Substance over Procedure in MEIS Claims: Supreme Court Restates Correctability of Shipping-Bill Errors under Section 149 of the Customs Act

Introduction

The Supreme Court’s decision in M/S Shah Nanji Nagsi Exports Pvt. Ltd. v. Union of India (2025 INSC 1032) addresses a recurring controversy in Indian export incentive law—whether the inadvertent failure to tick the “Yes” box declaring an exporter’s intent to claim benefits under the Merchandise Exports from India Scheme (MEIS) can extinguish the substantive right to the incentive.

The appellant, a Nagpur-based exporter of corn starch, filed 54 shipping bills during July–October 2017. Owing to a clerical lapse by its customs broker, the electronic shipping bills on ICEGATE reflected “No” in the crucial “Declaration of Intent” field. Although the Deputy Commissioner of Customs subsequently amended the bills under Section 149 of the Customs Act, 1962, the Directorate General of Foreign Trade (DGFT) still refused to process the MEIS claim, and the Policy Relaxation Committee (PRC) dismissed a hardship application without reasons. The Bombay High Court upheld that stance.

The Supreme Court granted leave, overturned the High Court, quashed the PRC’s rejection, and directed authorities to process the incentive. In doing so, it crystallised a principle of “substance over procedure”: once a statutory amendment corrects a purely procedural error, the exporter’s substantive entitlement under the FTP cannot be denied.

Summary of the Judgment

• Section 149 amendments cure procedural defects retrospectively; the corrected shipping bills must be treated as filed with “Yes” ab initio.
• Refusal by DGFT / PRC to recognise amended bills violates natural justice when done without reasoned order or hearing.
• High Court erred in suggesting the exporter seek damages from the broker instead of receiving a statutory benefit.
• Authorities must process MEIS claims on amended documents within 12 weeks.
• Supreme Court urges CBIC and DGFT to formulate systemic/IT solutions to avoid needless litigation.

Analysis

1. Precedents Cited and their Influence

The Court anchored its ruling on a trilogy of Bombay High Court decisions:

1. Portescap India Pvt. Ltd. v. Union of India (2021 SCC OnLine Bom 285) – Held that an “N” instead of “Y” is a rectifiable error; once corrected, benefits must flow.
2. Technocraft Industries (India) Ltd. v. Union of India (2023 SCC OnLine Bom 280) – Emphasised that systemic rigidity cannot override exporters’ substantive rights; urged administrative reforms.
3. Larsen & Toubro Ltd. v. Union of India (2024 SCC OnLine Bom 3565) – Imposed costs on DGFT for similar denial; reiterated the liberal interpretation of incentive schemes.

Although not formally binding, these decisions form a coherent body of persuasive precedent. The Supreme Court’s endorsement elevates their ratio to national authority, closing any lingering debate among High Courts.

2. Legal Reasoning

• Statutory foundation – Section 149, Customs Act: Permits amendment of any document (including shipping bills) “for any reason” before clearance or within a specified period, provided no fraudulent intent. The Court read the provision purposively: once an amendment is allowed, the document stands “regularised in law”.
• Beneficial-scheme interpretation: Chapter 3 of the Foreign Trade Policy (FTP) 2015-20 is an export promotion measure. Consistent with welfare-benefit jurisprudence, procedural prescriptions should be construed liberally to fulfil objectives.
• Doctrine of substantial compliance: Where the underlying export is genuine and the only defect is clerical, insistence on literal compliance defeats the scheme’s purpose.
• Natural justice: The PRC’s cryptic email, bereft of reasons and issued without hearing, violates audi alteram partem. Decisions affecting valuable rights must be reasoned.
• Misplaced remedy against broker: While contractual remedies against agents may exist, they cannot substitute the State’s duty to confer statutory incentives when conditions are ultimately met.

3. Impact of the Judgment

This ruling will reverberate across three dimensions:

1. Administrative practice: Customs and DGFT IT systems must incorporate functionalities to recognise Section 149 amendments automatically—eliminating the “system cannot accept” argument.
2. Litigation economy: Hundreds of pending writ petitions on similar MEIS/SEIS errors are likely to be resolved quickly, relying on this precedent.
3. Future incentive schemes (RoDTEP, RoSCTL, etc.): The “substance over procedure” principle will guide interpretation of forms and declarations under current and forthcoming FTP 2023-28 regimes.

Complex Concepts Simplified

Foreign Trade Policy (FTP)

A five-year roadmap issued by the Ministry of Commerce under the Foreign Trade (Development & Regulation) Act, 1992. It prescribes incentives, export obligations, and operational guidelines.

Merchandise Exports from India Scheme (MEIS)

An incentive granting duty-credit scrips (expressed as a percentage of FOB value) to exporters of notified products, redeemable against customs duties.

Shipping Bill

The primary customs document filed electronically through ICEGATE for export clearance. An embedded tick-box (“Declaration of Intent”) signals whether the exporter seeks policy benefits.

Section 149 Amendment

A statutory mechanism allowing customs authorities to amend documents, even post-export, to correct errors or add particulars, thereby validating the document for all legal purposes.

Policy Relaxation Committee (PRC)

A DGFT committee empowered to relax procedural conditions under Para 2.58 of the FTP where “genuine hardship” is demonstrated.

Conclusion

The Supreme Court has decisively pronounced that procedural missteps, once rectified under the law, cannot nullify substantive export incentives. By harmonising Section 149 of the Customs Act with the objectives of the FTP, the Court prioritises commercial reality over bureaucratic formality and fortifies the principles of natural justice in trade facilitation. Going forward, the judgment should:

• Serve as binding authority compelling Customs and DGFT to accept amended shipping bills for all incentive schemes;
• Reduce litigation and compliance friction in India’s export sector;
• Encourage administrative bodies to institute technology solutions aligned with legal mandates.

In the broader legal landscape, Shah Nanji Nagsi Exports epitomises the judiciary’s commitment to a pragmatic, rights-oriented interpretation of trade laws—where benefit schemes are liberally construed and procedural dragnets yield to substantive justice.