Prospective application of EPCG import restrictions prevents denial of concessional duty for earlier second-hand machinery imports.

Imports under the EPCG Scheme were governed by Chapter 5 of the EXIM Policy, which did not impose any age restriction on second-hand capital goods during the relevant period. The age limit for imported machinery was introduced only from 1-3-2003, so that amendment operated prospectively and could not be applied to earlier imports. Where the importer had obtained an DGFT licence and the policy then in force contained no such condition, Customs could not deny concessional EPCG duty on the basis of a later restriction. The denial of the EPCG benefit was therefore unsustainable.

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Issues: Whether the restriction limiting import of second-hand capital goods to machinery upto 10 years old applied to imports made under the Export Promotion Capital Goods Scheme during the relevant period.

Analysis: The EXIM Policy maintained separate treatment for general imports and imports under the Export Promotion Capital Goods Scheme. During the relevant period, Chapter 5 governing EPCG imports did not contain any age restriction for the imported machinery. The age condition was introduced only with effect from 1-3-2003, and the subsequent amendment could not govern imports made earlier. Since the importer had obtained the licence from the DGFT and no objection had been raised by that authority regarding the age of the machine, the Customs authorities were not justified in denying the concessional EPCG benefit on the basis of a condition not applicable at the time of import.

Conclusion: The age restriction did not apply to the EPCG import in question, and the denial of concessional duty was unsustainable.

Final Conclusion: The impugned order was set aside and the importer was granted the consequential relief flowing from acceptance of the EPCG claim.

Ratio Decidendi: An amendment introducing an import-condition under the EPCG Scheme operates prospectively and cannot be used to deny benefits for imports made before its commencement where the governing policy then contained no such restriction.

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