EPCG export obligation and licence redemption under customs law limited confiscation and penalties on the facts.

Under the EPCG scheme, customs concession was linked to fulfilment of the export obligation under the Export and Import Policy, 2002-2007, and compliance could be examined by Customs. However, where the licensing authority had redeemed the licence after accepting fulfilment, that acceptance could not be disregarded without valid reasons. On the facts, the imported vehicles were shown to have been used for the licensed travel and tour services, and the broader licence wording did not support restricting export obligation credit only to direct earnings from the cars. The Tribunal therefore found no basis to sustain confiscation, duty demand, redemption fine, or penalties.

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Issues: Whether the import of cars under the EPCG scheme justified confiscation, demand of duty, and penalty when the export obligation was claimed to have been fulfilled and the DGFT had redeemed the licence.

Analysis: The exemption notification under the EPCG scheme linked the concession to the export obligation prescribed in the Export and Import Policy, 2002-2007. The notification also contemplated fulfillment of the obligation in accordance with the policy provisions. The Customs authorities could examine compliance independently, but the DGFT's acceptance of fulfillment could not be ignored without valid reasons. The record did not show that the imported vehicles were used for any purpose other than travel and tour services covered by the licence. The expression used in the licence was wide, and the contention that only direct earnings from the cars could count towards export obligation was not accepted. On the facts, the Tribunal found no justification to sustain confiscation and the consequential monetary liabilities.

Conclusion: The confiscation, duty demand, redemption fine, and penalties were not sustainable and the appeals succeeded.

Final Conclusion: The assessee was held entitled to relief because the impugned order could not be sustained on the facts and in the light of the EPCG notification and the policy linkage.

Ratio Decidendi: Where an EPCG exemption notification incorporates the export policy framework, fulfillment of export obligation as accepted by the licensing authority cannot be disregarded by Customs without valid reasons, especially when the imported goods are shown to have been used for the licensed purpose.

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