EPCG export obligation must meet prescribed endorsement conditions; non-compliance sustains duty, confiscation and interest.

For EPCG imports, export obligation must be discharged strictly in the manner prescribed by the governing policy, and exports from another unit could be clubbed only if the required shipping bill endorsement and related identification conditions were met. As those conditions were not shown to be satisfied, the export obligation was not proved to have been fulfilled. The resulting non-fulfilment sustained the differential customs duty, confiscation and interest, while the redemption fine and penalty were reduced because the obligation had been substantially met to a large extent.

---

---

Issues: (i) Whether exports made from another manufacturing unit could be clubbed for discharge of export obligation under the EPCG scheme, and whether the appellant had fulfilled the export obligation; (ii) Whether the differential customs duty, confiscation, redemption fine, penalty, and interest were sustainable.

Issue (i): Whether exports made from another manufacturing unit could be clubbed for discharge of export obligation under the EPCG scheme, and whether the appellant had fulfilled the export obligation.

Analysis: The notification benefit was availed for capital goods imported under the EPCG scheme, and the export obligation had to be discharged in the manner prescribed by the relevant policy provisions. The policy permitted clubbing only where the export was a direct export in the name of the EPCG licence holder, with the licence number and date endorsed on the shipping bill, and allowed third-party exports only if those conditions were met. The record did not show compliance with the shipping bill endorsement requirement for the exports sought to be clubbed. The later DGFT communication also did not assist the appellant because the conditions for extension and regularisation were not shown to have been satisfied.

Conclusion: The export obligation was not proved to have been fulfilled by clubbing the other unit's exports, and the finding of non-fulfilment was upheld.

Issue (ii): Whether the differential customs duty, confiscation, redemption fine, penalty, and interest were sustainable.

Analysis: Since the export obligation remained unfulfilled, the exemption-linked capital goods became liable to confiscation and the differential duty was payable. At the same time, the appellant had substantially discharged the obligation to a large extent, which justified reduction in the monetary consequences. The order therefore sustained the duty demand and the liability to confiscation, while scaling down the redemption fine and penalty. Interest was also held chargeable because the liability to pay had arisen when the default occurred and the applicable interest provision was then in force.

Conclusion: The duty demand, confiscation, and interest were upheld, while the redemption fine and penalty were reduced.

Final Conclusion: The appeal succeeded only to the limited extent of reduction in redemption fine and penalty, but the substantive duty liability and related consequences arising from non-fulfilment of export obligation were sustained.

Ratio Decidendi: For EPCG imports, export obligation must be discharged strictly in the manner prescribed by the governing policy and notification conditions, and clubbing of exports or third-party exports is permissible only upon compliance with the specified endorsement and identification requirements; failure to do so justifies duty demand and attendant penal consequences.

---