CESTAT Mumbai Validates MEIS Scrip Payments for Education Cess and Surcharges

Aadrikaa Legal Services (ALS) – IDT Tax I Arbitration I Litigation

Date: 15.05.2026

CESTAT Mumbai Validates MEIS Scrip Payments for Education Cess and Surcharges

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) Mumbai recently delivered a significant order regarding the validity of duty payments made through Merchandise Exports from India Scheme (MEIS) scrips. This article provides a detailed overview of the case, the legal issues involved, and the implications for importers and customs authorities.

Background of the Case

Multiple appeals were filed by the Revenue against importers who had discharged their customs duty liabilities—including Education Cess, Secondary & Higher Education Cess, and Social Welfare Surcharge—using MEIS duty credit scrips. The department contended that such payments were not permissible under the Foreign Trade Policy and relevant notifications, specifically for Education Cess and Secondary & Higher Education Cess prior to February 1, 2018.

Key Legal Issues

1. Scope of MEIS Scrip Utilization:
   • The Foreign Trade Policy 2015-20 and Notification No. 24/2015-Cus restricted MEIS scrip usage to Basic Customs Duty, Social Welfare Surcharge, and specified additional duties.
   • The department argued that there was no explicit provision allowing payment of Education Cess and Secondary & Higher Education Cess via MEIS scrips.
2. CBIC Circular No. 02/2020-Customs (10.01.2020):
   • This circular clarified that past payments of Social Welfare Surcharge through MEIS scrips should not be disturbed and are to be accepted as valid.
   • The core dispute was whether this principle extended to Education Cess and Secondary & Higher Education Cess for past periods.

Tribunal’s Analysis and Findings

• The Tribunal noted that the CBIC Circular, while explicitly mentioning Social Welfare Surcharge, was based on administrative pragmatism and certainty. It emphasized that past payments made through MEIS scrips should be treated as valid discharge of duty.
• The imports in question occurred before the circular’s issuance, and importers had discharged their liabilities without any allegations of fraud or mis-declaration.
• The Tribunal referenced the Madras High Court’s decision in KTV Health Food Pvt. Ltd. v. Commissioner of Customs, which held that payments made through MEIS scrips towards Education Cess and Secondary & Higher Education Cess for past periods cannot be disturbed and are valid.
• The Tribunal also cited its own precedent in Wellknown Polyester Ltd. v. Commissioner of Customs, Mumbai, reinforcing that cash payments should not be insisted upon where MEIS scrips had already been used.

Final Order and Implications

• The Tribunal dismissed the Revenue’s appeals, affirming that payments made through MEIS scrips for Education Cess and Secondary & Higher Education Cess (for the relevant past period) constitute valid discharge of duty liability.
• Insisting on cash recovery would result in double recovery, which is impermissible.
• The order provides clarity and relief to importers who had used MEIS scrips for such payments, ensuring administrative certainty and avoiding retrospective demands.

Conclusion

The CESTAT Mumbai ruling establishes that, for past periods, payments of Education Cess and Secondary & Higher Education Cess made through MEIS scrips are valid. This decision, grounded in CBIC’s administrative guidance and judicial precedents, offers significant clarity for importers and customs authorities alike.

Connected Matter

Madras High Court Quashes Customs Order on Education Cess Debiting from MEIS Scrips and Upholds Importer’s Right to Refund

Source: CESTAT Mumbai

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