Interim protection in EPCG dispute permits bank guarantee encashment, but bars appropriation until the relaxation application is decided.

Pending consideration of an EPCG relaxation application, the interim arrangement allowed the customs authority to proceed with encashment of the bank guarantee for customs dues, but protected the petitioner by requiring the realised amount to be kept in a separate account and not appropriated as government dues until the EPCG Committee passed a reasoned order after hearing the parties. The Committee was directed to decide the relaxation application within four weeks. The effect was partial interim relief: encashment could continue, but final appropriation was stayed pending the Committee's decision.

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Issues: Whether encashment of the bank guarantee for customs dues should be allowed to proceed pending consideration of the petitioner's pending EPCG relaxation application, and what interim protection should be granted in the meantime.

Analysis: The application for relaxation under the EPCG framework was already pending, so the matter was not decided on merits. The interim arrangement balanced the competing interests by permitting the customs authority to proceed with encashment, but directing that the realised amount be kept in a separate account and not appropriated as government dues until the EPCG Committee passed a reasoned order after hearing the concerned parties. The order also required the Committee to decide the petitioner's application within four weeks.

Conclusion: Interim protection was granted in part in favour of the petitioner, with encashment permitted only subject to segregation of the realised amount and further decision by the EPCG Committee.

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