed articles in question under ITC 68159990, the same would clearly not amount to it being ipso facto assumed that the same amounted to an act of suppression or wilful misstatement.” Customs can't doubt instrument issued under FTDR Act In its 91-page judgment, the Court also pointed out that the MEIS certificate is issued under the provisions of the Foreign Trade Act, 1992 and held that the power to cancel or suspend it vests in the Director General of the licensing authority alone. “Section 28AAA would thus have to be interpreted as contemplating a prior determination on the issue of collusion, wilful misstatement or suppression of facts tainting an instrument issued under the FTDR Act before action relating to recovery of duty could be possibly initiated…Taking any other view would result in us recognizing a parallel or a contemporaneous power inhering in two separate sets of authorities with respect to the same subject.