EPCG export obligation extension defeats block-year duty demand, while unresolved extension timing can justify remand

Where the export obligation period under an EPCG licence is validly extended, customs duty and interest demands based on an earlier block-year default cannot survive on that basis. The demand under one licence was set aside because the extended period made the original duty trigger redundant, though the authority was left free to act if default arose after expiry of the extension. For the other licence, the extension was accepted in principle but the operative date and effect of later exports required fresh examination, so the demand order was set aside and the matter remanded for reconsideration after hearing the assessee.

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Issues: (i) Whether the demand of customs duty and interest raised on the goods imported under EPCG Licence No. 2156068 could survive after extension of the export obligation period; (ii) Whether the demands raised in relation to the goods imported under EPCG Licence No. 2154520 were sustainable or required remand for fresh decision.

Issue (i): Whether the demand of customs duty and interest raised on the goods imported under EPCG Licence No. 2156068 could survive after extension of the export obligation period.

Analysis: The export obligation period under the relevant EPCG licence was extended by the DGFT pursuant to the BIFR rehabilitation scheme. Once the full period stood extended, the block-year basis for demanding duty became redundant and the demand could not be sustained on the then existing basis.

Conclusion: The duty demands under EPCG Licence No. 2156068 were set aside and the appeals were allowed in favour of the assessee, with liberty reserved to the original authority to proceed after the extended period expired if warranted.

Issue (ii): Whether the demands raised in relation to the goods imported under EPCG Licence No. 2154520 were sustainable or required remand for fresh decision.

Analysis: The extension of the export obligation period had been accepted in principle, but the exact operative date and the effect of subsequent exports required clarification and examination. The record also showed that the matter had not been finally worked out by the departmental authorities, making fresh consideration necessary.

Conclusion: The orders confirming duty demand under EPCG Licence No. 2154520 were set aside and the matter was remanded to the original authority for fresh decision after giving a reasonable opportunity of hearing.

Final Conclusion: The judgment relieved the assessee from the confirmed demands in both sets of appeals, with one set allowed outright and the other sent back for reconsideration on the extended export obligation period.

Ratio Decidendi: Where the export obligation period under an EPCG licence stands validly extended, duty demands premised on earlier block-year defaults cannot be sustained on that basis, and unresolved issues concerning the operative extent of extension may be remitted for fresh adjudication.

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