EPCG and SHIS benefit linkage upheld where duty regularisation was accepted under the foreign trade policy

Regularisation of zero-duty EPCG authorisations by payment of duty and interest, followed by availing SHIS benefits under the applicable foreign trade policy, was treated as consistent with the policy framework. The DGFT's clarification, supported by its counter-affidavit, and the revised DRI instructions both indicated no objection to that position. The court applied the principle that once the licensing authority has accepted the licence position and has not questioned it, customs authorities cannot deny the consequential benefit on a different footing. On that basis, the impugned order was held unsustainable and the writ petition was allowed.

---

---

Issues: Whether the impugned order could be sustained when the petitioner had already regularised the zero duty EPCG authorisations by paying duty and interest, and thereafter availed SHIS benefits in accordance with the applicable foreign trade policy.

Analysis: The dispute turned on the interplay between the EPCG and SHIS schemes and the effect of the petitioner's voluntary exit from EPCG obligations after payment of customs duty and interest. The counter-affidavit of the DGFT supported the petitioner's stand that such regularisation did not violate the policy and that the clarification issued by DGFT, being the authority competent to interpret the foreign trade policy, supported the same position. The revised instructions issued by the DRI also recorded no objection to the DGFT's stand. In addition, the Court relied on the principle that once the licensing authority has accepted the licence position and has not questioned it, the customs authorities cannot deny consequential benefit on a different footing.

Conclusion: The impugned order was not sustainable and the writ petition was allowed in favour of the petitioner.

---