The Central Board of Indirect Taxes and Customs (CBIC), Department of Revenue, Ministry of Finance, has issued Instruction No. 17/2026-Cus dated September 21, 2026, providing important clarification on adjudication of cases where Show Cause Notices (SCNs) have been issued under Section 28AAA of the Customs Act, 1962 in cases involving allegedly fraudulently obtained instruments/scrips issued by the Directorate General of Foreign Trade (DGFT).
Background: Recovery under Section 28AAA
Section 28AAA of the Customs Act, 1962 provides for recovery of duty from the person to whom an instrument/scrip was originally issued where such instrument was obtained fraudulently by way of collusion, wilful misstatement or suppression of facts.
Earlier, Para II.2 of the TRU D.O. letter dated June 1, 2012 had advised field formations to issue demands once DGFT or the concerned Regional Authority initiated action for cancellation of an instrument, but to decide the matter only after the instrument had actually been cancelled by DGFT.
CBIC has now clarified the procedure to be followed in different categories of cases after receiving references from field formations regarding difficulties in adjudicating SCNs for want of cancellation of the concerned instrument/scrip by DGFT.
Misdeclaration in Shipping Bills: Customs to Investigate and Adjudicate First
Where Customs or the Directorate of Revenue Intelligence (DRI) alleges that an instrument/scrip was fraudulently obtained on account of misdeclaration in the Shipping Bill, including misclassification, overvaluation or other incorrect declarations, CBIC has clarified that Customs must first undertake investigation and complete adjudication under the Customs Act, 1962.
Where warranted, Customs must also make the consequential amendment to the Shipping Bill/classification. Only after such final determination should the matter be referred to the concerned DGFT authority for further action, including cancellation of the instrument/scrip.
CBIC has agreed with DGFT’s position that a scrip should not be cancelled merely on the basis of allegations, suspicion or requests from Customs/DRI without a final determination and consequential amendment of the Shipping Bill by Customs.
Policy, Eligibility and Entitlement Issues: DGFT’s View to Prevail
In cases where the allegation of fraudulent obtaining of an instrument/scrip relates to interpretation of Foreign Trade Policy, eligibility, entitlement or other matters falling within DGFT’s domain, the matter must first be referred to DGFT.
CBIC has clarified that DGFT, being the competent authority for issuance, administration and interpretation of the relevant instrument/scrip, will determine such policy-related issues.
Accordingly, the view of DGFT will prevail regarding the validity of and entitlement under the instrument/scrip, and Customs/DRI proceedings are required to be decided in accordance with the determination or view communicated by DGFT.
Where DGFT Cannot Cancel Scrip on Legal or Technical Grounds, SCN Need Not Remain Pending
CBIC has also addressed cases where DGFT is unable to cancel an instrument/scrip because of technical or legal impediments, including situations where cancellation is barred by an order or judgment of a Court.
Referring to the decision in M/s Supreme Castings Ltd. v. Joint DGFT, Ludhiana, the Instruction notes the judicial position concerning retrospective cancellation of DEPB licences.
CBIC has clarified that in such circumstances, there is no reason to keep SCNs issued under Section 28AAA pending merely for want of cancellation of the instrument/scrip by DGFT.
The adjudicating authorities have therefore been directed to proceed with adjudication and decide such cases on merits, in accordance with law.
Other Fraud Cases: Adjudication Only After DGFT Cancels the Scrip
For all other cases where it is alleged that a DGFT-issued instrument has been fraudulently obtained and DGFT has initiated proceedings for cancellation of the instrument/scrip, CBIC has reiterated that adjudication under Section 28AAA should take place only after the instrument/scrip has been cancelled by DGFT.
CBIC Brings Clarity on Jurisdictional Sequence Between Customs and DGFT
The Instruction provides a clear distinction between matters falling within the jurisdiction of Customs and those requiring determination by DGFT. While misdeclaration, classification, valuation and correctness of Shipping Bills are to be investigated and adjudicated by Customs first, questions relating to Foreign Trade Policy, eligibility and entitlement under DGFT schemes are to be determined by DGFT.
The clarification is expected to facilitate disposal of pending proceedings under Section 28AAA and avoid cases remaining indefinitely pending merely because of non-cancellation of the concerned instrument/scrip, particularly where cancellation itself is legally or technically not possible.
The Instructions can be accessed at: https://taxinformation.cbic.gov.in/view-pdf/1000587/ENG/Instructions
