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Issues: (i) Whether, under the EPCG scheme, the bank guarantee required for clearance of imported capital goods had to be computed on the face value of the entire licence or only on the duty saved on the goods actually imported; (ii) Whether the requirement to execute the legal undertaking and bank guarantee within six months from the date of the licence was an absolute bar to relief in the facts of the case.
Issue (i): Whether, under the EPCG scheme, the bank guarantee required for clearance of imported capital goods had to be computed on the face value of the entire licence or only on the duty saved on the goods actually imported.
Analysis: The exemption under the customs notification and the EPCG framework was treated as operating on the goods actually imported and cleared, not on machinery that might be imported later under the same licence. Once the importer fell within the scheme, the words concerning the amount of duty saved were construed with reference to the duty saved on the particular items imported, and not by reference to the total face value of the licence. The court also held that the scheme did not require simultaneous import of all items in the licence and that no prejudice to revenue would result if clearance was allowed on security computed only on the duty saved on the imported goods.
Conclusion: The bank guarantee was required only on the duty saved on the two imported machines, and not on the face value of the full licence, in favour of the assessee.
Issue (ii): Whether the requirement to execute the legal undertaking and bank guarantee within six months from the date of the licence was an absolute bar to relief in the facts of the case.
Analysis: The time limit in the handbook was read in the context of the object of the export promotion scheme and the circumstances in which the licence had been amended. The court treated the requirement as a procedural condition capable of being relaxed where only a short delay had occurred and where the importer was willing to comply with the substantive obligations of the scheme. The importer's willingness to execute the legal undertaking for the full value and to seek amendment from the licensing authority was treated as sufficient to permit clearance.
Conclusion: The delay in complying with the six-month requirement did not defeat relief, and the importer was permitted to proceed subject to seeking appropriate amendment, in favour of the assessee.
Final Conclusion: The writ petition succeeded because the importer satisfied the substantive requirements of the exemption scheme for the goods actually imported, and the procedural delay did not justify refusal of clearance.
Ratio Decidendi: Where an exemption scheme applies to goods actually imported, the security obligation must be measured by the duty saved on those goods, and a procedural time condition in the handbook may not be treated as an inflexible bar when the importer otherwise substantially complies with the scheme.
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