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The Central Board of Indirect Taxes and Customs (CBIC) has issued Instruction No. 17/2026-Cus dated 21 September 2026 to clarify how field formations should handle cases involving Show Cause Notices (SCNs) issued under Section 28AAA of the Customs Act, 1962.
The clarification addresses difficulties arising when adjudication is kept pending because the relevant instrument or scrip has not been cancelled by the Directorate General of Foreign Trade (DGFT).
Section 28AAA provides for recovery of duty in specified cases where an instrument has been obtained through collusion, wilful misstatement or suppression of facts and subsequently used for duty benefits.
The new instruction explains when Customs should first complete its own adjudication, when DGFT’s determination should be obtained, and when an SCN can proceed even if the scrip cannot be cancelled.
What is Section 28AAA of the Customs Act?
Section 28AAA deals with recovery of customs duty where an instrument issued under the Foreign Trade (Development and Regulation) Act, 1992 has been obtained through specified fraudulent means.
The provision covers situations involving:
- Collusion
- Wilful misstatement
- Suppression of facts
Where the conditions under Section 28AAA are met, the duty relatable to the utilisation of the instrument may be recovered from the person to whom the instrument was issued.
The issue addressed by CBIC was how such proceedings should move forward when DGFT cancellation of the instrument or scrip is pending.
Why has CBIC issued this clarification?
An earlier TRU D.O. letter dated 1 June 2012 advised field formations to issue demands when DGFT or the concerned Regional Authority initiated action for cancellation of an instrument, while deciding the matter only after the instrument had been cancelled by DGFT.
Field formations subsequently reported difficulties in adjudicating Section 28AAA SCNs where cancellation had not taken place.
CBIC has now clarified that the procedure should depend on why the instrument or scrip is alleged to have been obtained fraudulently.
What happens when fraud is linked to Shipping Bill misdeclaration?
Customs must investigate and adjudicate first
Where Customs or DRI alleges that a scrip was obtained fraudulently because of incorrect declarations in the Shipping Bill, the matter should first be handled by Customs.
Examples include allegations involving:
- Misclassification
- Overvaluation
- Other incorrect declarations
In these cases, Customs should:
- Investigate the alleged misdeclaration.
- Complete adjudication under the applicable provisions of the Customs Act.
- Make a consequential amendment to the Shipping Bill or classification wherever warranted.
- Refer the matter to the concerned DGFT authority for further action, including cancellation of the instrument or scrip.
CBIC has agreed with the DGFT position that a scrip should not be cancelled merely on the basis of allegations, suspicions or requests from Customs/DRI without a final determination and, where required, amendment of the Shipping Bill.
What if the issue concerns DGFT policy or eligibility?
DGFT’s determination becomes relevant
Some disputes may not concern the accuracy of a Shipping Bill but instead relate to matters such as:
- Policy interpretation
- Eligibility
- Entitlement
- Other issues falling within DGFT’s domain
In such cases, the matter should first be referred to DGFT, as the competent authority for the issuance, administration and interpretation of the relevant instrument or scrip.
CBIC has clarified that DGFT’s view will prevail regarding the validity of and entitlement under the instrument or scrip for these policy-related matters.
Customs or DRI proceedings should then be decided in accordance with the determination or view communicated by DGFT.
What if DGFT cannot cancel the scrip?
Adjudication should not remain pending indefinitely
The instruction also covers cases where DGFT is unable to cancel the instrument or scrip because of technical or legal grounds.
This may include circumstances where cancellation is prevented by an order or judgment of a court.
CBIC specifically refers to M/s Supreme Castings Ltd. v. Joint DGFT, Ludhiana, where the court considered the issue of retrospective cancellation of a DEPB licence.
In such circumstances, CBIC has clarified that there is no reason to keep a Section 28AAA SCN pending merely because the instrument or scrip has not been cancelled.
The adjudicating authority should instead:
Proceed with adjudication and decide the case on its merits and in accordance with law.
When should adjudication wait for DGFT cancellation?
For other cases involving alleged fraudulent procurement of a DGFT-issued instrument, where DGFT has initiated cancellation proceedings, adjudication should take place only after the instrument or scrip has been cancelled by DGFT.
Therefore, the general position under the clarification can be understood as follows:
| Nature of issue | Required action |
|---|---|
| Misdeclaration in Shipping Bill | Customs investigates and adjudicates first |
| Misclassification/overvaluation | Customs determines the issue and amends Shipping Bill where warranted |
| Policy interpretation | Refer to DGFT |
| Eligibility or entitlement | DGFT determines the issue |
| DGFT unable to cancel for legal/technical reasons | Customs should proceed with adjudication on merits |
| DGFT has initiated cancellation in other cases | Adjudication after DGFT cancellation |
This distinction is important because not every Section 28AAA case should automatically remain pending until DGFT cancels the scrip.
What does the clarification mean for Customs and DRI?
The instruction provides a clearer division of responsibilities between Customs/DRI and DGFT.
Where the allegation concerns the accuracy of export declarations, Customs is expected to investigate and adjudicate the matter. Where the dispute concerns DGFT’s policy, eligibility or entitlement, the matter should first go to DGFT.
At the same time, cases cannot necessarily be kept pending indefinitely where DGFT is legally or technically unable to cancel the instrument.
This provides field formations with a framework for determining the appropriate sequence of action in Section 28AAA proceedings.
Note:
CBIC Instruction No. 17/2026-Cus is dated 21 September 2026. It specifically addresses difficulties in adjudicating Section 28AAA SCNs arising from the earlier TRU instruction dated 1 June 2012.
Businesses involved in export incentive schemes and transferable instruments should examine the nature of the allegation and the respective roles of Customs and DGFT before determining the appropriate course of action.
The instruction should be read along with the applicable provisions of the Customs Act, 1962, the Foreign Trade (Development and Regulation) Act, 1992, the Foreign Trade Policy and relevant rules/orders.
Conclusion
CBIC’s latest clarification provides a structured approach to Section 28AAA adjudication involving DGFT instruments and scrips.
The key distinction is whether the alleged irregularity concerns a Customs-related declaration, a DGFT policy or eligibility issue, or a situation where cancellation of the scrip is legally or technically not possible.
For Shipping Bill misdeclaration cases, Customs should first investigate and adjudicate and make necessary amendments where warranted. For policy and eligibility matters, DGFT’s determination is to guide the proceedings. Where cancellation cannot take place for legal or technical reasons, adjudication should proceed on merits. In other cases where DGFT has initiated cancellation, adjudication should await cancellation.
Notification Reference:
Customs
Instruction No. 17/2026-Cus
21/09/2026