TaxTMI 
TaxTMI 
TaxTMI 
M/s. Vedanta Ltd. Versus Commissioner of Customs, Tuticorin - 2026 (1) TMI 1244 - CESTAT CHENNAI
The Chennai Bench of the CESTAT has delivered a significant ruling wherein it was held that Customs authorities cannot question or deny duty exemption benefits once DGFT has regularised export shortfalls and issued Export Obligation Discharge Certificates (EODCs). The said ruling has reinforced the supremacy of DGFT decisions in matters relating to Advance Authorization export obligations.
Background
- Vedanta Ltd. has imported materials under three Advance Authorization licenses issued under Notification Nos. 96/2009-Cus and 99/2009-Cus.
- Though the company fulfilled export obligations (EO) against the said licenses in terms of quantity, there was a shortfall in value.
- Vedanta regularized the shortfalls by paying 1% of FOB value shortfall as per para 4.28 of FTP 2009–14 / para 4.49 of FTP 2015–20
- The DGFT accepted the regularization and issued EODCs for all three authorizations in 2017, leading to cancellation of bonds by Customs.
- However, DRI later issued a show-cause notice alleging violation of authorization conditions, i.e., non-fulfilment of export obligation and the Commissioner has confirmed duty, interest and penalty on such alleged non-compliance.
CESTAT’s Key Findings
DGFT Is the Final Authority on Export Obligation:
- The Tribunal held that DGFT alone is empowered to fix, monitor, interpret, and regularise EO under the FTP.
- Once DGFT issues EODC, Customs cannot take a contrary stand.
EODC Is Conclusive Proof of EO Fulfilment
- Issuance of EODC means EO is deemed fulfilled and the License stands redeemed
- Customs authorities cannot question or go behind the EODC.
- The Tribunal, by referring to CBIC Circular No. 16/2017-Cus, has held that once EODC is produced, no proceedings ought to be initiatedagainst such Assessee.
Customs Cannot Override DGFT Decisions
- Customs authorities cannot override the decision of the DGFT,which is the licensing authority.
- The Tribunal remarked that two wings of the Government cannot take conflicting positions.
Final Decision
- The appeal was allowed in full and the Order-in-Original was set aside
- All duty, interest, and penalties quashed
Conclusion:
- The ruling of the CESTAT reinforces a judicial principle that has repeatedly surfaced across Advance Authorization and EPCG disputes: Customs authorities cannot override or sit in appeal over the decisions of DGFT, the statutory body entrusted with administering and interpreting the Foreign Trade Policy.
- Also, the Tribunal’s observation that “two wings of the Government cannot take conflicting positions” is particularly significant. DGFT, being responsible for implementing the Foreign Trade Policy, when accepts to regularize a shortfall or issuing EODC or granting post-facto approvals, it reflects the Government’s authoritative conclusion on the exporter’s fulfilment of obligations. If Customs later takes a contrary view on the very same issue, it results not only in administrative inconsistency but also undermines exporters’ confidence in the finality of DGFT approvals. By setting aside the duty demands, such internal contradictions and unwarranted demands would be eliminated.