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Issues: Whether the customs authorities could demand duty, interest, confiscation and penalty after the Export Promotion Capital Goods licence was converted from zero duty to 10% duty with retrospective effect and the licensing authority had accepted compliance.
Analysis: The licence holder had obtained conversion of the licence through the licensing authority and the conversion was accepted with retrospective effect. Once the licensing authority had regularised the position under the EPCG scheme, the customs authorities could not proceed on the footing that the original licence conditions continued to be breached. The demand for duty and the consequential confiscation and penalty action, including penalty under Section 112A of the Customs Act, 1962, could not survive against the assessee in the face of the accepted amendment of the licence.
Conclusion: The issue was decided in favour of the assessee, and the customs demand, confiscation and penalty were not sustainable.
Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.
Ratio Decidendi: Where the competent licensing authority has retrospectively converted and accepted an EPCG licence, the customs authorities cannot ignore that accepted amendment and continue to enforce duty, confiscation or penalty on the basis of the original licence condition.
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