Provisional EPCG benefit accepted on undertaking cannot bar duty recovery when approval is later declined

A petitioner who accepted a provisional EPCG arrangement on an express undertaking to pay duty saved with interest if higher approval was not granted could not later resist recovery. The Madras High Court treated the policy circulars clarifying the Foreign Trade Policy as applicable, noted that the petitioner had enjoyed clearance of the goods without challenging the rejection at the relevant stage, and held that the Department could invoke the bank guarantee to recover the customs duty. The challenge to the refusal of EPCG benefit and the consequential recovery action was rejected.

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Issues: Whether the petitioner was entitled to insist upon an EPCG licence for import of second-hand capital goods of Indian origin and to resist recovery of duty by invocation of the bank guarantee after accepting a provisional licence on agreed conditions.

Analysis: The request for import of second-hand capital goods of Indian origin was rejected in the light of the policy circulars clarifying the Foreign Trade Policy, and the provisional licence was issued only against a specific undertaking that the petitioner would pay the duty saved amount with interest if the Headquarters did not concur. The petitioner accepted the provisional licence, furnished the undertaking and enjoyed the benefit of clearance of the goods, but did not challenge the rejection at the relevant stage. In those circumstances, the petitioner could not question the consequence of its own undertaking or deny the Department's right to recover the customs duty by invoking the bank guarantee. The circular was treated as clarificatory and the petitioner was held to lack the basis to seek interference.

Conclusion: The challenge to the refusal of EPCG benefit and to the consequential invocation of the bank guarantee was rejected, and the action of the Department was upheld.

Final Conclusion: The writ petition failed because the petitioner had accepted the provisional arrangement with a binding undertaking and could not avoid the resulting fiscal liability once the higher authority declined concurrence.

Ratio Decidendi: A party that accepts a provisional fiscal benefit on an express undertaking cannot later resist recovery in terms of that undertaking when the competent authority ultimately declines approval, especially where the governing policy clarification is treated as applicable and the challenge is inconsistent with the party's own conduct.

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