Legal principle

Once an EODC or EPCG instrument has been issued by the DGFT and has not been cancelled or suspended by the competent authority under the FTDR Act, the customs authorities cannot go behind it or confirm duty demands and penalties for non-fulfilment of export obligation.

Court decision

The Tribunal allowed the appeal in part: it set aside the duty demand and penalties in respect of imports made under EPCG Licence Nos. 3530002103 and 3530002105, both dated 07.11.2006, with consequential relief, deciding the issue in favour of the appellant and against the Revenue for those two licences. As regards the remaining two EPCG licences, the appellant withdrew the appeal, so the portion of the impugned order dealing with those licences and the imports thereunder remains unchallenged.

Facts

M/s. Sree Koppammal Cotton Spinning Mills Pvt. Ltd. imported capital goods under four EPCG licences availing concessional duty under Notification No. 97/2004-Cus dated 17.09.2004, executing bonds to pay differential duty with interest if the export obligation of Rs. 11,39,30,128 was not met. DRI alleged the appellant fraudulently obtained EODCs from JDGFT, Madurai by submitting shipping bills of unconnected third-party exporters and a false Chartered Accountant certificate. The DRI's SCN proposed rejection of the EODCs, enforcement of bonds under Section 143(3), differential duty of Rs. 1,42,41,266 with interest, confiscation under Sections 111(d) and 111(o), and penalties under Sections 114A and 114AA. The Commissioner of Customs, Tuticorin by Order-in-Original No. 11/2017 dated 31.03.2017 rejected the EODCs, denied the exemption, confirmed the duty demand with interest, confiscated the goods with redemption fines of Rs. 1,00,000/- (Chennai) and Rs. 9,00,000/- (Tuticorin) under Section 125, and imposed penalties.

Key provisions

• Section 143(3), Customs Act, 1962 — Power to allow import or export on execution of bonds in certain cases
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 114AA, Customs Act, 1962 — Penalty for use of false and incorrect material
• Section 5, The Foreign Trade (Development and Regulation) Act, 1992 — Foreign Trade Policy.
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 25(1), Customs Act, 1962 — Power to grant exemption from duty
• Section 3, Customs Tariff Act, 1975 — Levy of additional duty equal to excise duty, sales tax, local taxes and other charges
• Section 6, The Foreign Trade (Development and Regulation) Act, 1992 — Appointment of Director General and his functions.