Tribunal Upholds Duty Demand & Penalty for EPCG License Breach, Refers Matter to Larger Bench

The Appellate Tribunal CESTAT, Mumbai confirmed the demand of duty, imposed a personal penalty, and confiscated capital goods against the appellants for failing to meet the requirements of their Export Promotion Capital Goods (EPCG) license. The case centered on the amendment of the EPCG license from a 0% to a 10% duty scheme by the DGFT. The Tribunal held that once the license was amended by the DGFT, Customs authorities were obligated to assess the case based on the amended license. However, due to conflicting views, the Tribunal referred the matter to a Larger Bench for resolution, withholding opinions on other issues pending the Larger Bench decision.

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Issues:
Confirmation of demand of duty, imposition of personal penalty, confiscation of capital goods, amendment of EPCG license from 0% to 10% scheme, retrospective effect of license amendment, jurisdiction of DGFT to amend license, Customs authorities' power to question license amendment, conflicting views of Tribunal, reference to Larger Bench.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Mumbai, involved the confirmation of a demand of duty, imposition of a personal penalty, and confiscation of capital goods against the appellants. The case revolved around the Export Promotion Capital Goods (EPCG) license obtained by the appellants under the 0% duty scheme. The license required the import of capital goods worth a minimum of Rs. 20 crores CIF value, failing which duty and interest were to be paid. The appellants imported goods worth around Rs. 12.67 crores, leading to proceedings against them. The main contention was the subsequent amendment of the EPCG license from the 0% to the 10% scheme by the DGFT, which the Commissioner did not accept due to the license's expiry and the timing of the amendment request.

The Tribunal considered the power of the DGFT to amend licenses, including retrospective amendments, citing provisions under the Foreign Trade (Regulations) Rules, 1993. It was argued that the amendment by the DGFT could have a retrospective effect. The Tribunal referred to a previous case where it was held that the licensing authority could relax conditions and amend licenses retrospectively, which Customs authorities could not question. The Tribunal concluded that once the license was amended by the DGFT, Customs authorities were bound to assess the case based on the amended license.

However, a conflicting view expressed in a previous case led the Tribunal to refer the matter to a Larger Bench for resolution. The Tribunal directed the registry to place the case before the Hon'ble President for the constitution of a Larger Bench. It was clarified that no opinion was expressed on other issues raised, pending the Larger Bench decision on the main issue. The judgment was pronounced in court on 18-4-2007.

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