Premature EPCG duty demand fails while extended export obligation period remains in force

Duty under the EPCG scheme cannot be demanded for alleged non-fulfilment of export obligation while the extended export period granted by the licensing authority is still running. The alleged shifting of machinery from the licensed premises, even if contrary to licence conditions, was treated as a matter for the licensing authority and did not by itself justify customs action on the facts then existing. On that basis, the duty demand was premature and unsustainable, and the confiscation and penalty based on the same premise also could not stand.

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Issues: Whether duty could be demanded for alleged non-fulfilment of export obligation before expiry of the extended period granted by the licensing authority under the EPCG scheme, and whether confiscation and penalty could survive on the same basis.

Analysis: The capital goods were imported under the EPCG scheme and the export obligation period had been extended by the DGFT up to 23-2-2010. The demand was founded on the alleged failure to discharge the export obligation, but that basis could not be sustained while the extended time to complete exports was still available. The alleged shifting of machinery from the licensed premises, even if a breach of licence conditions, was a matter for the licensing authority and did not justify customs action on the facts then existing.

Conclusion: The duty demand was premature and unsustainable. The confiscation order, resting on the same ground, also failed, and the penalty could not survive.

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